Adam Smith's Proposition

Will an artificial independent supply policy really desirable?

The general principles of political economy teach us to buy all our commodities where we can have them the cheapest.

The most natural and just objects of national ambition are:

1. Present wealth
2. Population
3. Power

It is only by a strict adherence to this rule that the capital of a country can ever be made to yield its greatest amount of produce.

Smith correctly states that a country may enjoy more subsistence, and consequently have a larger population, than what its own lands could afford, through trade and manufactures.

If Holland, Venice, and Hamburg would have remained inconsiderable had they declined dependence on foreign countries.

The price of corn affects the price of labour slowly, and never regulates it wholly.

Yet it has a powerful influence on it.

A most perfect free trade in corn greatly contributes to:

• an equalization of prices and
• a level in the value of the precious metals.

A manufacturing country can only use its advantages if the price of its labour and other commodities were reduced to a level comparable with other countries.

• This can be brought about by the most perfect freedom of the corn trade.

People against foreign corn say that:

• the great sums which we had to pay for foreign corn during the last 20 years has led to the neglect of local agriculture
• our 40 millions worth of imports are extravagant purchases that must be reduced

I reply that we purchase foreign corn with our products that we make advantageously.

In an unfavourable season, we might need to purchase a lot of foreign corn.

But this is in itself an evil that is soon rectified.

The cause of the evil is the unusual demand, not the average amount imported.

The habit on the part of foreigners to supply this amount, would rather facilitate than impede further supplies.

All trade is ultimately a trade of barter.

The power of purchasing cannot be permanently extended without an extension of the power of selling.

The foreign countries which supplied us with corn would increase their power to purchase our own commodities.

• This would thus contribute more effectually to our commercial and manufacturing prosperity.

The corn law supporters [anti-imports] say that, by growing our own consumption, we shall keep the price of corn within moderate bounds and keep it steady.

I reply that this is obviously not tenable.

We can only grow for our own consumption if we keep the price of corn up very considerably above the average of the rest of Europe.*

A bounty on exportation in one country, may be considered, in some degree, as a bounty upon production in Europe; and if the growing price of corn in the country where the bounty is granted be not higher than in others, such a premium might obviously after a time have some tendency to create a temporary abundance of corn and a consequent fall in its price.

But restrictions upon importation cannot have the slightest tendency of this kind. Their whole effect is to stint the supply of the general market, and to raise, not to lower, the price of corn.

Nor is it in their nature permanently to secure what is of more consequence, steadiness of prices. During the period indeed, in which the country is obliged regularly to import some foreign grain, a high duty upon it is effectual in steadily keeping up the price of home corn, and giving a very decided stimulus to agriculture. But as soon as the average supply becomes equal to the average consumption, this steadiness ceases. A plentiful year will occasion a sudden fall; and from the average price of the home produce being so much higher than in the other markets of Europe, such a fall can be but little relieved by exportation. It must be allowed, that a free trade in corn would in all ordinary cases not only secure a cheaper, but a more steady, supply of grain.