Speculation

Can speculative commerce be depended on for this reserve against a deficiency?

At first sight it might appear that it could, that self-interest would be an adequate motive.

The difference of the price of wheat in years of abundance and scarcity is very great.

But the recurrence of the oscillation is too irregular in distance of time, and too infrequent also, to give rise to a regular traffic, or one that can be repeated at pleasure.

The purchase of the grain, the number and size of the storehouses, require a very large advance of capital and a heavy arrear of interest= it is an article that must be repeatedly shifted and turned, and is much exposed to fraud and damage, as well as to popular violence.

All these are to be covered by a profit of rare occurrence.

Wherefore, it is possible, that the article may not hold out sufficient temptation to the speculator, although this would be the most commendable kind of speculation, being framed upon the principle of buying from the producer when he is eager to sell, and selling to the consumer when he finds it difficult to purchase.

Public stores and granaries are after all but auxiliary and temporary expedients of supply. The most abundant and advan- tageous supply will always be that furnished by the utmost freedom of commerce, whose duties in respect to grain con- sist chiefly in transporting the produce from the farmyard to the principal markets, and thence in smaller quantities from the markets of the districts where it is superabundant to those of others that may be scantily supplied; or in exporting when cheap, and importing when dear.

In default of the individual providence of the consumer, and of speculative accumulation and reserve, neither of which it would seem can be safely depended upon, can the public authority, as representing the aggregate interest, undertake the charge of providing against a scarcity with any prospect of

Popular prejudice and ignorance have universally regarded with an evil eye those concerned in the corn-trade; nor have

mals. The distant prospect of scarcity, or even a slight rise of price, is insufficient to check this improvidence betimes.

If the great holders shut up their stores, however, the consequent anticipation of a rise of price immediately puts the public on their guard, and awakens the particular frugality and care of the little consumers, of whom the great mass of consump- tion is composed. Ingenuity is set at work to find a substitute for the scarce article of food, and not a particle is wasted.

Thus, the avarice of one part of mankind operates as a salutary check upon the improvidence of the rest; and, when the stock withheld at length appears in the market, its quantity tends to lower the price in favour of the consumer.

the depositories of national authority been always exempt from similar illiberality. The main charge against them is, that they buy up corn with the express purpose of raising its price, or at least of making an unreasonable profit upon the purchase and re-sale, which is in effect so much gratuitous loss to the producer and consumer.

What is meant by this charge?

If it be meant to accuse the dealers of buying in plentiful seasons, when corn is cheap, and laying by in reserve against seasons of scarcity, we have just seen that this is a most beneficial operation, and the sole means of accommodating the supply of so precarious an article to the regularity of an unceasing demand.

Large stores of grain laid in at a Low price contribute powerfully to place the subsistence of the population beyond risk of failure, and deserve not only the protection, but the encouragement of the public authorities.

But, if it be meant to charge the corn-dealers with buying up on a rising market and on the approach of scarcity, and thereby enhancing the scarcity and the price, although I admit that this operation has not the same recommendation of utility, and that the consumer is saddled with the additional cost of the operation without any direct equivalent benefit, for in this instance the deficiency of one year is not made good by the hoarded sur- plus of a preceding one; yet I cannot think it has ever been attended with any very alarming or fatal consequences.

Corn is a commodity of most extended production; and its price cannot be arbitrarily raised, without disarming the competi- tion of an infinity of sellers, and without an extent of dealing and of agency scarcely practicable to individuals.

It is, besides, a most cumbersome and inconvenient article in comparison with its price, and, consequently, most expensive and troublesome in the carriage and warehousing.

A store of any considerable value can not escape observation. 196 And its liability to damage or decay often makes sales compulsory, and exposes the larger speculators to immense loss.

With regard to the tribute which the dealer is supposed to exact from both producer and consumer, it is a charge that will attach with equal justice upon every branch of commerce whatsoever.

There would be some meaning in it, could products reach the hands of the consumer without any advance of capital, without warehouses, trouble, combination, or any kind of difficulty.

But, so long as difficulties shall exist, nobody will be able to surmount them so cheaply, as those who make it their special business. Legislation should take an enlarged view of commerce in the aggregate, small and great;

It will find its agents busied in traversing the whole surface of the territory, watching every fluctuation of demand and supply, adjusting the casual or local deficiency of price to meet the charges of production and excess of price above the capacity of consumption.

