Book IV, Chapter V, 5

It impeded not only that division in the employment of stock so beneficial to every society, but also the improvement and cultivation of the land. By forcing the farmer to practice two trades instead of one, it forced him to divide his capital into two parts, only one of which could be employed in cultivation. Had he been free to sell his entire crop to a corn merchant as quickly as he could thresh it, all his capital could have returned immediately to the land and gone toward buying more cattle and hiring more workers, so that he might improve and cultivate it better. Forced instead to sell his corn by retail, he had to keep a large part of his capital in his granaries and stackyard throughout the year, and could not cultivate as well as he otherwise might with the same capital. This law, therefore, necessarily hindered the improvement of the land and, far from making corn cheaper, must have made it scarcer and consequently dearer than it would otherwise have been.

After farming itself, the corn merchant's trade is in fact the one that, properly protected and encouraged, would contribute most to the growing of corn. It would support the farmer's trade just as the wholesale dealer's trade supports the manufacturer's.

By offering the manufacturer a ready market, taking his goods off his hands as fast as he can make them, and sometimes even advancing him their price before they are made, the wholesale dealer enables him to keep all his capital, and sometimes more than all of it, constantly employed in manufacturing. The manufacturer can thus produce far more goods than if he had to sell them himself to the consumers, or even to retailers. The wholesale merchant's capital, moreover, is generally sufficient to replace the capital of many manufacturers. Their dealings therefore give the owner of a large capital an interest in sustaining the owners of many small capitals, and in helping them through losses and misfortunes that might otherwise ruin them.

Dealings of the same kind, universally established between farmers and corn merchants, would benefit farmers equally. They could keep all their capital, and even more, constantly employed in cultivation. Should any of the accidents to which no trade is more exposed than theirs occur, they would find in their regular customer, the wealthy corn merchant, someone both interested in supporting them and able to do so. They would not, as they are now, depend entirely on the patience of their landlord or the mercy of his steward. If it were possible—as perhaps it is not—to establish such dealings everywhere and all at once; if all the farming stock of the kingdom could be turned at once to its proper work, cultivating land, and withdrawn from every other use to which some part of it is now diverted; and if another stock almost as large could at once be provided to support and assist the operations of this great stock when needed, it would perhaps be hard to imagine how great, how widespread, and how sudden an improvement this change alone would bring to the whole face of the country.

The statute of Edward VI., therefore, by barring as far as possible any middleman between grower and consumer, tried to destroy a trade whose free exercise is not only the best relief from the hardships of a dearth but the best means of preventing that calamity. After farming, no trade contributes more to growing corn than the corn merchant's.

The severity of this law was later softened by several successive statutes permitting corn to be engrossed when wheat did not exceed 20s. and 24s. 32s. and 40s. the quarter. Finally, under the 15th of Charles II. c.7, engrossing or buying corn for resale was declared lawful, so long as wheat did not exceed 48s. the quarter and other grain was priced proportionately, for anyone who was not a forestaller—that is, who did not resell in the same market within three months. This statute conferred all the freedom the inland corn dealer's trade has ever enjoyed. The statute of the twelfth of the present king, repealing almost all the other old laws against engrossers and forestallers, does not repeal this particular statute's restrictions, which therefore remain in force.

This statute, however, gives some sanction to two thoroughly absurd popular prejudices.

First, it supposes that when wheat reaches 48s. the quarter, with other grain priced proportionately, corn is likely to be engrossed to the people's detriment. But what has already been said makes it plain enough that inland dealers cannot engross corn at any price to the people's detriment. Besides, although 48s. the quarter may be considered very high, in years of scarcity that price often prevails immediately after harvest, when scarcely any of the new crop can yet have been sold. At such a time not even ignorance can suppose that any of it has been engrossed to the people's detriment.

