Chap. 2a: Import Restraints

Chap. 2A: The Restraints on the Imports Which Can be Produced at Home

1 The monopoly of domestic industry is secured through high duties or import bans of foreign goods which can be produced at home.

  • The ban on importing foreign live cattle or foreign salt secures the monopoly of the home market for meat to British graziers.
  • The high duties on corn imports amount to a ban in times of moderate plenty.
    • Such duties give a like advantage to corn growers.
  • The ban on woollens importation is equally favourable to woollen manufacturers.
    • The silk manufacture uses foreign materials.
    • It has recently obtained the same advantage.
  • The linen manufacture has not yet obtained it, but is making great strides towards it.
  • In Great Britain, many other kinds of manufacturers have obtained a monopoly against their countrymen.
    • The variety of goods banned from being imported exceeds what is commonly known by people unfamiliar with the customs laws.

2 The home-market monopoly greatly encourages the industries which enjoy it.

  • It frequently turns more of the society’s labour and stock towards those industries.
  • It is not so obvious whether it:
    • increases the society’s industry, or
    • gives it the most advantageous direction.

3 The general industry of society can never exceed what the capital of the society can employ.

  • The number of workers that can be employed by any person must be proportional to his capital.
    • Likewise, the number that can be employed by a society must be proportional to the total capital of that society.
      • It can never exceed that proportion.
  • No commercial regulation can increase the amount of industry in any society beyond what its capital can maintain.
    • It can only divert some of it into a direction which it might not otherwise have gone into.
      • It is uncertain whether this artificial direction will be more advantageous to society than its natural direction.

4 “Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command.”

  • It is his own advantage which he has in view, and not that of the society.
  • But the study of his own advantage naturally leads him to prefer that employment which is most advantageous to society.
  1. 5 Every individual endeavours to employ his capital as near home as he can.
  • He consequently supports domestic industry as much as he can, provided that he can always obtain profits which are ordinary or not much less than the ordinary.
  • 6 Thus, on equal profits, every wholesale merchant naturally prefers the home-trade to the foreign trade of consumption.
    • He prefers the foreign trade of consumption to the carrying trade.
    • In the home-trade, his capital is never long out of his sight.
      • He can better know the character and situation of the persons whom he trusts.
      • If he is deceived, he knows better the local laws from which he must seek redress.
    • In the foreign trade of consumption, his capital is frequently out of sight.
    • In the carrying trade, his capital is divided between two foreign countries.
      • None of it is ever brought home or placed in his own immediate view and command.
      • An example of the carrying trade is an Amsterdam merchant carrying corn from Konigsberg to Lisbon and fruit & wine from Lisbon to Konigsberg.
        • Half of his capital must be at Konigsberg and the other half at Lisbon.
          • None of it ever needs to come to Amsterdam.
        • His natural residence should be at Konigsberg or Lisbon.
          • Only some particular circumstances can make him prefer to reside in Amsterdam.
        • The uneasiness he feels from being separated far from his capital makes him bring part of the Konigsberg and Lisbon goods to Amsterdam.
          • This subjects him to:
            • a double charge of loading and unloading, and
            • some duties
          • Yet he willingly submits to this extraordinary charge for the sake of having some of his capital under his own view and command.
      • In this way, every country doing the carrying trade becomes the emporium for foreign goods.
        • The merchant sells as many foreign goods in the home-market as possible, to save a second loading and unloading.
          • He converts his carrying trade into a foreign trade of consumption.
      • When a merchant in the foreign trade of consumption collects goods for foreign markets, he will always be glad, on equal profits, to sell as much of them at home as he can.
        • He saves the risk and trouble of exportation when he converts his foreign trade of consumption into a home-trade.
    • Home is the centre:
      • around which capitals are continually circulating, and
      • to which capitals are always tending
    • Sometimes, capital may be driven off towards more distant employments.
      • But a capital employed in the home-trade mobilizes more domestic industry.
      • It gives revenue and employment to more people in the country than an equal capital employed in the foreign trade of consumption.
    • The capital employed in the foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade.
    • Upon equal profits, every individual is naturally inclined to employ his capital to:
      • support domestic industry, and
      • give revenue and employment to the greatest number of people of his own country.
  1. 7 Every individual who employs his capital to support domestic industry necessarily tries to direct that industry so that its produce may be of the greatest value.
  • 8 The produce of industry is what capital adds to the raw materials.
  • The profits of the employer will be in proportion to the value of this produce.
  • But it is only for the sake of profit that anyone employs a capital to support industry
    • He will always employ it to support that industry which gives the most valuable produce.

