Chap. XV: A general View of the Principles to be attended to by a Statesman, who resolves to establish Trade and Industr

The two preceding chapters I have introduced purposely to swerve as an illustration of general principles, and as a relaxation to the mind, like a farce between the acts of a serious opera. I now return to the place where I broke off my subject, at the end of the twelfth chapter.

It is a great assistance to memory, now and then to assemble our ideas, after certain intervals, in going through an extensive subject. Every branch of it must, in setting out, be treated with simplicity, and all combinations not absolutely necessary, must be banished from the theory. When this theory again comes to be applied to examples, combinations will crowd in, and every one of these must be attended to.

For this reason nothing can appear more inconsistent than the spirit which runs through some parts of this book, if compared with that which prevailed in the first. There luxury was looked on with a favourable eye, and every augmentation of superfluity was considered as a method of advancing population. We were then employed in drawing mankind, as, it were, out of a state of idleness, in order to increase their numbers, and engage them to cultivate the earth. We had no occasion to divide them into societies having separate interests, because the principles we treated of were common to all. We therefore considered the industrious, who are the providers, and the luxurious, who are the consumers, as children of the same family, and as being under the care of the same father.

We are now engaged in a more complex operation; we represent different societies, animated with a different spirit; some given to industry and frugality, others to dissipation and luxury. This creates separate interests among nations, and every one must be supposed to be under the government of a statesman, who is wholly taken up in advancing the good of those he governs, though at the expence of other societies which lie round him.

This presents a new idea, and gives birth to new principles. The general society of mankind treated of in the first book, is here in a manner divided into two: the industrious providers are supposed to live in one country, the luxurious consumers in another. The principles of the first book remain here in full vigour. Luxury still tends as much as ever to the advancement of industry, the statesman's business only is, to remove the seat of it from his own country. When this can be accomplished without detriment to industry at home, he has an opportunity of joining all the advantages of ancient simplicity to the wealth and power which attend upon the luxury of modern states. He may preserve his people in sobriety, and moderation as to every expence, as to every consumption, and make them enjoy, at the same time, riches and superiority over all their neighbours.

Such would be the state of trading nations, were they employed in supplying the wants or extravagant consumption of strangers only, and did they not insensibly adopt the very manners with which they strive to inspire others.

As often, therefore, as we suppose a people applying themselves to the advancement of foreign trade, we must simplify our ideas, by dismissing all political combinations of other circumstances; that is to say, we must suppose this spirit universal, and then point out the principles which influence the success of it.

We must encourage oeconomy, frugality, and a simplicity of manners, discourage the consumption of every thing that can be exported, and excite a taste for superfluity in neighbouring nations. When such a system can no more be supported to its full extent, by the scale of foreign demand becoming positively lighter; then in order to set the balance even again, without taking any thing out of the heavier scale, and to preserve and to give bread to those who have enriched the state; an additional home consumption, proportioned to the deficiency of foreign demand, must be encouraged. For were the same simplicity of manners still kept up, the infallible consequence would be a forced restitution of the balance, by the distress, misery, and at last extinction of the supernumerary workmen.

I must therefore, upon such occasions, consider the introduction of luxury, or superfluous consumption, as a rational and moral consequence of the deficiency of foreign trade.

I am, however, far from thinking that the luxury of every modern state, is in proportion only to such failure; and I readily admit, that many examples may be produced where the progress of luxury at home and the domestic competitions with strangers who come to market, have been the cause both of the decline and extinction of their foreign, trade but as my business is chiefly to point out principles, and to shew their effects, it is here sufficient to observe, that in proportion as foreign trade declines, either a proportional augmentation upon home consumption must take place, or a number of the industrious, proportioned to the diminution of former consumption, must decrease. By the first, what I call a natural restitution of the balance is brought about, from the principles above deduced; by the second, what I call a forced one.

Here then is an example, where the introduction of luxury may be a rational and prudent step of administration; and as long as the progress of it is not accelerated from any other motive, but that of preserving the industrious, by giving them employment; the same spirit, under the direction of an able statesman, will soon throw industry into a new channel, better calculated for reviving foreign trade, and for promoting the public good, by substituting the call of foreigners instead of that of domestic luxury.

