Chap. XXIII: When a Nation, which has enriched herself by a reciprocal Commerce in Manufactures with other Nations, find

Trade having subsisted long in the nation we are now to keep in our eye, I shall suppose that, through length of time, her neighbours have learned to supply one article of their own and other people's wants cheaper than she can do. What is to be done? Nobody will buy from her, when they can be supplied from another quarter at a less price. I say, what is to be done? For if there be no check put upon trade, and if the statesman do not interpose with the greatest care, it is certain, that merchants will import the produce, and even the manufactures of rival nations; the inhabitants will buy them preferably to their own; the wealth of the nation will be exported; and her industrious manufacturers will be brought to starve. We may therefore look upon this, as a problem in trade, to be resolved by the principles already established.

First, then, it must be inquired, if, in the branch in which she is undersold, her rivals enjoy a natural advantage above her, which no superior industry, frugality, or address on her side, can counterbalance? If this he the case, there are three different courses to be pursued, according to circumstances.

First, To renounce this branch of commerce entirely, and to take the commodities wanted from foreigners, as they can furnish them cheaper.

Secondly, To prohibit the importation of such commodities altogether.

Thirdly, To impose a duty upon importation, in order to raise the price of them so high as to make them dearer than the same kind of commodity produced at home.

The first course may be taken, if, upon examining how the hands employed in a manufacture may be disposed of, it be found, that they may easily be thrown into another branch of industry, in which the nation's natural advantages are as superior to her rivals, as their's are superior to her's in the branch she intends to abandon; and provided her neighbours will agree to open their ports to the free importation of the commodities in question. For though there may be little profit in a trade by exchange, I still think it advisable to continue correspondence, and to avoid every occasion of cutting off commerce with other nations. A laborious, oeconomical, and sagacious nation, such as I suppose our traders to be, will be able to profit of many circumstances, which would infallibly turn to the disadvantage of others less expert in commerce, with whom she trades; and in expectation of favourable revolutions, she ought not rashly, nor because of small inconveniences, to renounce trading with them; especially if luxury should appear there to be on the growing hand.

But suppose the rival nation will not consent to receive the manufactures, which the traders may produce with great natural advantages, what course is then the best to be taken?

I think she ought to encourage, for her own consumption, the branch in which she is rivalled, though she must give over exporting it; and, in this case, it must be examined, whether the importation of it should be prohibited altogether, (which is the second course mentioned above) or whether it be more advisable to prefer the last scheme, viz. to allow such commodities to be imported, with a duty which may raise their price to so just a height as neither to suffer them to he sold so cheap as to discourage the domestic fabrication, nor so dear, as to raise the profits of manufactures above a reasonable standard, in case of an augmentation of demand.

The second course must be taken, when the natural advantages of the foreign nations are so great, as to oblige the statesman to raise duties to such a height as to give encouragement to smuggling.

The third course seems the best, when the advantages of the rivals are more inconsiderable; in which case, the traders may, in time, and by the progress of luxury among their neighbours, or from other revolutions, which frequently happen in trading nations, regain their former advantages.

This may be the decision, in case a nation be rivalled in a branch where she has not equal advantages with her neighbours; and when she cannot compensate this inconvenience, either by her frugality or industry, or by the means of a proper application of her national wealth. These operations have been already fully explained, and are now considered as laid aside; not that we suppose they can ever cease to operate their effects in all nations; but in order to simplify our ideas, and to point out the principles which ought to direct a statesman's conduct upon occasions, where from different combinations of circumstances, he finds better expedients impracticable.

Let me next suppose a nation to be rivalled in her staple manufactures; that is, in those where she has the greatest natural advantages.

Whenever such a case happens, it must proceed from some vice within the state. Either from the progress of luxury in the workmen, which must proceed from consolidated profits, or from accidental disadvantages; such as dearness of subsistence, or from taxes injudiciously imposed. These (I mean all, except the taxes, of which afterwards) must be removed upon the principles above laid down: and if this cannot be compassed, no matter why; then comes the fatal period, when all foreign reciprocal commerce in manufactures must be given up. For if no profit can be made upon branches where a nation has the greatest natural advantages, it is more than probable, that every other branch will prove at least equally disadvantageous. If upon this revolution the ports of the nation be not shut against the importation of foreign manufactures, merchants will introduce them, and this will drain off the nation's wealth, and bring the industrious to starve.

It is upon this principle that incorporations are established. Of these we shall say a word, and conclude our chapter.

Cities and corporations, may be considered as nations, where luxury and taxes have rendered living so expensive, that goods cannot be furnished but at a high rate. If labour, therefore, of all kinds, were permitted to be brought from the provinces, or from the country, to supply the demand of the capital and smaller corporations, what would become of tradesmen and manufacturers who have their residence there? If these, on the other hand, were to remove beyond the liberties of such corporations, what would become of the public revenue, collected in these little states, as I may call them?

By the establishment of corporations, a statesman is enabled to raise high impositions upon all sorts of consumption; and notwithstanding these have the necessary consequence of increasing the price of labour, yet by other regulations, (of which afterwards,) the bad consequences thereby resulting to foreign trade may be avoided, and every article of exportation be prevented from rising above the proper standard for making it vendible, in spite of all foreign competition.

The plan of modern taxation seems first to have been introduced into cities, while the country was subject to the barons, and remained in a manner quite free from it. Cities having obtained the privilege of incorporation, began, in consequence of the powers vested in their magistrates, to levy taxes: and finding the inconveniences resulting from external competition (foreign trade), they erected the different classes of their industrious into confraternities, or corporations of a lower denomination, with power to prevent the importation of work from their fellow tradesmen not of the society.

