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Book IV, Chapter V, 2
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Spain by taxing, and Portugal by prohibiting, the exportation of gold and silver, load that exportation with the expense of smuggling, and raise the value of those metals in other countries so much more above what it is in their own, by the whole amount of this expense. When you dam up a stream of water, as soon as the dam is full, as much water must run over the dam-head as if there was no dam at all. The prohibition of exportation cannot detain a greater quantity of gold and silver in Spain and Portugal, than what they can afford to employ, than what the annual produce of their land and labour will allow them to employ, in coin, plate, gilding, and other ornaments of gold and silver. When they have got this quantity, the dam is full, and the whole stream which flows in afterwards must run over. The annual exportation of gold and silver from Spain and Portugal, accordingly, is, by all accounts, notwithstanding these restraints, very near equal to the whole annual importation. As the water, however, must always be deeper behind the dam-head than before it, so the quantity of gold and silver which these restraints detain in Spain and Portugal, must, in proportion to the annual produce of their land and labour, be greater than what is to be found in other countries. The higher and stronger the dam-head, the greater must be the difference in the depth of water behind and before it. The higher the tax, the higher the penalties with which the prohibition is guarded, the more vigilant and severe the police which looks after the execution of the law, the greater must be the difference in the proportion of gold and silver to the annual produce of the land and labour of Spain and Portugal, and to that of other countries. It is said, accordingly, to be very considerable, and that you frequently find there a profusion of plate in houses, where there is nothing else which would in other countries be thought suitable or correspondent to this sort of magnificence. The cheapness of gold and silver, or, what is the same thing, the dearness of all commodities, which is the necessary effect of this redundancy of the precious metals, discourages both the agriculture and manufactures of Spain and Portugal, and enables foreign nations to supply them with many sorts of rude, and with almost all sorts of manufactured produce, for a smaller quantity of gold and silver than what they themselves can either raise or make them for at home. The tax and prohibition operate in two different ways. They not only lower very much the value of the precious metals in Spain and Portugal, but by detaining there a certain quantity of those metals which would otherwise flow over other countries, they keep up their value in those other countries somewhat above what it otherwise would be, and thereby give those countries a double advantage in their commerce with Spain and Portugal. Open the flood-gates, and there will presently be less water above, and more below the dam-head, and it will soon come to a level in both places. Remove the tax and the prohibition, and as the quantity of gold and silver will diminish considerably in Spain and Portugal, so it will increase somewhat in other countries; and the value of those metals, their proportion to the annual produce of land and labour, will soon come to a level, or very near to a level, in all. The loss which Spain and Portugal could sustain by this exportation of their gold and silver, would be altogether nominal and imaginary. The nominal value of their goods, and of the annual produce of their land and labour, would fall, and would be expressed or represented by a smaller quantity of silver than before; but their real value would be the same as before, and would be sufficient to maintain, command, and employ the same quantity of labour. As the nominal value of their goods would fall, the real value of what remained of their gold and silver would rise, and a smaller quantity of those metals would answer all the same purposes of commerce and circulation which had employed a greater quantity before. The gold and silver which would go abroad would not go abroad for nothing, but would bring back an equal value of goods of some kind or other. Those goods, too, would not be all matters of mere luxury and expense, to be consumed by idle people, who produce nothing in return for their consumption. As the real wealth and revenue of idle people would not be augmented by this extraordinary exportation of gold and silver, so neither would their consumption be much augmented by it. Those goods would probably, the greater part of them, and certainly some part of them, consist in materials, tools, and provisions, for the employment and maintenance of industrious people, who would reproduce, with a profit, the full value of their consumption. A part of the dead stock of the society would thus be turned into active stock, and would put into motion a greater quantity of industry than had been employed before. The annual produce of their land and labour would immediately be augmented a little, and in a few years would probably be augmented a great deal; their industry being thus relieved from one of the most oppressive burdens which it at present labours under.
