Section XVII. Bounties and Prohibitions

Under this title I include all encouragements and discouragements, of whatsoever sort, the object of which is, to make more or less of production or exchange to flow in certain channels, than would go into them of its own accord.

The argument, on this subject, I trust, will be clear and conclusive, without a multiplicity of words.

If it should appear, that production and exchange fall into the most profitable channels, when they are left free to themselves; it will necessarily follow that, as often as they are diverted from those channels, by external interpositions of any sort, so often the industry of the country is made to employ itself less advantageously.

That production and exchange do, when left to themselves, fall into the most profitable channels, is clear by a very short demonstration.

The cases of production and of exchange require to be considered separately; for, in the case of production, there is hardly any difference of opinion. If a country had no commercial intercourse with other countries, and employed the whole of its productive powers exclusively for the supply of its own consumption, nothing could be more obviously absurd, than to give premiums for the production of one set of commodities, and oppose obstructions of any sort to the production of another; I mean, in the view of Political Economy, or, on account of production: for if any country opposes obstructions to certain commodities, as spirituous liquors, because the use of them is hurtful; this regards morality, and has, for its end, to regulate not production, but consumption. Wherever it is not intended to limit consumption, it seems admitted, even in practice, that the demand will always regulate the supply, in the manner in which the benefit of the community is best consulted. The most stupid governments have not thought of giving a premium for the making of shoes, or imposing a preventive tax upon the production of stockings, in order to enrich the country by making a greater quantity of shoes, and a less quantity of stockings. With a view to the internal supply, it seems to be understood that just as many shoes, and just as many stockings, should be made, as there is a demand for. If a different policy were pursued; if a premium were bestowed upon the production of shoes, a tax or other burthen imposed upon the production of stockings, the effect would only be, that shoes would be afforded to the people cheaper, and stockings dearer, than they otherwise would be: that the people would be better supplied with shoes, worse supplied with stockings, than they would have been, if things had been left to their natural course, that is, if the people had been left to consult freely their own convenience, in other words, if the greatest quantity of benefit, from their labour, had been allowed to be obtained.

All that regulation of industry, therefore, the object of which has been, to increase the quantity of one sort of commodities, lessen the quantity of another, has been directed to the purpose of regulating the exchange of commodities with foreign countries; of increasing, or diminishing, most commonly diminishing, the quantity of certain commodities, which would be received from abroad.

Now it is certain, as has been already abundantly proved, that no commodity, which can be made at home, will ever be imported from a foreign country, unless it can be obtained by importation with a smaller quantity of labour, that is, cost, than it could be produced with at home. That it is desirable to have commodities produced with as small a cost of labour as possible seems to be not only certain, but admitted. This is the object of all the improvements that are aimed at in production, by the division and distribution of labour, by refined methods of culture applied to the land, by the invention of more potent and skilful machines. It seems, indeed, to be a self-evident proposition, that whatever the quantity, which a nation possesses of the means of production, the more productive they can possibly be rendered, so much the better; for this is neither more nor less than saying, that to have all the objects we desire, and to have them with little trouble, is good for mankind.

Not only is it certain, that in a state of freedom no commodity, which can be made at home, will ever be imported, unless it can be imported with a less quantity, or cost, of labour than it could be produced with at home; but, whatever is the country from which it can be obtained with the smallest cost of labour, to that recourse will be had for obtaining it; and whatever the commodity, by the exportation of which, it can be obtained with the smallest quantity of home labour, that is the commodity, which will be exported in exchange. This results, so obviously, from the laws of trade, as not to require explanation. It is no more than saying, that the merchants, if left to themselves, will always buy in the cheapest market, and sell in the dearest.

It seems, therefore, to be fully established, that the business of production and exchange, if left to choose its own channels, is sure to choose those, which are most advantageous to the community. It is sure to choose those channels, in which the commodities, which the community desires to obtain, are obtained with the smallest cost. To obtain the commodities, which man desires, and to obtain them with the smallest cost, is the whole of the good which the business of production and exchange, considered simply as such, is calculated to yield. In whatever degree, therefore, the business of production and exchange is forced out of the channels into which it would go of its own accord, to that degree the advantages arising from production and exchange are sacrificed; or, at any rate, postponed to something else. If there is any case, in which they ought to be postponed to something else, that is a question of politics, and not of political economy.

There is no subject, upon which the policy of the restrictive and prohibitive system has been maintained with greater obstinacy, and with a greater quantity of sophistry, than that of the trade in corn. There can, however, be no doubt, that corn never will be imported, unless when it can be obtained from abroad with a smaller quantity of labour than it can be produced with at home. All the good, therefore, which is obtained from the importation of any commodity, capable of being produced at home, is obtained from the importation of corn. Why should that advantage which, in the case of corn, owing to the diversities of soil and extent of population, is liable to be much greater than in the case of any other commodity, be denied to the community?

The reasons, upon which the advocates for a restriction of the corn trade chiefly support themselves, are two; neither is of any value.