The Invisible Hand

9 The annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry.

  • Its revenue is precisely the same thing with that exchangeable value.
  • Every individual necessarily works to render the society’s annual revenue as great as he can.
    • He generally does not:
      • intend to promote the public interest, or
      • know how much he is promoting it
  • By preferring to support domestic industry over foreign industry, he intends only his own security.
  • By directing that industry to produce the greatest value, he intends only his own gain.
    • In this case, as in many other cases, he is led by an invisible hand to promote an end which he did not intend.
    • “Nor is it always the worse for the society that it was no part of it.”
  • By pursuing his own interest, he frequently promotes the society’s interest more effectively than when he really intends to promote it.
    • “I have never known much good done by those who affected to trade for the public good.”
      • It is an affectation not very common among merchants.
      • Very few words can be used to dissuade them from it.

10 Every individual can, in his local situation, judge much better than any statesman on what domestic industry his capital produce the greatest value.

  • The statesman who directs private people how they should employ their capitals would load himself with a most unnecessary attention.
    • He would assume an authority which could not be safely trusted to any single person nor to any council or senate.
    • Such authority would be most dangerous in the hands of a man who had the folly and presumption to fancy himself fit to exercise it.

Smith’s Comparative Advantage

11 To give the monopoly of the home-market to any domestic industry is to direct private people how they should employ their capitals.

  • The monopoly of the home market is a useless or a hurtful regulation in almost all cases.
    • It is useless if the price of domestic produce is already as cheap as the price of foreign produce.
    • It must be hurtful if it cannot lower the price of domestic produce.
  • “It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy.”
    • The tailor does not make his own shoes, but buys them of the shoemaker.
    • The shoemaker does not make his own clothes, but employs a tailor.
    • The farmer does not make shoes nor clothes, but employs tailors and shoemakers.
  • For their interest, all of them employ their industry with some advantage over their neighbours.
    • They buy whatever else they need with the price of their own produce.

12 The prudence in the conduct of every private family cannot be a folly in the conduct of a great kingdom.

  • If a foreign country can supply us with a commodity cheaper than we can make ourselves, better buy it of them with the produce of our own industry employed in our advantage.
  • The general industry of the country is always in proportion to the capital which employs it.
    • The general industry will only be reduced in those disadvantageous industries.
    • It will find the best way to be employed with the greatest advantage.
  • It is certainly not employed to the greatest advantage when it is directed towards making something which it can buy cheaper.
    • The value of its produce is reduced when its industry is turned to making commodities at home which could be bought cheaper overseas.
    • Those cheap foreign commodities could have been purchased instead with local commodities naturally produced at home at an advantage.
  • By making those cheap foreign commodities at home, the nation’s industry is thus turned into a less advantageous employment.
    • The exchangeable value of its annual produce is reduced by such regulations, opposite of the intention of the lawgiver.

13 By such regulations, a particular manufacture may sometimes be developed sooner.

  • After a certain time, it may be made at home cheaper than in the foreign country.
  • But even if the society’s industry may be advantageously brought into a particular channel sooner, it does not follow that its total industry or revenue can be increased by such regulations.
  • The society’s industry can increase only in proportion as its capital increases.
    • Its capital can increase only in proportion to what can be gradually saved out of its revenue.
  • The immediate effect of such regulations is to reduce its revenue.
    • What reduces its revenue will not increase its capital faster than if capital and industry were left to find their natural employments.

