Chap 7h: Monopoly Effects

130 A moderate and gradual relaxation of the British exclusive trade to the colonies, until it is rendered free, is the only expedient which can deliver her from this danger in the future.

  • Only this can enable her to withdraw some of her capital from this overgrown employment.
    • It can turn her capital towards other employments, though with less profit.
  • By gradually reducing one industry and increasing the rest, this relaxation can restore her industry to that natural and healthy proportion which perfect liberty necessarily establishes.
    • Perfect liberty can alone preserve this natural balance.
  • Opening the colony trade all at once to all nations might create some temporary inconvenience.
    • It might create a great permanent loss to most of those presently engaged in it.
    • Even the sudden loss of the employment of the ships which import the surplus tobacco might alone be felt very sensibly.
  • “Such are the unfortunate effects of all the regulations of the mercantile system!”
    • They introduce very dangerous disorders into the political body
    • Those disorders are often difficult to remedy without creating greater short term disorders.
  • We must leave the following to the wisdom of future statesmen and legislators to determine:
    • How the colony trade should be gradually opened
    • Which restraints should be taken away first and which one taken away last.
    • How the natural system of perfect liberty and justice should be gradually restored.

131 Great Britain has now been excluded from the trade with the 12 North American provinces for more than a year (from December 1, 1774).

  • Five unforeseen events have very fortunately concurred to hinder Great Britain from feeling this total exclusion from the colony trade:
  1. The North American colonies prepared themselves for their non-importation agreement.
    1. They drained Great Britain completely of all the commodities fit for their market
  1. This year, the extraordinary demand of the Spanish Flota drained Germany and the North of many commodities which competed with British manufactures.
    1. Linen was one of such commodities
  1. The peace between Russia and Turkey created an extraordinary demand from the Turkey market
    1. Turkey was very poorly supplied during its distress while a Russian fleet was cruising in the Archipelago
  1. The rising year on year demand of Northern Europe for British manufactures
  2. The late partition and consequential pacification of Poland.
    1. It opened the market of that great country
    2. This year it added an extraordinary demand for British manufactures.
  • All these events, except the fourth, were transitory and accidental.
  • The continued exclusion from the colony trade may still create some distress.
    • This distress will come gradually.
    • It will be felt much less severely than if it came all at once.
  • In the meantime, Great Britain’s industry and capital may find new employment and direction to prevent this distress from rising.

132  In all cases, the colony trade monopoly turned British capital from a foreign trade of consumption with a neighbouring country to a more distant country.

    • In many cases, it turned British capital from a direct foreign trade of consumption into a round-about one.
    • In some cases, it turned British capital from a foreign trade of consumption into a carrying trade.
  • In all cases, it turned British capital from a direction where it could maintain more productive labour into one where it can maintain fewer.
  • By suiting only to one market so much of British industry and commerce, the monopoly rendered them less secure than if they were accommodated to more markets.

133 “We must carefully distinguish between the effects of the colony trade and those of the monopoly of that trade.”

  • The effects of the colony trade are always beneficial.
  • The effects of the monopoly of the colony trade are always hurtful.
  • The colony trade is so beneficial even if it were subject to a monopoly with its hurtful effects.

134 The effect of the colony trade in its natural and free state is to open a great, distant market for British industry which may exceed the demand at home, Europe, and the Mediterranean.

  • In its natural and free state, the colony trade:
    • Encourages Great Britain to continually increase the surplus by continually presenting new equivalents to be exchanged for it.
      • It does not draw produce from those markets previously sent to them.
    • Increases the quantity of productive labour in Great Britain.
      • It does not alter the direction of the labour previously employed there.
    • Allow competition from other nations.
      • It would hinder the profit rate from rising above the common level in the new market or new employment.
      • The new market would not draw produce from the old market.
      • It would create a new produce for its own supply.
        • That new produce would be a new capital for carrying on the new employment.
        • The new employment would draw nothing from the old market.

