An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

any particular period since the establishment of the act of

navigation, the state or extent of the mercantile capital of

Great Britain, the monopoly of the colony trade must, during the

continuance of that state, have raised the ordinary rate of

British profit higher than it otherwise would have been, both in

that and in all the other branches of British trade. If, since

the establishment of the act of navigation, the ordinary rate of

British profit has fallen considerably. as it certainly has, it

must have fallen still lower, had not the monopoly established by

that act contributed to keep it up.

But whatever raises, in any country, the ordinary rate of profit

higher than it otherwise would be, necessarily subjects that

country both to an absolute, and to a relative disadvantage in

every branch of trade of which she has not the monopoly.

It subjects her to an absolute disadvantage ; because, in such

branches of trade, her merchants cannot get this greater profit

without selling dearer than they otherwise would do, both the

goods of foreign countries which they import into their own, and

the goods of their own country which they export to foreign

countries. Their own country must both buy dearer and sell

dearer; must both buy less, and sell less; must both enjoy less

and produce less, than she otherwise would do.

It subjects her to a relative disadvantage; because, in such

branches of trade, it sets other countries, which are not subject

to the same absolute disadvantage, either more above her or less

below her, than they otherwise would be. It enables them both to

enjoy more and to produce more, in proportion to what she enjoys

and produces. It renders their superiority greater, or their

inferiority less, than it otherwise would be. By raising the

price of her produce above what it otherwise would be, it enables

the merchants of other countries to undersell her in foreign

markets, and thereby to justle her out of almost all those

branches of trade, of which she has not the monopoly.

Our merchants frequently complain of the high wages of British

labour, as the cause of their manufactures being undersold in

foreign markets; but they are silent about the high profits of

stock. They complain of the extravagant gain of other people; but

they say nothing of their own. The high profits of British stock,

however, may contribute towards raising the price of British

manufactures, in many cases, as much, and in some perhaps more,

than the high wages of British labour.

It is in this manner that the capital of Great Britain, one may

justly say, has partly been drawn and partly been driven from the

greater part of the different branches of trade of which she has

not the monopoly ; from the trade of Europe, in particular, and

from that of the countries which lie round the Mediterranean sea.

It has partly been drawn from those branches of trade, by the

attraction of superior profit in the colony trade, in consequence

of the continual increase of that trade, and of the continual

insufficiency of the capital which had carried it on one year to

carry it on the next.

It has partly been driven from them, by the advantage which the

high rate of profit established in Great Britain gives to other

countries, in all the different branches of trade of which Great

Britain has not the monopoly.

As the monopoly of the colony trade has drawn from those other

branches a part of the British capital, which would otherwise

have been employed in them, so it has forced into them many

foreign capitals which would never have gone to them, had they

not been expelled from the colony trade. In those other branches

of trade, it has diminished the competition of British capitals,

and thereby raised the rate of British profit higher than it

otherwise would have been. On the contrary, it has increased the

competition of foreign capitals, and thereby sunk the rate of

foreign profit lower than it otherwise would have been. Both in

the one way and in the other, it must evidently have subjected

Great Britain to a relative disadvantage in all those other

branches of trade.

The colony trade, however, it may perhaps be said, is more

advantageous to Great Britain than any other; and the monopoly,

by forcing into that trade a greater proportion of the capital of

Great Britain than what would otherwise have gone to it, has

turned that capital into an employment, more advantageous to the

country than any other which it could have found.

The most advantageous employment of any capital to the country to

which it belongs, is that which maintains there the greatest

quantity of productive labour, and increases the most the annual

produce of the land and labour of that country. But the quantity

of productive labour which any capital employed in the foreign

trade of consumption can maintain, is exactly in proportion, it

has been shown in the second book, to the frequency of its

returns. A capital of a thousand pounds, for example, employed in

a foreign trade of consumption, of which the returns are made

regularly once in the year, can keep in constant employment, in

the country to which it belongs, a quantity of productive labour,

equal to what a thousand pounds can maintain there for a year. If

the returns are made twice or thrice in the year, it can keep in

constant employment a quantity of productive labour, equal to

what two or three thousand pounds can maintain there for a year.

A foreign trade of consumption carried on with a neighbouring,

is, upon that account, in general, more advantageous than one

carried on with a distant country ; and, for the same reason, a

direct foreign trade of consumption, as it has likewise been

shown in the second book, is in general more advantageous than a

round-about one.