14 Even if a society fails to develop a certain manufacture because of the lack of the needed supporting regulations, it would not be necessarily poorer.

  • A society’s total capital and industry might still be employed on other manufactures most advantageous at the time.
  • Its revenue might have been the greatest which its capital could afford.
  • Both capital and revenue might have been increased the fastest.

15 The natural advantages one country has over another in producing particular commodities are sometimes so great that it is in vain to struggle with them.

  • Very good grapes can be raised in Scotland by using glasses, hotbeds, and hot walls.
    • Very good wine can be made at about 30 times more expence than those from overseas.
    • Would it be reasonable to ban all foreign wine imports merely to encourage the making of claret and burgundy in Scotland?
  • It is absurd to turn 30 times more capital & industry towards making a product that could be bought overseas instead using a single capital.
    • It is as absurd, though not so glaring, to turn towards such products 1/30th or even 1/300th part more of the capital & industry.
  • In this respect, it does not matter whether the advantages which one country has over another is natural or acquired.
    • As long as one country has those advantages and the other wants them, it will always be more advantageous for the latter to buy than to make.
  • The advantage of one artificer in one trade over another artificer in another trade, is only an acquired advantage.
    • They find it more advantageous to buy of one another than to make what does not belong to their trades.

16 Merchants and manufacturers derive the greatest advantage from this monopoly of the home-market.

  • The high duties on foreign corn amount to a ban in times of moderate plenty.
    • These duties, with the ban on the importation of foreign cattle and salt, are not so advantageous to British graziers and farmers as other bans are to British merchants and manufacturers.
  • Manufactures, especially those of the finer kind, can be more easily transported than corn or cattle.
  • Foreign trade is chiefly employed in the fetching and carrying of manufactures.
  • In manufactures, a very small advantage will enable foreigners to undersell our own workers, even in the home-market.
    • It will require a very great advantage in the rude produce to enable foreigners to undersell our farmers.
  • If the free importation of foreign manufactures were permitted, several of the home manufactures would probably suffer.
    • Perhaps some of them would go to ruin.
    • Their stock and industry would be forced to find other employments.
  • But the freest importation of the rude produce of the soil could have no such effect on the country’s agriculture.

17 For example, if the importation of foreign cattle were made free, so few could be imported that the British grazing trade could be little affected by it.

  • Live cattle are perhaps the only commodity which is more expensive to transport by sea than by land.
    • By land, they carry themselves to market.
    • By sea, their food and water must be carried with them.
    • The short sea between Ireland and Great Britain renders Irish cattle importation easier.
      • Their free importation was recently permitted for a limited time.
      • Should it be made permanent, it could have no big effect on the interest of British graziers.
  • The parts of Britain which border the Irish Sea are all grazing lands.
    • Irish cattle could never be imported for their labour.
    • They must be driven through those extensive lands expensively and inconveniently, before they could arrive at their proper market.
    • Fat cattle cannot be driven so far.
    • Lean cattle can only be imported.
      • Such an importation would not interfere with the interest of the feeding or fattening lands.
      • It would be advantageous to the breeding lands because it would reduce the price of the lean cattle it produces.
  • The free importation of Irish cattle can never affect the breeding lands of Great Britain.
    • This is proven by:
      • the few Irish cattle imported
      • the consistently good selling price of lean cattle
  • The common people of Ireland have sometimes violently opposed the exportation of their cattle.
    • The exporters could have easily conquered this mobbish opposition if they found any great advantage in continuing the exportation.

