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

produce of British industry as may exceed the demand of the

markets nearer home, of those of Europe, and of the countries

which lie round the Mediterranean sea. In its natural and free

state, the colony trade, without drawing from those markets any

part of the produce which had ever been sent to them, encourages

Great Britain to increase the surplus continually, by continually

presenting new equivalents to be exchanged for it. In its natural

and free state, the colony trade tends to increase the quantity

of productive labour in Great Britain, but without altering in

any respect the direction of that which had been employed there

before. In the natural and free state of the colony trade, the

competition of all other nations would hinder the rate of profit

from rising above the common level, either in the new market, or

in the new employment. The new market, without drawing any thing

from the old one, would create, if one may say so, a new produce

for its own supply ; and that new produce would constitute a new

capital for carrying on the new employment, which, in the same

manner, would draw nothing from the old one.

The monopoly of the colony trade, on the contrary, by excluding

the competition of other nations, and thereby raising the rate of

profit, both in the new market and in the new employment, draws

produce from the old market, and capital from the old employment.

To augment our share of the colony trade beyond what it otherwise

would be, is the avowed purpose of the monopoly. If our share of

that trade were to be no greater with, than it would have been

without the monopoly, there could have been no reason for

establishing the monopoly. But whatever forces into a branch of

trade, of which the returns are slower and more distant than

those of the greater part of other trades, a greater proportion

of the capital of any country, than what of its own accord would

go to that branch, necessarily renders the whole quantity of

productive labour annually maintained there, the whole annual

produce of the land and labour of that country, less than they

otherwise would be. It keeps down the revenue of the inhabitants

of that country below what it would naturally rise to, and

thereby diminishes their power of accumulation. It not only

hinders, at all times, their capital from maintaining so great a

quantity of productive labour as it would otherwise maintain, but

it hinders it from increasing so fast as it would otherwise

increase, and, consequently, from maintaining a still greater

quantity of productive labour.

The natural good effects of the colony trade, however, more than

counterbalance to Great Britain the bad effects of the monopoly ;

so that, monopoly and altogether, that trade, even as it is

carried on at present, is not only advantageous, but greatly

advantageous. The new market and the new employment which are

opened by the colony trade, are of much greater extent than that

portion of the old market and of the old employment which is lost

by the monopoly. The new produce and the new capital which has

been created, if one may say so, by the colony trade, maintain in

Great Britain a greater quantity of productive labour than what

can have been thrown out of employment by the revulsion of

capital from other trades of which the returns are more frequent.

If the colony trade, however, even as it is carried on at

present, is advantageous to Great Britain, it is not by means of

the monopoly, but in spite of the monopoly.

It is rather for the manufactured than for the rude produce of

Europe, that the colony trade opens a new market. Agriculture is

the proper business of all new colonies; a business which the

cheapness of land renders more advantageous than any other. They

abound, therefore, in the rude produce of land ; and instead of

importing it from other countries, they have generally a large

surplus to export. In new colonies, agriculture either draws

hands from all other employments, or keeps them from going to any

other employment. There are few hands to spare for the necessary,

and none for the ornamental manufactures. The greater part of the

manufactures of both kinds they find it cheaper to purchase of

other countries than to make for themselves. It is chiefly by

encouraging the manufactures of Europe, that the colony trade

indirectly encourages its agriculture. The manufacturers of

Europe, to whom that trade gives employment, constitute a new

market for the produce of the land, and the most advantageous of

all markets ; the home market for the corn and cattle, for the

bread and butcher’s meat of Europe, is thus greatly extended by

means of the trade to America.

But that the monopoly of the trade of populous and thriving

colonies is not alone sufficient to establish, or even to

maintain, manufactures in any country, the examples of Spain and

Portugal sufficiently demonstrate. Spain and Portugal were

manufacturing countries before they had any considerable

colonies. Since they had the richest and most fertile in the

world, they have both ceased to be so.

In Spain and Portugal, the bad effects of the monopoly,

aggravated by other causes, have, perhaps, nearly overbalanced

the natural good effects of the colony trade. These causes seem

to be other monopolies of different kinds: the degradation of the

value of gold and silver below what it is in most other countries

; the exclusion from foreign markets by improper taxes upon

exportation, and the narrowing of the home market, by still more

improper taxes upon the transportation of goods from one part of

the country to another ; but above all, that irregular and

partial administration of justice which often protects the rich

and powerful debtor from the pursuit of his injured creditor, and

which makes the industrious part of the nation afraid to prepare

goods for the consumption of those haughty and great men, to whom

they dare not refuse to sell upon credit, and from whom they are

altogether uncertain of repayment.

