AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS.


By Adam Smith



PART II.--Of the Unreasonableness of those extraordinary Restraints,
upon other Principles.

In the foregoing part of this chapter, I have endeavoured to show, even
upon the principles of the commercial system, how unnecessary it is to
lay extraordinary restraints upon the importation of goods from
those countries with which the balance of trade is supposed to be
disadvantageous.

Nothing, however, can be more absurd than this whole doctrine of the
balance of trade, upon which, not only these restraints, but almost all
the other regulations of commerce, are founded. When two places trade
with one another, this doctrine supposes that, if the balance be even,
neither of them either loses or gains; but if it leans in any degree to
one side, that one of them loses, and the other gains, in proportion to
its declension from the exact equilibrium. Both suppositions are false.
A trade, which is forced by means of bounties and monopolies, may be,
and commonly is, disadvantageous to the country in whose favour it is
meant to be established, as I shall endeavour to show hereafter.
But that trade which, without force or constraint, is naturally and
regularly carried on between any two places, is always advantageous,
though not always equally so, to both.

By advantage or gain, I understand, not the increase of the quantity
of gold and silver, but that of the exchangeable value of the annual
produce of the land and labour of the country, or the increase of the
annual revenue of its inhabitants.

If the balance be even, and if the trade between the two places consist
altogether in the exchange of their native commodities, they will, upon
most occasions, not only both gain, but they will gain equally, or very
nearly equally; each will, in this case, afford a market for a part of
the surplus produce of the other; each will replace a capital which had
been employed in raising and preparing for the market this part of the
surplus produce of the other, and which had been distributed among, and
given revenue and maintenance to, a certain number of its inhabitants.
Some part of the inhabitants of each, therefore, will directly derive
their revenue and maintenance from the other. As the commodities
exchanged, too, are supposed to be of equal value, so the two capitals
employed in the trade will, upon most occasions, be equal, or very
nearly equal; and both being employed in raising the native commodities
of the two countries, the revenue and maintenance which their
distribution will afford to the inhabitants of each will be equal, or
very nearly equal. This revenue and maintenance, thus mutually afforded,
will be greater or smaller, in proportion to the extent of their
dealings. If these should annually amount to £100,000, for example, or
to £1,000,000, on each side, each of them will afford an annual revenue,
in the one case, of £100,000, and, in the other, of £1,000,000, to the
inhabitants of the other.

If their trade should be of such a nature, that one of them exported
to the other nothing but native commodities, while the returns of that
other consisted altogether in foreign goods; the balance, in this
case, would still be supposed even, commodities being paid for with
commodities. They would, in this case too, both gain, but they would not
gain equally; and the inhabitants of the country which exported nothing
but native commodities, would derive the greatest revenue from the
trade. If England, for example, should import from France nothing but
the native commodities of that country, and not having such commodities
of its own as were in demand there, should annually repay them by
sending thither a large quantity of foreign goods, tobacco, we shall
suppose, and East India goods; this trade, though it would give some
revenue to the inhabitants of both countries, would give more to those
of France than to those of England. The whole French capital annually
employed in it would annually be distributed among the people of
France; but that part of the English capital only, which was employed
in producing the English commodities with which those foreign goods were
purchased, would be annually distributed among the people of England.
The greater part of it would replace the capitals which had been
employed in Virginia, Indostan, and China, and which had given revenue
and maintenance to the inhabitants of those distant countries. If the