Popular Political Economy: Four Lectures Delivered at the London Mechanics' Institution

Hodgskin, Thomas
(1787-1869)
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1827
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London: Charles Tait
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1827
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Chapter VII
TRADE.

Trade, a branch of business like agriculture and manufactures.—Does not form a part of this science.—Reason for explaining the utility of wholesale and retail dealers.—Home trade results from individual, foreign trade from territorial division of labour.—Natural circumstances which give rise to retail trade.—Differences in the nature of commodities, and in the times of their production.—Advantages of the present mode of paying retail dealers.—Natural circumstances which give rise to wholesale trade.—Territorial division of labour is necessary, or only advantageous.—Examples.—The benefits of trade illustrated.—It adds to employment and promotes civilization.—It is a part of the natural system of production, and grows up independent of governments.—Its advantages not limited or regulated by political distinctions.—Example of the provinces of France and the American States formerly under the government of this country.—Merchants necessary to our obtaining these advantages.—The principle of buying and selling with a view to gain tends to prevent fluctuations in the condition of society.—Merchants a distinct class from speculators and gamblers.

VII.1

TRADE, whether wholesale or retail, is to be considered like agriculture or manufactures, as only one of the three chief heads under which the manifold employments and businesses of individuals in society, arising from division of labour, have been classified. Each of them embraces a great variety of separate employments. The cattle-breeder, for example, follows a distinct occupation from the hop-grower; and the cultivators of madder, of wheat, of the vine and the olive, are in general different persons, though they are all agriculturists. The whole business of working in iron is quite distinct from that of making cloth, and each of them, both being classed under the head of manufactures, consists of a great number of distinct employments. In like manner there is both wholesale and retail trade; and each of these separate branches is subdivided into numberless businesses. We have Baltic, West India, and Turkey merchants, each of whom confines his trade to the North of Europe, to the great American islands, or to the countries within the straits of Gibraltar; and we have tea-dealers, cheesemongers, and mercers. Trade, therefore, is only the general name for the business of dealers and merchants, as agriculture and manufactures are the general names for the two other important branches of that combined system of social production, by which the comfort and enjoyments of all are augmented.

VII.2

In general all the occupations of individuals are considered as their own business, they are classed as the arts of life, and are purposely excluded from the science of national wealth. Some branches of trade, however, are generally included in the science, making a distinction between them and other occupations, for which I can see no good reason whatever; particularly as agriculturists and manufacturers are also merchants and dealers, buying seed corn, and lean stock, and cotton and silk, and again selling them when their peculiar labour has added to the value of these raw materials. Notwithstanding the example set by political economists, and the very undue importance attributed by them and by governments to trade, being convinced that it stands in the same relation to the science of political economy as every other useful art, I should not have taken any notice of it, were it not, that there yet exists in society, I believe, some unfounded prejudices against the persons engaged in it, which it may be advisable in us to correct; and under the influence of the hope that I may partly accomplish this, I shall endeavour to explain, as distinctly as I can, the natural circumstances which give rise to such occupations as those of wholesale merchants and retail dealers, and in what consists their utility to other labourers. Treatises on the art of trade are the proper books for discussing all the complicated questions connected with the principles which determine in every case the profits of the merchant, and induce him at any moment to export or import commodities.

VII.3

It is a consequence of division of labour, that no one person completes of himself, and without assistance from other men, any one commodity. Every thing we now use or enjoy, is the result of joint and combined labour. Tools are made by one, raw materials are grown or collected by another, transported from place to place by a third, and fashioned, by means of the tools made by the first workman, into their ultimate form by a fourth. I here merely state the principle; but for the production of many commodities, several hundred different workmen must act in concert, or work into each other's hands, and the mutual exchange of their different products is indispensable to complete production.

VII.4

It has been shown, that there are two species of division of labour—one arising from difference of organization, and difference of taste and disposition, among the individuals of our species, and the other arising from difference of soil, climate, and spontaneous productions. The exchange of commodities, necessarily resulting from the former or division of labour among individuals, is usually confined to neighbours, or the inhabitants of the same district and place, and may be called the HOME TRADE; the exchange of commodities resulting from territorial division of labour, takes place, on the contrary, between the inhabitants of different and distant countries, whether they have or have not different governments, and a different political organization, and will here be called FOREIGN TRADE. In general the words home trade are applied to all the exchanges, including many derived from a territorial division of labour,—such as the exchange of the young cattle bred on the Scottish hills, for the hops of Kent, or the barley of Norfolk,—carried on between all and each of the parts, and between all the inhabitants of the same politically organized country, or between all the subjects of the same government; while the terms foreign commerce are applied to every species of exchange made between countries not under the same government. Thus applied, the meaning of these phrases is quite unscientific. I prefer, therefore, restricting the phrase home trade, to the exchanges arising from individual division of labour, and extending the term foreign trade, to all the exchanges arising from territorial division of labour, though the different districts which carry it on, be under the same government. We shall thus get rid of the arbitrary bounds and limits to thought, set by such chance-be-gotten things as governments and states,—we shall get rid, also, of some of the prejudices with which they are connected,—and have a clear distinction, not liable to alteration, derived from the nature of things.

VII.5

As there are two distinct species of trade, there are, of course, two distinct classes of persons who carry it on; viz. wholesale and retail dealers. A retail dealer buys goods from the wholesale merchant, from the grower or manufacturer of commodities, living at or near the same place where he lives, and he sells them in small parcels to the persons who live in his own neighbourhood. There may be many exceptions to this description,—many retail dealers, who order commodities from a considerable distance, uniting with the retail a wholesale trade; but in general they procure what they retail in their own neighbourhood, and seldom extend their speculations to other districts and countries. Their occupation is the result, therefore, of division of labour among individuals.

VII.6

Wholesale dealers or merchants, on the contrary, rarely or never deal in commodities manufactured or obtained on the spot where they are consumed, unless they are at the same time manufacturers and retailers. The wholesale druggists and furnitur makers of the metropolis, who supply the retail traders, both in town and country, are also manufacturers and retailers. As the rule, therefore, wholesale merchants trade with commodities manufactured or produced at a distance from where they are consumed, and their occupation is a consequence of territorial division of labour.

