No More Learning

Those goods too would not be all matters of mere luxury and expense, to
be consumed by idle people, who produce nothing in return for their
consumption. As the real wealth and revenue of idle people would not be
augmented by this extraordinary exportation of gold and silver, so would
neither their consumption be augmented by it. Those goods would,
probably the greater part of them, and certainly some part of them,
consist in materials, tools, and provisions, for the employment and
maintenance of industrious people, who would reproduce with a profit,
the full value of their consumption. A part of the dead stock of the
society would thus be turned into active stock, and would put into
motion a greater quantity of industry than had been employed before. "

By not allowing a free trade in the precious metals when the prices of
commodities are raised, either by taxation, or by the influx of the
precious metals, you prevent a part of the dead stock of the society
from being turned into active stock--you prevent a greater quantity of
industry from being employed. But this is the whole amount of the evil;
an evil never felt by those countries where the exportation of silver is
either allowed or connived at.

The exchanges between countries are at par only, whilst they have
precisely that quantity of currency which in the actual situation of
things they should have to carry on the circulation of their
commodities. If the trade in the precious metals were perfectly free,
and money could be exported without any expense whatever, the exchanges
could be no otherwise in every country than at par. If the trade in the
precious metals were perfectly free, if they were generally used in
circulation, even with the expenses of transporting them, the exchange
could never in any of them deviate more from par, than by these
expenses. These principles I believe are now no where disputed. If a
country used paper money not exchangeable for specie, and therefore not
regulated by any fixed standard, the exchanges in that country might
deviate as much from par, as its money might be multiplied beyond that
quantity which would have been allotted to it by general commerce, if
the trade in money had been free, and the precious metals had been used,
either for money, or for the standard of money.

If by the general operations of commerce, 10 millions of pounds
sterling, of a known weight and fineness of bullion, should be the
portion of England, and 10 millions of paper pounds were substituted, no
effect would be produced on the exchange; but if by the abuse of the
power of issuing paper money, 11 millions of pounds should be employed
in the circulation, the exchange would be 9 per cent. against England;
if 12 millions were employed, the exchange would be 16 per cent. ; and if
20 millions, the exchange would be 50 per cent. against England. To
produce this effect it is not however necessary that paper money should
be employed: any cause which retains in circulation a greater quantity
of pounds than would have circulated, if commerce had been free, and the
precious metals of a known weight and fineness had been used, either for
money, or for the standard of money, would exactly produce the same
effects. Suppose that by clipping the money, each pound did not contain
the quantity of gold or silver which by law it should contain, a greater
number of such pounds might be employed in the circulation, than if they
were not clipped. If from each pound one tenth were taken away, 11
millions of such pounds might be used instead of 10; if two tenths were
taken away, 12 millions might be employed; and if one half were taken
away, 20 millions might not be found superfluous. If the latter sum were
used instead of 10 millions, every commodity in England would be raised
to double its former price, and the exchange would be 50 per cent.
against England, but this would occasion no disturbance in foreign
commerce, nor discourage the manufacture of any one commodity. If for
example, cloth rose in England from 20_l. _ to 40_l. _ per piece, we
should just as freely export it after as before the rise, for a
compensation of 50 per cent. would be made to the foreign purchaser in
the exchange; so that with 20_l. _ of his money, he could purchase a bill
which would enable him to pay a debt of 40_l. _ in England. In the same
manner if he exported a commodity which cost 20_l. _ at home, and which
sold in England for 40_l. _ he would only receive 20_l. _, for 40_l. _ in
England would only purchase a bill for 20_l. _ on a foreign country. The
same effects would follow from whatever cause 20 millions could be
forced to perform the business of circulation in England, if 10 millions
only were necessary. If so absurd a law, as the prohibition of the
exportation of the precious metals, could be enforced, and the
consequence of such prohibition were to force 11 millions instead of 10
into circulation, the exchange would be 9 per cent. against England; if
12 millions, 16 per cent. ; and if 20 millions, 50 per cent. against
England. But no discouragement would be given to the manufactures of
England; if home commodities sold at a high price in England, so would
foreign commodities; and whether they were high or low would be of
little importance to the foreign exporter and importer, whilst he would,
on the one hand, be obliged to allow a compensation in the exchange when
his commodities sold at a dear rate, and would receive the same
compensation, when he was obliged to purchase English commodities at a
high price. The sole disadvantage then which could happen to a country
from retaining by prohibitory laws a greater quantity of gold and silver
in circulation than would otherwise remain there, would be the loss
which it would sustain from employing a portion of its capital
unproductively, instead of employing it productively. In the form of
money this capital is productive of no profit; in the form of materials,
machinery, and food, for which it might be exchanged, it would be
productive of revenue, and would add to the wealth and the resources of
the state. Thus then I hope I have satisfactorily proved, that a
comparatively low price of the precious metals, in consequence of
taxation, or in other words, a generally high price of commodities,
would be of no disadvantage to a state, as a part of the metals would be
exported, which, by raising their value, would again lower the prices
of commodities. And further, that if they were not exported, if by
prohibitory laws they could be retained in a country, the effect on the
exchange would counterbalance the effect of high prices. If then taxes
on necessaries and on wages would not raise the prices of all
commodities on which labour was expended, they cannot be condemned on
such grounds; and moreover, even if the opinion that they would have
such an effect were well founded, they would be in no degree injurious
on that account.