135 The colony trade monopoly, on the contrary, excludes foreign competition.

  • It raises the profit rate in the new market and the new employment.
    • It draws produce from the old market and capital from the old employment.
  • The avowed purpose of the monopoly is to increase our share of the colony trade beyond the natural.
    • If our share were no greater than without the monopoly, there could be no reason for establishing the monopoly.
  • More capital of the country is unnaturally forced into a trade where the returns are slower and more distant.
    • It renders all the productive labour and national produce less than they otherwise would be.
    • It keeps down the revenue of the inhabitants of that country below what it would naturally rise to.
    • It reduces their power of accumulation.
    • It hinders, at all times, their capital from maintaining productive labour as it would otherwise maintain.
    • It hinders their capital from increasing so fast as it would otherwise increase to maintain more productive labour.

136 The natural good effects of the colony trade more than counterbalance the bad effects of the monopoly on Great Britain.

  • The colony trade becomes greatly advantageous even with the monopoly.
  • The new market and new employment opened by the colony trade are wider than the old market and old employment lost by the monopoly.
  • The new produce and the new capital created by the colony trade maintain more productive labour in Great Britain than what was thrown out of employment by the revulsion of capital from other trades with more frequent returns.
  • If the colony trade is advantageous to Great Britain, it is in spite of the monopoly, not because of the monopoly.

137 It 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.
  • The cheapness of land renders agriculture more advantageous than any other business.
  • They abound in the rude produce of land.
  • They generally have a large surplus to export.
  • In new colonies, agriculture:
    • Draws hands from all other employments or
    • Keeps them from going to any other employment
  • There are few hands to spare for the necessary manufactures and none for the ornamental ones.
    • They find it cheaper to purchase of manufactures of other countries than to make it themselves.
  • The colony trade indirectly encourages its agriculture by encouraging European manufactures.
    • The colony trade gives employment to European manufactures, which become a new and most advantageous market for rude produce.
    • The trade to America greatly extends the home market for corn, cattle, bread and meat of Europe.

138 The monopoly of the trade of populous and thriving colonies is not alone sufficient to establish or maintain manufactures in any country.

  • This is demonstrated by Spain and Portugal.
  • “Spain and Portugal were manufacturing countries before they had any considerable colonies.”
  • They were once the richest and most fertile in the world but not anymore.

139 The bad effects of the monopoly in Spain and Portugal were aggravated by other causes.

  • These causes perhaps overbalanced the natural good effects of the colony trade:
    • Other monopolies
    • The degradation of gold and silver value below its value in most other countries
    • The exclusion from foreign markets by improper taxes upon exportation
    • The narrowing of the home market by more improper taxes on the transportation of goods
    • Above all, that irregular and partial administration of justice which protects the rich and powerful debtor from his injured creditor.
      • It makes the industrious afraid to prepare goods for those haughty and great men.
      • The industrious dare not refuse to sell on credit despite being uncertain of repayment.

140 In England, on the contrary, the natural good effects of the colony trade are assisted by other causes which conquered the bad effects of the monopoly.

  • These causes seem to be:
    • The general liberty of trade which is at least equal or perhaps superior to any other country.
    • The liberty of exporting, duty free, almost all sorts of domestic goods to almost any foreign country.
      • More importantly, the unbounded liberty of transporting them from our own country to any other without:
        • Being obliged to give any account to any public office
        • Being liable to question or examination of any kind
    • Above all, that equal and impartial administration of justice which renders the meanest British subject respectable to the greatest.
      • This justice secures to every man the fruits of his own industry
      • It gives the greatest and most effectual encouragement to every sort of industry.

141 If British manufactures were advanced by the colony trade, it was not by its monopoly but in spite of its monopoly.

  • The monopoly altered the quality and shape of some of British manufactures
  • It accommodated to a market where the returns are slow and distant, instead of a market where the returns are frequent and near.
  • It turned a part of British capital from an employment where it would have maintained more manufacturing industry to one where it maintains a much smaller.
  • It diminished the whole quantity of manufacturing industry maintained in Great Britain.