VII.7

Both wholesale and retail traders, are distinct from the carriers of goods, whether by land or water. The latter, it is obvious, perform a very useful part in the exchange of commodities between distant places, and if the exchange be beneficial their utility and productiveness must be admitted. I understand by the term traders, men who merely buy and sell with a view to gain. The hardy navigator who is eternally buffeted by the storms of our own seas, or who braves all the vicissitudes of climate between the ice at one pole, and the ice at the other,—and the patient-plodding waggoner who is a-foot and on the road long before even the industrious artisans of the city have left their beds, are, it is plain, labourers, and do not belong to the class of traders on whose occupations exclusively I wish to fix the reader's attention.

VII.8

RETAIL DEALERS shall first be treated of. In general, the natural qualities and properties of the various products of labour are not taken notice of in writings of Political Economy. It will be found, however, that many of the phenomena of the science, such as the invention of money, the utility of various sub-divisions of labour, the dependence of all classes of labourers on one another, and, in particular, the almost extreme dependence of those who own and cultivate the land on other men, which is a most important circumstance, can only be explained by attending to the differences in time required to produce commodities, and to some peculiar properties in the different products of labour. Dr. Smith has, indeed, remarked the influence of the size and bulk of commodities, and the necessity of dividing them to suit individual consumption. On this principle he explains the utility of retail dealers. "If," says he, "there were no such trade as a (retail) butcher, every man would be obliged to purchase a whole ox or a sheep at a time. This would generally be inconvenient to the rich, but more so to the poor. Nothing can be more convenient to such persons, than to be able to purchase their subsistence from day to day, or even from hour to hour, as they want it."*48 The same fact is equally true of webs of cloth, whole cheeses, casks of butter, &c. &c. Or it is found by experience, that the form and quantity of commodities in which it is most convenient to produce them, is not that form and quantity best adapted to individual consumption. To suit them to this, is therefore another branch of labour which is performed by retail dealers.

VII.9

After division of labour has taken place, it soon becomes evident, also, that the productive operations of different labourers, or the commodities they make, require different periods to complete them. From the period, for example, of beginning to prepare the ground for wheat in this country till the harvest is gathered in, full eleven months elapses. In this statement the time required to clear, drain, and inclose the land, and to work the fallow through the summer, if fallowing be the practice, is not included. To grind and sift the wheat, or to make flour into bread, may be done in a few hours. To construct a canal or a bridge, several months are in general needed; but the pick-axes and other instruments used in executing these works may each be made in less time than a day. Some weeks are necessary to make a plough, or build a house, but a pair of shoes, or a suit of clothes, may be made in less than twenty-four hours; and hundreds of nails are completed by one man in the same time. The labours, therefore, of the farmer, the miller, the baker, the engineer, the builder, the tailor, and of every class of workmen, are completed; or their respective commodities are prepared for sale or use, in unequal times.*49

VII.10

Commodities of all descriptions are moreover of unequal durability. Bread and meat, without some additional labour, cannot in general be kept more than a few days. Corn, with some little care, may be preserved for many months; and a bridge or canal, if it be kept in order, will last for ages.

VII.11

But though the products of different species of labour are completed in unequal times, and are of such unequal durability, that some must be immediately sold and consumed, while others can be kept from the market for months, the appetite of each labourer is renewed daily, and must every day be satisfied. If we were aware of these natural laws, influencing both us and the materials of our subsistence, and if we at the same time knew that the great majority of the operations carried on in society, were, in the long run, of equal utility, each being necessary to the completion of the others, and that civilized society probably could not exist, and certainly could not flourish, wanting any of them, should we not think ourselves bound to take measures by which he whose useful task could not be completed and its produce brought to market for several months, might be able to obtain his daily bread? I am surprised, indeed, that our parliament-men, who delight so much in completing what Nature leaves imperfect, have not before now discovered her neglect in not enabling us to produce every commodity in the precise form, and at the precise time it is wanted; and have not taken measures to ensure all classes of labourers, however long a time may be required for their products to reach the market, their necessary daily subsistence. This, however, is one great branch of social economy, which grows up unperceived and uninfluenced by them. That it is as well performed as what they prescribe, must not, I suppose, be asserted. Dealers, however, know very well the utility of different commodities, and they conjecture, with tolerable accuracy, the different periods in which a given quantity will be consumed. They buy, therefore, from the various classes of labourers or manufacturers their different products, and share them out as is most suitable to the wants of all. They reconcile the apparent incongruity of nature, and while labouring for themselves are useful to others. The important business of actually distributing the wealth of society in such proportions as individuals can buy it, so that the daily wants of all classes, even of those whose produce is not completed for months or years, may be conveniently supplied, is, in fact, performed by retail dealers. They take to their business, I am aware, with no such high object in view; they are led to it by an instinctive view of their own interest; and they are just as unobserving of those great natural circumstances which give rise to their occupation, and as ignorant of the great utility to society at large of that sub-division of labour they carry into practice, as those individuals who pretend that nature regulates nothing, and that, but for their ordering wisdom, society could not exist.

VII.12

Supposing men to have money to procure articles as they have occasion for them, "it would be very inconvenient." says Mr. Mill, "to repair in each instance to the several manufacturers and producers of each, who may often live at a considerable distance from one another. A great deal of trouble is saved to consumers when they find assembled in one place the whole, or any considerable portion of the articles which they use."*50 But the manufacturers of each article require their undivided attention for their own business of production. In the great majority of cases they may form a tolerably correct estimate of the quantity of their goods, which twelve or a score retail dealers will require; though it would be difficult, if not impossible, for them to judge of the wants of almost numberless individuals. But retail dealers, who make it their principal business to find out the extent of consumption, do ascertain this, each in his particular neighbourhood, in a rough way, and by their instrumentality the manufacturer and producer is enabled to judge of the quantity of commodities he is likely to sell with advantage. Retail dealers seem to me to be indispensable agents, in adjusting the supply of commodities to the demand and to consumption.

