Book IV, Chapter V, 6

III. The trade of the merchant who exports corn for foreign consumption certainly does not contribute directly to an abundant supply in the home market. It does, however, contribute indirectly. Whatever the usual source of that supply, whether domestic production or foreign imports, the home market can never be very plentifully supplied unless the country ordinarily grows or imports more corn than it ordinarily consumes. Yet unless the surplus can ordinarily be exported, growers will take care never to grow, and importers never to import, more than the home market's bare consumption requires. That market will very rarely have too much corn; more often it will have too little, since those whose business it is to supply it generally fear being left with unsold goods. Prohibiting exports limits the country's improvement and cultivation to what its own inhabitants require. Allowing exports enables cultivation to expand to supply foreign nations.

By the 12th of Charles II. c.4, exporting corn was permitted whenever wheat did not exceed 40s. the quarter, with other grain priced proportionately. By the 15th of the same prince, this freedom was extended until wheat exceeded 48s. the quarter; and by the 22d, to all higher prices. A poundage was indeed payable to the king on such exports, but grain was valued so low in the book of rates that this charge came to only 1s. on wheat, 4d. on oats, and 6d. the quarter on all other grain. By the 1st of William and Mary, the act establishing the bounty, this small duty was effectively removed whenever wheat did not exceed 48s. the quarter; and by the 11th and 12th of William III. c. 20, it was expressly removed at every higher price.

The exporting merchant's trade was thus not only encouraged by a bounty but made much freer than the inland dealer's. Under the last of these statutes, corn could be engrossed at any price for export, but not for inland sale unless the price did not exceed 48s. the quarter. Yet the inland dealer's interest, as has already been shown, can never conflict with that of the great body of the people. The exporter's interest can, and sometimes does. If a neighboring country were stricken by famine while his own suffered a dearth, he might find it profitable to send the neighboring country enough corn to make the dearth at home much worse. The direct purpose of these statutes was not an abundant home supply; rather, under the pretense of encouraging agriculture, they sought to raise the money price of corn as high as possible, thereby creating, as far as possible, a constant dearth in the home market. Discouraging imports confined that market, even in times of great scarcity, to the domestic crop; encouraging exports even when the price stood as high as 48s. the quarter kept that market, even in times of considerable scarcity, from enjoying the whole domestic crop. The temporary laws to which Great Britain has so often had to resort, barring corn exports for a limited time and removing import duties for a limited time, sufficiently show how unsound her general system is. Had it been good, she would not so often have needed to depart from it.

If every nation adopted the liberal system of free exports and imports, the different states of a great continent would in this respect resemble the provinces of a great empire. Reason and experience alike show that free inland trade among an empire's provinces is not only the best means of relieving a dearth but the most effective means of preventing a famine; free export and import trade would do the same among the states of a great continent. The larger that continent, and the easier it is to travel among all its parts by land and water, the less any one region would be exposed to either calamity: the scarcity of one country could more readily be relieved by another's abundance. But very few countries have fully adopted this liberal system. Freedom in the corn trade is restricted almost everywhere to some degree; in many countries regulations so absurd constrain it that they frequently turn the unavoidable hardship of a dearth into the dreadful calamity of a famine. Their need for corn may become so great and urgent that a small neighboring state, itself then suffering some degree of dearth, could not venture to supply them without exposing itself to the same dreadful calamity. The very bad policy of one country may thus make it somewhat dangerous and imprudent for another to adopt what would otherwise be the best policy. Unlimited freedom to export would, however, be far less dangerous in large states, where production is much greater and supplies could seldom be much affected by whatever quantity of corn was likely to be exported. In a Swiss canton or one of the little states of Italy, restricting corn exports might sometimes be necessary. In great countries such as France or England, it scarcely ever can be. To prevent farmers from sending their goods to the best market at all times is, moreover, plainly to sacrifice the ordinary rules of justice to an idea of public utility, to a kind of reason of state. Such an exercise of legislative authority ought to occur—and can be excused—only in the most urgent necessity. If exports of corn must ever be prohibited, the price triggering prohibition ought always to be very high.

Laws about corn can everywhere be compared to laws about religion. People feel so deeply concerned with both their sustenance in this life and their happiness in a life to come that government must yield to their prejudices and, to preserve public peace, establish the system they approve. This is perhaps why we so seldom find a reasonable system established for either of these two matters of the highest importance.

