Chap 5b: Trade

24 Wholesale trade is the buying and selling by wholesale.

It may be reduced to three kinds:

  1. The home-trade
    • This is the purchase of local produce in one part of a country to sell in another part of the same country.
    • It includes the inland and the coasting trade.
  2. The foreign trade of consumption
    • This is the purchase of foreign goods for home-consumption.
  3. The carrying trade
    • This is the carrying of the surplus produce of one country to another.
    • It is the transacting of the commerce of foreign countries.


25 The home trade generally replaces two distinct capitals [that of the buyer and that of the seller] employed in agriculture or manufactures.

  • It enables the buyers and sellers to continue that employment.
  • The value of commodities sent out from the merchant’s shop generally returns an equal value of other commodities.
  • When both commodities are domestic produce, it replaces two distinct capitals which support productive labour.
    • It enables them to continue that support.
  • A trader’s capital sends Scotch manufactures to London and brings back English corn and manufactures to Edinburgh.
    • His capital replaces distinct Scottish and English capitals employed in agriculture or manufactures.


26 The capital employed in buying foreign goods for home-consumption in exchange for domestic produce, also replaces two distinct capitals.

  • But only one of them is employed in supporting domestic industry.
  • A trader’s capital sends British goods to Portugal and brings back Portuguese goods to Great Britain.
    • His capital replaces only one British capital and only one Portuguese capital.
  • The foreign trade of consumption will only give half the encouragement to national industry as the home trade, even if its returns were as quick as the home-trade.


27 But the returns of the foreign trade of consumption are very seldom as quick as those of the home-trade.

  • The returns of the home-trade come in before the end of the year.
    • It comes three or four times in the year.
  • The returns of the foreign trade of consumption seldom come in before the end of the year.
    • It sometimes comes after two or three years.
  • A capital employed in the home-trade can make 12 operations.
    • It can be sent out and return 12 times, before that of the foreign trade of consumption has made one.
  • If the capitals are equal, the home trade will give 24 times more encouragement to the country’s industry than the foreign trade.


28 The foreign goods for home-consumption may sometimes be bought with other foreign goods.

  • Those other foreign goods must be bought immediately with domestic produce because foreign goods can only be bought with domestic goods, except during war and conquest.
  • The effects of a round-about foreign trade are the same as a direct foreign trade.
    • Except that the final returns will likely be more distant because they must depend on the returns of two or three other foreign trades.
  • Assuming:
    • British manufactures are used to buy Virginia tobacco
    • Virginia tobacco is used to buy the flax & hemp of Latvia [Riga].
      • The merchant must wait for the returns of Virginia tobacco and the flax & hemp of Latvia before he can re-purchase British manufactures.

NARA trade - New Page (1)

  • Assuming:
    • British manufactures are used to buy Jamaican sugar & rum instead,
    • Jamaican sugar & rum are used to buy Virginia tobacco, and
    • Virginia tobacco are used to buy the flax & hemp of Latvia.
      • The merchant must wait for the returns of the goods from Jamaica, Virginia, and Latvia.
      • If those three foreign trades were done by three merchants, each merchant will receive the returns of his own capital more quickly if:
        • the first imports goods
        • the second buys the goods imported by the first
        • the third buys those goods imported by the second, to export them again.
          • But the final returns of the trade will be just as slow as ever.

NARA trade - New Page (2)

  • It makes no difference to the country whether the capital employed in a round-about trade belong to one or three merchants.
    • It may make a difference to the particular merchants.
    • In both cases, three times more capital must be employed to exchange British manufactures for flax & hemp than necessary had the manufactures and the flax & hemp been directly exchanged for one another.
  • Such round-about foreign trade of consumption will generally give less encouragement to country’s productive labour than the direct trade of the same kind.


29 Whatever foreign goods are used to buy other foreign goods for home-consumption, brings no essential difference in:

  • the nature of the trade or
  • the encouragement it can give to the productive labour of the country it is carried on.

For example, if foreign goods are bought in Britain with Brazilian gold, this gold, like the tobacco of Virginia must have been bought with:

  • British produce or
  • another foreign commodity which was bought with British produce.

As far as the nation’s productive labour is concerned, the foreign trade done with gold and silver has all the advantages and inconveniences of any round-about foreign trade.

  • It will replace with the same speed the capital immediately employed in supporting that productive labour.
    • It even has one advantage over other round-about foreign trades.
  • The transportation of those metals is less expensive than almost any other foreign goods, due to their small bulk and great value.
    • Their freight is much less.
    • Their insurance is not greater.
    • No goods, besides, are less liable to suffer by the carriage.
  • By the intervention of gold and silver, an equal amount of foreign goods may frequently be bought with fewer domestic produce, than with any other foreign goods.
    • The country’s demand can be supplied more completely and at a smaller cost than in any foreign commodity.
  • I shall examine next whether the country which continually exports those metals will be impoverished.


30 The capital of any country employed in the carrying trade is all withdrawn from supporting its productive labour to support the productive labour of foreign countries.

