Monday, September 10, 2012


To resume our subject.—We have seen, that the very advantages
aimed at by the means of a favourable balance of trade, are altogether
illusory; and that, supposing them real, it is impossible for a nation
permanently to enjoy them. It remains to be shown, what is the
actual operation of regulations framed with this object in view.
By the absolute exclusion of specific manufactures of foreign
fabric, a government establishes a monopoly in favour of the home
producers of these articles, and in prejudice of the home consumers;
that is to say, those classes of the nation which produce them, being
entitled to their exclusive sale, can raise their prices above the natural rate; while the home consumers, being unable to purchase elsewhere, are compelled to pay for them unnaturally dear.* If the articles be not wholly prohibited, but merely saddled with an impjn
duty, the home producer can then increase their price by the whole
amount of the duty, and the consumer will have to pay the difference. For example, if an import duty of 20 cents per dozen be laid
upon earthenware plates worth 00 cents per dozen, the importei
whatever country he may belong to, must charge the consumer 30
cents; and the home manufacturer of that commodity is enabled to
ask 80 cents per dozen of his customers for plates of the same quality; which he could not do without the intervention of the duty
because the consumer could get the same article for 60 cents: thus,
a premium to the whole extent of the duty is given to the home
manufacturer out of the consumer's pocket.
Should any one maintain, that the advantage of producing at home
counterbalances the hardship of paying dearer for almost every article ; that our own capital and labour are engaged in the production,
and the profits pocketed by our own fellow-citizens; my answer is,
that the foreign commodities we might import are not to be had
gratis: that we must purchase them with values of home production,
which would have given equal employment to our industry and
capital; for we must never lose sight of this maxim, that products
are always bought ultimately with products. It is most for our advantage to employ our productive powers, not in those branches in
which foreigners excel us, but in those which we excel in ourselves;
and with the product to purchase of others. The opposite • course
would be just as absurd, as if a man should wish to make his own
coats and shoes. What would the world say, if, at the door of every
house an import duty were laid upon coats and shoes, for the laudable purpose of compelling the inmates to make them for themselves ?
Would not people say with justice, Let us follow each his own pursuits, and buy what we want with what we produce, or, which comes
to the same thing, with what we get for our products. The system
would be precisely the same, only carried to a ridiculous extreme.
Well may it be a matter of wonder, that every nation should
manifest such anxiety to obtain prohibitory regulations, if it be true
that it can profit nothing by them; and lead one to suppose the two
cases not parallel, because we do not find individual householders
solicitous to obtain the same privilege. But the sole difference is
this, that individuals are independent and consistent beings, actuated
by no contrariety of will, and more interested in their character of
consumers of coats and shoes to buy them cheap, than as manufacturers to sell unnaturally dear.
Who, then, are the classes of the community so importunate for
prohibitions or heavy import duties? The producers of the particular commodity, that applies for protection from competition, not
the consumers of that commodity. The public interest is their plea,
but self-interest is evidently their object. Well, but, say tnese
gentry, are they not the same thing ? are not our gains national gains ?
By no means: whatever profit is acquired in this manner is so much taken out of the pockets of a neighbour and fellow-citizen
and, if the excess of charge thrown upon consumers by the monopoly could be correctly computed, it would be found, that the loss of
the consumer exceeds the gain of the monopolist. Here, then,
individual and public interest are in direct opposition to each other;
and, since public interest is understood by the enlightened few alone,
is it at all surprising, that the prohibitive system should find so
many partisans and so few opponents ?
There is in general far too little attention paid to the serious mischief of raising prices upon the consumers. The evil is not apparent
to cursory observation, because it operates piecemeal, and is felt in ii
very slight degree on every purchase or act of consumption: but it
is really most serious, on account of its constant recurrence and
universal pressure. The whole fortune of every consumer is affected by every fluctuation of price in the articles of his consumption;
the cheaper they are, the richer he is, and vice versa. If a single
article rise in price, he is so much the more poor in respect of that
article; if all rise together, he is poorer in respect to the whole.