But the monopoly of the colony trade, so far as it has operated

upon the employment of the capital of Great Britain, has, in all

cases, forced some part of it from a foreign trade of consumption

carried on with a neighbouring, to one carried on with a more

distant country, and in many cases from a direct foreign trade of

consumption to a round-about one.

First, The monopoly of the colony trade has, in all cases,

forced some part of the capital of Great Britain from a foreign

trade of consumption carried on with a neighbouring, to one

carried on with a more distant country.

It has, in all cases, forced some part of that capital from the

trade with Europe, and with the countries which lie round the

Mediterranean sea, to that with the more distant regions of

America and the West Indies ; from which the returns are

necessarily less frequent, not only on account of the greater

distance, but on account of the peculiar circumstances of those

countries. New colonies, it has already been observed, are always

understocked. Their capital is always much less than what they

could employ with great profit and advantage in the improvement

and cultivation of their land. They have a constant demand,

therefore, for more capital than they have of their own ; and, in

order to supply the deficiency of their own, they endeavour to

borrow as much as they can of the mother country, to whom they

are, therefore, always in debt. The most common way in which the

colonies contract this debt, is not by borrowing upon bond of the

rich people of the mother country, though they sometimes do this

too, but by running as much in arrear to their correspondents,

who supply them with goods from Europe, as those correspondents

will allow them. Their annual returns frequently do not amount to

more than a third, and sometimes not to so great a proportion of

what they owe. The whole capital, therefore, which their

correspondents advance to them, is seldom returned to Britain in

less than three, and sometimes not in less than four or five

years. But a British capital of a thousand pounds, for example,

which is returned to Great Britain only once in five years, can

keep in constant employment only one-fifth part of the British

industry which it could maintain, if the whole was returned once

in the year; and, instead of the quantity of industry which a

thousand pounds could maintain for a year, can keep in constant

employment the quantity only which two hundred pounds can

maintain for a year. The planter, no doubt, by the high price

which he pays for the goods from Europe, by the interest upon the

bills which he grants at distant dates, and by the commission

upon the renewal of those which he grants at near dates, makes

up, and probably more than makes up, all the loss which his

correspondent can sustain by this delay. But, though he make up

the loss of his correspondent, he cannot make up that of Great

Britain. In a trade of which the returns are very distant, the

profit of the merchant may be as great or greater than in one in

which they are very frequent and near ; but the advantage of the

country in which he resides, the quantity of productive labour

constantly maintained there, the annual produce of the land and

labour, must always be much less. That the returns of the trade

to America, and still more those of that to the West Indies, are,

in general, not only more distant, but more irregular and more

uncertain, too, than those of the trade to any part of Europe, or

even of the countries which lie round the Mediterranean sea, will

readily he allowed, I imagine, by everybody who has any

experience of those different branches of trade.

Secondly, The monopoly of the colony trade, has, in many

cases, forced some part of the capital of Great Britain from a

direct foreign trade of consumption, into a round-about one.

Among the enumerated commodities which can be sent to no other

market but Great Britain, there are several of which the quantity

exceeds very much the consumption of Great Britain, and of which,

a part, therefore, must be exported to other countries. But this

cannot be done without forcing some part of the capital of Great

Britain into a round-about foreign trade of consumption.

Maryland, and Virginia, for example, send annually to Great

Britain upwards of ninety-six thousand hogsheads of tobacco, and

the consumption of Great Britain is said not to exceed fourteen

thousand. Upwards of eighty-two thousand hogsheads,

therefore, must be exported to other countries, to France, to

Holland, and, to the countries which lie round the Baltic and

Mediterranean seas. But that part of the capital of Great

Britain which brings those eighty-two thousand hogsheads to Great

Britain, which re-exports them from thence to those other

countries, and which brings back from those other countries to

Great Britain either goods or money in return, is employed in a

round-about foreign trade of consumption; and is necessarily

forced into this employment, in order to dispose of this great

surplus. If we would compute in how many years the whole of this

capital is likely to come back to Great Britain, we must add to

the distance of the American returns that of the returns from

those other countries. If, in the direct foreign trade of

consumption which we carry on with America, the whole capital

employed frequently does not come back in less than three or four

years, the whole capital employed in this round-about one is not

likely to come back in less than four or five. If the one can

keep in constant employment but a third or a fourth part of the

domestic industry which could be