IV. The carrying merchant's trade—that of importing foreign corn for reexport—helps keep the home market abundantly supplied. Selling his corn there is not, indeed, the direct purpose of his trade; yet he will generally be willing to do so, even for considerably less money than he might expect abroad, because he thereby saves the costs of loading and unloading, freight, and insurance. The inhabitants of a country that becomes a depot and storehouse supplying other countries through the carrying trade can very seldom be in want themselves. Though the carrying trade must thus lower corn's average money price in the home market, it would not lower its real value; it would merely raise the real value of silver somewhat.

In Great Britain the carrying trade was effectively prohibited in ordinary circumstances by the high import duties on foreign corn, most of which were not refunded on reexport. In extraordinary circumstances, when scarcity made it necessary to suspend those duties temporarily, exports were invariably prohibited. This system of laws therefore effectively prohibited the carrying trade.

The system of laws associated with the establishment of the bounty, then, seems to deserve none of the praise bestowed on it. Other causes can readily account for the improvement and prosperity of Great Britain so often attributed to these laws. The assurance given by British laws that everyone will enjoy the fruits of his own labor is alone sufficient to make any country prosper in spite of these and twenty other absurd commercial regulations. That assurance was secured by the Revolution, at about the same time the bounty was established. Every individual's natural effort to improve his own condition, when allowed to operate with freedom and security, is so powerful a force that it alone, unaided, can not only carry society toward wealth and prosperity but overcome a hundred petty obstacles with which the folly of human laws so often encumbers it—though those obstacles always, to some degree, either encroach on its freedom or diminish its security. Industry in Great Britain is entirely secure; and although far from entirely free, it is as free as, or freer than, anywhere else in Europe.

Although the period of Great Britain's greatest prosperity and improvement came after the establishment of the system of laws associated with the bounty, we must not attribute that prosperity to those laws. It also came after the national debt; but the national debt most certainly did not cause it.

The laws associated with the bounty tend, exactly as the practices of Spain and Portugal do, to reduce somewhat the value of precious metals in the country where they operate. Yet Great Britain is certainly among Europe's richest countries, while Spain and Portugal are perhaps among its poorest. Two distinct causes readily explain this difference. First, Spain's tax on exporting gold and silver, Portugal's prohibition of it, and the vigilant policing that enforces these laws must work both more directly and much more powerfully to lower the metals' value in these two very poor countries—which together import upwards of six millions sterling each year—than the corn laws do in Great Britain. Second, in those countries this bad policy is not offset by the people's general freedom and security. Industry there is neither free nor secure; and the civil and ecclesiastical governments of both Spain and Portugal would alone suffice to perpetuate their present poverty even if their commercial regulations were as wise as most of them are absurd and foolish.

The 13th of the present king, c. 43, seems to have established a new system of corn laws, better than the old in many respects, though perhaps not quite so good in one or two.

Under this statute, the high duties on imports for domestic consumption end as soon as middling wheat rises to 48s. the quarter; middling rye, pease, or beans to 32s.; barley to 24s.; and oats to 16s. In their place a small duty of only 6d per quarter of wheat is imposed, with duties on other grain in proportion. For all these kinds of grain, particularly wheat, the home market is thereby opened to foreign supplies at prices substantially lower than before.

Under the same statute, the old bounty of 5s. on exported wheat ends as soon as the price rises to 44s. the quarter, rather than 48s. as before; the bounty of 2s:6d. on exported barley ends when the price reaches 22s. rather than 24s.; and the bounty of 2s:6d. on exported oatmeal ends at 14s. rather than 15s. The bounty on rye is reduced from 3s:6d. to 3s. and ends when the price reaches 28s. rather than 32s. If bounties are as ill-advised as I have tried to prove, the sooner they end, and the smaller they are, the better.

The same statute permits corn to be imported at even the lowest prices, duty-free, for reexport, provided it is meanwhile kept in a warehouse secured under the joint locks of the king and the importer. This freedom does extend to only twenty-five of Great Britain's ports; but these are the principal ones, and most of the others may not have warehouses suitable for the purpose.

So far this law is plainly an improvement on the old system.

But the same law also grants a bounty of 2s. the quarter on exported oats whenever the price does not exceed fourteen shillings. No bounty had previously been given for exports of this grain, any more than for pease or beans.

The same law also prohibits the export of wheat as soon as its price rises to forty-four shillings the quarter; of rye at twenty-eight shillings; of barley at twenty-two shillings; and of oats at fourteen shillings. All these prices seem considerably too low. Moreover, there seems something improper in prohibiting exports altogether at precisely the prices at which the bounty meant to force them is withdrawn. Either the bounty should certainly have been withdrawn at a much lower price, or exports should have remained permitted at a much higher one.