The bounty upon the exportation of corn necessarily operates exactly in the same way as this absurd policy of Spain and Portugal. Whatever be the actual state of tillage, it renders our corn somewhat dearer in the home market than it otherwise would be in that state, and somewhat cheaper in the foreign; and as the average money price of corn regulates, more or less, that of all other commodities, it lowers the value of silver considerably in the one, and tends to raise it a little in the other. It enables foreigners, the Dutch in particular, not only to eat our corn cheaper than they otherwise could do, but sometimes to eat it cheaper than even our own people can do upon the same occasions; as we are assured by an excellent authority, that of Sir Matthew Decker. It hinders our own workmen from furnishing their goods for so small a quantity of silver as they otherwise might do, and enables the Dutch to furnish theirs for a smaller. It tends to render our manufactures somewhat dearer in every market, and theirs somewhat cheaper, than they otherwise would be, and consequently to give their industry a double advantage over our own.
The bounty, as it raises in the home market, not so much the real, as the nominal price of our corn; as it augments, not the quantity of labour which a certain quantity of corn can maintain and employ, but only the quantity of silver which it will exchange for; it discourages our manufactures, without rendering any considerable service, either to our farmers or country gentlemen. It puts, indeed, a little more money into the pockets of both, and it will perhaps be somewhat difficult to persuade the greater part of them that this is not rendering them a very considerable service. But if this money sinks in its value, in the quantity of labour, provisions, and home-made commodities of all different kinds which it is capable of purchasing, as much as it rises in its quantity, the service will be little more than nominal and imaginary.
There is, perhaps, but one set of men in the whole commonwealth to whom the bounty either was or could be essentially serviceable. These were the corn merchants, the exporters and importers of corn. In years of plenty, the bounty necessarily occasioned a greater exportation than would otherwise have taken place; and by hindering the plenty of the one year from relieving the scarcity of another, it occasioned in years of scarcity a greater importation than would otherwise have been necessary. It increased the business of the corn merchant in both; and in the years of scarcity, it not only enabled him to import a greater quantity, but to sell it for a better price, and consequently with a greater profit, than he could otherwise have made, if the plenty of one year had not been more or less hindered from relieving the scarcity of another. It is in this set of men, accordingly, that I have observed the greatest zeal for the continuance or renewal of the bounty.
Our country gentlemen, when they imposed the high duties upon the exportation of foreign corn, which in times of moderate plenty amount to a prohibition, and when they established the bounty, seem to have imitated the conduct of our manufacturers. By the one institution, they secured to themselves the monopoly of the home market, and by the other they endeavoured to prevent that market from ever being overstocked with their commodity. By both they endeavoured to raise its real value, in the same manner as our manufacturers had, by the like institutions, raised the real value of many different sorts of manufactured goods. They did not, perhaps, attend to the great and essential difference which nature has established between corn and almost every other sort of goods. When, either by the monopoly of the home market, or by a bounty upon exportation, you enable our woollen or linen manufacturers to sell their goods for somewhat a better price than they otherwise could get for them, you raise, not only the nominal, but the real price of those goods; you render them equivalent to a greater quantity of labour and subsistence; you increase not only the nominal, but the real profit, the real wealth and revenue of those manufacturers; and you enable them, either to live better themselves, or to employ a greater quantity of labour in those particular manufactures. You really encourage those manufactures, and direct towards them a greater quantity of the industry of the country than what would properly go to them of its own accord. But when, by the like institutions, you raise the nominal or money price of corn, you do not raise its real value; you do not increase the real wealth, the real revenue, either of our farmers or country gentlemen; you do not encourage the growth of corn, because you do not enable them to maintain and employ more labourers in raising it. The nature of things has stamped upon corn a real value, which cannot be altered by merely altering its money price. No bounty upon exportation, no monopoly of the home market, can raise that value. The freest competition cannot lower it, Through the world in general, that value is equal to the quantity of labour which it can maintain, and in every particular place it is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate, or scanty, in which labour is commonly maintained in that place. Woollen or linen cloth are not the regulating commodities by which the real value of all other commodities must be finally measured and determined; corn is. The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn. The real value of corn does not vary with those variations in its average money price, which sometimes occur from one century to another; it is the real value of silver which varies with them.
Bounties upon the exportation of any homemade commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord; and, secondly, to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production. When our country gentlemen, therefore, demanded the establishment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not act with that complete comprehension of their own interest, which commonly directs the conduct of those two other orders of people. They loaded the public revenue with a very considerable expense: they imposed a very heavy tax upon the whole body of the people; but they did not, in any sensible degree, increase the real value of their own commodity; and by lowering somewhat the real value of silver, they discouraged, in some degree, the general industry of the country, and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depend upon the general industry of the country.