Is it to the cultivator, to the consumer, or to the public administration that we can safely look for so ben- eficial and powerful an agency?

Extend, if you please, the facility of intercourse, and particularly the capacities of internal navigation, which alone is suited to the transport of a commodity so cumbrous and bulky as grain; vigilantly watch over the personal security of the trader; and then leave him to follow his own track.

Commerce cannot make good the failure of the crop; but it can distribute whatever there may be to distribute, in the manner best suited to the wants of the com- munity, as well as to the interests of production.

This is why Adam Smith pronounced the labour of the corn dealer to be favourable to the production of corn, in the next degree to that of the cultivator himself.

Speculative monopoly is, therefore, extremely difficult, and little to be dreaded. The kind of engrossment most prejudi- cial, as well as most difficult of prevention, is that practised by the domestic prudence of individuals in apprehension of a scarcity.

Some, from excess of precaution, lay by rather more than they want; while farmers, farming proprietors, millers, and bakers, who habitually keep a stock on hand, take care somewhat to swell that stock, in the idea that they shall sell to a profit whatever surplus there may be; and the infinite num- ber of these petty acts of engrossment makes them greatly exceed, in the aggregate, all the united efforts of speculation.

The prevalence of erroneous views of the production and commerce of articles of human subsistence, has led to a world of mischievous and contradictory laws, regulations, and ordinances, in all countries, suggested by the exigency of the moment, and often extorted by popular importunity.

The danger and odium thus heaped upon the dealers in grain have frequently thrown the business into the hands of inferior per- sons, qualified neither by information nor ability for the business; and the usual consequence has followed; namely, that the same traffic has been carried on in secret, at far greater expense to the consumers; the dealers to whom it was aban-

But what if it should turn out, after all, that even the selfish and odious views of such speculators are productive of some good?

When corn is cheap, it is consumed with less providence and frugality, and used as food for the domestic aniticle in the country where the scarcity occurs, amounting sometimes to as much as 200 or 300%.

If this be not sufficient to tempt the importer, I know of no adequate inducement that the government could hold out to him.

doned being of course obliged to pay themselves for all the risk and inconvenience of the occupation.

Whenever a maximum of price has been affixed to grain, it has immediately been withdrawn or concealed. The next step was to compel the farmers to bring their grain to market, and prohibit the private sales. These violations of property, with all their usual accompaniments of inquisitorial search, personal violence, and injustice, have never afforded any con- siderable resource to the government employing them.

In polity as well as morality, the grand secret is, not to constrain the actions, but to awaken the inclinations of mankind. Mar- kets are not to be supplied by the terror of the bayonet or the sabre. 197

Nations would be less subject to famine, were they to employ a greater variety of aliments. When the whole population de- pends upon a single product for subsistence, the misery of a scarcity is extreme. A deficiency of corn in France is as bad as one of rice in Hindostan. When their diet consists of many articles, as butcher’s meat, poultry, esculent roots, vegetables, fruits, fish, &c., according to local circumstances, the supply is less precarious; for these articles seldom fail all at a time. 201

Scarcity would also be of less frequent occurrence, if more attention were paid to the dissemination and perfection of the art of preserving, at a cheap rate, such kinds of food, as are offered in superabundance at particular seasons and places; fish, for instance; their periodical excess might in this way be made to serve for times of scarcity. A perfect freedom of in- ternational maritime intercourse would enable the inhabitants of the temperate latitudes to partake cheaply of those productions, that nature pours forth in such profusion under a tropical sun. 202

I know not how far it would be possible to preserve and transport the fruit of the banana; but the experi- ment has in a great measure succeeded with respect to the sugarcane, which furnishes, in a thousand shapes, an agree- able and wholesome article of diet, and is produced so abun- dantly by all parts of the world, lying within 38º of latitude, that, but for our present absurd legislative provisions, it might be had much cheaper than butcher’s meat, and for the same price as many indigenous fruits and vegetables. 203

When the national government attempts to supply the population by becoming itself a dealer, it is sure to fail in satisfy- ing the national wants itself, and at the same time to extinguish all the resources that freedom of commerce would of- fer; for nobody else will knowingly embark in a losing trade, though the government may.

During the scarcity prevalent throughout many parts of France, in the year 1775, the municipalities of Lyons and some other towns attempted to relieve the wants of the inhabitants, by buying up corn in the country, and re-selling it at a loss in the towns. To defray the expense of this operation, they at the same time obtained an increase of the octroi or tolls upon goods entering their gates.