VII.13

This view of their utility is confirmed by what takes place in societies formed and regulated by men. In communities, with property in common, it is not in general accessible at all times to every individual. Monks and nuns, for example, have servants or assistants, lay brothers or sisters, whose business it is to distribute among all the members their respective shares of the common stock. Every regiment of soldiers has Quarter-masters, or some corresponding officers; every ship of war has a Purser and assistants, who deal out to every soldier or sailor his allowance of provisions. Even in Mr. Owen's establishments, in which retail dealers are regarded as an evil, and rejected as a nuisance, there must be some persons to take care of the food and clothing, and distribute it among the inhabitants of his parallelograms, or the members of his co-operative communities. Retail dealers, therefore, perform such offices for society at large, as quarter-masters perform for soldiers, and pursers for sailors, and which somebody must perform for Mr. Owen's pupils. They are not appointed to this office except by nature, but they are quite as useful as if they acted under the direction of Mr. Owen, or by the King's warrant.

VII.14

Retail dealers receive no wages for their services. They are paid by making a profit on what they sell; and on this account they are generally objected to. They are sometimes described as sucking the marrow out of the bones of the poor labourers. But were they paid by a salary or wages, what interest could they have in taking care of the common stock? At present, as they can only make a profit by the greatest economy in distributing commodities, they must, for their own sakes, buy as cheap as possible; and if they are negligent or wasteful, no additional price they can ask will remunerate them. They have now a direct interest in performing their task well, and strong motives for that watchfulness which is beneficial to the whole society. So impressed are most men with the utility of such motives, that we may find numberless instances of regulations made expressly to produce them. To encourage Pursers, for example, to watch over the distribution of the provisions entrusted to them, they are allowed a per centage for every thing saved, and are compelled to pay a high price for any deficient articles. Under the influence of self-interest, buying and selling only with a view to their own profit, retail dealers distribute the whole wealth of society in the most economical manner possible. They find customers even for refuse; and it may be doubted if there is as much food actually wasted in this great metropolis in one year, as by a single tribe of Esquimaux or other savages in a successful season.

VII.15

In making the distribution, retail dealers have no settled scale, no rations for each individual appointed by governments, which seem only to have known of their occupation to tax and vilify, to licence and derange it; they take voluntarily to their business, and other men voluntarily go to them to buy what they want. This particular subdivision of labour is in no respect, therefore, the offspring of legislation; it is a part of the social polity of nature; and so nicely is it regulated, that all the different classes of labourers, whatever period may be required to bring their commodities to market, and whatever may be the durability and the bulk of them, are in general enabled to procure, by labouring only at their own business, any assignable quantity of any useful commodity.

VII.16

WHOLESALE DEALERS, of whom I now proceed to speak, derive their occupation from territorial division of labour. Before I can fully satisfy the reader, however, of their utility, I must explain the utility of that exchange they are the instruments of making. We may first distinguish two kinds of territorial division of labour: one, which in the present state of our knowledge is unavoidable; the other is not absolutely unavoidable, it is only highly advantageous.

VII.17

As examples of the former, I may mention that bark, which is an admirable febrifuge in every quarter of the globe, is the produce of only a small district of America. For us to have it, some persons there must collect it; and though we can purchase it at a small price by our own productions, no art could enable us directly to produce it. Cotton, which forms so healthy and convenient a covering for the body in every climate, grows only in countries situated in or near the tropics; and though the plant which bears it, by dint of hot-houses, can be nourished here into puny existence, yet, in countries nearer the pole, to rear it is not possible. Tea, though it refresh and delight the people both of Europe and America, is obtained only from China, and hitherto numerous attempts made to cultivate it in other countries have not succeeded. Bark, cotton, and tea, therefore, are the products of very limited spaces, but they are highly useful wherever any portion of the human race lives, suffers, or enjoys.

VII.18

Whether wool could be produced in large quantities in tropical climates or not, seems doubtful, the coverings of most animals in such climates degenerating into long straggling coarse hair. At present, however, it is chiefly obtained in the temperate parts of the globe; but the woollens of England have long formed the chief part of our exports to India; and a blanket, as I know from personal experience, is one of the most tempting articles of traffic which can be offered to the negroes of the Western coast of Africa, who live in the hottest region of the globe. The inhabitants of Norway, the produce of which is chiefly fir-trees, the sea-coast consisting of an immense multitude of bleak, barren, and rocky islands, can of necessity do little else than catch fish, and saw trees into planks. Fortunately, they find in this opulent and industrious community a market for their lobsters*51 and their planks, and we are equally fortunate in having the useful articles they produce or procure plentifully supplied to us. I do not say merely that catching lobsters and sawing trees into planks, are the most advantageous occupations the Norwegians can pursue; I say no art that we are at present acquainted with, could enable them to grow corn in any quantity, or have fine rich velvet pasture, like the low flat land of Holland, though by catching lobsters, and sawing trees into planks, they can purchase the grain, and butter and cheese, for producing which the most fertile land is chiefly useful. There is one species, therefore, of territorial division of labour, which must take place whether the inhabitants of different districts mutually exchange, or not, their respective products.

VII.19

There is another species of territorial division of labour not strictly necessary, but highly advantageous. In general, for example, the continent of Europe is chiefly supplied with sugar and coffee from the West Indies; but in France, during the late war, when that country was excluded by Buonaparte's decrees, and our blockade system, from all communication with tropical climates, the people succeeded in making sugar from beet-root, and in finding several substitutes for coffee. The cost, however, of producing the former, with all the help of science and art, was at least four times as great as the cost of producing it in the West Indies, and bringing it to France; and the substitutes for the latter were at once so miserable and so dear, that they were instantly given up when real coffee could be procured. It would not be absolutely impracticable to make sugar or grow rice in England, but it would be amazingly disadvantageous, compared with the practice of buying both with our hardware, and bringing them from Carolina or Jamaica. It would be nearly intolerable, though not impossible, for the West Indians, who have no coal, to cast and forge their own cutlery, and other iron and steel instruments, which, in return for their sugar, they can procure at a comparatively small cost. Wine, which may be purchased in France, Spain, or Portugal, for twopence, fourpence, or sixpence a bottle, and brought here at a very small additional expense, could not be made in England for four times the sum. Sour and half ripened oranges, though rather for ornament than use, are made to grow in this country at a very great cost, by means of the forcing-houses of our opulent gentry; but they may be purchased in Portugal, or at the Azore islands, for threepence a score. To make such knives in these islands, as are sold at Birmingham for twopence a-piece, and with which, perhaps, the oranges are bought, would probably cost twelve times twopence if they could be made at all.