And, since the whole nation is comprehended in the class of the
consumers, the whole nation must in that case be the poorer. Besides which, it is crippled in the extension of the variety of its enjoyments, and prevented from obtaining products whereof it stands
in need, in exchange for those wherewith it might procure them.
It is of no use to assert, that, when prices are raised, what one gains
another loses. For the position is not true, except in the case oi
monopolies; nor even to the full extent with regard to them; foi
the monopolist never profits to the full amount of the loss to the
consumers. If the rise be occasioned by taxation or import-duty
under any shape whatever, the producer gains nothing by the in
crease of price, but just the reverse, as we shall see by and by (Book
III. Chapter VII.:) so that, in fact, he is no richer in his capacity of
producer, though poorer in his quality of consumer. This is one
of the most effective causes of national impoverishment, or at least
one of the most powerful checks to the progress of national wealth.
For this reason, it may be perceived, that it is an absurd distinction
to view with more jealousy the import of foreign objects of barren
consumption, than that of raw materials for home manufacture.
Whether the products consumed be of domestic or of foreign
growth, a portion of wealth is destroyed in the act of consumption,
and a proportionate inroad made into the wealth of the community.
But that inroad is the result of the act of consumption, not of the
act of dealing with the foreigner; and the resulting stimulus to
national production, is the same in either case. For, wherewith
was the purchase of the foreign product made ? either with a domestic product or with money, which must itself have been procured with a domestic product. In buying of a foreigner, the nation
really does no more than send abroad a domestic product in lieu of
consuming it at home, and consume in its place the foreign product
received ir exchange. The individual consumer himself, piobably, does not conduct this operation; commerce conducts it for him.
No one country can buy of another, except with its own domestic,
In defence of import duties it is often urged, "that when the interest of money is lower abroad than at home, the foreign has an advantage over the home producer, which must be met by a countervailing duty." The low rate of interest is, to the foreign producer,
an advantage, analogous to that of the superior quality of his land. It
tends to cheapen the products he raises; and it is reasonable enough
that our domestic consumers should take the benefit of that cheapness. The same motive will operate here, that leads us rather to
import sugar and indigo from tropical climates, than to raise them
in our own.
" But capital is necessary in every branch of production: so that
the foreigner, who can procure it at a lower rate of interest, has
the same advantage in respect to every product; and, if the free importation be permitted, he will have an advantage over all classes of
home producers." Tell me, then, how his products are to be paid
for. " Why, in specie, and there lies the mischief." And how is
the specie to be got to pay for them ? " All the nation has, will go
in that way; and when it is exhausted national misery will be complete." So then it is admitted, that before arriving at this extremity,
the constant efflux of specie will gradually render it more scarce at
home, and more abundant abroad; wherefore, it will gradually rise
1, 2, 3, per cent higher in value at home than abroad; which is fully
sufficient to turn the tide, and make specie flow inwards faster than
i* flowed outwards. But it will not do so without some returns; and
of what can the returns be made, but of products of the land, or the
commerce of the nation ? For there is no possible means of purchasing from foreign nations, otherwise than with the products oi
the national land and commerce; and it is better to buy of them
what they can produce cheaper than ourselves, because we may rest
assured, that they must take in payment what we can produce
cheaper than they. This they must do, else there must be an end of
all interchange.
Again, it is affirmed, and what absurd positions have not been
advanced to involve these questions in obscurity? that, since almost
all the nation are at the same time consumers and producers, they
gain by prohibition and monopoly as much in the one capacity as
they lose in the other; that the producer, who gets a monopoly-profit upon the object of his own production, is, on the other hand, the
sufferer by a similar profit upon the objects of his consumption; and
thus that the nation is made up of rogues and fools, who are a match
as producers, the enormous profits made upon a single article areor each other. It is worth remarking, that every body thinks himself more rogue than fool; for, although all" are consumers as well
much more striking, than reiterated minute losses upon the numberless items of consumption. If an import duty be laid upon calicoes,
the addition al annual charge to each person of moderate fortune, may.