Second, it supposes that there is a particular price at which corn is likely to be forestalled—that is, bought up for prompt resale in the same market—to the people's detriment. But if a merchant ever buys corn on its way to a particular market or in that market, intending to resell it there soon afterward, he must believe that the market cannot be as amply supplied throughout the season as it is on that occasion, and that the price will therefore soon rise. If he is mistaken, and the price fails to rise, he loses not only all the profit on the stock he employs this way but part of the stock itself, through the expenses and losses inevitably involved in storing and keeping corn. He therefore hurts himself far more seriously than he can hurt even the particular people whom he prevents from buying on that market day; they can later buy just as cheaply on any other market day. If he is right, far from harming the great body of the people, he performs a service of the highest importance. By making them feel the hardships of a dearth somewhat earlier than they otherwise would, he prevents them from feeling those hardships later as severely as they certainly would if low prices encouraged them to consume faster than the season's real scarcity warrants. Where scarcity is real, the best that can be done for the people is to distribute its hardship as evenly as possible among all the months, weeks, and days of the year. The corn merchant's interest leads him to study how to do this as precisely as he can. Since no one else can have the same interest, knowledge, or ability to do it so precisely, this most important operation of commerce ought to be entrusted entirely to him. In other words, the corn trade, at least in supplying the home market, ought to be left completely free.

The popular fear of engrossing and forestalling may be compared with popular fears and suspicions of witchcraft. The unfortunate people accused of that latter crime were no more responsible for the misfortunes attributed to them than those accused of the former. The law that ended prosecutions for witchcraft, and took away anyone's power to indulge his malice by accusing his neighbor of that imaginary crime, appears to have ended those fears and suspicions effectively by removing their chief source of encouragement and support. A law restoring complete freedom to the inland corn trade would probably be equally effective against the popular fears of engrossing and forestalling.

The 15th of Charles II. c. 7, despite all its defects, has perhaps done more than any other law in the statute book both to supply the home market abundantly and to increase tillage. To this law the inland corn trade owes all the liberty and protection it has yet enjoyed; and both the home market's supply and the interests of tillage are promoted far more effectively by inland trade than by either import or export trade.

The author of the Tracts upon the Corn Trade has calculated that the ratio of the average quantity of all kinds of grain imported into Great Britain to that of all kinds consumed does not exceed one to five hundred and seventy. For supplying the home market, then, the inland trade must be to the import trade as five hundred and seventy to one.

According to the same author, the average quantity of all kinds of grain exported from Great Britain does not exceed one thirty-first of the annual produce. As a means of encouraging tillage by providing a market for domestic produce, therefore, the inland trade must be to the export trade as thirty to one.

I have little faith in political arithmetic and do not vouch for the precision of either calculation. I cite them only to show how much less important the foreign corn trade is than the home trade in the judgment of the most discerning and experienced people. The exceptionally low price of corn in the years just before the bounty was established may perhaps, with reason, be attributed in part to the operation of this statute of Charles II., enacted some five-and-twenty years earlier, and thus given ample time to take effect.

A few words will suffice to explain all I have to say about the other three branches of the corn trade.

II. The trade of merchants importing foreign corn for domestic consumption plainly contributes to the immediate supply of the home market and must, to that extent, immediately benefit the great body of the people. It does tend to lower the average money price of corn somewhat, but not its real value or the quantity of labor it can support. If importation were always free, our farmers and country gentlemen would probably receive less money for their corn on average than they do now, when importation is effectively prohibited most of the time. But the money they received would be worth more: it would buy more goods of every other kind and employ more labor. Their real wealth and real revenue would therefore remain as they are now, though expressed in less silver, and they would be neither less able nor less inclined to grow as much corn as they now grow. On the contrary, when the lower money price of corn raises the real value of silver, it also somewhat lowers the money prices of all other commodities. This gives the industry of the country where it happens some advantage in every foreign market and thus tends to encourage and expand that industry. Yet the extent of the home market for corn must be proportional to the country's general industry, or to the number of people who produce something else and therefore have something else—or its price—to offer for corn. In every country, moreover, the home market is not only the nearest and most convenient market for corn but also the largest and most important. The rise in the real value of silver resulting from a lower average money price of corn thus tends to enlarge corn's largest and most important market and so to encourage, not discourage, its cultivation.