VII.20

The mutual exchange of such objects as can only be produced in districts and spots, but more abundantly in those spots than their inhabitants require, and of which the utility is universal, must be conducive to the enjoyments and welfare of all concerned. The manifold advantages of such an exchange,—of our giving woollens for tea, and knives for bark,—can no more be doubted than the advantages of the division of labour, or of the due cultivation of both our mental and bodily faculties.

VII.21

The advantages of mutually exchanging those different productions which are only favoured by difference of climate and soil, may be made, I think, equally evident. Many of our most useful and valuable manufactures could not exist, except we made such an exchange. We do not possess more than enough land in our immediate neighbourhood to supply us with the bulky articles of provision, such as cattle, potatoes, corn, which cannot so conveniently be brought from a distance; and where, then, could we find the means of growing cotton, the raw material of our most extensive manufacture? At present, this is conveniently brought from several distant parts of the earth, and working it up gives employment and subsistence, including the sailors who bring it, and the persons who make the machinery for manufacturing it, to at least one-tenth part of our whole population.

VII.22

Silk, manufacturing which, employs a great, though not an equal number of our people, and enables them to subsist comfortably, is also a foreign production. It might be, and is, produced in England, but in such small quantities, and at such a great expense, that if we did not import it from climates enjoying a warmer sun and brighter sky, our spinning-mills would fall to ruin, our looms would be idle, the cheerful shuttle, with its accompanying hum of human voices, would no longer be heard, and our numerous silk manufacturers, with all their skill, intellect, and happiness, would be gradually annihilated.*52

VII.23

Cochineal, indigo, and various other substances used in dying, are not the produce of Britain; they, or substitutes for them, could perhaps be procured or made here, but at such a cost as would check, if not ruin, several of our most flourishing manufactures. Much of our furniture, and even the frames of our houses, are made of foreign wood. Our chair and cabinet makers, and our house carpenters, are as dependent on the forests of Honduras and Norway, as the cotton manufacturers are on the cultivators of Georgia, for the raw materials they work into beautiful furniture or invaluable dwellings.

VII.24

Our breakfast, and by common consent, it seems the best we can have, is prepared from a plant brought from the farthest part of Asia, sweetened by the juice of a cane cultivated most successfully in the West Indies. We might, undoubtedly, live on oatmeal, or beer and meat, or something else which grows or is made in England, but we do not, because we like tea better. Our meat is seasoned with spices, the produce of islands in the Indian Ocean; and the sweet-meats, such as figs, prunes, etc, with which we indulge our passion for niceties, or which we give our children, on account of their cheapness and gratefulness, come from Germany, France, Spain, and Turkey. The oranges that are so plentifully hawked in our streets, in the winter part of the year, which moisten the speaking organs of our law mystifiers and of our law-makers, as well as the bawlers in the upper gallery at the theatres; which relieve the parched palate of the fever-sick patient, and gratify the apparently natural longing of all classes for a little fresh vegetable acid, when no other fruit can be procured; are brought thousands of miles, are purchased, by our hardware and cloths, and could not be procured in any quantity except by this mutual exchange.*53 Our roast beef, the Englishman's fare—would to God that every one of our countrymen could command its daily enjoyment!—is indeed a native production; but its companion, plum pudding,—exclusively an English dish,—derives its name and its savouriness from the produce of foreign climates. Raisins are brought from Malaga and Smyrna, and currants from the Greek Islands.

VII.25

I have purposely selected these few familiar illustrations, in order to bring the fact clearly before the reader, that all classes and conditions of men derive enjoyment or benefit from the mutual exchange of the products of different countries and climates. The humblest man in this community, the common beggar, to say nothing of our industrious labourers, solaces himself with tobacco, or refreshes himself with tea. If this mutual exchange were confined to such things as are only enjoyed by a few opulent and luxurious nobles and merchants, as is sometimes supposed; if nothing could be brought from Italy but a few antique pictures and modern statues; nothing from India and the Brazils, but diamonds and topazes; if nothing could be obtained from France but a small quantity of very costly but delicious wine; foreign trade would not be deserving of the high place it ought to have in our esteem, as a means of adding to the wealth and comfort of mankind. If, instead of contributing to universal enjoyment, it merely gratified the almost bloated desires of a few for an endless succession of luxuries, it would be no more worthy of our approbation than an emasculated singer, or than any other of those unsightly excrescences which grow from our present diseased and unjust distribution of wealth.

VII.26

The few commodities, however, by which I have illustrated the advantages to us of that exchange which results from territorial division of labour, constitute only a small part of those imported from countries not under our government, which are used by the great mass of the people, which contribute to their subsistence, or to which the industry and skill of our labourers give additional value. Numberless persons and very important interests in this country, are connected with and benefited by such trade,—in all cases it is voluntarily carried on; we may therefore be sure that it is beneficial to all parties. The persons who receive our cutlery, hardware, woollens, and cottons in exchange for their sugar, raw cotton, oranges, raisins, etc., could not obtain these necessary and valuable articles so cheaply by any others means. Must it not be as pleasant to the inhabitants of Portugal, of Turkey, and of Spain, to procure by the cultivation of their own vines, fig-trees, and olives, the instruments and the clothing manufactured in this country, as it is for us to obtain, by making these articles, the refreshing produce of a brighter sun than in general shines over Britain? Productive labour, be it also remembered, is that which procures the labourer his subsistence; and if the labour employed in making the commodities to be exchanged was not productive, no man would or could continue it. We have thus a direct proof that such trade is beneficial and productive to both the parties who actually carry it on.

VII.27

It is said, indeed, that importing commodities from one district into another, lessens employment in the importing district. On this principle most of the restrictions on the trade carried on between different states have been imposed and justified. But the people from whom we obtain commodities, of whatever description, do not give them to us. On the contrary, they receive for them an equivalent, or what they esteem more than an equivalent, for they prefer it to the commodities they exchange for it. But this equivalent, be it what it may, is made or purchased by our own industry. There is no species of wealth which is not the produce of labour; consequently, to produce or obtain the equivalent commodities requires about as much labour as is necessary to create the commodities imported at the place whence they are brought. An individual not supported by the labour of others, pays with his labour for his subsistence or his luxuries; and so does a trading nation. For every pipe of wine imported from Portugal, for example, a quantity of woollens or hardware, corresponding in value to the wine, must be made here and exported to pay for it. Unless the exchange were made, there would be no market and no payment for the wine and the woollens; there would be no hope of any enjoyment from producing these commodities, and neither would be produced. The wine is not wanted in Portugal, the woollens are not required here; and both are only made in order to be exchanged for one another. If the exchange were prohibited or prevented, there would be so much less industry and wealth in two districts, and so much less enjoyment in the world.

