Digression on the wheat trade and wheat laws: The Carrying Trade of Wheat

⁷³ In years of scarcity, the distress caused by the strict execution of those laws was probably very great.

But sometimes, its execution was suspended by temporary statutes which allowed wheat imports for a limited time.

• The necessity of these temporary statutes demonstrates the impropriety of this general one.

⁷⁴ These import restraints came before the bounty’s establishment.

• They were dictated by the same spirit and principles of those bounties.

No matter how hurtful the import restraints were, they became necessary because of the bounties.

If wheat prices rose around 576 pence the quarter, foreign wheat could be imported duty-free.

• But the bounty would cause this wheat to be re-exported.

THe re-exportation would be:

• a great loss of public revenue and
• the perversion of the entire institution.
  • The bounties would be used for extending the growth of foreign countries and not the market for home growth.

The Wheat Exporter

⁷⁵ The wheat exporter only indirectly contributes to the home market’s supply.

The growers will be careful never to grow more wheat unless the ordinary surplus can be exported.

The importers will never import more than what is needed at the home market. That market will generally be understocked and very seldom be overstocked. The wheat suppliers will be afraid that their wheat should be unsold. The export ban limits the country’s cultivation to what the local supply requires. The freedom of exportation enables it to extend cultivation for the supply of foreign markets.

⁷⁶ The 12th of Charles 2nd Chapter 4, allowed wheat exportation whenever wheat prices did not exceed 480 pence the quarter relative to other grains.

The 15th of Charles 2nd extended this liberty until wheat prices exceeded 576 pence the quarter. The 22nd of Charles 2nd extended it to all higher prices.

A poundage tax was to be paid to the king on such exportation.

But all grain was rated so low in the book of rates that this poundage amounted only:

• 12 pence on wheat
• 4 pence on oats
• 6 pence the quarter on all other grain

The 1st of William and Mary was the act that established the bounty.

This act virtually removed this small duty whenever wheat prices did not exceed 576 pence the quarter. The 11th and l2th of William III. c. 20 expressly removed this small duty at all higher prices.

⁷⁷ In this way, the exporter’s trade was encouraged by a bounty.

It became much freer than the inland dealer’s trade. The last of these statutes allowed wheat to be engrossed at any price for exportation. But it could not be engrossed for inland sale except when the price did not exceed 576 pence the quarter.

However, the inland dealer’s interest can never be opposite the people’s interest.

The merchant exporter’s interest may be opposite and sometimes is. If his own country has a dearth while a neighbouring country has a famine, he might carry his country’s wheat to the neighbouring country. He might very much aggravate the dearth.

Those statutes did not aim for the plentiful supply of the home market. It aimed to:

• raise wheat’s money price as high as possible, under the pretence of encouraging agriculture
• create a constant dearth in the home market, as much as possible

By discouraging imports, the home market’s supply was confined to the home growth, even during great scarcity.

By encouraging exportation, the home market was not allowed to enjoy all of that growth, even during scarcity.

The current system’s impropriety is proven by frequency of temporary laws which:

• prohibit exportation
• remove import duties for a limited time

Had that system been good, Great Britain would not have needed to frequently change it.

Smith’s Free Trade System

⁷⁸ Were all nations to follow free exportation and importation, they would resemble the provinces of a great empire.

As the freedom of the inland trade is the best palliative of a dearth and the most effectual preventative of a famine, so is the freedom of the exportation and importation among the states of a great continent.

One part of the continent will be less exposed to calamities= 
    the larger the continent
    the easier the land and water communication through it
The scarcity of one country would be relieved by the plenty of another.
    But very few countries have entirely adopted this liberal system.

The freedom of the wheat trade is almost everywhere restrained. In many countries it is confined by absurd regulations that frequently aggravate a dearth into a famine. The wheat demand of such countries might become so great and urgent that a small nearby state, which was also under a dearth, would not be able to supply them without exposing itself to famine. One country’s very bad policy might render it dangerous to establish what would otherwise be the best policy in another country.

The unlimited freedom of exportation would be much less dangerous in great states where the growth is much greater. Its supply could seldom be much affected by any amount of exported wheat.

In a Swiss canton, or in some little Italian states, it may be necessary to restrain wheat exportation. In big countries such as France or England, export restraints can rarely be necessary.

To hinder the farmer from sending his goods at all times to the best market is to sacrifice justice for public utility or some state reasons.

This legislative authority should be exercised and pardoned only during the most urgent necessity.
The price at which wheat exportation is prohibited should always be a very high price.

⁷⁹ The laws concerning wheat may be compared to the laws concerning religion.

People feel so interested in their subsistence in this life or their happiness in the next life, that government must yield to their prejudices.

To preserve public peace, the government establishes systems which people approve of.

Perhaps it is because of this that we so seldom find a reasonable system for wheat or religion.