It is undoubtedly true, that "taxes upon luxuries have no tendency to
raise the price of any other commodities, except that of the commodities
taxed;" but it is not true, that "taxes upon necessaries, by raising the
wages of labour, necessarily tend to raise the price of all
manufactures. " It is true, that "taxes upon luxuries are finally paid by
the consumers of the commodities taxed, without any retribution. They
fall indifferently upon every species of revenue, the wages of labour,
the profits of stock, and the rent of land;" but it is not true, "that
taxes upon necessaries _so far as they affect the labouring poor_, are
finally paid partly by landlords in the diminished rent of their lands,
and partly by rich consumers, whether landlords or others, in the
advanced price of manufactured goods;" for _so far as these taxes affect
the labouring poor_, they will be almost wholly paid by the diminished
profits of stock, a small part only being paid by the labourers
themselves in the diminished demand for labour, which taxation of every
kind has a tendency to produce.

It is from Dr. Smith's erroneous view of the effect of those taxes, that
he has been led to the conclusion, that "the middling and superior ranks
of people, if they understood their own interest, ought always to oppose
all taxes upon the necessaries of life, as well as all direct taxes upon
the wages of labour. " This conclusion follows from his reasoning, "that
the final payment of both one and the other falls altogether upon
themselves, and always with a considerable overcharge. They fall
heaviest upon the landlords, who always pay in a double capacity; in
that of landlords, by the reduction of their rent, and in that of rich
consumers, by the increase of their expense. The observation of Sir
Matthew Decker, that certain taxes are in the price of certain goods,
sometimes repeated and accumulated four or five times, is perfectly just
with regard to taxes upon the necessaries of life. In the price of
leather, for example, you must pay, not only for the tax upon the
leather of your own shoes, but for a part of that upon those of the
shoemaker and the tanner. You must pay too for the tax upon the salt,
upon the soap, and upon the candles, which those workmen consume while
employed in your service, and for the tax upon the leather, which the
salt-maker, the soap-maker, and the candle-maker consume, while employed
in their service. "

Now as Dr. Smith does not contend that the tanner, the salt-maker, the
soap-maker, and the candle-maker, will either of them be benefited by
the tax on leather, salt, soap, and candles; and as it is certain, that
government will receive no more than the tax imposed, it is impossible
to conceive, that more can be paid by the public upon whomsoever the tax
may fall. The rich consumers may, and indeed will, pay for the poor
consumer, but they will pay no more than the whole amount of the tax;
and it is not in the nature of things, that "the tax should be repeated
and accumulated four or five times. "