VII.28

We know from very long experience, that in proportion as commodities are obtained by trifling exertion they are sold for a small sum. What comes light goes light, is applicable in trade as well as in the other concerns of life. But I have, I hope, satisfied the reader that the means of obtaining commodities at a small expense consist principally in the increase of knowledge and division of labour. We may expect, therefore, that we shall obtain commodities at a cheap rate, from those countries with which we trade, in proportion as they are there cheaply produced, and they will be cheaply produced as the people of those countries increase in knowledge.*54 From this circumstance we learn, that it is for the interest of every nation that every other should make the utmost possible progress in knowledge and civilization, in skill and in all the wealth-creating arts; and it demonstrates the utter foolishness of that national jealousy and rivalry which politicians love to foster and encourage.

VII.29

To make the advantages of having skilful and opulent neighbours more apparent, I beg leave to remind the reader of what England has lately done, and is now doing for the rest of the world. Though other nations may envy her prosperity, they eagerly borrow her arts. By her example they are stimulated to make greater exertions, and they are clothed by her hands. British cottons and woollens, that are so cheaply manufactured, in consequence of our increased skill, are almost as cheap in Russia and South America, as in London; which is as advantageous to the inhabitants of those countries as to our own people. Steam-engines, as well as various other equally useful machines, are almost exclusively our inventions and improvements, but they add to the wealth and power of other nations. They ought, consequently, to be delighted with our increased skill, for it supplies them with cheap commodities and useful instruments. And for what reason should we not reap similar advantages were all our neighbours as skilful as ourselves. I do not recollect any useful art we have imported from Russia, or from the slave coast of Africa, or from the West India Islands; but, to say nothing of the various improvements we adopted from Italy, France, Flanders and Germany, in the 15th, 16th, and 17th centuries, they being then the most opulent and skilful nations of Europe,—from France we have lately introduced an improved silk loom, from Flanders the Hainault scythe, and from North America lightning conductors, and several improvements in steam-boats. From ignorant, poor, and unskilful people, neither knowledge, wealth, nor ingenuity, can be brought; wherefore it is for the interest of all nations to have enlightened, wealthy, and ingenious neighbours.*55

VII.30

The immediate pecuniary advantages which accrue to all the parties concerned, in exchanging the products favoured by one climate, for those favoured by another, gives but a feeble notion of the benefits conferred on mankind by trade. The animal appetites of man are soon gratified, and unless he be then roused by some terrible and destroying passion, he sinks into inglorious repose. The savage passes his life contending with wild beasts, or with his wilder fellow savages, for food, or in gluttony and sleep. The skill and knowledge requisite at any time to provide for our animal wants, must be small, and did not some other stimulus intervene, all the ingenuity and faculties of civilized man would remain dormant, or be much limited. No reflections on our intellectual nature or high density, did they ever occur, could rouse the barbarian from his sloth, or wean him from his sensuality. Such motives have been employed by missionaries, but have been found ineffectual to overcome indolence. But present him with the solemn pageantries of Catholicism; offer him some glittering bawble to adorn his person; show him the utility of some wealth-creating arts; let him taste the enjoyment of some new productions of human skill; and you will infallibly excite his exertions. He will give you every thing he already possesses for mere bawbles; he will endeavour for the sake of a dram or a musket to collect more elephants teeth, and kill more fur-bearing animals; nay, for glittering and sometimes pernicious presents, he will sell himself or his dearest relations. Precisely the same motives, though they are not so perceptible, and do not lead to the same excesses, in consequence of our enjoying numerous foreign commodities from the beginning of our existence, operate also on all classes of the most civilized community; and after our mere animal wants are gratified, we still labour, and are happy when labouring, to obtain some other, and generally foreign productions.

VII.31

"Flourishing cities," says Dr. Paley, "are raised and supported by trading in tobacco: populous towns subsist by the manufacture of ribands. A watch may be a very unnecessary appendage to the dress of a peasant; yet if the peasant will till the ground in order to obtain a watch, the true design of trade is answered; and the watch-maker, while he polishes the case or files the wheels of his machine, is contributing to the production of corn, as effectually, though not so directly, as if he handled the spade or held the plough. The use of tobacco affords a remarkable example of the caprice of human appetite, yet if the fisherman will ply his nets, or the mariner fetch rice from foreign countries, in order to procure himself this indulgence, the market is supplied with two important articles of provision by the instrumentality of a merchandise, which has no other apparent use than the gratification of a vitiated palate."*56

VII.32

The mutual exchange of the products of different climates, is a great means, therefore, of promoting civilization. It offers additional enjoyments, and to procure them it incites to additional exertions. It is the parent, consequently, of much of our skill. To obtain its gratifications, gives a perpetual but gentle stimulus to our passions, saving us both from the weariness of idleness, and from those violent emotions which are followed by painful lassitude, and end in speedy when not self-destruction. A number of innocent desires fill up, with an equable flow of happiness, the time of our existence; and foreign trade is even a greater good by the stimulus it gives to thought and exertion, than by the enjoyments it immediately bestows.

