Digression on the wheat trade and wheat laws: Domestic wheat market

⁴⁰ The praises for the following are unmerited:

• The law which establishes the wheat export bounty
• The regulations connected with the bounty

This is demonstrated by examining the nature of:

• the wheat trade, and
• the British laws related to it

This is a very important subject, justified by this long digression.

⁴¹ The wheat merchant’s trade is composed of 4 separate branches which can be done by the same person:

1. The trade of the inland dealer
2. The merchant importer for home consumption
3. The merchant exporter of home produce for foreign consumption
4. The merchant carrier or importer and re-exporter of wheat

The Wheat Merchant and The Invisible Hand of Svadharma

⁴² The interest of the inland dealer is exactly the same with the people’s interest even if it may appear opposite even in years of great scarcity.

His interest is to raise wheat prices as high as needed by the season’s real scarcity.

• It can never be his interest to raise it higher.

He discourages wheat consumption by raising its price.

• He puts everybody on thrift and good management, especially the lower class.

If he raises wheat prices too high, he discourages wheat consumption so much that the season’s supply will be more than the season’s consumption.

• The supply will last for some time after the next crop comes in.

He runs the hazard of:

• losing a big part of his wheat by natural causes
• being obliged to sell what remains for much less

If he does not raise the price high enough, he discourages wheat consumption so little that the season’s supply will be less than the season’s consumption.

• He loses some of the profit he might have made.
• He exposes the people to a horrific famine before the season’s end, instead of a difficult dearth.

It is the people’s interest that their daily, weekly, and monthly consumption should be proportional to the season’s supply.

The interest of the inland wheat dealer is the same as the people.

He can sell all his wheat for the highest price and the most profit by supplying them in this proportion, as nearly as he can judge.

He judge the people’s real supplies through his knowledge of:

• the wheat’s state
• his daily, weekly, and monthly sales

Without intending the people’s interest, he is necessarily led by a regard to his own interest.

Even in years of scarcity, he treats people in the same way as a prudent shipmaster treats his crew.

• He puts them on short allowance when he foresees that provisions will run short.
• He sometimes does this unnecessarily.
  • But all the crew’s inconveniences are small compared to the danger from doing otherwise.

In the same way, excessive avarice might cause the inland wheat merchant to raise wheat prices higher than what the season’s scarcity requires.

• Yet all the people’s inconveniences from this secures them from a famine in the season’s end.

The suffering is small compared to the suffering created by a more liberal way of dealing with the scarcity.

• The wheat merchant will likely suffer the most by this excess of avarice because:
  • of the indignation against him
  • he must sell his season’s leftover wheat at a lower price if the next season is abundant.

⁴³ If one great merchant company got all of a country’s crops, it might be its interest to destroy a big part of it to keep up the price of the rest.

This is what the Dutch did to the Moluccas spiceries.

But it is impossible, even by the violence of law, to establish such an extensive monopoly on wheat.

Wherever there is free trade, wheat is the least liable to be engrossed or monopolized by a few large capitals. Its value far exceeds what the capitals of a few private men can buy. Even if they were able to buy it, it would be impractical because of the way wheat is produced.

In every civilized country, wheat is the commodity consumed the most annually.

• More industry is employed in producing wheat than any other commodity.

When it first comes from the ground, it is divided among more owners than any other commodity.

• These owners can never be collected into one place like independent manufacturers.
• They are scattered throughout the countryside.

These first owners immediately supply:

• the consumers in their own neighbourhood or
• other inland dealers who supply those consumers

The inland dealers in wheat include the farmer and the baker.

• They are more numerous than the dealers in any other commodity.
• Their dispersed situation makes it impossible for them to have a general combination.

If a dealer has more wheat than he could sell during a year of scarcity, he would never keep up its price to his own loss.

He would immediately lower it to get rid of his wheat before the new crop came in.

All dealers would be bound by these same motives and interests.

Generally, it would oblige them all to sell their wheat at the price most suitable to the season.

⁴⁴ Whoever examines the history of European dearths and famines from 16th century to the present will find that a dearth always arose from a real scarcity.