perhaps, not exceed
2\ dollars or 3 dollars at most; and probably he
does not very well comprehend the nature of the loss, or feel it
much, though repeated in some degree or other upon every thing he
consumes; whereas, possibly, this consumer is himself a manufacturer, say a hat-maker; and should a duty be laid upon the import
of foreign hats, he will immediately see that it will raise the price
of his own hats, and probably increase his annual profits by several
thousand dollars. It is this delusion that makes private interest so
w a rm an advocate for prohibitory measures, even where the whole
community loses more by them as consumers, than it gains as
But, even in this point of view, the exclusive system is pregnant
with injustice. It is impossible that every class of production should
profit by the exclusive system, supposing it to be universal, which,
in point of fact, it never is in practice, though possibly it may be in
law or intention. Some articles can never, from the nature of things,
be derived from  a b r o a d; fresh fish, for instance, or horned cattle;
as to them, therefore, import duties would be inoperative in raising
the price. The same may be said of masons and carpenters' work,
and of the numberless callings necessarily carried on within the
community; as those of shopmen, clerks, carriers, retail dealers,
and many others. The producers of immaterial products, public
functionaries, and fundholders, lie under the same disability. These
classes can none of them be invested with a monopoly by means of
import duties, though they are subjected to the hardship of many
monopolies granted in that  w a y to other classes of producers.*
Besides, the profits of monopoly are not equitably divided amongst
the different classes even of those that concur in the production of
the commodity, which is the subject of monopoly. If the master*
adventurers, whether in agriculture, manufacture, or commerce, have
the consumers at their mercy, their labourers and subordinate productive agents are still more exposed to their extortion, for reasons
that will be explained in Book II. So that these latter classes participate in the loss with consumers at large, but get no share of the
unnatural gains of their superiors.
Prohibitory measures, besides affecting the pockets of the consumers, often subject them to severe privations. I am ashamed to say, that, within these few years, we have had the hat-makers oi

Marseilles petitioning for the prohibition of the import of foreign
straw or chip hats, on the plea that they injured the sale of their own
felt hats;* a measure that would have deprived the country people
and labourers in husbandry, who are so much exposed to the sun, of a
light, a cool, and cheap covering, admirably adapted,,to their wants,
the use of which it was highly desirable to extend and encourage.
In pursuit of what it mistakes for profound policy, or to gratify
feelings it supposes to be laudable, a government will sometimes
prohibit or divert the course of a particular trade, and thereby do
irreparable mischief to the productive powers of the nation. When
Philip II. became master of Portugal, and forbade all intercourse
between his new subjects and the Dutch, whom he detested, what
was the consequence 1 The Dutch, who before resorted to Lisbon
for the manufactures of India, of which they took off an immense
quantity, finding this avenue closed against their industry, went
straight to India for what they wanted, and, in the end, drove out
the Portuguese from that quarter; and, what was meant as the
deadly blow of inveterate hatred, turned out the main source of
their aggrandizement. " Commerce," says Fenelon, " is like the
native springs of the rock, which often cease to flow altogether, if
it be attempted to alter their course."f
Such are the principal evils of impediments thrown in the way of
import, which are carried to the extreme point by absolute prohibition. There have, indeed, been instances of nations that have thriven
under such a system ; but then it was, because the causes of national
prosperity were more powerful than the causes of national impoverishment. Nations resemble the human frame, which contains a vital
principle, that incessantly labours to repair the inroads of excess and
dissipation upon its health and constitution. Nature is active in
closing the wounds and healing the bruises inflicted by our own
awkwardness and intemperance. In like manner, states maintain
themselves, nay, often increase in prosperity, in spite of the infinite
injuries of every description, which friends as well as enemies indict
upon them. And it is worth remarking, that the most industrious
nations are those, which are the most subjected to such outrage,
because none others could survive them. The cry is then " our system must be the true one, for the national prosperity is advancing.