To encourage the production of any commodity, a bounty upon production, one should imagine, would have a more direct operation than one upon exportation. It would, besides, impose only one tax upon the people, that which they must contribute in order to pay the bounty. Instead of raising, it would tend to lower the price of the commodity in the home market; and thereby, instead of imposing a second tax upon the people, it might, at least in part, repay them for what they had contributed to the first. Bounties upon production, however, have been very rarely granted. The prejudices established by the commercial system have taught us to believe, that national wealth arises more immediately from exportation than from production. It has been more favoured, accordingly, as the more immediate means of bringing money into the country. Bounties upon production, it has been said too, have been found by experience more liable to frauds than those upon exportation. How far this is true, I know not. That bounties upon exportation have been abused, to many fraudulent purposes, is very well known. But it is not the interest of merchants and manufacturers, the great inventors of all these expedients, that the home market should be overstocked with their goods; an event which a bounty upon production might sometimes occasion. A bounty upon exportation, by enabling them to send abroad their surplus part, and to keep up the price of what remains in the home market, effectually prevents this. Of all the expedients of the mercantile system, accordingly, it is the one of which they are the fondest. I have known the different undertakers of some particular works agree privately among themselves to give a bounty out of their own pockets upon the exportation of a certain proportion of the goods which they dealt in. This expedient succeeded so well, that it more than doubled the price of their goods in the home market, notwithstanding a very considerable increase in the produce. The operation of the bounty upon corn must have been wonderfully different, if it has lowered the money price of that commodity.
Something like a bounty upon production, however, has been granted upon some particular occasions. The tonnage bounties given to the white herring and whale fisheries may, perhaps, be considered as somewhat of this nature. They tend directly, it may be supposed, to render the goods cheaper in the home market than they otherwise would be. In other respects, their effects, it must be acknowledged, are the same as those of bounties upon exportation. By means of them, a part of the capital of the country is employed in bringing goods to market, of which the price does not repay the cost, together with the ordinary profits of stock.
But though the tonnage bounties to those fisheries do not contribute to the opulence of the nation, it may, perhaps, be thought that they contribute to its defence, by augmenting the number of its sailors and shipping. This, it may be alleged, may sometimes be done by means of such bounties, at a much smaller expense than by keeping up a great standing navy, if I may use such an expression, in the same way as a standing army.
Musean translation
Mouseia’s complete machine-assisted Musean translation, made directly from the complete English text of all five books for fidelity, the author’s force and cadence, and modern clarity.
Spain taxes the export of gold and silver, while Portugal prohibits it. Both measures burden export with the cost of smuggling, raising the value of those metals in other countries above their value at home by the full amount of that cost. When a stream is dammed, once the reservoir is full, as much water must flow over the dam as would have flowed without it. A prohibition on export cannot keep in Spain and Portugal more gold and silver than they can afford to employ—more than the annual produce of their land and labor allows them to use—in coin, plate, gilding, and other ornaments of gold and silver. Once they have that quantity, the reservoir is full, and every additional inflow must spill over. Accordingly, despite these restraints, the annual export of gold and silver from Spain and Portugal is, by all accounts, very nearly equal to the whole annual import. Yet water must always stand deeper behind the dam than below it. So, in proportion to the annual produce of their land and labor, the quantity of gold and silver retained by these restraints in Spain and Portugal must exceed what is found in other countries. The higher and stronger the dam, the greater the difference between the depths on either side. The higher the tax, the harsher the penalties protecting the prohibition, and the more vigilant and severe the police enforcing the law, the greater must be the difference between the proportion of gold and silver to the annual produce of land and labor in Spain and Portugal and the corresponding proportion elsewhere. That difference is said to be considerable: one often finds a profusion of plate in houses possessing nothing else that other countries would consider fitting for such magnificence. The cheapness of gold and silver—or, what amounts to the same thing, the high price of all commodities—necessarily follows from this excess of precious metals. It discourages agriculture and manufactures in Spain and Portugal, while allowing foreign nations to furnish them with many kinds of raw produce and almost every kind of manufactured product for less gold and silver than they themselves could use to grow or make them at home. The tax and prohibition work in two ways. They greatly reduce the value of precious metals in Spain and Portugal; and, by holding back metals that would otherwise flow into other countries, they keep their value in those countries somewhat higher than it would be, giving those countries a double advantage in trade with Spain and Portugal. Open the floodgates, and there will soon be less water above the dam and more below, until both sides approach the same level. Remove the tax and prohibition, and gold and silver will decrease considerably in Spain and Portugal and increase somewhat elsewhere. Their value—their proportion to the annual produce of land and labor—will soon become equal, or nearly so, everywhere. Any loss Spain and Portugal suffered through this export of their gold and silver would be merely nominal and imaginary. The nominal value of their goods