A system of taxation may be defective; more may be raised from the
people, than what finds its way into the coffers of the state, as a
part, in consequence of its effect on prices, may possibly be received
by those, who are benefited by the peculiar mode in which taxes are
laid. Such taxes are pernicious, and should not be encouraged; for it
may be laid down as a principle, that when taxes operate justly, they
conform to the first of Dr. Smith's maxims, and raise from the people as
little as possible beyond what enters into the public treasury of the
state. M. Say says, "others offer plans of finance, and propose means
for filling the coffers of the sovereign, without any charge to his
subjects. But unless a plan of finance is of the nature of a commercial
undertaking, it cannot give government more than it takes away, either
from individuals, or from government itself, under some other form.
Something cannot be made out of nothing, by the stroke of a wand. In
whatever way an operation may be disguised, whatever forms we may
constrain a value to take, whatever metamorphosis we may make it
undergo, we can only have a value by creating it, or by taking it from
others. The very best of all plans of finance is to spend little, and
the best of all taxes is, that which is the least in amount. "

Dr. Smith uniformly, and I think justly, contends, that the labouring
classes cannot materially contribute to the burdens of the state. A tax
on necessaries, or on wages, will therefore be shifted from the poor to
the rich: if then, the meaning of Dr. Smith is, "that certain taxes are
in the price of certain goods sometimes repeated, and accumulated four
or five times," for the purpose only of accomplishing this end, namely,
the transference of the tax from the poor to the rich, they cannot be
liable to censure on that account.

Suppose the just share of the taxes of a rich consumer to be 100_l. _,
and that he would pay it directly, if the tax were laid on income, on
wine, or on any other luxury, he would suffer no injury if by the
taxation of necessaries, he should be only called upon for the payment
of 25_l. _, as far as his own consumption of necessaries, and that of his
family was concerned, but should be required to repeat this tax three
times, by paying an additional price for other commodities to remunerate
the labourers, or their employers, for the tax which they have been
called upon to advance. Even in that case the reasoning is inconclusive:
for if there be no more paid than what is required by Government; of
what importance can it be to the rich consumer, whether he pay the tax
directly, by paying an increased price for an object of luxury, or
indirectly, by paying an increased price for the necessaries and other
commodities he consumes? If more be not paid by the people, than what is
received by Government, the rich consumer will only pay his equitable
share; if more is paid, Adam Smith should have stated by whom it is
received.

M. Say does not appear to me to have consistently adhered to the obvious
principle, which I have quoted from his able work; for in the next page,
speaking of taxation, he says, "When it is pushed too far, it produces
this lamentable effect, it deprives the contributor of a portion of his
riches, without enriching the state. This is what we may comprehend, if
we consider that every man's power of consuming, whether productively or
not, is limited by his income. He cannot then be deprived of a part of
his income, without being obliged proportionally to reduce his
consumption. Hence arises a diminution of demand for those goods, which
he no longer consumes, and particularly for those on which the tax is
imposed. From this diminution of demand, there results a diminution of
production, and consequently of taxable commodities. The contributor
then will lose a portion of his enjoyments; the producer, a portion of
his profits; and the treasury, a portion of its receipts. "

M. Say instances the tax on salt in France, previous to the revolution;
which, he says, diminished the production of salt by one half. If,
however, less salt was consumed, less capital was employed in producing
it; and therefore, though the producer would obtain less profits on the
production of salt, he would obtain more on the production of other
things. If a tax, however burdensome it may be, falls on revenue, and
not on capital, it does not diminish demand, it only alters the nature
of it. It enables Government to consume as much of the produce of the
land and labour of the country, as was before consumed by the
individuals who contribute to the tax. If my income is 1000_l. _ per
annum, and I am called upon for 100_l. _ per annum for a tax, I shall
only be able to demand nine tenths of the quantity of goods, which I
before consumed, but I enable Government to demand the other tenth. If
the commodity taxed be corn, it is not necessary that my demand for corn
should diminish, as I may prefer to pay 100_l. _ per annum more for my
corn, and to the same amount abate in my demand for wine, furniture, or
any other luxury. [17] Less capital will consequently be employed in the
wine or upholstery trade, but more will be employed in manufacturing
those commodities, on which the taxes levied by Government will be
expended.