Whereas, were we to take an enlarged view of the circumstances,
that, for the last three centuries, have combined to develope the
power and faculties of man; to survey with the eye of intelligence the ] rogress of navigation and discovery, of invention in every
branch of art and science; to take account of the variety of useful
animals and vegetables that have been transplanted from one hemisphere to the other, and to give a due attention to the vast augmentation and increased scope both of science and of its practical applications, that we are daily witnesses of, we could not resist the
conviction, that our actual prosperity is nothing to what it might
have been; that it is engaged in a perpetual struggle against the
obstacles and impediments thrown into its way; and that, even in
those parts of the world where mankind is deemed the most enlightened, a great part of their time and exertions are occupied in
destroying instead of multiplying their resources, in despoiling
instead of assisting each other; and all for want of correct knowledge and information respecting their real interests.*
But, to return to the subject, we have just been examining, the
nature of the injury that a community suffers by difficulties thrown
in the way of the introduction of foreign commodities. The mischief
occasioned to the country that produces the prohibited article, is
of the same kind and description ; it is prevented from turning its
capital and industry to the best account. But it is not to be supposed
that -the foreign nation can by this means be utterly ruined and
stripped of all resource, as Napoleon seemed to imagine, when he
excluded the products of Britain from the markets of the continent.
To say nothing of the impossibility of effecting a complete and actual
blockade of a whole country, opposed as it must be by the universal
motive of self-interest, the utmost effect of it can only be to drive
its production into a different channel. A nation is always competent
to the purchase and consumption of the whole of its own products,
for products are always bought with other products. Do you think
it possible to prevent England from producing value to the amount
of a million, by preventing her export of woollens to that amount ?
You are much mistaken if you do. England will employ the same
capital and the same manual labour in the preparation of ardent
spirits, by the distillation of grain or other domestic products, that
were before occupied in the manufacture of woollens for the French
market, and she will then no longer bring her woollens to be bartered for French brandies. A country, in one way or other, direct or
indirect, always consumes the values it produces, and can consume
nothing more. If it cannot exchange its products with its neighbours,
it is compelled to produce values of such kinds only as it can consume at home. This is the utmost effect of prohibitions; both parties
are worse provided, and neither is at all the richer. Napoleon, doubtless, occasioned much injury, both to England
and to the continent, by cramping their mutual relations of commerce as far as he possibly could. But, on the other hand, lie diet
the continent of Europe the involuntary service of facilitating the.
communication between its different parts, by the universality of
dominion, which his ambition had well-nigh achieved. The frontier
duties between Holland, Belgium, part of Germany, Italy, and
France, were demolished; and those of the other powers, with the
exception of England, were far from oppressive. We may form
some estimate of the benefit thence resulting to commerce, from the
discontent and stagnation that have ensued upon the establishment
of the present system of lining the frontier of each state with a
triple guard of douaniers. All the continental states so guarded
have, indeed, preserved their former means of production; but that
production has been made less advan
It cannot be denied, that France has gained prodigiously by the
suppression of the provincial barriers and custom-houses, consequent
upon her political revolution. Europe had, in like manner, gained
by the partial removal of the international barriers between its different political states; and the world at large would derive similar
benefit from the demolition of those, which insulate, as it were, the
various communities, into which the human race is divided.
I have omitted to mention other very serious evils of the exclusive
system; as, for instance, the creation of a new class of crime, that
of smuggling; whereby an action, wholly innocent in itself, is made
legally criminal: and persons, who are actually labouring for the
general welfare, are subjected to punishment.
Smith admits of two circumstances, that, in his opinion, will justify
a government in resorting to import-duties:—1. When a particular
branch of industry is necessary to the public security, and the external supply cannot be safely reckoned upon.. On this account a
government may very wisely prohibit the import of gun-powder, if
such prohibition be necessary to set the powder-mills at home in
activity; for it is better to pay somewhat dear for so essential an
article, than to run the risk of being unprovided in the hour of need.*
2. Where a similar .commodity of home produce is already saddled
with a duty. The foreign article, if wholly exempt from duty,
would in this case have an actual privilege; so that a duty imposed
has not the effect of destroying, but of restoring the natural equilibrium and relative position of the different branches of production.