and of the annual produce of their land and labor would fall, and would be expressed in a smaller quantity of silver than before. But their real value would remain unchanged, sufficient to maintain, command, and employ the same quantity of labor. As the nominal value of their goods fell, the real value of the gold and silver remaining at home would rise, and fewer of these metals would serve all the purposes of commerce and circulation that had previously required more. The gold and silver sent abroad would not be given away: they would bring back goods of equal value. Nor would all those goods be mere luxuries and expenses, consumed by idle people who produce nothing in return. Since this extraordinary export would not increase the real wealth and revenue of idle people, it would not substantially increase their consumption either. Most of the goods brought back, probably, and some of them certainly, would consist of materials, tools, and provisions to employ and support industrious people, who would reproduce the full value of what they consumed, together with a profit. Part of society’s dead stock would thus become active stock, setting more industry in motion than before. The annual produce of their land and labor would immediately increase a little and, within a few years, probably increase greatly, as their industry was relieved of one of the most oppressive burdens it now bears.
The bounty on corn exports necessarily works in precisely the same way as this absurd policy of Spain and Portugal. Whatever the current state of cultivation, it makes our corn somewhat dearer in the home market than it would otherwise be in that state, and somewhat cheaper abroad. And because the average money price of corn more or less governs that of all other commodities, the bounty considerably reduces the value of silver at home and tends to raise it a little abroad. It lets foreigners, particularly the Dutch, not only eat our corn more cheaply than they otherwise could but sometimes eat it more cheaply than our own people can in the same circumstances, as we are assured by an excellent authority, Sir Matthew Decker. It prevents our workmen from offering their goods for as little silver as they otherwise might, while enabling the Dutch to offer theirs for less. It tends to make our manufactures somewhat dearer in every market and theirs somewhat cheaper, giving their industry a double advantage over ours.
In the home market the bounty raises not so much the real as the nominal price of our corn. It increases not the amount of labor that a given quantity of corn can maintain and employ, but only the amount of silver for which it can be exchanged. Thus it discourages our manufactures without rendering any substantial service either to our farmers or to our country gentlemen. It does put a little more money in the pockets of both, and it may be hard to persuade most of them that this is not a substantial service. But if that money loses as much in value—in the labor, provisions, and domestically made goods of every kind it can buy—as its quantity increases, the benefit is little more than nominal and imaginary.
Perhaps only one group in the whole commonwealth has received, or could receive, any essential benefit from the bounty: the corn merchants, exporters and importers alike. In abundant years the bounty necessarily caused more corn to be exported than otherwise would have been. By preventing one year’s abundance from easing another year’s scarcity, it then made greater imports necessary in scarce years. It increased the corn merchant’s business in both circumstances; in scarce years it enabled him not only to import more, but to sell at a higher price and therefore a greater profit than he could have earned if one year’s abundance had not been prevented, to some extent, from relieving another year’s scarcity. Accordingly, it is among this group that I have observed the greatest zeal for continuing or renewing the bounty.
When our country gentlemen imposed high duties on the export of foreign corn—duties that amount to a prohibition in times of moderate plenty—and established the bounty, they seem to have copied our manufacturers. By the first measure they secured a monopoly of the home market; by the second they tried to prevent that market from ever being flooded with their commodity. Through both measures they sought to raise its real value, just as manufacturers had used similar measures to raise the real value of many kinds of manufactured goods. They may have overlooked the great and essential difference nature has established between corn and almost every other kind of goods. When a monopoly of the home market or an export bounty lets our woolen or linen manufacturers sell at a somewhat higher price than they otherwise could, it raises both the nominal and the real price of their goods. Those goods become equivalent to more labor and subsistence. The manufacturers gain not only in nominal but in real profit, real wealth, and revenue; they can either live better themselves or employ more labor in those manufactures. You genuinely encourage these manufactures and direct toward them more of the country’s industry than would naturally go there. But when similar measures raise the nominal or money price of corn, they do not raise its real value, increase the real wealth or revenue of farmers or country gentlemen, or encourage corn production: they do not enable its growers to maintain and employ more laborers. Nature has set upon corn a real value that a mere change in its money price cannot alter. No export bounty or monopoly of the home market can raise that value; the freest competition cannot lower it. Throughout the world in general, that value equals the quantity of labor corn can maintain; in each particular place, it equals the quantity of labor it can maintain at the customary level of subsistence there, whether generous, moderate, or scanty. Woolen and linen cloth are not the standards by which the real value of every other commodity must ultimately be measured and determined; corn is. The real value of every other commodity is ultimately measured and determined by the relation of its average money price to the average money price of corn. Corn’s real value does not change with the variations in its average money price that sometimes occur from century to century; it is the real value of silver that changes.