The scarcity grew worse and worse, for a very obvious reason; the ordinary dealers naturally abandoned markets where goods were sold below the cost price, and which they could not resort to without paying extra toll upon entry. 198

To return to the corn-trade, I must protest against the indis- criminate and universal application of the arguments I have adduced to show the benefits of liberty. Nothing is more dan- gerous in practice, than an obstinate, unbending adherence to system, particularly in its application to the wants and errors of mankind. The wiser course is, to approximate invariably to the standard of sound and acknowledged principles, to lead towards them by the never-failing influence of gradual and insensible attraction. It is well to fix beforehand a maximum of price beyond which exportation of grain shall either be prohibited, or subjected to heavy duties; for, as smuggling cannot be prevented entirely, it is better that those who are resolved to practise it should pay the insurance of the risk to the state than to individuals.

The more necessary an article is, the more dangerous it is to reduce its price below the natural level. An accidental dear- ness of corn, though doubtless a most unwelcome occurrence, is commonly brought about by causes out of all human power to remove. 199 There is no wisdom in heaping one calamity upon another, and passing bad laws because there has been a bad season.

Governments have met with no better success in the matter of importation, than in the conduct of internal commerce. The enormous sacrifices made by the commune of Paris and the general government, to provision the metropolis in the win- ter of 1816–17 with grain imported from abroad, did not pro- tect the consumer from an exorbitant advance in the price of bread, which was besides deficient both in weight and qual- ity; and the supply was found inadequate after all. 200 We have hitherto regarded the inflated price of grain as the only evil to be apprehended. But England, in 1815, was alarmed by a prospect of an opposite evil; viz., that, its price would be reduced too low by the influx of foreign grain. The production of this article is, like that of every other, much On the subject of bounties on import, it is hardly necessary to touch. The most effectual bounty is the high price of the ar-

more costly in England than in the neighbouring states, owing to a variety of causes, which it is immaterial here to ex- plain; amongst others, chiefly to the exorbitance of her taxation. Foreign grain could be sold in England at two-thirds of its cost price to the English grower.

It, therefore, became a most important question, whether it were better to permit the free importation, and thus, by exposing the home producer to a ruinous competition with the foreign grower, to render him incapable of paying his rent and taxes, to divert him from the cultivation of wheat altogether, and place England in a state of dependence for subsistence upon foreign, perhaps hostile nations; or, by excluding foreign grain from her market, to give a monopoly to the home producer, at the expense of the consumer, thereby augmenting the difficulty of subsistence to the labouring classes, and, by the advanced price of the necessaries of life, indirectly raising that of all the manufac- tured produce of the country, and proportionately disabling it to sustain the competition of other nations.

world; and that an extensive commerce of grain would lead to the formation of large stores and depots, which will offer the best possible security against the recurrence of scarcity; and that, accordingly, as they asserted, there are no countries less subject to that calamity, or even to violent fluctuations of price, than those that grow no corn at all; for which they cited the example. of Holland and other nations similarly circum- stanced. 205

Even in countries best able to reckon on commercial supply, there are many serious inconveniences to be apprehended from the ruin of internal tillage.

Subsistence is the primary want of a nation, and it is neither prudent nor safe to become dependent upon distant supply. Admitting that laws, which, for the protection of the agricultural prohibit the import of grain to the prejudice of the manufacturing interest, are both unjust and impolitic, it should be recollected that, on the other hand, excessive taxa- tion, loans, overgrown establishments, civil, military, or dip- lomatic, are equally impolitic and unjust, and fall more heavily upon agriculture than upon manufacture. Perhaps one abuse may make another necessary, to restore the equilibrium of production, otherwise industry would abandon one branch, and take exclusively to another, to the evident peril of the existence of society. 206

This great question has given rise to the most animated contest both of the tongue and the pen; and the obstinate conten- tion of two parties, each of which had much of justice on its side, leaves the bystanders to infer, that neither has chosen to notice the grand cause of mischief; that is to say, the neces- sity of supporting the arrogant pretensions of England to uni- versal influence and dominion, by sacrifices out of all pro- portion to her territorial extent. At all events, the great acute- ness and intelligence, displayed by the combatants on either side, have thrown new light upon the interference of author- ity in the business of the supply of grain, and have tended to strengthen the conclusion in favour of commercial liberty.