Indeed, it is impossible to find any reasonable ground for exempting the production of values by the channel of external commerce
from the ^ame pressure of taxation that weighs upon the production
effected in those of agriculture and manufacture. Taxation is, doubt less, an evil, and one which should be reduced to the lowest possible
degree; but when once a given amount of taxation is admitted to be
necessary, it is but common justice to lay it equally on all three
branches of industry. The error I wish to expose to reprobation is
the notion that taxes of this kind are favourable to production. A
tax can never be favourable to the public welfare,, except by the
good use that is made of its proceeds.
These points should never be lost sight of in the framing of commercial treaties, which are really good for nothing but to protect
industry and capital, diverted into improper channels by the blunders
of legislation. These it would be far wiser to remedy than to perpetuate. The healthy state of industry and wealth is the state of
absolute liberty, in which each interest is left to take care of itself.
The only useful protection authority can afford them is that against
fraud or violence. Taxes and restrictive measures never can be a
benefit: they are at the best a necessary evil; to suppose them useful
to the subjects at large, is to mistake the foundation of national prosperity, and to set at naught the principles of political economy.
Import duties and prohibitions have often been resorted to as a
means of retaliation: * Your government throws impediments in the
way of the introduction of our national products: are not we, then,
justified in equally impeding the introduction of yours?" This is
the favourite plea, and the basis of most commercial treaties; but
people mistake their object: granting that nations have a right to do
one another as much mischief as possible, which, by the way, 1 can
hardly admit; I am not here disputing their rights, but discussing
their interests.
Undoubtedly, a nation that excludes you from all commercial
intercourse with her, does you an injury;—robs you, as far as in her
lies, of the benefits of external commerce; if, therefore, by the dread
of retaliation, you can induce her to abandon her exclusive measures,
there is no question about the expediency of such retaliation, as a
matter of mere policy. But it must not be forgotten that retaliation
hurts yourself as well as your rival; that it operates, not defensively
against her selfish measures, but offensively against yourself, in the
first instance, for the purpose of indirectly attacking her. The only
point in question is this, what degree of vengeance you are animated
by, and how much will you consent to throw away upon its gratification.* I will not undertake to enumerate all the evils arising from
treaties of commerce, or to apply the principles enforced throughout this work to all the clauses and provisions usually contained in them,
i will confine myself to the remark, that almost every modern treaty
of commerce has had for its basis the imaginary advantage ana
possibility of the liquidation of a favourable balance of trade by an
import of specie. If these turn out to be chimerical, whatever
advantage may have resulted from such treaties must be wholly
referred to the additional freedom and facility of international communication obtained by them, and not at all to their restrictive
clauses or provisoes, unless either of the contracting parties has
availed itself of its superior power, to exact conditions savouring of
a tributary character; as England has done in relation to Portugal.
In such case, it is mere exaction and spoliation Again. I would observe, that the offer of peculiar achantages by
one nation to another, in the way of a treaty of commerce, if not an
act of hostility, is at least one of extreme odium in the eyes of other
nations. For the concession to one can only be rendered effectual
by refusal to others. Hence the germ of discord and of war, with
all its mischiefs. It is infinitely more simple, and I hope to have
shown, more profitable also, to treat all nations as friends, and
impose no higher duties on the introduction of their products, than
what are necessary to place them on the same footing as those of
domestic growth.
Yet, notwithstanding all the mischiefs resulting from the exclusion
of foreign products, which I have been depicting, it would be an act
of unquestionable rashness suddenly to change even so ruinous a
policy. Disease is not to be eradicated in a moment; it requires
nursing and management, to dispense even national benefits. Monopolies are an abuse, but an abuse in which enormous capital is vested,
and numberless industrious agents employed, which deserve to be
treated with consideration; for this mass of capital and industry
cannot all at once find a more advantageous channel of national
production. Perhaps the cure of all the partial distresses that must
follow the downfall of that colossal monster in politics, the exclusive
system, would be as much as the talent of any single statesman could
accomplish; vet when one considers calmly the wrongs it entails
when it is established, and the distresses consequent upon its overthrow, we are insensibly led to the reflection, that, if it be so difficult
to set shackled industry at liberty again, with what caution ought
we not to receive any proposition for ensjaving her!