VII.33

All these immense advantages arise naturally from men acting, as we know from all history they are disposed to do, on a perception of the advantages to be derived from the mutual exchange of the products of different climates. There are numberless instances of governments checking and prohibiting the natural trade which, but for their interference, would be carried on between different countries; there is no instance of their calling any beneficial trade into existence, and no instance of a people, unless prevented by their government, refusing to engage in such a trade. Thus trade, in all its vast ramifications, and with its immeasurable benefits, is a natural phenomenon growing out of natural differences in the soil, climate, and spontaneous productions of the earth. Merchants at present regulate their proceedings by the money price of goods, by the rate of exchange, by the enactments of the law-giver, and by that forced state of things which these enactments have brought into existence. With all these considerations, the science of Political Economy has no more to do than it has with the motives which induce the farmer to sow wheat or plant hops. To judge of them is the business of the merchant. The science contents itself with enumerating some of the advantages of trade, and stating its natural source. The ultimate regulating principles of all foreign trade, whether it be carried on between countries under the sway of the same king or not, are the great natural circumstances mentioned; and any interference, whether by governments or individuals, to impede or prevent the mutual exchange of those commodities which can be only or most advantageously produced in limited spaces, is a violation of the order of nature, equal in principle, if not in degree, to an interference to prevent men dedicating themselves to separate employments.

VII.34

The advantages, moral and physical, of trade, are unknown to the rulers of mankind; or at least, in their estimation, they are of no importance in comparison with the preservation of their power. Under the influence of ignorant ambition, they have, in almost all cases, prescribed regulations for that trade which has, and prohibited much of that which might have been, carried on between different states. Any thing more meddling or impertinent cannot be imagined. The individuals who are willing to make an exchange say for example, of French wine for English cutlery, find it mutually advantageous; and no third party, whether he be a rival manufacturer or merchant, a monopolizing trader or landlord, a theoretical politician or a practical statesman, can, under any circumstances, be entitled to say such an exchange is mischievous, or lay any impediments in the way of this species of honest, honourable, and productive industry. Unfortunately, this principle is not yet generally recognised, and the business of the merchant has been interfered with, prescribed, and regulated, in a manner which is tolerated in no other branch of social production. We are all interested in checking this absurd conduct; for unless we stop the interference of one man, or a class of men, with the business of another, at its very commencement, by a positive and complete denial of its utility, there is no point short of entire slavery where we can arrest it. Ambition is insatiable, and all history tells us, in regulating kingdoms as well as regulating clubs, that those whom we permit or request to assume for some trifling purpose the office of legislators, never rest satified till they obtain the power of prescribing our speech, our behaviour, and our thoughts.

VII.35

Why should the advantages resulting from territorial division of labour, and the consequent exchange of commodities between districts of the earth differently situated, be confined to countries acknowledging the same master, and why should they not be universally enjoyed? Why should any individuals of this country not be freely permitted to exchange all or any part of the produce of their industry for the produce of some other industrious men living in France or Spain, as well as for the produce of the unhappy slaves in our colonies? It is found to be very advantageous for the cotton spinners in Lancashire to buy wheat from the Irish, by means of their own produce, for the manufacturers of Birmingham, and the farmers of Cheshire, mutually to exchange hardware and cheese, for the graziers of Scotland to give cattle for barley, and for the English to trade with China and America,—and for what reason would an exchange of commodities with neighbouring countries not be equally beneficial; and what has the fact of their having different governments to do with their trade, that it should be restrained or interdicted?

VII.36

If it be good for individuals to confine their exertions to one branch of business, for the tailor or fisherman, for example, to do nothing but make clothes or catch fish, buying whatever he may need with the produce of his peculiar industry; if it be advantageous for the miners of Durham and Cornwall, to be only miners, having their knives, pickaxes, and gunpowder brought from Birmingham and Hounslow; if it be advantageous for the inhabitants of the Scotch hills, to attend only to rearing cattle, importing cutlery and cloth from Yorkshire,—it must also be advantageous for the people on the south coast of England, to exchange their produce for the produce of the people on the opposite side of the Channel, with whom they are naturally and geographically much closer connected than with Ireland or Scotland;—and it must also be advantageous for the inhabitants generally of this foggy, moist country, abounding in coal, to exchange the commodities of which the production is favoured by these circumstances, for the apples and wheat of Normandy, the raisins of Provençe, and for the brandy and wine of Gascony. The English Channel can make no more difference in this respect, than the Irish Channel or than the Tweed. If, in fact, the provinces of France, which once bowed beneath the sceptre of our Plantagenets, now acknowledged the sway of our Guelphs, if they were regulated and taxed by laws made at Westminster, if their affairs were administered by our Eldons, Liverpools, and Cannings, a free commercial intercourse with them would be considered as advantageous as such an intercourse between Yorkshire and Suffolk.

VII.37

Fortunately for us, and fortunately for the world, when our colonies in America thew off the yoke of the British Parliament and King, and formed themselves into the United States, the trading bonds of connexion between the two countries were so numerous, their want of each other was so urgent, and something like a free communication between them was so necessary to the prosperity of both, that whatever may have been the wish of statesmen,—and it has been plainly manifested by many jealous and unwise regulations in both hemispheres,—it was not possible to interdict the trade between Britain and America, and declare it a nuisance, as the trade between this country and the ancient dominions of our kings on the neighbouring continent, has been interdicted and declared. To a certain extent, the trade between the United States and Great Britain has been permitted, and has contributed largely to the prosperity of both countries,—teaching the world that the organization of men into different political societies, or into little hordes and knots of slaves, has nothing whatever to do with their progress in wealth, except to impede it; and that the trade which is beneficial when carried on by the subjects of the same state, is equally beneficial when they have different masters.

VII.38

No man can suppose that the chance which made our former continental dominions a part of the patrimony of the Bourbons, instead of their adding to the almost numberless dependencies of the Guelphs,—or that the wisdom which took the people of North America from under the dominion of our sporting squires, intriguing statesmen, and greedy capitalists, which, God knows! we find enough burdensome,—can alter in the smallest degree those natural and eternal laws which regulate production, and by which the mutual exchange of the varied products of different climates, stimulates industry, adds to enjoyment, and bestows, like Charity, a double blessing, for it blesses those who buy and those who sell.