This scarcity was created by:

• war, or
• the fault of the seasons, most frequently

It never arose from any combination of the inland wheat dealers. A famine only arose from the government’s violence in attempting to remedy a dearth improperly.

⁴⁵ In an extensive wheat country with free commerce and communication, the scarcity created by the most unfavourable seasons can never be so great as to produce a famine.

If managed with frugality and economy, the scantiest crop will maintain the same number of people fed during periods of moderate plenty.

Excessive drought or rain are bad for crops.

But wheat grows equally on:

• high and low lands, and
• wet or dry land

Drought or excessive rains may hurt one part of the country.

• But the other part will not have them.

In wet and dry seasons, some of the wheat lost in one part of the country is compensated by the wheat gained in the other.

Rice requires a very moist soil and must be laid underwater.

• In rice countries, a drought is much more dismal.
• However, even in such countries, the drought is perhaps never so universal to create a famine if the government allows a free trade.

The drought in Bengal a few years ago might have created a very great dearth.

Some improper regulations and restraints imposed by the East India Company on the rice trade perhaps contributed to turn that dearth into a famine.

⁴⁶ When the government tries to to remedy a dearth by ordering all dealers to sell their wheat at a reasonable price, it:

• hinders the dealers from bringing it to market, and
  • It may then produce a famine
• enables the people to consume it so fast.
  • It produces a famine before the season’s end.

The unlimited, unrestrained freedom of the wheat trade is the only effective preventative of a famine.

It is the best palliative of a dearth. Because the inconveniences of a real scarcity cannot be remedied, it can only be palliated. Free wheat trade deserves and requires the most protection of the law because no trade is so much exposed to popular odium.

⁴⁷ In years of scarcity, the lower classes impute their distress to the wheat merchant’s avarice.

Instead of profiting from the scarcity, he is often in danger of being ruined. His magazines are in danger of being plundered and destroyed by violence. The wheat merchant expects his main profit during years of scarcity when prices are high. He is in contract with some farmers to furnish him a certain amount of wheat at a certain price for a certain number of years. This contract price is settled according to the ordinary price which is moderate and reasonable. Before the recent years of scarcity, it was about 336 pence for the quarter of wheat. In years of scarcity, the wheat merchant buys most of his wheat for the ordinary price and sells it dearer. This extraordinary profit is just enough to put his trade on a fair level with other trades. It compensates his many other losses from= the wheat’s perishable nature, and the frequent and unforeseen fluctuations of its price This alone shows why great fortunes are seldom made in the wheat trade. A popular odium attends the wheat trade in years of scarcity. It makes people of character and fortune averse to enter into it. The wheat trade is abandoned to an inferior set of dealers.

The only middlemen that come between the grower and the consumer are:

• millers
• bakers
• mealmen [warehouse?]
• meal factors [agents? retailers?] , together with wretched hucksters [resellers? peddlers?]

⁴⁸ Europe’s ancient policy authorized and encouraged this popular odium against the wheat trade, even if the wheat trade is so beneficial to the public.

⁴⁹ The 5th and 6th of Edward 6th cap. 14 enacted that anyone who buys any wheat or grain with intent to sell it again would be an unlawful engrosser.

For the first fault:

• he would be imprisoned for two months, and
• the value of his wheat would be forfeited.

For the second: he would be imprisoned for six months, and the double value of his wheat would be forfeited. For the third: he would be imprisoned in the pillory, and all his goods and chattels would be forfeited.

The ancient policy of other European countries was no better than that of England.

50 Our ancestors imagined that people could buy their wheat cheaper from the farmer than from the wheat merchant.

They were afraid that the wheat merchant would require an exorbitant profit to himself.

They tried to:

• annihilate his trade altogether, and
• hinder any middle man from coming in between the grower and the consumer, by imposing many restraints.

A wheat carrier could only exercise his trade with a licence proving that he was fair. Edward VI’s statute required three justices of the peace to grant this licence. The privilege of granting it was further confined to the quarter-sessions by a statute of Elizabeth.