But governments have not been content with checking the import
of foreign products. In the firm conviction, that national prosperity
consists in selling without buying, and blind to the utter impossibility
of the thing, they have gone beyond the mere imposition of a tax
or fine upon purchasing of foreigners, and have in many instances
offered rewards in the shape of bounties for selling to them.
This expedient has been employed to an extraordinary degree by
the British government, which until recently always evinced the
greatest anxiety to enlarge the market for British commercial anc/
manufactured produce.* It is obvious, that a merchant, who ro ceives a bounty upon export, can, without personal loss, afford to se.l
his goods in a foreign market at a lower rate than prime cost, lu
the pithy language of Smith, " We cannot force foreigners to bu)
the goods of our own workmen, as we may our own countrymen;
the next best expedient, it has been thought, therefore, is to pay them
for buying."
In fact, if a particular commodity, by the time it has reached the
French market,, costs the English exporter 20 dollars, his trouble,
&c. included, and the same commodity could be bought in France
at the same or a less rate, there is nothing to give him exclusive
possession of the market. But if the British government pays a
bounty of 2 dollars upon the export, and thereby enables him to
lower his demand from 20 to 18 dollars, he may safely reckon upon
a preference. Yet what is this but a free gift of two dollars from
the British government to the French consumer? It may be conceived, that the merchant has no objection to this mode of dealing;
for his profits are the same as if the French consumer paid the full
value, or cost price, of the commodity. The British nation is the
loser in this transaction, in the ratio of 10 per cent, upon the French
consumption; and France remits in return a value of but 18 for
what has cost 20 dollars.
When a bounty is paid, not at the moment of export, but at the
commencement of productive creation, the home consumer participates with the foreigner in the advantage of the bounty; for, in that
case, the article can be sold below cost price in the home as well as
in the foreign market. And if, as is sometimes the case, the producer
pockets the bounty, and yet keeps up the price of the commodity,
the bounty is then a present of the government to the producer, over
and above the ordinary profits of his industry.
When, by the means of a bounty, a product is raised either for
home or foreign consumption, which would not have been raised
without one, the effect is, an injurious production, one that costs
more than it is worth. Suppose an article, when completely finished
off, to be saleable for 5 dollars and no more, but its prime cost, including of course the profits of productive industry, to a'nount to 6
dollars, it is quite clear that nobody will volunteer the production,
for fear of a loss of 1 dollar. But, if the government, with a view
to encourage this branch of industry, be willing to defray this loss—
in other words, if it offer a bounty of 1 dollar to the producer, the
production can then go on, and the public revenue, that is to say, the
nation at large, will be a loser of 1 dollar. And this is precisely
the kind of advantage that a nation gains by encouraging a branch of production which cannot support itself: it is in fact urging the
prosecution of a losing concern, the produce of which is exchanged,
not for pther produce, but for the bounty given by the state.
Wherever there is any thing to be made by a particular employment of industry, it wants no encouragement; where there is nothing
to be made, it deserves none. There is no truth in the argument,
that perhaps the state may gain, though individuals cannot; for how
can the state gain, except through the medium of individuals ? Perhaps it may be said, that the state receives more in duties than it
pays in bounties; but suppose it does, it merely receives with one
hand and pays with the other: let the duties be lowered to the whole
amount of the bounty, and production will stand precisely where it
did before, with this difference in its favour, viz. that the state will
save the whole charge of management of the bounties, and part of
that of the duties.