I hope, from what I have said, that the political effects of luxury, or the consumption of superfluity, are sufficiently understood. These I have hitherto considered as advantageous to those classes only who are made to subsist by them; I reserve for another occasion the pointing out how they influence the imposition of taxes, and how the abuse of consumption in the rich may affect the prosperity of a state.

So soon as all foreign trade has come to a stop, without a scheme for recalling it, and domestic consumption has filled up its place in consuming the work, and giving bread to the industrious, we fund ourselves obliged to reason again upon the principles of the first book. The statesman has once more both the producers and the consumers under his care. The consumers can live without employment, the producers cannot. The first seldom have occasion for the statesman's protection; the last constantly stand in need of it. There is a perpetual fluctuation in the balance between these two classes, from which a multitude of new principles arise; and these render the administration of government infinitely more difficult, and require superior talents in the person who is at the helm. I shall here point out the most striking effects only of the fluctuation and overturn of this new balance, which in the subsequent chapters shall be more fully illustrated.

First, In proportion as the consumers become extravagant, the producers become wealthy; and when the former become bankrupts, the latter fill their place.

Secondly, As the former become frugal and oeconomical, the latter languish; when those begin to hoard, and to adopt a simple life, these are extinguished: all extremes are vicious.

Thirdly, If the produce of industry consumed in a country surpass the income of those who do not work, the balance due by the consumers must be paid to the suppliers by a proportional alienation of their funds. This vibration of the balance gives a very correct idea of what is meant by relative profit and loss. The nation here loses nothing by the change produced.

Fourthly, When, on the other hand, the annual produce of industry consumed in a country, does not amount to the value of the income of those who do not work, the balance of income saved; must either be locked up in chests, made into plate, lent to foreigners, or fairly exported as the price of foreign consumption.

Fifthly, The scales stand even when there is no balance on either side; that is, when the domestic consumption is just equivalent to the annual income of the funds. I do not pretend to decide at present whether this exact equilibrium marks the state of perfection in a country where there is no foreign trade, (of which we are now treating,) or whether it would be better to have small vibrations between the two scales; but I think I may say, that all subversions of the balance on either side must be hurtful, and therefore should be prevented.

Let this suffice at present, upon a subject which shall be more fully treated of afterwards.

Let us next fix our attention upon the interests of a people entirely taken up in the prosecution of foreign trade. So long as this spirit prevails, I say, that it is the duty of a statesman to encourage frugality, sobriety, and an application to labour in his own people, and to excite in foreign nations a taste for superfluities as much as possible.

While a people are occupied in the prosecution of foreign trade, the mutual relations between the individuals of the state, will not be so intimate as when the producers and consumers live in the same society; such trade implies, and even necessarily creates a chain of foreign dependences; which proportionally diminish the mutual dependence which formerly subsisted among the citizens. Now the use of dependences, I have said, is to form a band of society, capable of making the necessitous subsist out of the superfluities of the rich, and to keep mankind in peace and harmony with one another.

Trade, therefore, and foreign communications, form a new kind of a society among nations; and consequently render the occupation of statesman more complex. He must, as before, be attentive to provide food, other necessaries and employment for all his people; but as the foreign connections make these very circumstances depend upon the entertaining a good correspondence with neighbouring nations, he must acquire a proper knowledge of their domestic situation, so as to reconcile, as much as may be, the interests of both parties, by engaging the strangers to furnish articles of the first necessity, when the precious metals cannot be procured; and to accept, in return, the most consumable superfluities which industry can invent. And, last of all, he must inspire his own people with a spirit of emulation in the exercise of frugality, temperance, oeconomy, and an application to labour and ingenuity. If this spirit of emulation be not kept up, another will take place; for emulation is inseparable from the nature of man; and if the citizens cannot be made to vie with one another, in the practice of moderation, the wealth they must acquire, will soon make them vie with strangers, in luxury and dissipation.

While a spirit of moderation prevails in a trading nation, it may rest assured, that as far as in this particular it excels the nations with whom it corresponds, so far will it increase the proportion of its wealth, power, and superiority, over them. These are lawful pursuits among men, when purchased by success in so laudable an emulation.