  • It may replace the capitals of foreign countries.
  • The Dutch merchant who sends the Polish corn to Portugal and returns Portuguese fruits & wines to Poland, replaces the capitals of Poland and Portugal.
    • Neither of those two capitals supported the productive labour of Holland.
    • One of the capitals supports the productive labour of Poland
    • The other one supports that of Portugal.
    • Only the profits return regularly to Holland.
      • This is its sole addition to the national produce of Holland.
  • When the carrying trade of any country is carried on with its own ships and sailors, the capital which pays the freight is distributed among, and mobilizes productive labourers of that country.
  • Almost all nations in the carrying trade have done it in this way.
    • The trade itself probably derived its name from it.
    • The people of such countries are the carriers to other countries.
      • However, this is not essential in the carrying trade.
        • A Dutch merchant may carry the commerce of Poland and Portugal in British ships.
        • We may presume that this is actually done.
  • This is why the carrying trade was peculiarly advantageous to Great Britain
    • Its defence and security depend on its shipping and on its sailors.
  • But the same capital may employ as many sailors and shipping in the foreign trade or even in the home-trade (done in coasting vessels), as in the carrying trade.
  • The number of sailors and shipping which any capital can employ does not depend on the nature of the trade.
    • It depends partly on the bulk of the goods in proportion to their value.
    • It depends partly on the distance of the ports where they are carried, chiefly upon their bulk.
      • For example, the coal trade from Newcastle to London employs more shipping than all the carrying trade of England, though the ports are not far apart.
  • Forcing more of the country’s capital into the carrying trade by extraordinary encouragements above the natural will not always increase that country’s shipping.

31 The capital employed in the home-trade will generally:

  • Support more of its productive labour
  • Increase the value of its produce more than an equal capital employed in the foreign trade

The capital in the foreign trade of consumption has a greater advantage over an equal capital in the carrying trade.

  • The riches and 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 should give no preference nor encouragement:
    • to the foreign trade above the home-trade
    • to the carrying trade above either of those two
  • It should neither force nor tempt into either of those two channels more of a country’s capital than what would naturally flow into them.

32 When the produce of any country exceeds its own demand, the surplus must be sent abroad.

  • It must be exchanged for something which is in demand at home.
  • Without such exportation, a part of the productive labour of the country must cease.
    • The value of its annual produce must diminish.
  • The land and labour of Great Britain produce more corn, woollens, and hardware than needed at home.
    • The surplus must be exchanged for something in demand at home.
    • This surplus can compensate the labour and expence of producing it only through such exportation.
  • The sea-coast and the banks of navigable rivers are advantageous for industry only because they facilitate the exchange of such surplus produce.

33 When the foreign goods purchased with the surplus domestic produce exceed the demand at home, the surplus must be sent abroad again.

  • About 96,000 hogsheads of tobacco are annually purchased in Virginia and Maryland with surplus British produce.
    • But Great Britain does not require perhaps more than 14,000.
    • If the remaining 82,000 could not be exchanged abroad, their importation must cease immediately.
    • The productive labour of all the British employed in making those goods which purchase the 82,000 hogsheads must also cease.
    • Those goods are part of Great Britain’s annual produce which has no market at home.
    • The production of those goods must cease, as they are deprived of overseas demand.
  • The most round-about foreign trade of consumption therefore may be as necessary as the most direct foreign trade in terms of supporting the productive labour of the country and the value of its produce.


34 When a country’s capital stock is increased to the point that it cannot be all employed to support its productive labour, the surplus naturally disgorges itself into the carrying trade.

  • “The carrying trade is the natural effect and symptom of great national wealth”
    • But it is not the natural cause of its wealth.
    • Those statesmen who encourage it mistake the effect for the cause.
  • Holland is by far the richest country in Europe.
    • It has the greatest share of the European carrying trade.
  • England is perhaps the second richest European country.
    • It also has a big share of the European carrying trade.
    • Although the English carrying trade frequently is, perhaps, a round-about foreign trade of consumption in reality.
  • The round-about foreign trade of consumption is largely made up of the trades between America, the East and West Indies and Europe.
  • Those goods are generally purchased immediately with:
    • British produce or
    • foreign produce bought with British produce, with the final returns being consumed in Great Britain
  • The principal branches of the carrying trade of Great Britain are perhaps made up of:
    • the trade done in British ships between the Mediterranean ports, and
    • some of the trade done by British merchants between Indian ports.

35 The extent of the home-trade and the capital employed in it, is limited by the value of the surplus produce of all the distant places within the country.

  • The extent of the foreign trade of consumption and the capital employed in it, is limited by the value of the surplus produce of the whole country.
  • The extent of the carrying trade and the capital employed in it, is limited by the value of the surplus produce of all the countries in the world.
    • Therefore, its farthest extent is infinite compared to the other two.
    • It can absorb the greatest capitals.

36 Private profit is the sole motive of the owner of the capital in agriculture, manufactures, or wholesale or retail trade.

  • The productive labour it may mobilize and the values it may add to the national annual produce is never in his thoughts.
  • Individual capitals will naturally be employed in the most advantageous way for society in countries where:
    • agriculture is the most profitable of all employments, and
    • farming and land improvement are the most direct roads to a splendid fortune.
      • However, agricultural profits are not superior to other employments in Europe.
  • Within these few years, projectors everywhere have amused the public with most magnificent accounts of the profits to be made by land cultivation and improvement.
    • A very simple observation can prove that they are false.
      • Everyday we see the most splendid fortunes acquired in a single lifetime through trade and manufacturers, frequently from a very small capital, sometimes from no capital.
      • Such a fortune acquired by agriculture from such a capital has perhaps not occurred in Europe in the present century.
    • However, in all great European countries, much good land still remains uncultivated.
      • Most of the cultivated lands are not yet fully improved.
      • Almost everywhere, agriculture can absorb much more capital than before.
  • In Books 3 and 4, I will explain:
    • why European policy gave the trades of towns a great advantage over the trades in the countryside.
    • why private persons find it better to employ their capitals in the most distant carrying trades of Asia and America than in the their own country’s land improvement.

Words: 2,253

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