Though bounties are chargeable, and a dead loss to the gross
national wealth, there are cases in which it is politic to incur that
loss;(l) as when a particular product is necessary to public security,
and must be had at any rate, however extravagant. Louis XIV.,
with a view to restore the marine of France, granted a bounty of 1
dollar per ton upon every ship fitted out in France. His object was
to train up sailors. So likewise when the bounty is the mere refunding of a duty previously exacted. The bounty paid by Great Britain
upon the export of refined sugar is nothing more than the reimbursement of the import duties upon muscovado and molasses.
Perhaps, too, it may be wise in a government to grant a premium
on a particular product, which, though it make a loss in the outset,
holds out a fair prospect of profit in a few years' time. Smith
thinks otherwise: hear what he says on the subject. " No regulation of commerce can increase the quantity of industry in any
society, beyond what its capital can maintain. It can only divert a
part of it into a direction, into which it might not otherwise have
gone; and it is by no means certain, that this artificial direction is
likely to be more advantageous to the society, than that into which
it would have gone of its own accord. The statesman, who should
attempt to direct private people in what manner they ought to empioy their capitals, would not only load himself with a most unnecessary attention, but assume an authority, which could safely be trusted, not only to no single person, but to no council or senate
whatever; and which would nowhere be so dangerous, as in the
hands of a man who had folly and presumption enough to fane)
himself fit to exercise it. Though for want of such regulations, the
society should never acquire the proposed manufacture, it would n«x
upon that account necessarily be the poorer in any one period of its
duration. In every period of its duration, its whole capital and industry might still have been employed, though upon different objecl'v in the manner that was most advantageous at the time."*
Ai.a Smith is certainly right in the main; though perhaps there
are circumstances that may form exceptions to the general rule, that
every one is the best judge how to employ his industry and capital.
Smith wrote at a period and in a country, where personal interest is
well understood, and where any profitable mode of investing capital
and industry is not likely to be long overlooked. But every nation
is noi so far advanced in intelligence. How many countries are
there, where many of the best employments of capita] are altogether
excluded by prejudices that the government alone can remove!
How many cities and provinces, where certain established investments of capital have prevailed from time immemorial! In one
place, every body invests in landed property, in another, in houses,
and in others still, in public offices or national funds. Every unusual
application of the power of capital is, in such places, contemplated
with distrust or disdain ; so that partiality shown to a profitable mode
of employing industry or capital may possibly be productive of
national advantage.
Moreover, a new channel of industry may ruin an unsupported
speculator, though capable of yielding enormous profit, when the
labourers shall have acquired practice, and the novelty has once been
overcome. France at present contains the most beautiful manufactures of silk and of woollen in the world, and is probably indebted
for them to the wise encouragement of Colbert's administration.
He advanced to the manufacturers 2000 fr. for every loom at work ;
and, by the way, this species of encouragement has a very peculiar
advantage. In ordinary cases, whatever the government levies upon
the product of individual exertion is wholly lost to future production ; but, in this instance, a part was employed in reproduction; a
portion of individual revenues was thrown into the aggregate productive capital of the nation. This was a degree of wisdom one
could hardly have expected, even from personal self-interest.
It woulJ be out of place here to inquire, how wide a field bounties open to peculation, partiality, and the whole tribe of abuses Incident to the management of public affairs. The most enlightened statesman is often obliged to abandon a scheme of evident public
utility, by the unavoidable defects and abuses in the execution.
Among these, one of the most frequent and prominent is, the risk of
paying a premium, or granting a favour to the pretensions, not of
merit, but of importunity. In other respects, I have no fault to find
with the honours, or even pecuniary rewards publicly given to
artists or mechanics, in recompense of some extraordinary achievement of genius or address. Rewards of this kind excite emulation,
and enlarge the stock of general knowledge, without diverting industry or capital from their most beneficial channels. Besides, they
cost nothing in comparison of bounties of another description. The
bounty on the export of wheat has, by Smith's account, cost England
in some years as much as a million and a half of dollars. I do not
believe that the British or any other government ever spent the
fiftieth part of that sum upon agriculture in any one year.

A Treatise on Political Economy

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