M. Say says that M. Turgot, by reducing the market dues on fish (_les
droits d'entrée et de halle sur la marée_) in Paris one half, did not
diminish the amount of their produce, and that consequently, the
consumption of fish must have doubled. He infers from this, that the
profits of the fisherman and those engaged in the trade, must also have
doubled, and that the income of the country must have increased, by the
whole amount of these increased profits; and by giving a stimulus to
accumulation, must have increased the resources of the state. [18]

Without calling in question the policy, which dictated this alteration
of the tax, I may be permitted to doubt whether it gave any great
stimulus to accumulation. If the profits of the fisherman and others
engaged in the trade, were doubled in consequence of more fish being
consumed, capital and labour must have been withdrawn from other
occupations to engage them in this particular trade. But in those
occupations capital and labour were productive of profits, which must
have been given up when they were withdrawn. The ability of the country
to accumulate was only increased by the difference between the profits
obtained in the business in which the capital was newly engaged, and
those obtained in that from which it was withdrawn.

Whether taxes be taken from revenue or capital, they diminish the
taxable commodities of the state. If I cease to expend 100_l. _ on wine,
because by paying a tax of that amount I have enabled Government to
expend 100_l. _ instead of expending it myself, one hundred pounds worth
of goods are necessarily withdrawn from the list of taxable
commodities. If the revenue of the individuals of a country be 10
millions, they will have at least 10 millions worth of taxable
commodities. If by taxing some, one million be transferred to the
disposal of Government, their revenue will still be nominally 10
millions, but they will remain with only nine millions worth of taxable
commodities. There are no circumstances under which taxation does not
abridge the enjoyments of those on whom the taxes ultimately fall, and
no means by which those enjoyments can again be extended, but the
accumulation of new revenue.

Taxation can never be so equally applied, as to operate in the same
proportion on the value of all commodities, and still to preserve them
at the same relative value. It frequently operates very differently from
the intention of the legislature, by its indirect effects. We have
already seen, that the effect of a direct tax on corn and raw produce,
is, if money be also produced in the country, to raise the price of all
commodities, in proportion as raw produce enters into their composition,
and thereby to destroy the natural relation which previously existed
between them. Another indirect effect is, that it raises wages, and
lowers the rate of profits; and we have also seen, in another part of
this work, that the effect of a rise of wages, and a fall of profits, is
to lower the money prices of those commodities which are produced in a
greater degree by the employment of fixed capital.

That a commodity when taxed can no longer be so profitably exported, is
so well understood, that a drawback is frequently allowed on its
exportation, and a duty laid on its importation. If these drawbacks and
duties be accurately laid, not only on the commodities themselves, but
on all which they may indirectly affect, then indeed there will be no
disturbance in the value of the precious metals. Since we could as
readily export a commodity after being taxed as before, and since no
peculiar facility would be given to importation, the precious metals
would not, more than before, enter into the list of exportable
commodities.

Of all commodities, none are perhaps so proper for taxation, as those
which either by the aid of nature or art, are produced with peculiar
facility. With respect to foreign countries, such commodities may be
classed under the head of those which are not regulated in their price
by the quantity of labour bestowed, but rather by the caprice, the
tastes, and the power of the purchasers. If England had more productive
tin mines than other countries, or if from superior machinery or fuel
she had peculiar facilities in manufacturing cotton goods, the prices of
tin, and of cotton goods would still in England be regulated by the
comparative quantity of labour and capital required to produce them, and
the competition of our merchants would make them very little dearer to
the foreign consumer. Our advantage in the production of these
commodities might be so decided, that probably they could bear a very
great additional price in the foreign market, without very materially
diminishing their consumption. This price they never could attain,
whilst competition was free at home, by any other means but by a tax on
their exportation. This tax would fall wholly on foreign consumers, and
part of the expenses of the Government of England would be defrayed, by
a tax on the land and labour of other countries. The tax on tea, which
at present is paid by the people of England, and goes to aid the
expenses of the Government of England, might, if laid in China, on the
exportation of the tea, be diverted to the payment of the expenses of
the Government of China.

Taxes on luxuries have some advantage over taxes on necessaries. They
are generally paid from income, and therefore do not diminish the
productive capital of the country. If wine were much raised in price in
consequence of taxation, it is probable that a man would rather forego
the enjoyments of wine, than make any important encroachments on his
capital, to be enabled to purchase it. They are so identified with
price, that the contributor is hardly aware that he is paying a tax. But
they have also their disadvantages. First, they never reach capital, and
on some extraordinary occasions it may be expedient that even capital
should contribute towards the public exigencies; and secondly, there is
no certainty as to the amount of the tax, for it may not reach even
income. A man intent on saving will exempt himself from a tax on wine,
by giving up the use of it. The income of the country may be
undiminished, and yet the state may be unable to raise a shilling by the
tax.