If it be true, that superfluity, intemperance, prodigality, and idleness, qualities diametrically opposite to the former, corrupt the human mind, and lead to violence and injustice; is it not very wisely calculated by the Author of all things, that a sober people, living under a good government should, by industry and moderation, necessarily acquire wealth, which is the best means of warding off the violence of those, with whom they are bound in the great society of mankind? And is it not also most wisely ordained, that in proportion as a people contract vicious habits, which may lead to excess and injustice, the very consequence of their dissipation (poverty) should deprive them of the power of doing harm? But such reflections seem rather to be too great a refinement on my subject, and exceed the bounds of political oeconomy.

When we treat of a virtuous people applying to trade and industry, let us consider their interest only, in preserving these sentiments; and examine the political evil of their falling off from them. When we treat of a luxurious nation, where the not-working part is given to excesses in all kinds of consumption, and the working-part to labour and ingenuity, in order to supply them, let us examine the consequences of such a spirit, with respect to foreign trade: and if we find, that a luxurious turn in the rich is prejudicial to it, let us try if we can discover the methods for engaging the inhabitants to correct their manners from a motive of self-interest. These things premised.

I shall now give a short sketch of the general principles upon which a system of foreign trade may be established, and preserved as long as possible; and of the methods by which it may be again recovered, when, from the natural advantages and superior ability of administration in rival nations, (not from vices at home,) a people may have lost for a time every advantage they used to draw from their foreign commerce.

The first general principle is to employ, as usefully as possible, a certain number of the society, in producing objects of the first necessity, always more than sufficient to supply the inhabitants; and to contrive means of enabling every one of the free hands to procure subsistence for himself, by the exercise of some species of industry.

These first objects compassed, I consider the people as abundantly provided with what is purely necessary; and also with a surplus prepared for an additional number of free hands, so soon as a demand can be procured for their labour. In the mean time, the surplus will be an article of exportation; but no sooner will demand come from abroad, for a greater quantity of manufactures than formerly, than such demand will have the effect of gradually multiplying the inhabitants up to the proportion of the surplus above mentioned, provided the statesman be all along careful to employ these additional numbers, which an useful multiplication must have produced, in supplying the additional demand: then with the equivalent they receive from strangers, they will at the same time enrich the country, and purchase for themselves that part of the national productions, which had been permitted to be exported, for want only of a demand for it at home.

He must, at the same time, continue to give a proper encouragement to the advancement of agriculture, in order that there may be constantly found a surplus of subsistence (for without a surplus there can never be enough); this must be allowed to be exported, and ought to be considered as the provision of those industrious hands which are yet unborn.

He must cut off all foreign competition, above a certain standard price, for that quantity of subsistence which is necessary for home consumption; and, by premiums upon exportation, he must discharge the farmers of any superfluous load, which may remain upon their hands when prices fall too low. This important matter shall be explained at large in another place, when we come to treat of the policy of grain.

If natural causes should produce a rise in the price of subsistence, which cannot be brought down by any encouragement he can give to agriculture, he must then lay the whole community under contribution, in order to indemnify those who work for strangers, for the advance upon the price of their food; or he must indemnify the strangers in another way, for the advance in the price of manufactures.

He must consider the manufactures of superfluity, as wrought up for the use of strangers, and discourage all domestic competition for them, by every possible means.

He must do what he can, constantly to proportion the supply to the demand made for them; and when the supply necessarily comes to exceed the demand, in spite of all his care, he must then consider what remains over the demand, as a superfluity of the strangers; and for the support of the equal balance between work and demand, he must promote the sale of this superfluity even within the country (under certain restrictions however), until the hands employed in such branches where a redundancy is found, can be more usefully set to work in another way.

He must consider the advancement of the common good as a direct object of private interest to every individual, and by a disinterested administration of the public money, he must plainly make it appear that it is so.

From this principle flows the authority, vested in all governments, to load the community with taxes, in order to advance the prosperity of the state. And this object can be nowise better obtained than by applying the amount of them to the keeping an even balance between work and demand. Upon this the health of a trading state principally depends.

If the failure of foreign demand be found to proceed from the superior natural advantages of other countries, he must double his diligence to promote luxury among his neighbours; he must support simplicity at home; he must increase his bounties upon exportation; and his expence in relieving manufactures, as oft as the price of their industry falls below the expence of their subsistence.