Under the 22d of Charles II. c. 13, wheat imported when the home-market price did not exceed 53s:4d. the quarter was charged a duty of 16s. the quarter, and a duty of 8s. when the price did not exceed £4. The first of these prices has occurred in more than a century only during very great scarcities, and the second, so far as I know, has never occurred at all. Yet until wheat rose above that second price, this statute imposed a very high duty, and until it rose above the first, a duty tantamount to prohibition. Imports of other kinds of grain were restricted by price thresholds and duties almost as high in proportion to their value. Before the 13th of the present king, the import duties on the various kinds of grain were as follows:

Grain. Duties. Duties Duties. Beans to 28s. per qr. 19s:10d. after till 40s. 16s:8d. then 12d. Barley to 28s. - 19s:10d. - 32s. 16s. - 12d. Malt is prohibited by the annual malt-tax bill. Oats to 16s. - 5s:10d. after - 9½d. Pease to 40s. - 16s: 0d. after - 9¾d. Rye to 36s. - 19s:10d. till 40s. 16s:8d - 12d. Wheat to 44s. - 21s: 9d. till 53s:4d. 17s. - 8s. till £4, and after that about 1s:4d. Buck-wheat to 32s. per qr. to pay 16s.

These various duties were imposed partly by the 22d of Charles II. in place of the old subsidy, partly by the new subsidy, the one-third and two-thirds subsidy, and the subsidy 1747. Later laws increased them still further.

The hardship that strict enforcement of these laws might have inflicted on the people in years of scarcity would probably have been very great. On such occasions, however, temporary statutes generally suspended their enforcement and allowed foreign corn to be imported for a limited time. The need for these temporary statutes sufficiently demonstrates the folly of the general law.

Although these import restrictions predated the bounty, they sprang from the same spirit and the same principles that later enacted it. Harmful as they were in themselves, these or some other import restrictions became necessary because of the bounty. If foreign corn could have been imported duty-free, or at a low duty, when wheat was below 48s. the quarter or not much above it, it might have been exported again with the bounty. The public revenue would have suffered great loss, and an institution meant to expand the market for domestic crops, not foreign ones, would have been utterly turned against its purpose.

The law did more than prevent the division of stock among different trades, which benefits every society. It also held back the improvement and cultivation of land. By making a farmer carry on two businesses instead of one, it forced him to split his capital in two. Only one part could go into farming. If he had been free to sell his entire crop to a corn merchant as soon as he threshed it, he could have put all his capital straight back into the land. He could have bought more cattle and hired more workers to improve and cultivate it. Instead, he had to sell his grain to individual buyers. That meant keeping much of his capital tied up in his granaries and stack-yard throughout the year. He could not cultivate the land as well as he could have with the same capital. The law therefore necessarily held back the improvement of land. Rather than making grain cheaper, it tended to make grain scarcer and more expensive than it would otherwise have been.

After farming itself, the corn merchant’s trade would do the most to increase grain production if it were properly protected and encouraged. It would support farmers’ work in the same way that wholesale dealers support manufacturers.

A wholesale dealer gives a manufacturer a ready market. He takes the goods as quickly as they are made and sometimes even pays for them in advance. This lets the manufacturer keep all his capital, and sometimes more than that, continuously at work in manufacturing. He can therefore make far more goods than he could if he had to sell directly to consumers or even to retailers. A wholesale merchant also generally has enough capital to replace the capital of many manufacturers. Dealing with them gives the owner of a large capital an interest in supporting the owners of many small ones. He can help them through losses and setbacks that might otherwise ruin them.