VII.39

If the reader is now sensible of the benefits of foreign trade, a few words will elucidate the utility of the wholesale merchant. It is plain that the producers of commodities to be exchanged, whose business it is to produce as much with as little labour as possible, cannot attend to the wants of mankind in distant parts of the world. The wine-maker must be acquainted with the principles of fermentation, and the cloth-maker must know the arts of weaving, fulling, and dying; but to send either wine or cloth to a suitable market, requires a knowledge of the wants and tastes of different communities. Such knowledge is quite distinct from that necessary for the production of the commodities to be exchanged: to acquire it, both time and attention must be bestowed; and the art of the merchant must be learned like any other branch of business. He is a labourer, but his labour is chiefly mental; and his occupation is one branch of the division of labour. By finding a market for the commodities of two producers, living at a distance from and unacquainted with each other, he relieves them both from this trouble. He produces neither wine in Portugal nor cloth in Yorkshire, but by ascertaining that one can be advantageously exchanged for the other, and being the chief agent in making the exchange, he contributes, like the watchmaker mentioned by Dr. Paley, to produce both cloth and wine. If these commodities, as I have already stated, would not be produced unless they could be exchanged for each other, the merchant must be as instrumental in producing both, as the actual wine and cloth makers. He is quite as useful, therefore, but not more useful, than those who make cloth and wine. His occupation could not exist but for them, and it springs from one of them being able to produce a greater quantity of wine, and the other of cloth, than they require for their own use.

VII.40

All wealth, it must be remembered, has a relation to our wants. The rich and luscious pine-apple, that annually ripens and decays in the wilds of Africa, and the majestic trees which flourish and fade, century after century, in the unexplored forests of America, almost unseen and untouched by a single human being, are not wealth. Transport them, however, into Covent-garden market, or to the banks of the Thames, and they would instantly acquire that relation to the wants of some persons, which gives to a material object the characteristics of wealth. This is an extreme case; but the business of the merchant is to give, in a degree, this characteristic of wealth to every object he deals with. He removes commodities from where they possess little, to where they possess much value; from where there are few or no persons requiring them, and they are of little use, to where they are of more use, and where the demand for them is greater; and as far as this relation of material objects to the wants of man is concerned, he creates wealth as much as the man who, by converting wool into cloth, adapts it to the purposes of clothing.

VII.41

He is not paid by any salary or wages for these valuable services, but by the increased price the commodities fetch in consequence of being removed to the spot where they are most required. From this mode of payment, we see that his principal object must always be to buy when and where commodities are cheap, and sell when and where commodities are dear. This is the principle of his operations, and therefore they tend to equalize prices at all times and places. It is accordingly found, as, for example, in Holland, where for many years the price of grain has been comparatively steady, that whenever trade is free and governments leave it to its natural course, fluctuations in price are of little extent. The mode of paying merchants, and the object they must necessarily have in view, shows that trade instead of causing, as is usually stated, alternations of prosperity and decay, and fluctuations in the condition of a society, tends, in fact, to raise it above all such fluctuations, and even to secure it against the effects of variations in the seasons.

VII.42

That the seasons vary in fertility, and that great fluctuations consequently take place in prices, causing perhaps some of the most grievous calamities by which the very complicated mechanism of civilized society is liable to be deranged, is very well known. But variations which appear very great when examined only in relation to limited spaces and short periods, disappear as observation is extended to a wider range. Nature provides a remedy for the evils which might occur from such variations, by making the fertility of one species of produce, one district, climate, soil, or year, compensate for the barrenness of some other year and district, and the failure of some other crop. Such a provision, however, requires that the surplus of the fertile year be stored up against the coming of the barren year; and the luxuriant crops of one spot be conveyed from the place where they are in excess, to where there are mouths but no food. To ascertain all such circumstances, and to buy and sell accordingly, is one part of the business of the merchant; and but for his occupation, this beneficial arrangement of nature would be useless. Let it also be remarked, that the evils of such variations in the seasons would probably be less felt as the earth was deficient in people; that they would be augmented, and become terrific as men multiplied; but as that multiplication goes on, division of labour is extended, the business of the merchant is established, and his occupation places the citizens of a well-peopled country in this respect far above the level of the thinly-scattered inhabitants of the most fertile regions. Thus there have been no such enormous fluctuations in price, and no such famines in this country, within the last century, as occurred in the 14th, 15th and 16th centuries, and as now occur in South America; and corn never fluctuates in price in Holland to the same degree as in Spain. Trade, which is in a great measure free in Holland, and amazingly restricted in Spain,—which is now so extensive in this country, and was formerly almost unknown,—is the great means of preventing fluctuations in price, and the alternation of dearth and abundance.

VII.43

The governments of some countries, distinguished for wisdom, noticing the evils resulting from variations in the seasons, have established public granaries to prevent them, and to equalize the operations of nature; but the merchant buying when and where commodities are cheap, and only selling when and where they are dear, does, in fact, perform, but infinitely better than governments can, all the functions of public granaries. But are not the magnificent store-houses erected on the banks of the Thames public granaries, exceeding in vastness and completeness the national granaries of any other people; and would any salaried servants of government have the same interest as the merchant to watch and conjecture the fluctuations of the markets? The sharpsightedness of his self-interest is continually on the alert, and he can only obtain a profit as his operations tend to equalize supply and demand. His motives are selfish, but the consequences of his proceedings are not the less beneficial. They are not prescribed by the legislator, but they are a most important part of social order. Trade supplies us with one of the many examples of nature regulating and prescribing our conduct, in cases for which governments,—imagining she had turned us adrift on the wide ocean of the universe, without compass, chart, or pilot,—thought it was their business to provide. The motives of the individuals may be called trivial; and perhaps some great sea and land captains may say they are unworthy and inglorious; but nature nevertheless effects by them a purpose of far more importance to mankind than all their victories. The operations of the merchant, though they arise from the most selfish motives, have a direct tendency, whenever they are freely permitted, to neutralize the variations of the seasons, and to spread with an equal hand the means of subsistence and enjoyment over the whole civilized world, and among all classes and conditions of men.