While these operations are conducted with coolness and perseverance, while the allurements of the wealth acquired do not frustrate the execution, the statesman may depend upon seeing foreigners return to his ports, so soon as their own dissipation, and want of frugality, come to compensate the advantages which nature had formerly given them over their frugal and industrious neighbours.

If this plan be pursued, foreign trade will increase in proportion to the number of inhabitants; and domestic luxury will serve as an instrument only in the hands of the statesman to increase demand at home, when the supply becomes too great for foreign consumption. In other words, the rich citizens will be engaged to consume what is superfluous, in order to keep the balance even in favour of the industrious, and in favour of the nation.

The whole purport of this plan is to point out the operation of three very easy principles.

The first, That in a country entirely taken up with the object of foreign trade, no competition should be allowed to come from abroad for articles of the first necessity, and principally for food, so as to raise prices beyond a certain standard.

The second, That no domestic competition should be encouraged upon articles of superfluity, so as to raise prices beyond a certain standard.

The third, That when these standards cannot be preserved, and that, from natural causes, prices get above them, public money must be thrown into the scale to bring prices to the level of those of exportation.

The greater the extent of foreign trade in any nation is, the lower these standards must be kept; the less the extent of it is, the higher they may be allowed to rise. Consequently,

Were nobody in a nation employed in producing the necessaries of life, and all the industrious employed in supplying other articles of consumption, the prices of necessaries might be allowed to fall as low as possible. There would be no occasion for a standard in favour of those who live by producing them.

Were no man in the state employed in supplying strangers, the prices of superfluities might be allowed to rise as high as possible, and a standard would also become useless, as the sole design of it is to favour exportation.

But as neither of these suppositions can ever take place, and as in every nation there is a part employed in producing, and a part in consuming; and as it is the surplus only of industry which can be exported; a standard is necessary for supporting the reciprocal interests of both parties at home; and the public money must be made to operate upon the price of the surplus of industry only so as to make it exportable, even in cases where the national prices upon home consumption have got up beyond the proper standard. Let me set this matter in another light, the better to communicate an idea which I think is still a little obscure.

Were food and other necessaries the pure gift of nature in any country, I should have laid it down as a principle to discourage all foreign competition for them, either below or above any certain standard; because in this case the lower the price of them be, it is so much the better, since no inconvenience can result from thence to any industrious person. But as the production of these is in itself a manufacture, or an object of industry, a certain standard must be kept up in favour of those who live by producing them.

On the other hand, as to the manufactures of superfluity, domestic competition should be discouraged, beyond a certain standard, in order that prices may not rise above those offered by foreigners; but it might be encouraged below the standard, in order to promote consumption and give bread to manufacturers. But were there no foreign demand at all, there would be no occasion for any standard, and the nation's wealth would thereby circulate only with greater or less rapidity in proportion as prices might rise or fall. The study of the balance between work and demand, would still continue a principal object of attention in the statesman, not with a view to enrich the state, but in order to preserve every member of it in health and vigour. On the other hand, the object of a standard regards foreign trade, and the acquisition of new wealth, at the expence of other nations. The rich, therefore, of a trading state must not be allowed to increase their consumption of superfluities to the full proportion of the constant supply; because an ample surplus must remain for exportation; and the only way to prevent foreigners from supplying themselves, is to prevent prices from getting up beyond the standard, at which these foreigners can produce them.

Farther, were every one of the society in the same pursuit after industry, there would be no occasion for the public to be laid under contribution for advancing the general welfare; but as there is constantly a part employed in enriching the state, by the sale of their work to strangers, and a part employed in making these riches circulate at home, by the consumption of superfluities, I think it is a good expedient to throw a part of domestic circulation into the public coffers by the name of taxes; that when the consequences of private wealth come necessarily to raise prices, a statesman may be enabled to defray the expense of bounties upon that part which can be exported, and thereby enable the nation to continue to supply foreigners at the same price as formerly.

The farther these principles can be carried into execution, the longer a state will flourish; and the longer she will support her superiority. When foreign demand begins to fail, so as not to be recalled, either industry must decline, or domestic luxury must begin. The consequences of both may be easily guessed at, and the principles which influence them shall be particularly examined in the following chapter.