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

therefore, as the productive labour of the country is concerned, the foreign

trade of consumption, which is carried on by means of gold and silver, has

all the advantages and all the inconveniencies of any other equally

round-about foreign trade of consumption; and will replace, just as fast, or

just as slow, the capital which is immediately employed in supporting that

productive labour. It seems even to have one advantage over any other

equally round-about foreign trade. The transportation of those metals from

one place to another, on account of their small bulk and great value, is

less expensive than that of almost any other foreign goods of equal value.

Their freight is much less, and their insurance not greater ; and no goods,

besides, are less liable to suffer by the carriage. An equal quantity of

foreign goods, therefore, may frequently be purchased with a smaller

quantity of the produce of domestic industry, by the intervention of gold

and silver, than by that of any other foreign goods. The demand of the

country may frequently, in this manner, be supplied more completely, and at

a smaller expense, than in any other. Whether, by the continual exportation

of those metals, a trade of this kind is likely to impoverish the country

from which it is carried on in any other way, I shall have occasion to

examine at great length hereafter.

That part of the capital of any country which is employed in the carrying

trade, is altogether withdrawn from supporting the productive labour of that

particular country, to support that of some foreign countries. Though it may

replace, by every operation, two distinct capitals, yet neither of them

belongs to that particular country. The capital of the Dutch merchant, which

carries the corn of Poland to Portugal, and brings back the fruits and wines

of Portugal to Poland, replaces by every such operation two capitals,

neither of which had been employed in supporting the productive labour of

Holland; but one of them in supporting that of Poland, and the other that of

Portugal. The profits only return regularly to Holland, and constitute the

whole addition which this trade necessarily makes to the annual produce of

the land and labour of that country. When, indeed, the carrying trade of any

particular country is carried on with the ships and sailors of that country,

that part of the capital employed in it which pays the freight is

distributed among, and puts into motion, a certain number of productive

labourers of that country. Almost all nations that have had any considerable

share of the carrying trade have, in fact, carried it on in this manner. The

trade itself has probably derived its name from it, the people of such

countries being the carriers to other countries. It does not, however, seem

essential to the nature of the trade that it should be so. A Dutch merchant

may, for example, employ his capital in transacting the commerce of Poland

and Portugal, by carrying part of the surplus produce of the one to the

other, not in Dutch, but in British bottoms. It maybe presumed, that he

actually does so upon some particular occasions. It is upon this account,

however, that the carrying trade has been supposed peculiarly advantageous

to such a country as Great Britain, of which the defence and security depend

upon the number of its sailors and shipping. But the same capital may

employ as many sailors and shipping, either in the foreign trade of

consumption, or even in the home trade, when carried on by coasting vessels,

as it could in the carrying trade. The number of sailors and shipping which

any particular capital can employ, does not depend upon the nature of the

trade, but partly upon the bulk of the goods, in proportion to their value,

and partly upon the distance of the ports between which they are to be

carried; chiefly upon the former of those two circumstances. The coal trade

from Newcastle to London, for example, employs more shipping than all the

carrying trade of England, though the ports are at no great distance. To

force, therefore, by extraordinary encouragements, a larger share of the

capital of any country into the carrying trade, than what would naturally go

to it, will not always necessarily increase the shipping of that country.

The capital, therefore, employed in the home trade of any country, will

generally give encouragement and support to a greater quantity of productive

labour in that country, and increase the value of its annual produce, more

than an equal capital employed in the foreign trade of consumption; and the

capital employed in this latter trade has, in both these respects, a still

greater advantage over an equal capital employed in the carrying trade. The

riches, and so far as power depends upon riches, the power of every country

must always be in proportion to the value of its annual produce, the fund

from which all taxes must ultimately be paid. But the great object of the

political economy of every country, is to increase the riches and power of

that country. It ought, therefore, to give no preference nor superior

encouragement to the foreign trade of consumption above the home trade, nor

to the carrying trade above either of the other two. It ought neither to

force nor to allure into either of those two channels a greater share of the

capital of the country, than what would naturally flow into them of its own

accord.

Each of those different branches of trade, however, is not only

advantageous, but necessary and unavoidable, when the course of things,

without any constraint or violence, naturally introduces it.

