Chapters 2 and 3

How to enrich our Country

January 30, 2020

Chap 2= How to enrich our Country and Increase our Wealth

A Kingdom might be enriched by gifts received, or by government-to-government transactions. Yet these are things uncertaim and of small consideration when they happen.

The ordinary means therefore to encrease our wealth is by Forraign Trade wherein we must ever observe this rule= to sell more than we buy of theirs in value.

If we sell our excess worth £2,200,000 pounds to foreign countriess and buy foreign goods worth £2,000,000 pounds, we will get richer by £200,000 in money because the part of our stock not returned to us in goods must necessarily return in money.

The national stock is like a man’s private estate who has £1,000 yearly revenue and £2,000 ready money in his chest.

  • If he spends £1,500 per annum, all his ready money will be gone in four years. [2000 / (1000 - 1500)]
  • But if he spends only £500 per annum, his savings will double in four years. [2000 / (1000 - 500)]

This rule is also true with our nation. This balance of national accounts should be drawn up regularly, so that the State can discover how much we gain or lose by foreign trade.

How we can increase our sales and reduce our purchases? This will be answered next.

Chapter 3: How to Increase our sales and reduce our purchases [Supply and Demand Curve]

In our sales overseas, we must think of our neighbours’ necessities, so that we can=

  • make as much of the goods they want that are unavailable anywhere else
  • sell them dear as long as the high price does not reduce our sales.

Cut-throat pricing

But other nations might sell the same goods as we do. This might reduce the demand for our goods. In this case, we must sell as cheap as possible, rather than lose the sale. By lowering the price of our cloth in Turkey, we have sold more. The Venetians have lost because theirs is dearer. When our cloth was expensive, we lost at the least half our clothing to foreigners.

A 25% price reduction raises sales by over 50%, to the public benefit.

When our cloth is expensive, other nations sell more cloths. When our cloth is cheap, they lose business. We therefore should increase the sale of our cloth.

Our sales could be better if we use our own ships so that=

  • we can source our goods for sale at local prices.
  • we can have better prices for freight and insurance.

Use own ships

If we use foreign ships, we earn 25 shillings for every sale of a quarter wheat and 20 shillings for a barrel of red herrings. But if we use our own ships and sell to Italy, we can get 50 shillings for wheat and 40 shillings for the herrings.

Ships Wheat Earnings Herrings Earnings
Foreign ships 25s 20s
Own ships 50s 40s

Trade farther

This profit will be greater when we trade to distant counties.

  • If Dutch pepper cost 20 pence per pound and sold in England for 24 pence, the merchant will earn 4 pence.
  • But if we buy pepper from India at 3 pence, we can get more of it from there beyond our own use, for sale to other countries.

We make more profit by sourcing from India than from other nations. But we must distinguish from merchant’s profit and government revenue.

  • The government pays only for the goods.
  • But merchants pay for the goods and for the freight, insurance, and customs taxes.

The government bases its computations on our computations. We merchants are doing all the work which brings so much happiness to the public. We increase the stock of other nations through our business. Our business has benefited India which has bought British goods. Therefore, we will do what we can to maintain and enlarge this noble business.

Native commodities should not be charged with customs duties because that will reduce their sales.

Foreign goods for re-export should be encouraged. But the local consumption of foreign goods should be taxed to restore supply and demand to an exact equilibrium.