Bounties on the export of any homemade commodity face, first, the general objection applicable to all the devices of the mercantile system: they force some of the country’s industry into a less advantageous channel than it would naturally follow. They face, second, a particular objection: they force industry not merely into a less advantageous channel, but into an actually disadvantageous one, since a trade that cannot be carried on without a bounty must be a losing trade. The corn-export bounty faces the additional objection that it cannot in any way promote the raising of the very commodity whose production it was intended to encourage. Thus, when our country gentlemen demanded this bounty, they imitated our merchants and manufacturers without the thorough understanding of their own interests that commonly guides those other two groups. They burdened the public revenue with a very substantial expense and imposed a heavy tax on the whole people, yet did not noticeably increase the real value of their commodity. By somewhat lowering the real value of silver, they also discouraged the country’s industry to a degree; instead of advancing the improvement of their own lands, which necessarily depends on that general industry, they retarded it to some extent.
To encourage the production of a commodity, a bounty on production would seem to work more directly than one on export. It would also impose just one tax on the people: what they must contribute to fund the bounty. Rather than raise the commodity’s price in the home market, it would tend to lower it, and might thereby repay the people, at least in part, for their first contribution instead of imposing a second tax on them. Yet production bounties have been granted very rarely. The prejudices fostered by the commercial system have taught us that national wealth comes more directly from exports than from production. Exports have accordingly received more favor as the more immediate means of bringing money into the country. It has also been said that experience finds production bounties more open to fraud than export bounties. I do not know how far this is true. It is well known, however, that export bounties have been put to many fraudulent uses. But merchants and manufacturers, the great inventors of all these devices, have no interest in flooding the home market with their goods, as a production bounty might sometimes do. An export bounty lets them send their surplus abroad and preserve the price of what remains at home, effectively preventing that outcome. Hence, of all the mercantile system’s devices, this is the one they favor most. I have known operators of particular works to agree privately to pay, from their own pockets, a bounty on the export of a certain proportion of the goods they handled. This worked so well that it more than doubled the home-market price of their goods, despite a very substantial increase in output. The corn bounty must have behaved in a remarkably different fashion if it has lowered that commodity’s money price.
Something resembling a production bounty has, however, been granted on particular occasions. The tonnage bounties paid to the white-herring and whale fisheries may perhaps be regarded as such. They might be expected to make the goods cheaper in the home market than they would otherwise be. In other respects, admittedly, their effects match those of export bounties. They cause part of the country’s capital to be employed in bringing to market goods whose price does not repay their cost together with the ordinary profits of stock.
Though the tonnage bounties for these fisheries do not add to national wealth, it may be thought that they contribute to defense by increasing the number of sailors and ships. It may be argued that such bounties can sometimes achieve this at much less expense than maintaining a great standing navy, if I may use the expression, on the model of a standing army.
Plain English translation
Mouseia’s complete Plain English edition, made independently and directly from the complete English text of all five books.