If the same kind of regular dealings existed everywhere between farmers and corn merchants, farmers would benefit just as much. They could keep all their capital, and even more than their capital, continuously at work on the land. No business faces more accidents than theirs. When trouble came, their regular customer, a wealthy corn merchant, would both want and be able to help them. They would not, as they are now, depend entirely on the patience of their landlord or the mercy of his steward. Suppose such dealings could be established everywhere at once, though perhaps they cannot. Suppose all the farming stock in the kingdom could at once be put to its proper use, cultivating land, instead of being diverted to other uses. Suppose also that another stock, nearly as large, could at once be made available to support and assist those farming operations when needed. It is hard to imagine how great, widespread, and sudden the resulting improvement across the country would be.

The statute of Edward VI. tried to eliminate middlemen between grain growers and consumers as far as possible. It tried to wipe out a trade whose freedom is the best way both to ease the problems of a grain shortage and to prevent such a shortage in the first place. No trade except farming does as much to increase the grain crop as the corn merchant’s trade.

Later statutes made this law less strict. One after another, they allowed merchants to buy up grain for resale when the price of wheat was no more than 20s., then 24s., 32s., and 40s. the quarter. Finally, the 15th of Charles II. c.7 declared it lawful for anyone who was not a forestaller to buy grain for resale, so long as wheat cost no more than 48s. the quarter and other grain cost proportionate amounts. A forestaller was someone who resold grain in the same market within three months. This statute gave inland corn dealers all the freedom they have ever had. The statute of the twelfth of the present king repealed nearly all the other old laws against people who bought grain for resale or forestalled it. But it did not repeal the restrictions of this particular statute, which remain in force.

This statute, though, gives some support to two very foolish popular beliefs.

First, it assumes that when wheat reaches 48s. the quarter, with other grain rising in proportion, dealers may buy up enough grain to harm the public. But as I have already shown, inland dealers cannot buy up grain at any price in a way that harms the public. And while 48s. the quarter may be considered a very high price, it often occurs just after harvest in years of scarcity. At that point, hardly any of the new crop can have been sold. Even someone who knows nothing about the matter could not think that dealers had already bought up enough of it to harm the public.

Second, it assumes there is some price at which forestalling grain—buying it for resale soon afterward in the same market—is likely to harm the public. But suppose a merchant buys grain on its way to a particular market, or in that market, planning to resell it there soon. He must believe that supplies will not be as plentiful through the rest of the season as they are on that occasion, and that the price will soon rise. If he is wrong and the price does not rise, he loses not just all the profit he could have made from that stock, but some of the stock itself. Storing grain and keeping it in good condition cost money and cause losses. He harms himself much more than he can harm even the particular people he keeps from buying on that market day. They can buy just as cheaply on another market day. If he is right, he provides a very important service to the public instead of hurting it. People feel the effects of a shortage a little earlier than they otherwise would. This prevents them from feeling those effects much more severely later, as they certainly would if a low price led them to consume grain faster than the season’s actual scarcity allows. When grain really is scarce, the best thing for the public is to spread the hardship as evenly as possible over all the months, weeks, and days of the year. The corn merchant’s own interest makes him try to do this as precisely as he can. No one else has the same interest, knowledge, or ability to do it so precisely. This crucial part of commerce should therefore be left entirely to him. In other words, the corn trade should be completely free, at least when it comes to supplying the home market.

The public fear of dealers buying up and forestalling grain resembles the public fear and suspicion of witchcraft. People accused of witchcraft were no more responsible for the disasters blamed on them than the people accused of buying up or forestalling grain are responsible for the harm blamed on them. A law ended prosecutions for witchcraft. It stopped anyone from indulging a grudge by accusing a neighbor of an imaginary crime. By removing the main cause that encouraged and sustained those fears, it seems to have ended them effectively. A law giving complete freedom to the inland corn trade would probably be just as effective in ending the public fear of buying up and forestalling grain.

Despite its faults, the 15th of Charles II. c. 7 has perhaps done more than any other statute to supply the home market with grain and increase cultivation. It gave the inland corn trade all the freedom and protection it has ever enjoyed. Inland trade does far more than either importing or exporting to supply the home market and promote cultivation.

The author of the Tracts upon the Corn Trade estimates that the average quantity of all kinds of grain imported into Great Britain is no more than one part for every five hundred and seventy parts consumed there. For supplying the home market, then, inland trade must be five hundred and seventy times as important as importing.