In this respect, therefore, the law seems inferior to the old system. Yet despite all its defects, perhaps we may say of it what was said of Solon's laws: though not the best in itself, it is the best that the interests, prejudices, and temper of the times would allow. In time it may perhaps prepare the way for a better one.

III. Merchants who export grain for people in other countries to eat do not directly help supply the home market. They do help indirectly. Whether a country usually gets its grain from its own farms or from imports, it must regularly grow or import more than it consumes if its home market is to have a plentiful supply. But farmers will avoid growing a surplus, and importers will avoid bringing one in, unless they can normally export it. They will supply only what the home market just needs. That market will rarely have too much grain and will generally have too little. The people who supply it will fear being left with unsold stock. Banning exports limits the cultivation and improvement of a country’s land to what its own people need. Free exports allow it to grow grain for people abroad as well.

The 12th of Charles II. c.4 permitted grain exports whenever wheat cost no more than 40s. the quarter and other grain cost proportionate amounts. The 15th of the same prince extended this permission until wheat rose above 48s. the quarter. The 22d extended it to all higher prices. Exporters did have to pay the king a duty based on value. But the official book of rates valued grain so low that the duty was only 1s. per quarter on wheat, 4d. on oats, and 6d. on every other grain. The 1st of William and Mary, which established the bounty, effectively removed this small duty whenever wheat cost no more than 48s. the quarter. The 11th and 12th of William III. c. 20 expressly removed it at all higher prices.

Export merchants were thus not only encouraged with a bounty but given much more freedom than inland dealers. Under the last of these statutes, grain could be bought up for export at any price. But it could be bought up for inland sale only when its price was no more than 48s. the quarter. As I have already shown, an inland dealer’s interest can never conflict with the interest of most people. An export merchant’s interest can, and sometimes does. If his own country had a grain shortage while a neighboring country had a famine, he might profit by sending so much grain abroad that the shortage at home became much worse. Plentiful supplies at home were not the direct aim of these statutes. Under the pretext of encouraging agriculture, they sought to raise the money price of grain as high as possible, and so cause as much ongoing scarcity at home as possible. By discouraging imports, they limited supplies for the home market to domestic crops even in severe shortages. By encouraging exports when the price was as high as 48s. the quarter, they kept some of those crops out of the home market even during considerable shortages. Great Britain has often had to pass temporary laws banning grain exports and removing import duties for a limited time. That repeated need clearly shows what is wrong with her general system. If the system worked well, she would not have had to depart from it so often.

If every country adopted free exports and free imports, the different states of a large continent would be much like the provinces of one large empire. Both reason and experience show that free trade between provinces is the best way to ease a grain shortage and the most effective way to prevent a famine. Free imports and exports between the states of a continent would do the same. The larger the continent, and the easier travel and shipping between its parts, the less likely any one area would suffer either disaster. An area with a shortage would be more likely to get help from an area with plenty. But very few countries have adopted this free system completely. Almost everywhere, the corn trade is restricted to some degree. In many countries, foolish regulations often turn the unavoidable hardship of a grain shortage into the terrible disaster of a famine. Their demand for grain can become so great and urgent that a neighboring small state, itself facing some shortage, cannot safely supply them without risking a famine of its own. One country’s very bad policy can thus make it dangerous and unwise for another to adopt what would otherwise be the best policy. Unlimited freedom to export would be much less dangerous in large states. They grow so much grain that likely exports could seldom affect supplies greatly. It might sometimes be necessary to restrict grain exports from a Swiss canton or one of the small Italian states. In a country as large as France or England, it could hardly ever be necessary. Moreover, stopping farmers from selling their goods in the best market is plainly a sacrifice of ordinary justice for supposed public benefit, a kind of reason of state. Such an act of legislative authority should be used, and can be excused, only in the most urgent need. If grain exports are ever prohibited at a particular price, that price should always be very high.

Grain laws everywhere can be compared with laws about religion. People care deeply both about having enough to live on in this life and about happiness in the next. So governments must give in to their prejudices and establish the systems they approve of to keep the peace. Perhaps that is why reasonable systems for either of these two vital matters are so rare.