Spain taxes exports of gold and silver, while Portugal prohibits them. Both measures add the cost of smuggling to exports. That cost raises the value of these metals in other countries above their value in Spain and Portugal. Think of a stream stopped by a dam. Once the space behind the dam fills up, as much water flows over it as would have flowed without the dam. A ban on exports cannot keep more gold and silver in Spain and Portugal than they can use. The annual produce of their land and labor determines how much they can use in coins, plate, gilding, and other gold and silver ornaments. Once they have that amount, the dam is full, and everything that flows in afterward must flow out. By all accounts, despite the restrictions, their annual exports of gold and silver are therefore almost equal to their entire annual imports. But water is always deeper behind the dam than in front of it. Likewise, the restrictions keep more gold and silver in Spain and Portugal, relative to the annual produce of their land and labor, than other countries have. The higher and stronger the dam, the greater the difference in water depth on its two sides. Similarly, the higher the tax, the harsher the penalties enforcing the prohibition, and the more watchful and severe the police enforcing the law, the greater the difference between Spain and Portugal and other countries in their proportions of gold and silver to annual produce. The difference is said to be very large. Houses there often contain lavish quantities of plate, even though nothing else in those houses would be thought suitable for such splendor in other countries. This excess of precious metals makes gold and silver cheap—or, equivalently, makes all other goods expensive. It discourages farming and manufacturing in Spain and Portugal. Foreign countries can supply them with many raw products and almost every kind of manufactured product for less gold and silver than it would cost them to grow or make those things at home. The tax and prohibition work in two ways. They greatly lower the value of precious metals in Spain and Portugal. They also keep there some metals that would otherwise flow to other countries, keeping the metals' value in those countries somewhat higher than it would otherwise be. This gives those countries a double advantage in trade with Spain and Portugal. Open the floodgates, and water will soon be lower on one side of the dam and higher on the other. The levels will soon become equal. Remove the tax and prohibition, and the quantity of gold and silver will fall considerably in Spain and Portugal and rise somewhat elsewhere. The value of those metals, relative to the annual produce of land and labor, will soon become equal, or nearly equal, everywhere. Any loss Spain and Portugal suffered from exporting their gold and silver would exist only on paper. The money value of their goods and annual produce would fall: it would be expressed in a smaller quantity of silver. But their real value would stay the same. They would still be enough to support, buy, and employ the same amount of labor. As the money value of their goods fell, the real value of their remaining gold and silver would rise. Less of those metals would do all the work in trade and circulation that a larger amount had done before. The exported gold and silver would not leave for nothing. Goods of equal value would come back in exchange. Nor would all these goods be luxuries and other things consumed by idle people who produce nothing in return. This extraordinary export of gold and silver would not increase idle people's real wealth or revenue, so it would not greatly increase their consumption either. Most of the imported goods probably, and some of them certainly, would be materials, tools, and provisions for employing and supporting industrious people. Those people would produce anew, with a profit, the full value of what they consumed. Some of society's inactive stock would become active stock and set more industry in motion than before. The annual produce of Spain and Portugal's land and labor would increase a little at once and probably a great deal within a few years. Their industry would be freed from one of the heaviest burdens it now bears.
The bounty paid on corn exports necessarily works in exactly the same way as this absurd policy of Spain and Portugal. Whatever the current state of cultivation, the bounty makes our corn somewhat more expensive at home and somewhat cheaper abroad than it otherwise would be. The average money price of corn more or less determines the price of all other goods. The bounty therefore considerably lowers the value of silver at home and tends to raise it a little abroad. It lets foreigners, especially the Dutch, eat our corn more cheaply than they otherwise could. At times they can even eat it more cheaply than our own people can in the same circumstances, as the excellent authority Sir Matthew Decker assures us. It prevents our workers from selling their goods for as little silver as they otherwise could, and it lets the Dutch sell theirs for less. It tends to make our manufactured goods somewhat more expensive in every market and Dutch goods somewhat cheaper. Their industry thus gains a double advantage over ours.
The bounty raises the price of our corn at home mainly in money, not in real terms. It does not increase the labor that a given amount of corn can support and employ, only the silver for which that corn can be exchanged. So it discourages our manufacturing without providing any significant benefit to our farmers or country gentlemen. It does put a little more money in both their pockets. Perhaps most of them will be hard to persuade that this is not a significant benefit. But if the money loses as much purchasing power over labor, provisions, and every kind of domestically made product as their money income gains in amount, the benefit is little more than an illusion on paper.
Perhaps only one group in the whole country has gained, or could gain, a real benefit from the bounty: corn merchants, who export and import corn. In plentiful years the bounty necessarily caused more exports than would otherwise have occurred. This kept one year's plenty from easing another year's scarcity, and thus caused more imports in scarce years than would otherwise have been needed. Both effects increased the corn merchant's business. In scarce years, the bounty let him import more corn and sell it at a better price and greater profit than he could have earned if one year's plenty had been allowed to ease the next year's scarcity. Accordingly, it is among these merchants that I have seen the strongest support for continuing or restoring the bounty.
