Loss of Competitve Advantage From the Division of Capital

⁵¹ In this way, Europe’s ancient policy tried to regulate agriculture by maxims different from those which regulated manufactures.

In agriculture, this policy forced the farmer to be both the wheat farmer and merchant or retailer. It made the end consumers and their wheat carriers as his only customers. In manufactures on the contrary, this policy banned the manufacturer from selling his own goods by retail or by being his own shopkeeper. In agriculture, this policy aimed to render wheat cheap without understanding how this was to be done. In manufactures, this policy protected the shopkeeper’s interest by preventing manufacturers from doing retail and underselling them.

⁵² The manufacturer was allowed to keep a shop and sell his own goods by retail, but he could not have undersold the common shopkeeper.

Whatever capital he placed in his shop must have been withdrawn from his manufacture.

To carry on his business on a level with other manufacturers and shopkeepers, he must have profits from his:

• manufacturing capital, and
• retail capital.

Let us suppose that 10% was the ordinary profit of manufacturing and shopkeeping in his town. In this case, he must have added a profit of 20% on each of his goods in his shop. When he carried them from his workhouse to his shop, he must have priced them at a wholesale price. The wholesale price is the price he sells them to shopkeepers. If he valued them lower than the wholesale price, he would lose some of his manufacturing capital’s profit. When he sold them from his shop, he would lose some of the profit of his shopkeeping capital if he sold them cheaper than the retail price of other shopkeepers. He might appear to make a double profit on the same goods. But as these goods came from two distinct capitals, he made only a single profit on the whole capital employed. If he made less than his usual profit, he was a loser.

⁵³ The manufacturer was banned from dividing his capital into two employments.

However, the farmer was forced to divide his capital into two. One part was in his granaries and stack yard for supplying the market. Another part was in land cultivation.

He could not afford cultivation for less than the ordinary profits of farming stock. He could as little afford granaries for less than the ordinary profits of mercantile stock. Whether the stock used in wheat trading belonged to the farmer or the wheat merchant, an equal profit is needed by the owner to= put his business on a level with other trades hinder him from changing his business to something more profitable The farmer was forced to exercise the trade of a wheat merchant. He could not afford to sell his wheat cheaper than any other wheat merchant, in the case of a free competition.

⁵⁴ The dealer who can employ his whole stock in one single business has the same advantage as the worker who can employ his whole labour in one single operation.

As the worker acquires the dexterity to perform more work, so the merchant acquires readier methods of buying and disposing of goods. With the same capital, the merchant can transact more business. As the merchant can afford the worker’s labour cheaper, so the worker can afford the merchant’s goods cheaper than if his stock and attention were employed in many various objects. Most manufacturers would not be able to retail their own goods as cheaply and effectively as an active shopkeeper. An active shopkeeper’s sole business is to buy at wholesale and sell at retail. Most farmers would be less able to retail their own wheat. They could not afford to supply the town 4-5 miles away as cheap and as vigilant as an active wheat merchant.

Svadharma

⁵⁵ The law, which banned the manufacturer from being a shopkeeper, forced this division in the employment of stock faster.

The law, which obliged the farmer to be a wheat merchant, hindered the division of the employment of stock from going on so fast. Both laws were violations of natural liberty and were therefore unjust and impolitic. “It is the interest of every society that things of this kind should never either be forced or obstructed.” The man who employs his labour or stock in more ways than necessary, can never hurt his neighbour through underselling. He may hurt himself by underselling, and he generally does so. “Jack of all trades will never be rich, says the proverb.” The law should always trust people with the care of their own interest. Because in their local situations, they must generally be able to judge better of their interest than the legislator. The law which obliged the farmer to be a wheat merchant was the most harmful of those two laws by far.

⁵⁶ It obstructed:

• the division in the employment of stock which is so advantageous to every society
• land improvement and cultivation

By obliging the farmer to do two trades, it forced him to divide his capital into two.

Only one of his capitals could be employed in cultivation. If he were free to sell his crops to a wheat merchant as fast as he could thresh it out, his whole capital might have returned immediately to the land.

His capital could have been used in:
    buying more cattle
    hiring more servants to improve it better

By being obliged to sell his wheat by retail, he was obliged to keep most of his capital in his granaries and stack yard through the year. He could not cultivate so well with the same capital. This law:

• obstructed land improvement, and
• must have rendered wheat scarcer and dearer.

The Trade Between The Farmer and The wheat Merchant

⁵⁷ After the farmer, the wheat merchant contributes the most to the raising of wheat, if his trade is properly protected and encouraged.

• He would support the farmer in the same way the wholesale dealer supports the manufacturer.

⁵⁸ The wholesale dealer affords a ready market to the manufacturer by taking the manufacturer’s goods as fast as the manufacturer can make them.

It enables the manufacturer to keep his whole capital constantly employed in manufacturing. He can manufacture more goods than if he sold them himself to end consumers or retailers. The wholesaler’s capital is generally enough to replace the capital of many manufacturers. This intercourse between the dealers and the manufacturers interests the owner of a large capital to support the many owners of small capitals. The merchant is interested in assisting the manufacturers in their losses which might be ruinous.

⁵⁹ The same intercourse universally established between farmers and wheat merchants would equally benefit the farmers.

The farmers would be enabled to keep their whole capitals constantly employed in cultivation. In case of any accidents, they would find that their wealthy wheat merchant customer has an interest and the ability to support them. The farmers would not be entirely dependent on their landlord, as at present. It is not very easy to imagine how great, extensive, and sudden would be the improvement to the entire countryside if it were possible to establish this intercourse between farmers and merchants universally and all at once= If it were possible to withdraw the nation’s whole farming stock from other employments and divert it towards land cultivation. If it were possible to provide another, almost equally great, stock of trading to support this great farming stock. Perhaps it is not possible.

⁶⁰ The statute of Edward 6th banned any middleman from coming between the grower and the consumer.

It tried to annihilate a trade which, when freely exercised, is the best palliative and preventative of a dearth.

⁶¹ This law was softened by several subsequent statutes.

They permitted the engrossing of wheat when the wheat prices should not exceed 240, 288, 384, and 480 pence the quarter. Finally, the 15th of Charles 2nd Chapter 7 declared the engrossing or buying of wheat for re-sale lawful to all, except to forestallers, as long as wheat prices did not exceed 576 pence the quarter relative to other grains.

Forestallers sold wheat again in the same market within three months.
This statute restored all the inland wheat dealer's freedom.

The statute of the 12th of George 3rd repeals almost all the other ancient laws against engrossers and forestallers. It does not repeal the restrictions of the 15th of Charles 2nd Chapter 7, which are still in force.