18 The feeding and fattening lands must always be highly improved.

  • Breeding lands are generally uncultivated.
    • The high price of lean cattle increases the value of uncultivated land.
      • It is like a bounty against improvement.
    • It would be more advantageous for highly improved lands to import its lean cattle than to breed them.
  • Holland currently follows this maxim.
  • The mountains of Scotland, Wales, and Northumberland are lands incapable of much improvement.
    • They seem destined by nature to be the breeding countries of Great Britain.
  • The only effect of the freest importation of foreign cattle is to hinder those breeding lands from taking advantage of the kingdom’s increasing population and improvement.
    • It would prevent those breeding lands from:
      • raising their prices
      • laying a real tax on the more improved parts of the country

19 In the same way, the freest importation of salt provisions would have little effect on the interest of British graziers.

  • Salt provisions are a very bulky commodity.
  • Foreign salt imports are of worse quality than fresh meat because they cost more labour and expence.
    • They could never:
      • compete with the fresh meat.
      • be any considerable part the people’s food
    • They might:
      • compete with the local salt
      • be used for victualling ships for distant voyages
  • The few salt provisions imported from Ireland is an experimental proof that our graziers do not have to worry about it.
    • The price of meat was never sensibly affected by it.

20 Even the free importation of foreign corn could affect the interest of British farmers very little.

  • Corn is a much more bulky commodity than meat.
  • A pound of wheat at 1 pence is as dear as a pound of meat at 4 pence.
  • A small amount of foreign corn is imported even during times of the greatest scarcity.
  • This can assure our farmers that they have nothing to fear from the freest importation.
  • According to the well informed author of the tracts upon the corn trade:
    • The average quantity imported yearly is 23,728 quarters of all kinds of grain.
    • It does not exceed the 1/571 part of the annual consumption.
  • The bounty on corn increases corn exports in years of plenty.
    • Because of it, the plenty of one year does not compensate the scarcity of another.
    • It increases corn imports in years of scarcity.
  • The bounty increases the average quantity of corn exported and imported.
    • If there were no bounty, less corn would be exported.
      • More corn would remain.
      • Less corn would be needed to be imported annually.
  • The corn merchants are the fetchers and carriers of corn between Great Britain and foreign countries.
    • Without the bounty, they would have much less employment.
    • They might suffer considerably.
    • But the country gentlemen and farmers could suffer very little.
    • I have observed the greatest anxiety in the corn merchants for the continuation of the bounty, and not in the country gentlemen and farmers.

21 To their great honour, country gentlemen and farmers are least subjected to the wretched spirit of monopoly.

  • The owner of a big manufacture is sometimes alarmed if another work of the same kind is established within 20 miles.
    • The Dutch woollen manufacturer at Abbeville stipulated that no work of the same kind should be established within 30 leagues of Abbeville.
  • On the contrary, farmers and country gentlemen promote, instead of obstruct, the cultivation and improvement of their neighbours’ farms.
    • Unlike most manufacturers, they have no secrets.
    • They are generally fond of communicating and extending to their neighbours any new advantageous practice they find.
    • Old Cato says “Pius quaestus, stabilissimusque, minimeque invidiosus; minimeque male cogitantes sunt, qui in eo studio occupati sunt.” [Farming is the most pious livelihood, the one least likely to provoke envy, and those engaged in it are the least dissatisfied.]
  • Country gentlemen and farmers are dispersed in the countryside.
    • They cannot easily combine as merchants and manufacturers.
  • Merchants and manufacturers are collected into towns.
    • They are accustomed to that exclusive corporation spirit which prevails in them.
    • They naturally try to obtain the same exclusive privilege which they have against the town’s people and use those privileges against them.
    • They were the original inventors of those restraints on foreign imports to secure them the home-market’s monopoly.
  • British country gentlemen and farmers probably imitated them in demanding the exclusive privilege of supplying their countrymen with corn and meat.
    • The country gentlemen and farmers forgot their own natural generosity.
    • They put themselves on a level with the merchants and manufacturers who were disposed to oppress them.
    • Perhaps they did not consider how the freedom of trade affected their interest much less than those of merchants and manufacturers.

22 In reality, permanently prohibiting the importation of foreign corn and cattle is enacting that the countryside’s population and industry shall never exceed what its rude produce can maintain.

Words: 3207

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