When the produce of any particular branch of industry exceeds what the

demand of the country requires, the surplus must be sent abroad, and

exchanged for something for which there is a demand at home. Without

such exportation, a part of the productive labour of the country must cease,

and the value of its annual produce diminish. The land and labour of Great

Britain produce generally more corn, woollens, and hardware, than the demand

of the home market requires. The surplus part of them, therefore, must be

sent abroad, and exchanged for something for which there is a demand at

home. It is only by means of such exportation, that this surplus can

acquired value sufficient to compensate the labour and expense of producing

it. The neighbourhood of the sea-coast, and the banks of all navigable

rivers, are advantageous situations for industry, only because they

facilitate the exportation and exchange of such surplus produce for

something else which is more in demand there.

When the foreign goods which are thus purchased with the surplus produce of

domestic industry exceed the demand of the home market, the surplus part

of them must be sent abroad again, and exchanged for something more in

demand at home. About 96,000 hogsheads of tobacco are annually purchased in

Virginia and Maryland with a part of the surplus produce of British

industry. But the demand of Great Britain does not require, perhaps, more

than 14,000. If the remaining 82,000, therefore, could not be sent abroad,

and exchanged for something more in demand at home, the importation of them

must cease immediately, and with it the productive labour of all those

inhabitants of Great Britain who are at present employed in preparing the

goods with which these 82,000 hogsheads are annually purchased. Those goods,

which are part of the produce of the land and labour of Great Britain,

having no market at home, and being deprived of that which they had abroad,

must cease to be produced. The most round-about foreign trade of

consumption, therefore, may, upon some occasions, be as necessary for

supporting the productive labour of the country, and the value of its annual

produce, as the most direct.

When the capital stock of any country is increased to such a degree that it

cannot be all employed in supplying the consumption, and supporting the

productive labour of that particular country, the surplus part of it

naturally disgorges itself into the carrying trade, and is employed in

performing the same offices to other countries. The carrying trade is the

natural effect and symptom of great national wealth; but it does not seem to

be the natural cause of it. Those statesmen who have been disposed to favour

it with particular encouragement, seem to have mistaken the effect and

symptom for the cause. Holland, in proportion to the extent of the land and

the number of it’s inhabitants, by far the richest country in Europe, has

accordingly the greatest share of the carrying trade of Europe. England,

perhaps the second richest country of Europe, is likewise supposed to have a

considerable share in it; though what commonly passes for the carrying trade

of England will frequently, perhaps, be found to be no more than a

round-about foreign trade of consumption. Such are, in a great measure, the

trades which carry the goods of the East and West Indies and of America to

the different European markets. Those goods are generally purchased, either

immediately with the produce of British industry, or with something else

which had been purchased with that produce, and the final returns of those

trades are generally used or consumed in Great Britain. The trade which

is carried on in British bottoms between the different ports of the

Mediterranean, and some trade of the same kind carried on by British

merchants between the different ports of India, make, perhaps, the principal

branches of what is properly the carrying trade of Great Britain.

The extent of the home trade, and of the capital which can be employed in

it, is necessarily limited by the value of the surplus produce of all those

distant places within the country which have occasion to exchange their

respective productions with one another ; that of the foreign trade of

consumption, by the value of the surplus produce of the whole country, and

of what can be purchased with it; that of the carrying trade, by the value

of the surplus produce of all the different countries in the world. Its

possible extent, therefore, is in a manner infinite in comparison of that of

the other two, and is capable of absorbing the greatest capitals.

The consideration of his own private profit is the sole motive which

determines the owner of any capital to employ it either in agriculture, in

manufactures, or in some particular branch of the wholesale or retail trade.

The different quantities of productive labour which it may put into motion,

and the different values which it may add to the annual produce of the land

and labour of the society, according as it is employed in one or other of

those different ways, never enter into his thoughts. In countries,

therefore, where agriculture is the most profitable of all employments, and

farming and improving the most direct roads to a splendid fortune, the

capitals of individuals will naturally be employed in the manner most

advantageous to the whole society. The profits of agriculture, however, seem

to have no superiority over those of other employments in any part of

Europe. Projectors, indeed, in every corner of it, have, within these few

years, amused the public with most magnificent accounts of the profits to be

made by the cultivation and improvement of land. Without entering into any

particular discussion of their calculations, a very simple observation may

satisfy us that the result of them must be false. We see, every day, the

most splendid fortunes, that have been acquired in the course of a single

life, by trade and manufactures, frequently from a very small capital,

sometimes from no capital. A single instance of such a fortune, acquired by

agriculture in the same time, and from such a capital, has not, perhaps,

occurred in Europe, during the course