142 The colony trade monopoly is like all the other mean and malignant expedients of the mercantile system.

  • It depresses the industry of all other countries and chiefly that of the colonies.
  • It reduces the industry of the country for which is it is established.

143 The monopoly hinders the country’s capital from maintaining so great a quantity of productive labour as it would otherwise maintain.

  • It hinders it from affording so great a revenue to its industrious people as it would otherwise afford.
  • Capital can be increased only by savings from revenue.
  • The monopoly hinders capital from:
    • affording so great a revenue as it would otherwise afford
    • increasing so fast as it would otherwise increase
    • maintaining more productive labour
    • affording more revenue to the industrious people of that country
      • The wages of labour is one great original source of revenue for them.
      • The monopoly must have rendered it at always less abundant than natural.

144 By raising mercantile profits, the monopoly discourages land improvement.

  • The profit of improvement depends on the difference between what the land actually produces and what it can be made to produce through the application of capital.
    • If this difference affords more profit than what can be drawn from an equal capital in any mercantile employment, land improvement will draw capital from all mercantile employments.
    • If the profit is less, mercantile employments will draw capital from land improvement.
  • Whatever raises the rate of mercantile profit lessens the superiority or increases the inferiority of the profit of improvement.
    • The one case hinders capital from going to improvement.
    • The other case draws capital from it.
  • Rent of land is another great original source of revenue.
    • By discouraging improvement, the monopoly retards the natural increase of rent.
    • By raising the profit rate, the monopoly keeps up the market interest rate higher than it otherwise would be.
    • But the price of land is in proportion to the rent which it affords.
    • The price of land falls as interest rates rise and rises as interest rate falls.
  • The monopoly hurts the landlord’s interest by retarding the natural increase of:
    • his rent
    • the price of his land, relative to its rent

145 The monopoly raises the mercantile profit rate and increases the gain of our merchants.

  • But it obstructs the natural increase of capital.
    • It reduces the total revenue derived by the citizens from the profits of stock.
  • A small profit on a great capital generally affords a greater revenue than a great profit on a small one.
    • The monopoly raises the profit rate but hinders the total profit from rising so high as it otherwise would do.

146 The original sources of revenue are wages, rent, and profits.

  • The monopoly renders them all 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 men in all other countries.”


147 It is solely by raising the ordinary profit rate that the monopoly has proved advantageous to any order of men.

  • The high rate of profit has one effect inseparable and more fatal than all its bad effects to the country combined.
  • The high rate of profit seems every where to destroy that parsimony natural to the character of the merchant.
    • When profits are high, parsimony seems unsuitable to the affluence of his situation.
    • But the owners of the great mercantile capitals are the leaders and conductors of the industry of every nation.
      • Their example has more influence on the manners of its industrious people than any other order of men.
      • If his employer is attentive and parsimonious, the workman is very likely to be so too
      • But if the master is dissolute and disorderly, the servant will follow his master’s example.
      • Accumulation is thus prevented among the masters of industrious people.
      • The funds for maintaining productive labour receive no increase from the revenue of the masters who should naturally increase them the most.
      • The capital of the country gradually dwindles away.
      • The quantity of productive labour maintained in it grows less every day.
  • Have the exorbitant profits of the merchants of Cadiz and Lisbon increased the capital of Spain and Portugal?
    • “Have they alleviated the poverty, have they promoted the industry of those two beggarly countries?”
    • Those exorbitant profits seem insufficient to keep up the capitals on which they were made.
    • Every day, foreign capitals are intruding more and more into the trade of Cadiz and Lisbon.
  • The Spaniards and Portuguese endeavour every day to strengthen their absurd monopoly to expel those foreign capitals from a trade which their own capitals grows less capable of carrying on.
  • The conduct and character of merchants of Cadiz and Lisbon merchants are very different from those of Amsterdam.
    • The high and low profits of stock affect them differently.
  • London merchants have not yet become such magnificent lords as those of Cadiz and Lisbon.
    • They neither are as attentive and parsimonious burghers as those of Amsterdam.
    • They are supposed to be richer than the merchants of Cadiz and Lisbon but not so rich as those of Amsterdam.
    • Their profit rate is much lower than that of Cadiz and Lisbon and much higher than that of Amsterdam.
  • Light come, light go, says the proverb.
  • The ordinary tone of expence seems to be regulated everywhere by the facility of getting money to spend, not so much by the real ability of spending.