IV. A merchant-carrier imports foreign grain in order to export it again. His trade helps provide a plentiful supply in the home market. Selling grain there is not his direct purpose. But he will generally be willing to sell it there, even for much less than he expects abroad, because doing so saves the costs of loading and unloading, freight, and insurance. People in a country that acts as a warehouse and distribution center for other countries through this carrying trade will very rarely run short themselves. The carrying trade lowers the average money price of grain in the home market. But that does not lower grain’s real value; it only raises the real value of silver somewhat.

High duties on foreign grain imports effectively banned the carrying trade in Great Britain in ordinary times. Most of those duties were not refunded when grain was exported again. In exceptional times, when shortages led temporary statutes to suspend the duties, exports were always banned. This set of laws thus effectively prohibited the carrying trade.

The laws associated with establishing the bounty therefore seem to deserve none of the praise they have received. Other causes readily explain Great Britain’s growth and prosperity, so often credited to those laws. British law assures every person that he can enjoy the product of his own labor. That assurance alone is enough to make any country thrive despite these and twenty other foolish trade regulations. It was made secure by the Revolution, at about the same time the bounty was established. When people are free and secure, their natural drive to improve their own condition is powerful enough, without any help, both to make society wealthy and prosperous and to overcome a hundred needless obstacles put in its way by foolish human laws. Those obstacles nevertheless always limit freedom or weaken security to some degree. In Great Britain, industry is entirely secure. Though it is far from entirely free, it is at least as free as industry anywhere else in Europe.

Great Britain’s greatest period of prosperity and improvement did come after the laws associated with the bounty. But that does not mean those laws caused it. It also came after the national debt, which certainly did not cause it.

The laws associated with the bounty tend to lower the value of precious metals somewhat in Great Britain, just as the practices of Spain and Portugal do in those countries. Yet Great Britain is certainly among Europe’s richest countries, while Spain and Portugal may be among its poorest. Two causes readily explain the difference. First, Spain taxes exports of gold and silver, and Portugal bans them. Both countries enforce these rules closely. They are very poor countries that together import upwards of six millions sterling every year. Their rules therefore lower the value of precious metals there more directly and much more powerfully than the corn laws can in Great Britain. Second, their bad policies are not offset by general freedom and security for their people. Industry there is neither free nor secure. The civil and religious governments of Spain and Portugal would themselves be enough to keep them poor, even if their trade regulations were sensible rather than, for the most part, absurd and foolish.

The 13th of the present king, c. 43 seems to have created a new system of corn laws. In many respects it is better than the old one, though in one or two respects it may not be quite as good.

Under this statute, the high duties on imports for domestic consumption end as soon as middling wheat reaches 48s. the quarter; middling rye, pease, or beans reaches 32s.; barley reaches 24s.; and oats reaches 16s. In their place there is a small duty of only 6d per quarter of wheat, with proportionate duties on other grain. Foreign supplies of all these grains, especially wheat, can thus enter the home market at much lower prices than before.

Under the same statute, the old export bounty of 5s. on wheat ends as soon as the price reaches 44s. the quarter, rather than 48s. as before. The export bounty of 2s:6d. on barley ends at 22s. instead of 24s. The export bounty of 2s:6d. on oatmeal ends at 14s. instead of 15s. The bounty on rye is cut from 3s:6d. to 3s., and ends at 28s. instead of 32s. If bounties are as unsuitable as I have tried to show, it is better for them to be lower and to end sooner.

The same statute allows grain to be imported duty-free even at the lowest prices if it is to be exported again, provided it is stored in a warehouse secured by locks held jointly by the king and the importer. This freedom applies to only twenty-five of Great Britain’s ports. But they are the principal ports, and most of the others may lack suitable warehouses.

In these respects the law clearly seems better than the old system.

But the same law offers an export bounty of 2s. the quarter on oats whenever the price is no more than fourteen shillings. No export bounty had ever been given for oats before, any more than for pease or beans.

The law also prohibits wheat exports as soon as the price reaches forty-four shillings the quarter, rye exports at twenty-eight shillings, barley exports at twenty-two shillings, and oats exports at fourteen shillings. All these price limits seem much too low. It also seems wrong to ban exports outright at exactly the prices where the bounty meant to encourage them ends. Either the bounty should have ended at a much lower price, or exports should have been allowed up to a much higher one.

In these respects, then, the law seems worse than the old system. Despite its faults, perhaps we can say of it what was said of Solon’s laws. It is not the best law in itself, but it is the best law the interests, prejudices, and attitudes of the time would permit. In due course, it may open the way to a better one.