In England, on the contrary, the natural good effects of the

colony trade, assisted by other causes, have in a great measure

conquered the bad effects of the monopoly. These causes seem to

be, the general liberty of trade, which, notwithstanding some

restraints, is at least equal, perhaps superior, to what it is in

any other country ; the liberty of exporting, duty free, almost

all sorts of goods which are the produce of domestic industry, to

almost any foreign country; and what, perhaps, is of still

greater importance, the unbounded liberty of transporting them

from one part of our own country to any other, without being

obliged to give any account to any public office, without being

liable to question or examination of any kind; but, above all,

that equal and impartial administration of justice, which renders

the rights of the meanest British subject respectable to the

greatest, and which, by securing to every man the fruits of his

own industry, gives the greatest and most effectual encouragement

to every sort of industry.

If the manufactures of Great Britain, however, have been

advanced, as they certainly have, by the colony trade, it has not

been by means of the monopoly of that trade, but in spite of the

monopoly. The effect of the monopoly has been, not to augment

the quantity, but to alter the quality and shape of a part of the

manufactures of Great Britain, and to accommodate to a market,

from which the returns are slow and distant, what would otherwise

have been accommodated to one from which the returns are frequent

and near. Its effect has consequently been, to turn a part of the

capital of Great Britain from an employment in which it would

have maintained a greater quantity of manufacturing industry, to

one in which it maintains a much smaller, and thereby to

diminish, instead of increasing, the whole quantity of

manufacturing industry maintained in Great Britain.

The monopoly of the colony trade, therefore, like all the other

mean and malignant expedients of the mercantile system, depresses

the industry of all other countries, but chiefly that of the

colonies, without in the least increasing, but on the contrary

diminishing, that of the country in whose favour it is

established.

The monopoly hinders the capital of that country, whatever may,

at any particular time, be the extent of that capital, from

maintaining so great a quantity of productive labour as it would

otherwise maintain, and from affording so great a revenue to the

industrious inhabitants as it would otherwise afford. But as

capital can be increased only by savings from revenue, the

monopoly, by hindering it from affording so great a revenue as it

would otherwise afford, necessarily hinders it from increasing so

fast as it would otherwise increase, and consequently from

maintaining a still greater quantity of productive labour, and

affording a still greater revenue to the industrious inhabitants

of that country. One great original source of revenue, therefore,

the wages of labour, the monopoly must necessarily have rendered,

at all times, less abundant than it otherwise would have been.

By raising the rate of mercantile profit, the monopoly

discourages the improvement of land. The profit of improvement

depends upon the difference between what the land actually

produces, and what, by the application of a certain capital, it

can be made to produce. If this difference affords a greater

profit than what can be drawn from an equal capital in any

mercantile employment, the improvement of land will draw capital

from all mercantile employments. If the profit is less,

mercantile employments will draw capital from the improvement of

land. Whatever, therefore, raises the rate of mercantile profit,

either lessens the superiority, or increases the inferiority of

the profit of improvement : and, in the one case, hinders capital

from going to improvement, and in the other draws capital from

it; but by discouraging improvement, the monopoly necessarily

retards the natural increase of another great original source of

revenue, the rent of land. By raising the rate of profit,

too, the monopoly necessarily keeps up the market rate of

interest higher than it otherwise would be. But the price of

land, in proportion to the rent which it affords, the number of

years purchase which is commonly paid for it, necessarily falls

as the rate of interest rises, and rises as the rate of interest

falls. The monopoly, therefore, hurts the interest of the

landlord two different ways, by retarding the natural increase,

first, of his rent, and, secondly, of the price which he would

get for his land, in proportion to the rent which it affords.

The monopoly, indeed, raises the rate of mercantile profit and

thereby augments somewhat the gain of our merchants. But as it

obstructs the natural increase of capital, it tends rather to

diminish than to increase the sum total of the revenue which the

inhabitants of the country derive from the profits of stock ; a

small profit upon a great capital generally affording a greater

revenue than a great profit upon a small one. The monopoly raises

the rate of profit, but it hinders the sum of profit from rising

so high as it otherwise would do.

All the original sources of revenue, the wages of labour, the

rent of land, and the profits of stock, the monopoly renders much

less abundant than they otherwise would be. To promote the little

interest of one little order of men in one country, it hurts the

interest of all other orders of men in that country, and of all

the men in all other countries.

It is solely by raising the ordinary rate of profit, that the

monopoly either has proved, or could