VII.44

I beg the reader to recollect that I speak only of the natural effects of the conduct of merchants, having for their object to buy when and where commodities are cheap, and to sell when and where they are dear. Such a class of labourers being highly useful to the rest of the community, it must be deeply lamented that in our time their honourable name and character have been usurped by gambling speculators. As they acquire wealth by dealing in commodities, the producers of which are very often in a state of destitution, they are liable, under the most favourable circumstances, to excite envy and hatred; but this usurpation will bring their name and occupation into contempt. In our time, unfortunately, owing to our immense taxation, the burden of which every man tries to throw on his neighbour, and to the variations in the value of paper money, which is sometimes exchangeable for gold, and sometimes not, as suits the conveniency of the government,—a low cupidity, and the spirit of lottery contractors have become the animating principles of all traders. A hocus-pocus system of multiplying wealth has been adopted throughout the community, and our merchants generally seek to become rich by time bargains and gambling speculations. Industry loses all its charms when affluence may be acquired by a lucky hit. At present the order of nature is reversed, and opulence, instead of being the result only of pains-taking labour, is the reward of some chance speculation. Among the numberless evils created by our national monetary, and borrowing systems, there is none greater perhaps than the abstracting a large number of persons from industrious occupations, who, under the name of merchants, rely for their prosperity on effecting by various falsehoods and tricks, a turn in the markets, or a rise or fall in the price of the Stocks. The business of the real merchant is totally different. His occupation springs from the natural circumstance of different climates giving rise to territorial division of labour; and in its effects it equalizes prices, and neutralizes the variations of the seasons. He is an indispensable member of the complicated, but well combined and nicely arranged system of social production, which grows up naturally and independent of all legislative regulation as our species is multiplied; and which renders civilized man so much more opulent, happier, and better than the savage.


Notes for this chapter


48.
Wealth of Nations, book 2. chap. 5.
49.
I take the difference of time required to complete the products of agriculture, and of other species of labour, to be the main cause of the great dependence of the agriculturists. They cannot bring their commodities to market in less time than a year. For that whole period they are obliged to borrow of the shoemaker, the tailor, the smith, the wheelwright, and the various other labourers, whose products they cannot dispense with, but which are completed in a few days or weeks. Owing to this natural circumstance, and owing to the more rapid increase of the wealth produced by other labour than that of agriculture, the monopolizers of all the land, though they have also monopolized legislation, have not been able to save themselves and their servants, the farmers, from becoming the most dependent class of men in the community. They can no longer prosper without continued legislative protection. The length of time required to complete agricultural productions, causing the dependence of those who cultivate the ground on other men, takes from them the power, wherever labour is in the least free, which they might otherwise possess, of starving the rest of the community. The observation may be extended to different communities as well as to the members of the same community, and convinces me, that those politicians who dread the dependence of our manufacturers on foreign agriculturists have never formed a correct notion of the phenomena of social production.
50.
Elements of Poliltical Economy, p. 84.
51.
Norway planks are not exactly excluded from our market, but they are burdened with a heavy duty, in order to impose on those who use planks the additional labour of bringing them from Canada. It is, perhaps, fortunate for the Norwegians, that lobsters were formerly considered a great luxury, and were chiefly consumed by the rich. They, with turbot, another article of luxury, were accordingly, under our much praised Navigation laws, allowed to be imported into this country in the vessels of any nation, I believe, while the importation of every other species of fish, which might have contributed to the subsistence of the people, was strictly confined to British vessels.
52.
It may be worth observing, that our people are quite as dependent for subsistence on these foreign products, as if they constituted their actual food. Were the supply of silk and cotton to be cut off, it would as surely annihilate all our silk and cotton manufacturers, as if the food necessary for their subsistence could no longer be produced. They would then have nothing to give for food, and the landed gentry and farmers would most certainly not allow them to have food without an equivalent. There is no class of men, however, interested in preventing the importation of cotton and silk, and, therefore, this species of dependence never excites any sinister forebodings. No apprehension is entertained of our people being starved by the supply of cotton or silk being withheld; but we are told, though the thing seems impossible, that were we to eat foreign corn, we should be reduced even to a worse state of bondage, than that sought to be imposed on us by the lords of our soil. To me the dependence, and of course the danger, if there be any, arising from so many of our people subsisting by working up cotton and silk, seems far greater than would arise from importing food. Cotton and silk are the products of comparatively limited spaces; but food of one kind or another, and even wheat, is the produce of almost all the climates of the globe. We can find almost numberless substitutes for any particular kind of food: if one nation will not allow us to have wheat, we can procure rye, or barley, or flour, or maize, from some other; but if our supplies of cotton and silk were withheld, what could we substitute for them? To me it is plain, that the dependence of men on men, whether they live under the same government or not, is the necessary consequence of the beneficial practice of division of labour; and politicians, unless they abolish this practice, cannot prevent the mutual dependence of nations; though, by their ill-timed jealousies and absurd restrictions, they may sow strife where Nature meant to teach kindness, and they may bring into jeopardy the existence of several millions of industrious men.
53.
Oranges, cheap as they appear, pay a duty of 15s. the 1000, or 75l. per cent. on their value; or 2s. 6d. per box, containing 5000 cubic inches. See Act 7, Geo IV.
54.
The principle stated in the text, obviously holds good throughout all countries under the same government; and if it do not hold good in countries not under the same government, the cause of the variation is political—not natural.
55.
The following passage from Mr. D. Hume's Essay, "Of the Jealousy of Trade," may perhaps not be without interest as confirming the view taken in the text, and exemplifying the great alteration which has taken place since a period somewhat prior to the time he wrote, in the relative situation of this country to the surrounding countries. "I go farther," he says, "and observe that where an open communication is preserved among nations, it is impossible but the domestic industry of every one must receive an increase from the improvements of the others. Compare the situation of Great Britain at present with what it was two centuries ago. All the arts of agriculture and manufactures were then extremely rude and imperfect. Every improvement we have since made, has arisen from our imitation of foreigners, and we ought so far to esteem it happy that they had previously made advances in arts and ingenuity. But this intercourse is still upheld to our great advantage; notwithstanding the advanced state of our manufacturers, we daily adopt in every art the inventions and improvements of our neighbours. The commodity is first imported from abroad to our discontent while we imagine it drains us of our money. Afterwards the art itself is gradually imported to our visible advantage; yet we continue still to repine that our neighbours should possess any art, industry, and invention, forgetting that had they not first instructed us, we should have been at present barbarians; and did they not still continue these instructions, the arts must fall into a state of languor, and lose that emulation and novelty which contribute so much to their advancement." At present Britain has become the teacher of her former teachers, and although we require the competition of other nations to stimulate us onward in our career, the instruction we at present derive from them is so little that there can be no fear, though it should wholly cease, of the arts falling into languor.
56.
Moral Philosophy, vol. ii.

Part I, Chapter VIII

End of Notes


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