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

⁶² The 15th of Charles 2nd Chapter 7 authorizes two very absurd popular prejudices.

⁶³ It supposes that when wheat prices rise to 576 pence the quarter, wheat is likely to be so engrossed as to hurt the people.

• But it is evident that wheat cannot be so engrossed by the inland dealers to hurt the people.

576 pence the quarter is a very high price.

• But in years of scarcity, it is the common price immediately after harvest.
  • After such a harvest, none of the new crop can be sold off.
• Thus, it is impossible that the crop can be so engrossed as to hurt the people.

⁶⁴ It supposes that there is a certain price at which wheat will be forestalled or bought to be re-sold in the same market, to hurt the people.

If a merchant ever buys up wheat to sell it again in the same market, it is because he judges that the market cannot be so liberally supplied through the whole season and that the price must soon rise.

If he judges wrong and the price does not rise, he loses:

• his whole profit
• some of the stock itself by the loss from storing wheat

He hurts himself much more than he can hurt the people who were supposed to buy wheat on that day because the people can buy cheaper wheat on any other day.

If he judges right, he renders them a most important service.

• He makes them feel the dearth earlier.
• He prevents them from consuming wheat as fast as before, when prices were cheap.
• He thus prevents them from feeling the dearth so severely afterwards.

When the scarcity is real, the best thing that can be done is to divide its inconveniencies as equally as possible through all the months, weeks, and days of the year.

The wheat merchant’s interest makes him study this as exactly as he can.

No other person can have the same interest, knowledge, or abilities to do it as he.

This most important operation of commerce should be trusted entirely to him.

The wheat trade which supplies the home market should be left perfectly free.

⁶⁵ “The popular fear of engrossing and forestalling may be compared to the popular terrors and suspicions of witchcraft.”

Those accused of witchcraft were as innocent as those who were accused of engrossing.

The law which ended all prosecutions against witchcraft, ended those fears and suspicions by removing the great cause of the fear.

It prevented men from gratifying their own malice in accusing others of imaginary crimes.

The law which restores the entire freedom of the inland wheat trade would probably end the popular fears of engrossing and forestalling.

⁶⁶ Despite all the imperfections of the 15th of Charles II. c. 7, it has perhaps contributed more than any other law in the statute book to increase the:

• home market’s supply, and
• tillage.

The inland wheat trade has derived all the liberty and protection from this law.

The home market’s supply and the interest of tillage are much more effectively promoted by the inland trade than by the external trade.

⁶⁷ According to Charles Smith, the proportion of grain imported into Great Britain to the grain consumed does not exceed 1= 570.

For supplying the home market, the importance of the inland trade must be 570 : 1 to the importance of the importation trade.

⁶⁸ The grain exported from Great Britain does not exceed 1/30th part of the annual produce.

For the encouragement of tillage, the importance of the inland trade must be 30 times the importance of the exportation trade.

⁶⁹ I have no great faith in political arithmetic computations.

I only mention them to show how much less consequence the foreign trade of wheat is than the home trade.

The great cheapness of wheat in the years immediately before the bounty’s establishment, may reasonably be ascribed to this statute of Charles II.

This statute was enacted 25 years before.

It had full time to produce its effect.

⁷⁰ A few words will explain the wheat trade’s other three branches.

⁷¹ The merchant importer of foreign wheat for home consumption contributes to the home market’s immediate supply.

It is immediately beneficial to the people.

It lowers somewhat the average money price of wheat, but does not reduce its real value.

If importation were always free, our farmers would probably get less money for their wheat than at present.

But the money they will get would be of more value.

It would buy more goods and employ more labour.

Their real wealth and revenue would be the same, but expressed by fewer silver.

They would not be disabled nor discouraged from cultivating wheat as at present.

Such lowering of wheat’s money price would naturally mean a rise in the real value of silver.

The rise in the real value of silver lowers somewhat the money price of all other commodities.

It gives the country’s industry some advantage in all foreign markets.

It encourages and increases that industry.

But the extent of the home market for wheat must be proportional to the general industry of the country where it grows.

It must be proportional to the number of people who have something else to give for wheat.

But in every country, the home market is the nearest and most convenient market.

The home market is the greatest and most important market for wheat.

The rise in the real value of silver caused by the lowering of the money price of wheat:

• enlarges this greatest wheat market and
• encourages its growth.