Here arises a question.

Why are corporations complained of in many countries, as being a check upon industry; if the establishment of them proceed from so plain a principle as this here laid down?

Let me draw my answer from another question. Why are they not complained of in all countries?

The difference between the situation of one country and another, will plainly point out the principle which ought to regulate the establishment and government of corporations. When this is well understood, all disputes concerning the general utility, or harm arising from them will be at an end: and the question will be brought to the proper issue; to wit, their relative utility considered with respect to the actual situation of the country where they are established. In one province a corporation will be found to be useful, in another just the contrary.

First then it must be agreed, on all hands, that the principle laid down is just. Nobody ever advanced, that the industry carried on in towns, where living is dear, ought to suffer a competition with that of the country, where living is cheap; I mean for the direct consumption of the citizens. But it may be alleged, that no subaltern corporation should enjoy an exclusive privilege against those who share of every burthen imposed by the great corporation from which they draw their existence: and that they have no right of exclusion against citizens; but against strangers only, who are not under the same jurisdiction, nor liable to the same burthens. Here the dispute lies between the members of the great corporation and those of the smaller. Now, I say, while no other interest is concerned, the decision of this question ought to be left to the corporation itself. But the moment the public good comes to be affected by certain privileges enjoyed by individuals, such privileges should either be abolished, or put under limitations.

In countries where industry stands at a determinate height, while the consumption of cities neither augments or diminishes; while those who live upon an income acquired, live uniformly in the same way; while this regular consumption is regularly supplied, by a certain number of citizens sufficient to supply it; while the hands employed for this purpose are in a perfect proportion to the demand made upon them; in such countries, I say, any diminution of the privileges of corporations, would be a mean of overturning the equal balance between work and demand.

We have said above, that when hands become too many for the work, profits fall below the necessary standard of subsistence; that the industrious enter into competition for the physical-necessary, and hurt one another. Here then is the principle which the corporation ought to keep in its eye: the profits under every trade ought to be in proportion to the demand for it.

In order the better to support this proportion, many towns in Germany have the subaltern corporations of trades restrained to certain numbers. There is a determinate number of apothecaries, joiners, smiths, &c. allowed in every town, and no more; according as employment is found for them. This seems a good regulation. I do not say but it may be abused. But the power of administration must be lodged somewhere; and if in a country where industry is making little progress, corporations were laid open, the consequence would be, that every workman would starve another, and the consumers would be ill served.

On the other hand, when industry springs up, when the manners of a people change all of a sudden, or by quick degrees, as has been the case in many countries in Europe within these threescore years: it is a mark of a narrow capacity not to perceive that a change of administration becomes necessary; and if on such revolutions those who are at the head of corporations should wish to profit of the increase of demand, in order to raise prices in favour of the incorporated workmen, the infallible consequence would be, to make the city become deserted, and deprived of a trade, which otherwise would necessarily fall to her share, in consequence of the advantage she must draw from establishments already made for supplying every branch of consumption.(1*) But let the principle above mentioned be constantly followed; let profits be kept at a right standard; let hands be increased according to demand; let the city workmen gain no advantage over those of the country which may not be compensated by the difference of the price of living; let the disadvantages again on the side of the town affect their own consumption only, not the surplus of their industry; let every convenience for carrying on foreign trade (every thing here is understood to be foreign, which does not enter into the consumption of the town) be provided for in the suburbs, or, if you please, in a place out of the town walled in for this purpose; let markets there be held for every kind of work coming from the country; and then the true intent of a corporation will be answered. If it be found that the prosperity of trade demands still more liberty, then the corporation may be thrown open; but on the other hand, every burthen must be taken off, and every incorporated member must be indemnified by the state, for the loss he is thereby made to suffer.

The great change daily operating on the spirit of European nations, where corporations have been long established, without any great inconvenience having been found to arise from them, suggest these reflections, which seem naturally to flow from the principles to which we refer. I shall only add, that from the practice of imposing taxes within these little republics (as I have called them) Princes seem to have taken the hint of extending this system; by first appropriating to the public revenue, what the cities had established in favour of themselves, and then by enlarging the plan as circumstances favoured their design. That this is the true origin of the modern plan of taxation (I mean that upon consumption) may be gathered from hence; that the right of imposing taxes appears no where, almost, to have been essentially attached to royalty, even in those kingdoms, where Princes have long enjoyed an unlimited constitutional authority over the persons of their subjects. An authority, which I take to be the least equivocal characteristic of an absolute and unlimited power. I know of no christian monarchy (except, perhaps, Russia) where either the consent of states, or the approbation or concurrence of some political body within the state, has not been requisite to make the imposition of taxes constitutional; and if more exceptions be found, I believe it will not be difficult to trace the origin of such an exertion of sovereign authority, without ascending to a very high antiquity. The prerogative of Princes in former times, was measured by the power they could constitutionally exercise over the persons of their subjects; that of modern princes, by the power they have over their purse.

Having, therefore, shewn the necessity of putting a stop to foreign reciprocal commerce in manufactures, so soon as in every branch this trade becomes disadvantageous to a nation; the next question is how to proceed in the execution of so great an undertaking, so as to avoid a sudden and violent revolution in the oeconomy of the state, which is of all things the most dangerous: the hurt, therefore, ought to be foreseen at a great distance, in order to be methodically prevented.