The first is, that unless the nation derive its corn from its own soil, it may, by the enmity of its neighbours, be deprived of its foreign supply, and reduced to the greatest distress. This argument implies an ignorance both of history, and of principle: Of history, because, in point of fact, those countries which have depended the most upon foreign countries for their supply of corn, have enjoyed beyond all other countries, the advantage of a steady and invariable market for grain: Of principle, because it follows unavoidably, if what, in one country is a favourable, is in other countries an unfavourable season, that obtaining a great part of its supply from various countries is the best security a nation can have against the extensive and distressing fluctuations which the variety of seasons is calculated to produce. Nor is the policy involved in this argument better than the political economy. It sacrifices a real good, to escape the chance of a chimerical evil: an evil so much the less to be apprehended, that the country, from which another derives its supply of corn, is scarcely less dependant upon that other country for a vent to its produce, than the purchasing country is for its supply. It will not be pretended, that a glut of corn, in any country, from the loss of a great market, with that declension of price, that ruin of the farmers, and that depression of rents, which are its unavoidable consequences, is an immaterial evil.

The second reason, upon which the advocates of the corn monopoly support themselves, is, That, if the merchants and manufacturers enjoy in certain cases the monopoly of the home supply, the farmers and landlords are subject to injustice, when a similar monopoly is not bestowed upon them. In the first place, it may be observed, that, if this argument is good for the growers of corn, it is good for every other species of producers whatsoever; if, because a tax is imposed upon the importation of woollens, a tax ought to be imposed upon the importation of corn, a tax ought also to be imposed upon the importation of every thing, which the country can produce; the country ought, in short, to have no foreign commerce, except in those articles alone, which it has not the means of producing.

The argument moreover supposes, that an extraordinary gain is obtained by the manufacturer, in consequence of his supposed protection; and that a correspondent evil is sustained by the corn grower, unless he is favoured by a similar tax. The ignorance of principle is peculiarly visible in those suppositions, in neither of which is there a shadow of truth.

The man who embarks his capital in the woollen, or any other manufacture, with the produce of which that of the foreign manufacturers is not allowed to come into competition, does not, on that account, derive a greater profit from his capital. His profit is no greater than that of the man whose capital is embarked in trades open to the competition of all the world. All that happens is, that a greater number of capitalists find employment in that branch of manufacture; that a portion, in short, of the capitalists of the country employ themselves in producing that particular species of manufacture, who would otherwise be employed in producing some other species, probably in producing something for the foreign market, with which that commodity, if imported from the foreign manufacturer, might be bought.

As the man who has embarked his capital in the trade, which is called protected, derives no additional profit from the protection; so the grower of corn sustains not any peculiar loss or inconvenience. Nothing, therefore, can be conceived more groundless than his demand of a compensation on that account. The market for corn is not diminished because a tax is laid upon the importation of woollens; nor would that market be enlarged if the tax were taken off. His business, therefore, is not in the least degree affected by it.

It would be inconsistent with the plan of a work, confined to the exposition of general principles, to lay open all the fallacies, which lurk in the arguments for restraining the trade in corn. One or two, however, of the sources of deception, cannot be left altogether unnoticed.

The landlord endeavours to represent his own case, and that of the manufacturer, as perfectly similar; though, in the circumstances which concern this argument, they are not only different, but opposite. The landlord also endeavours to mix up his own case with that of the farmer; and upon the success of that endeavour almost all the plausibility of his pretensions depends. That no pretensions are more unfounded, may be seen by a very short process of reasoning. The farmer, as a producer, requires, like every other producer, that all his outgoings be returned to him, with the due profit upon the capital which he employs. The surplus, which the land yields, over and above this return and profit, is what he pays to his landlord; and his interest is not affected by the quantity of that surplus, whether it be great or small. His interest, however, is very much affected by wages; because, in proportion as wages are low, his profits, like all other profits, are high. Wages cannot be low, if corn is dear. The interest, therefore, the permanent interest, of the class of farmers, consists, in having corn cheap. This or that individual in the class may, that is, during the currency of a lease, have an interest in high prices; and the reason of the exception shows the truth of the general rule. The individual, who, during the currency of a lease, has an interest in high prices, is, by his lease, converted, to a certain extent, into a receiver of rent. During the continuance of his lease, if prices rise, he gets, not only his due return of profits as a farmer, but something more, namely, a portion of what is truly rent, and which, but for his lease, would have gone to the landlord.

This, then, is the grand distinction. The receivers of rent are benefited by a high price of corn; the producers of corn, as such are not benefited by it, but the reverse. The case of the farmer corresponds with that of the manufacturer, not with that of the landlord. The farmer is a producer and capitalist; the manufacturer is a producer and capitalist; and they have both received all that belongs to them, when their capital is replaced with its profits. The landlord is not a producer, nor a capitalist. He is the owner of certain productive powers in the soil; and all which the soil produces belongs to him, after paying the capital which is necessary to put those productive powers in operation. It thus appears that the case of the landlord is peculiar; that a high price of corn is profitable to him, because, the higher the price, the smaller a portion of the produce will suffice to replace, with its profits, the capital of the farmer; and all the rest belongs to himself. To the farmer, however, and to all the rest of the community, it is an evil, both as it tends to diminish profits, and as it enhances the charge to consumers.