148 The single advantage the monopoly brings to a single order of men is in many ways hurtful to the country’s interest.

149  Creating a great empire of customers may appear as a project good only for a nation of shopkeepers.

  • In reality, it is not a good project for a nation of shopkeepers.
    • But it is extremely good for a nation whose government is influenced by shopkeepers.
    • That government imagines creating such an empire will be advantageous.
  • If you propose to a shopkeeper that you will buy all your clothes from his shop if he buys you an estate, he will not like your proposal.
    • But if another person buys you an estate and urged you to buy all your clothes from the shopkeeper, the shopkeeper would be much obliged to that person.
  • Some of England’s subjects were uneasy at home.
  • She purchased for them a great estate in a distant country.
    • The price was very small.
    • 30 years purchase is the present ordinary price of land.
    • Instead of 30 years purchase, its price was the cost of:
      • making the first discovery
      • surveying the coast
      • taking a fictitious possession of the country
    • The land was good and wide.
    • The cultivators had plenty of good ground to work on.
      • For some time, they were free to sell their produce where they pleased.
    • In 30 or 40 years (between 1620 and 1660), they became so numerous and thriving that English shopkeepers and traders wished to secure the monopoly of their custom.
    • They did not pretend to have paid any part of the original purchase-money or the subsequent expence of improvement.
    • They petitioned the parliament that American cultivators be confined to their shop:
      1. For buying all the European goods they wanted
      2. For selling all their own produce which those traders found convenient to buy
        1. The traders did not find convenient to buy all of it.
    • Some of the produce imported into England interfered with their trades at home.
    • Those produce which interfered were allowed to be sold by the colonists where they could, the farther the better.
    • The traders proposed that the market of the colonists for those goods should be confined to countries south of Cape Finisterre.
    • “A clause in the famous act of navigation established this truly shopkeeper proposal into a law.”

150 The maintenance of this monopoly was the sole end and purpose of British dominion over her colonies.

  • In this exclusive trade consists the great advantage of provinces, which have never yet afforded either a revenue or a military force to support the civil government or defend of Great Britain.
  • The monopoly is the principal badge of their dependence.
    • It is the sole fruit which has been gathered from that dependence.
  • Whatever Great Britain spent in maintaining this dependence was really spent to support this monopoly.
  • Before the start of the present disturbances, the cost of the ordinary peace establishment in the colonies amounted to:
    • the pay of 20 foot regiments
    • the cost of the artillery, stores, and their extraordinary provisions
    • the cost of a big naval force which guarded the immense coast of North America and the West Indian islands from foreign smuggling
  • This whole cost was charged to Great Britain
    • It was the smallest cost of the dominion of the colonies to Great Britain.
  • The total cost of this dominion is:
    • This annual cost of this peace establishment, plus
    • The interest of previous expences of Great Britain in defending them, plus
    • The whole cost of the recent war and most of the cost of the war which preceded it.
      • The late war was a colony quarrel.
        • Its whole global cost should justly be charged to the colonies.
          • It amounted to more than 90 million sterling which included:
            • the new debt which was contracted
            • the 2 shillings in the pound additional land tax
            • the sums which were borrowed every year from the sinking fund.
      • The Spanish war which began in 1739 was principally a colony quarrel.
        • “Its principal object was to prevent the search of the colony ships which carried on a contraband trade with the Spanish Main.”
  • In reality, this whole cost is a bounty given to support a monopoly.
    • Its pretended purpose was:
      • to encourage manufactures
      • to  increase British commerce
    • ts real effect was:
      • to raise mercantile profits
      • to enable our merchants to turn their capital into a trade where the returns are more slow and distant than other trades
  • These two events would have been worth giving a bounty to in order to prevent, not support.

Words: 3269

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