The Carrying Trade

³⁰ The capital employed in the carrying trade is diverted from supporting its productive labour to support that of foreign countries. It may replace the capitals of foreign countries.

The Dutch merchant who sends the Polish wheat to Portugal and returns Portuguese fruits & wines to Poland, replaces the capitals of Poland and Portugal.

• Neither of those two capitals supported the productive labour of Holland.
• One of the capitals supports the productive labour of Poland
• The other one supports that of Portugal.
• Only the profits return regularly to Holland.
• This is its sole addition to the national produce of Holland.

When the carrying trade of any country is carried on with its own ships and sailors, the capital which pays the freight is distributed among, and mobilizes productive labourers of that country.

Almost all nations in the carrying trade have done it in this way. The trade itself probably derived its name from it. The people of such countries are the carriers to other countries. However, this is not essential in the carrying trade.

A Dutch merchant may carry the commerce of Poland and Portugal in British ships. We may presume that this is actually done.

This is why the carrying trade was peculiarly advantageous to Great Britain Its defence and security depend on its shipping and on its sailors.

But the same capital may employ as many sailors and shipping in the foreign trade or even in the home-trade (done in coasting vessels), as in the carrying trade. The number of sailors and shipping which any capital can employ does not depend on the nature of the trade.

It depends partly on the bulk of the goods in proportion to their value. It depends partly on the distance of the ports where they are carried, chiefly upon their bulk.

For example, the coal trade from Newcastle to London employs more shipping than all the carrying trade of England, though the ports are not far apart.

Forcing more of the country’s capital into the carrying trade by extraordinary encouragements above the natural will not always increase that country’s shipping.

³¹ The capital employed in the home-trade will generally= Support more of its productive labour Increase the value of its produce more than an equal capital employed in the foreign trade

The capital in the foreign trade of consumption has a greater advantage over an equal capital in the carrying trade. The riches and power of every country must always be in proportion to the value of its annual produce, the fund from which all taxes must ultimately be paid. But the great object of the political economy of every country is to increase the riches and power of that country.

It should give no preference nor encouragement:

• to the foreign trade above the home-trade
• to the carrying trade above either of those two

It should neither force nor tempt into either of those two channels more of a country’s capital than what would naturally flow into them.

³² When the produce of any country exceeds its own demand, the surplus must be sent abroad. It must be exchanged for something which is in demand at home.

Without such exportation, a part of the productive labour of the country will cease and its resulting value will diminish.

The land and labour of Great Britain produce more grain, woollens, and hardware than needed at home.

• The surplus must be exchanged for something in demand at home.
• This surplus can compensate the labour and expence of producing it only through such exportation.

The sea-coast and the banks of navigable rivers are advantageous for industry only because they facilitate the exchange of such surplus produce.

³³ When the foreign goods purchased with the surplus domestic produce exceed the demand at home, the surplus must be sent abroad again.

Around 96,000 hogsheads of tobacco are annually purchased in Virginia and Maryland with surplus British produce.

• But Great Britain does not require perhaps more than 14,000.
• If the remaining 82,000 could not be sold abroad, their importation must cease immediately.
  • The productive labour of all the British employed in making those exported goods must also cease.

The most round-about foreign trade of consumption therefore may be as necessary as the most direct foreign trade in terms of supporting the country’s productive labour.

³⁴ When a country’s capital stock is increased to the point that it cannot be all employed to support its productive labour, the surplus naturally disgorges itself into the carrying trade.

The carrying trade is the natural effect and symptom of great national wealth, not the cause. Those statesmen who encourage it mistake the effect for the cause.

Holland is by far the richest country in Europe.

• It has the greatest share of the European carrying trade.

England is perhaps the second richest European country.

• It also has a big share of the European carrying trade, although the English carrying trade frequently really is a round-about foreign trade of consumption.

The round-about foreign trade of consumption is largely made up of the trades between=

• America
• the East and West Indies
• Europe

Those goods are generally purchased immediately with=

• British produce or
• foreign produce bought with British produce, with the final returns being consumed in Great Britain

The principal branches of the carrying trade of Great Britain are perhaps made up of=

• the trade done in British ships between the Mediterranean ports, and
• some of the trade done by British merchants between Indian ports.

³⁵ The extent of the home-trade is limited by the value of the surplus produce within the country.

The extent of the foreign trade of consumption is limited by the value of the surplus produce of the whole country.

The extent of the carrying trade is limited by the value of the surplus produce of all the countries in the world.

• Therefore, its farthest extent is infinite compared to the other two.
• It can absorb the greatest capitals.

³⁶ Private profit is the sole motive of the owner of the capital in agriculture, manufactures, or wholesale or retail trade.

He never thinks of=

• the productive labour it may mobilize and
• how it can increase the national annual produce.

Individual capitals will naturally be employed in the most advantageous way for society in countries where=

• agriculture is the most profitable of all employments, and
• farming and land improvement are the most direct roads to a splendid fortune.

However, agricultural profits are not superior to other employments in Europe.

Within these few years, projectors everywhere have amused the public with most magnificent accounts of the profits to be made by land cultivation and improvement.

But this is false, as proven by the splendid fortunes acquired in a single lifetime through trade and manufacturers, frequently from a very small capital.

Such a fortune acquired by agriculture from such a capital has perhaps not occurred in Europe in the present century.

However, in all great European countries, much good land still remains uncultivated.

• Most of the cultivated lands are not yet fully improved.
• Almost everywhere, agriculture can absorb much more capital than before.

In Books 3 and 4, I will explain:

• why European policy gave the trades of towns a great advantage over the trades in the countryside.
• why private persons find it better to employ their capitals in the most distant carrying trades of Asia and America than in the their own country’s land improvement.