According to the same author, the average quantity of all kinds of grain exported from Great Britain is no more than one-and-thirtieth of its annual production. By providing a market for grain grown at home, inland trade must therefore be thirty times as important for encouraging cultivation as exporting is.

I do not place much faith in political arithmetic, and I cannot vouch for either calculation’s accuracy. I mention them only to show that, in the opinion of the most sensible and experienced people, foreign corn trade matters far less than domestic trade. Grain was very cheap in the years just before the bounty was introduced. That may reasonably be due in part to this statute of Charles II., passed about five-and-twenty years earlier. It had had plenty of time to take effect.

A few words will explain all I need to say about the other three branches of the corn trade.

II. A merchant who imports foreign grain for people to consume at home clearly helps supply the home market right away. To that extent, the trade directly benefits most people. It does tend to lower the average money price of grain somewhat. But it does not lower grain’s real value, or the amount of labor that grain can support. If imports were always free, farmers and landowners here would probably receive less money for their grain on average than they do now, when imports are effectively banned most of the time. But the money they received would be worth more. It would buy more of every other kind of goods and employ more labor. Their real wealth and real revenue would therefore be the same as now, even if measured in less silver. They would be no less able or willing to grow as much grain as they do now. Indeed, when a lower money price of grain raises the real value of silver, the money price of all other goods also falls somewhat. This gives the country’s industry an advantage in foreign markets, encouraging it to grow. The size of the home market for grain depends on how much other work is done in the country where it grows. It depends on the number of people who produce other things and so have those things, or the money they bring, to exchange for grain. In every country the home market is not only the nearest and most convenient market for grain but also the largest and most important. Raising the real value of silver by lowering the average money price of grain therefore expands grain’s largest and most important market. It encourages grain production rather than discouraging it.

Under the 22d of Charles II. c. 13, imported wheat faced a duty of 16s. the quarter whenever the home-market price was no more than 53s:4d. the quarter, and a duty of 8s. whenever the price was no more than £4. For more than a century, the first of those prices has occurred only during very severe shortages. As far as I know, the second has not occurred at all. Yet this statute imposed a very high duty until wheat rose above the second price, and an effectively prohibitive duty until it rose above the first. Duties and price thresholds on imports of other kinds of grain were nearly as high in proportion to their value. Before the 13th of the present king, the duties on the different kinds of imported grain were as follows:

Grain. Duties. Duties Duties. Beans to 28s. per qr. 19s:10d. after till 40s. 16s:8d. then 12d. Barley to 28s. - 19s:10d. - 32s. 16s. - 12d. Malt is prohibited by the annual malt-tax bill. Oats to 16s. - 5s:10d. after - 9½d. Pease to 40s. - 16s: 0d. after - 9¾d. Rye to 36s. - 19s:10d. till 40s. 16s:8d - 12d. Wheat to 44s. - 21s: 9d. till 53s:4d. 17s. - 8s. till £4, and after that about 1s:4d. Buck-wheat to 32s. per qr. to pay 16s.

These various duties came partly from the 22d of Charles II. in place of the old subsidy, and partly from the new subsidy, the one-third and two-thirds subsidy, and the subsidy 1747. Later laws raised the duties further.

In years of scarcity, strict enforcement of these laws could probably have caused people great suffering. In such years, however, temporary statutes generally suspended them and allowed foreign grain to be imported for a limited time. The need for those temporary statutes shows plainly how unsuitable the general law was.

These restrictions on imports came before the bounty, but the same thinking and principles lay behind both. Harmful as the import restrictions were, the bounty made these or similar restrictions necessary. If foreign grain could be imported duty-free or with only a small duty when wheat cost 48s. the quarter or less, or not much more, that grain could then be exported again to collect the bounty. The public revenue would suffer a great loss, and the policy’s purpose would be completely defeated. Its aim was to expand the market for grain grown at home, not grain grown abroad.