When our country gentlemen established the bounty and imposed high duties on the export of foreign corn—duties amounting to a ban in times of moderate plenty—they seem to have copied our manufacturers. The duties gave them a monopoly of the home market. The bounty was meant to keep that market from ever having too much of their product. Both measures were intended to raise its real value, just as similar measures had raised the real value of many manufactured goods for manufacturers. But perhaps they overlooked a great and fundamental difference between corn and almost every other product. If a home monopoly or export bounty lets our woolen or linen manufacturers get a somewhat better price for their goods, it raises both the money price and the real price of those goods. Their goods become worth more labor and means of subsistence. The manufacturers' real profit, wealth, and revenue increase, not just their money amounts. They can live better or employ more workers in those manufactures. Those manufactures are genuinely encouraged, drawing in more of the country's industry than would naturally go into them. But when similar measures raise the money price of corn, they do not raise its real value. They do not increase the real wealth or revenue of our farmers or country gentlemen. Nor do they encourage more corn production, because they do not enable those people to support and employ more workers to grow it. Corn has a real value fixed by its nature; merely changing its money price cannot change that value. Neither an export bounty nor a home-market monopoly can raise it. Even the freest competition cannot lower it. In the world generally, that value equals the amount of labor corn can support. In each particular place, it equals the labor it can support according to the local standard of support, whether generous, moderate, or meager. Woolen and linen cloth are not the goods that finally determine the real value of everything else; corn is. Every other good's real value is ultimately measured by the relationship between its average money price and corn's average money price. When corn's average money price changes from one century to another, corn's real value does not change. The real value of silver does.
Export bounties on any homemade product face two objections. First is the general objection to all the devices of the mercantile system: they force some of the country's industry into a less advantageous line of work than it would naturally enter. Second is a particular objection: they force it into a line of work that is actually disadvantageous, not merely less advantageous. Trade that requires a bounty must be a losing trade. The corn export bounty faces a further objection: it cannot do anything to increase production of the very product it is meant to encourage. So when our country gentlemen sought the bounty, they copied our merchants and manufacturers without understanding their own interests as thoroughly as those groups usually do. They imposed a substantial cost on public revenue and a very heavy tax on all the people. Yet they did not appreciably raise the real value of their corn. By somewhat lowering the real value of silver, they also somewhat discouraged industry throughout the country. Instead of promoting improvements to their land, they held them back to some degree, since such improvements necessarily depend on the country's general industry.
One might expect a bounty on producing a good to encourage its production more directly than an export bounty does. It would also impose only one tax on the people: the tax they must pay to fund it. Instead of raising the good's home-market price, it would tend to lower that price. Rather than imposing a second tax on the people, it could thus partly repay their contribution to the first. Yet production bounties have rarely been given. Prejudices spread by the mercantile system have taught us to think national wealth comes more directly from exports than from production. Exports have therefore been favored as the more direct way of bringing money into the country. It has also been said that experience shows production bounties are more open to fraud than export bounties. I do not know whether this is true. We certainly know that export bounties have been used for many fraudulent purposes. But merchants and manufacturers, who invented all these devices, have no interest in flooding the home market with their goods, as a production bounty might sometimes do. An export bounty lets them ship their surplus abroad and maintain the home price of what remains. Of all the devices of the mercantile system, it is therefore the one they like best. I have known owners of certain works to agree privately to pay, from their own pockets, a bounty on exports of a certain share of the goods they dealt in. This worked so well that the home price of their goods more than doubled, despite a very substantial increase in output. The effect of the corn bounty must have been remarkably different if it lowered corn's money price.
Still, something like a production bounty has sometimes been given. The tonnage bounties for the white herring and whale fisheries may be examples. One might suppose they directly tend to make the goods cheaper in the home market than they would otherwise be. In other respects, admittedly, they work like export bounties. They put some of the country's capital to work bringing goods to market at a price that does not cover their cost plus the ordinary profits of stock.
Although the tonnage bounties for those fisheries do not increase the nation's wealth, one might think they help defend it by increasing its sailors and ships. It might be argued that such bounties can sometimes achieve this at much less cost than maintaining a large permanent navy, if I may call it that, like a standing army.