Chapter 7i of Book 4

The Effects of Monopoly on the Nation Icon

March 23, 2020

143 The monopoly hinders the country’s capital from maintaining so great a quantity of productive labour as it would otherwise maintain.

It hinders it from affording so great a revenue to its industrious people as it would otherwise afford. Capital can be increased only by savings from revenue. The monopoly hinders capital from= affording so great a revenue as it would otherwise afford increasing so fast as it would otherwise increase maintaining more productive labour affording more revenue to the industrious people of that country The wages of labour is one great original source of revenue for them. The monopoly must have rendered it at always less abundant than natural.

144 By raising mercantile profits, the monopoly discourages land improvement.

The profit of improvement depends on the difference between what the land actually produces and what it can be made to produce through the application of capital. If this difference affords more profit than what can be drawn from an equal capital in any mercantile employment, land improvement will draw capital from all mercantile employments. If the profit is less, mercantile employments will draw capital from land improvement. Whatever raises the rate of mercantile profit lessens the superiority or increases the inferiority of the profit of improvement. The one case hinders capital from going to improvement. The other case draws capital from it. Rent of land is another great original source of revenue.

By discouraging improvement, the monopoly retards the natural increase of rent. By raising the profit rate, the monopoly keeps up the market interest rate higher than it otherwise would be. But the price of land is in proportion to the rent which it affords. The price of land falls as interest rates rise and rises as interest rate falls.

The monopoly hurts the landlord’s interest by retarding the natural increase of=

  • his rent
  • the price of his land, relative to its rent

145 The monopoly raises the mercantile profit rate and increases the gain of our merchants.

But it obstructs the natural increase of capital.

It reduces the total revenue derived by the citizens from the profits of stock.

A small profit on a great capital generally affords a greater revenue than a great profit on a small one.

The monopoly raises the profit rate but hinders the total profit from rising so high as it otherwise would do.

146 The original sources of revenue are wages, rent, and profits.

The monopoly renders them all much less abundant than they otherwise would be. “To promote the little interest of one little order of men in one country, it hurts the interest of all other orders of men in that country, and of all men in all other countries.”

147 It is solely by raising the ordinary profit rate that the monopoly has proved advantageous to any order of men.

The high rate of profit has one effect inseparable and more fatal than all its bad effects to the country combined. The high rate of profit seems every where to destroy that parsimony natural to the character of the merchant.

When profits are high, parsimony seems unsuitable to the affluence of his situation. But the owners of the great mercantile capitals are the leaders and conductors of the industry of every nation.

Their example has more influence on the manners of its industrious people than any other order of men. If his employer is attentive and parsimonious, the workman is very likely to be so too But if the master is dissolute and disorderly, the servant will follow his master’s example. Accumulation is thus prevented among the masters of industrious people. The funds for maintaining productive labour receive no increase from the revenue of the masters who should naturally increase them the most. The capital of the country gradually dwindles away. The quantity of productive labour maintained in it grows less every day.

Have the exorbitant profits of the merchants of Cadiz and Lisbon increased the capital of Spain and Portugal?

“Have they alleviated the poverty, have they promoted the industry of those two beggarly countries?” Those exorbitant profits seem insufficient to keep up the capitals on which they were made. Every day, foreign capitals are intruding more and more into the trade of Cadiz and Lisbon.

The Spaniards and Portuguese endeavour every day to strengthen their absurd monopoly to expel those foreign capitals from a trade which their own capitals grows less capable of carrying on. The conduct and character of merchants of Cadiz and Lisbon merchants are very different from those of Amsterdam.

The high and low profits of stock affect them differently.

London merchants have not yet become such magnificent lords as those of Cadiz and Lisbon.

They neither are as attentive and parsimonious burghers as those of Amsterdam. They are supposed to be richer than the merchants of Cadiz and Lisbon but not so rich as those of Amsterdam. Their profit rate is much lower than that of Cadiz and Lisbon and much higher than that of Amsterdam.

Light come, light go, says the proverb. The ordinary tone of expence seems to be regulated everywhere by the facility of getting money to spend, not so much by the real ability of spending.

148 The single advantage the monopoly brings to a single order of men is in many ways hurtful to the country’s interest. 149 Creating a great empire of customers may appear as a project good only for a nation of shopkeepers.

In reality, it is not a good project for a nation of shopkeepers. But it is extremely good for a nation whose government is influenced by shopkeepers. That government imagines creating such an empire will be advantageous. If you propose to a shopkeeper that you will buy all your clothes from his shop if he buys you an estate, he will not like your proposal. But if another person buys you an estate and urged you to buy all your clothes from the shopkeeper, the shopkeeper would be much obliged to that person. Some of England’s subjects were uneasy at home. She purchased for them a great estate in a distant country. The price was very small. 30 years purchase is the present ordinary price of land. Instead of 30 years purchase, its price was the cost of= making the first discovery surveying the coast taking a fictitious possession of the country The land was good and wide. The cultivators had plenty of good ground to work on. For some time, they were free to sell their produce where they pleased. In 30 or 40 years (between 1620 and 1660), they became so numerous and thriving that English shopkeepers and traders wished to secure the monopoly of their custom. They did not pretend to have paid any part of the original purchase-money or the subsequent expence of improvement. They petitioned the parliament that American cultivators be confined to their shop= For buying all the European goods they wanted For selling all their own produce which those traders found convenient to buy The traders did not find convenient to buy all of it. Some of the produce imported into England interfered with their trades at home. Those produce which interfered were allowed to be sold by the colonists where they could, the farther the better. The traders proposed that the market of the colonists for those goods should be confined to countries south of Cape Finisterre. “A clause in the famous act of navigation established this truly shopkeeper proposal into a law.”

150 The maintenance of this monopoly was the sole end and purpose of British dominion over her colonies.

In this exclusive trade consists the great advantage of provinces, which have never yet afforded either a revenue or a military force to support the civil government or defend of Great Britain. The monopoly is the principal badge of their dependence. It is the sole fruit which has been gathered from that dependence. Whatever Great Britain spent in maintaining this dependence was really spent to support this monopoly. Before the start of the present disturbances, the cost of the ordinary peace establishment in the colonies amounted to= the pay of 20 foot regiments the cost of the artillery, stores, and their extraordinary provisions the cost of a big naval force which guarded the immense coast of North America and the West Indian islands from foreign smuggling This whole cost was charged to Great Britain It was the smallest cost of the dominion of the colonies to Great Britain. The total cost of this dominion is= This annual cost of this peace establishment, plus The interest of previous expences of Great Britain in defending them, plus The whole cost of the recent war and most of the cost of the war which preceded it. The late war was a colony quarrel. Its whole global cost should justly be charged to the colonies. It amounted to more than 90 million sterling which included= the new debt which was contracted the 2 shillings in the pound additional land tax the sums which were borrowed every year from the sinking fund. The Spanish war which began in 1739 was principally a colony quarrel. “Its principal object was to prevent the search of the colony ships which carried on a contraband trade with the Spanish Main.”

In reality, this whole cost is a bounty given to support a monopoly. Its pretended purpose was=

  • to encourage manufactures
  • to increase British commerce

Its real effect was=

  • to raise mercantile profits
  • to enable our merchants to turn their capital into a trade where the returns are more slow and distant than other trades

These two events would have been worth giving a bounty to in order to prevent, not support.


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