Wait and See

Sometimes, it is needed to tax a home commodity. But this disuturbs the local level of industry. Smith observes that taxing foreign imports in to the same level restores the local industry to before the tax.

I reply that the whole difference of price does not arise solely from taxation.

A large part of it is caused by the necessity of yearly cultivating and improving more poor land in order to provide for the demands of an increasing population.

• This land requires more labour and dressing, and expense of all kinds in its cultivation.

The growing price of corn therefore, independently of all taxation, is probably higher than in the rest of Europe.

This:

• increases the sacrifice that must be made for an independent supply
• enhances the difficulty of framing a legislative provision to secure it.

The former very high duties on foreign grain were accompanied by a bounty.

• Despite this, the growing price of corn in Britain was not higher than in Europe.

The stimulus given to agriculture by these laws, aided by other favourable circumstances, created so redundant a growth, that the average price of corn was not affected by the prices of importation.

The only sacrifice made was the small price increase from the bounty on its first establishment.

• Afterwards, it encouraged cultivation, leading to a period of cheapness.

If we did the same system in a very different state of the country, by raising the importation prices and the bounty in proportion to the fall in the value of money, the effects would be different.

Since 1740, Great Britain has added nearly 4.5 million to her population. With the addition of Ireland probably 8 millions, a greater proportion than in any other European country.

This led to the great increase of the middle classes which increased the demands for the products of pasture.

This would prevent us from exporting corn at the levels of the middle of the last century.

An increase of the bounty in proportion to the fall in the value of money, would certainly not be enough.

Only an excessive premium on exportation could accomplish it.

It would at once stop the progress of the population and foreign commerce of Britain, in order to let the produce of corn get before it.

Currently, we must give up the idea of creating a large average surplus.

Yet very high import duties, operating alone, can make the price fluctuate greatly.

Steady high prices would secure an an independent supply.

• This would lead to an oversupply, causing the price to fall.4

Should this low price continue for a third year, it would discourage cultivation.

• The country would again become partially dependent.

The necessity of importing foreign corn would again raise the price of importation.

• The same causes might make a similar fall and a subsequent rise recur.

Thus prices would tend to vibrate between:

• the high prices from the high import duties
• the low prices from a glut which could not be relieved by exportation

It is under these difficulties that the parliament is called upon to legislate.

Any final regulation should be delayed because of the present uncertain state of the currency.*

The corn laws should be revised to put a permanent duty on foreign corn, not to act as a prohibition, but as a protective, profitable tax.

It would be tasked to prevent the great fall of prices from a glut.

• It is not meant to create an average surplus.

The old bounty might be continued, and allowed to operate in the same way as the duty at all times, except in extreme cases.

These regulations:

• would be extremely simple and obvious in their operations
• would give more certainty to the foreign grower
• would afford a profitable tax to the government
• would be less affected even by the expected improvement of the currency, than high importation prices founded on any past average.(5*)

NOTES:

1. From the reign of Edward III to the reign of Henry VII, a day’s earnings, in corn, rose from a pack to near half a bushel, and from Henry VII to the end of Elizabeth, it fell from near half a bushel to little more than half a peck.

2. Wealth of Nations, b. iv, c. 2, p. 202.

3. The cheapness of corn, during the first half of the last century, was rather oddly mistaken by Dr. Smith for a rise in the value of silver. That it was owing to peculiar abundance was obvious, from all other commodities rising instead of falling.

4. The sudden fall of the price of corn this year seems to be a case precisely to point. It should be recollected however that quantity always in some degree balances cheapness.

5. Since sending the above to the press I have heard of the new resolutions that are to be proposed. The machinery seems to be a little complicated, but if it will work easily and well, they are greatly preferable to those which were suggested last year.

To the free exportation asked, no rational objection can of course be made, though its efficiency in the present state of things may be doubted. With regard to the duties, if any be imposed, there must always be a queston of degree. The principal objection which I see to the present scale, is that with an average price of corn in the actual state of the currency, there will be a pretty strong competition of foreign grain; whereas with an average price on the restoration of the currency, foreign competition will be absolutely and entirely excluded.