Whatever habit has rendered delightful, will be relinquished with
reluctance, and will continue to be consumed notwithstanding a very
heavy tax; but this reluctance has its limits, and experience every day
demonstrates that an increase in the nominal amount of taxation, often
diminishes the produce. One man will continue to drink the same quantity
of wine, though the price of every bottle should be raised three
shillings, who would yet relinquish the use of wine rather than pay
four. Another will be content to pay four, yet refuse to pay five
shillings. The same may be said of other taxes on luxuries: many would
pay a tax of 5_l. _ for the enjoyment which a horse affords, who would
not pay 10_l. _ or 20_l. _ It is not because they cannot pay more, that
they give up the use of wine and of horses, but because they will not
pay more. Every man has some standard in his own mind by which he
estimates the value of his enjoyments, but that standard is as various
as the human character. A country whose financial situation has become
extremely artificial, by the mischievous policy of accumulating a large
national debt, and a consequently enormous taxation, is particularly
exposed to the inconvenience attendant on this mode of raising taxes.
After visiting with a tax the whole round of luxuries; after laying
horses, carriages, wine, servants, and all the other enjoyments of the
rich, under contribution; a minister is disposed to conclude that the
country is arrived at the maximum of taxation, because by increasing the
rate, he cannot increase the amount of any one of these taxes. But in
this conclusion he will not be always correct, for it is very possible
that such a country could bear a very great addition to its burdens
without infringing on the integrity of its capital.




CHAPTER XV.

TAXES ON OTHER COMMODITIES THAN RAW PRODUCE.


On the same principle that a tax on corn would raise the price of corn,
a tax on any other commodity would raise the price of that commodity. If
the commodity did not rise by a sum equal to the tax, it would not give
the same profit to the producer which he had before, and he would remove
his capital to some other employment.

The taxing of all commodities, whether they be necessaries or luxuries,
will, while money remains at an unaltered value, raise their prices by a
sum at least equal to the tax. [19] A tax on the manufactured necessaries
of the labourer would have the same effect on wages as a tax on corn,
which differs from other necessaries only by being the first and most
important on the list; and it would produce precisely the same effects
on the profits of stock and foreign trade. But a tax on luxuries would
have no other effect than to raise their price. It would fall wholly on
the consumer, and could neither increase wages, nor lower profits.

Taxes which are levied on a country for the purpose of supporting war,
or for the ordinary expenses of the state, and which are chiefly devoted
to the support of unproductive labourers, are taken from the productive
industry of the country; and every saving which can be made from such
expenses will be generally added to the income, if not to the capital of
the contributors. When for the expenses of a year's war, twenty millions
are raised by means of a loan, it is the twenty millions which are
withdrawn from the productive capital of the nation. The million per
annum which is raised by taxes to pay the interest of this loan, is
merely transferred from those who pay it to those who receive it, from
the contributor to the tax to the national creditor. The real expense is
the twenty millions, and not the interest which must be paid for it. [20]
Whether the interest be or be not paid, the country will neither be
richer nor poorer. Government might at once have required the twenty
millions in the shape of taxes; in which case it would not have been
necessary to raise annual taxes to the amount of a million. This however
would not have changed the nature of the transaction. An individual
instead of being called upon to pay 100_l. _ per annum, might have been
obliged to pay 2000_l. _ once for all. It might also have suited his
convenience rather to borrow this 2000_l. _, and to pay 100_l. _ per annum
for interest to the lender, than to spare the larger sum from his own
funds. In one case it is a private transaction between A and B, in the
other Government guarantees to B the payment of the interest to be
equally paid by A. If the transaction had been of a private nature, no
public record would be kept of it, and it would be a matter of
comparative indifference to the country whether A faithfully performed
his contract to B, or unjustly retained, the 100_l. _ per annum in his
own possession. The country would have a general interest in the
faithful performance of a contract, but with respect to the national
wealth, it would have no other interest than whether A or B would make
this 100_l. _ most productive, but on this question it would neither have
the right nor the ability to decide. It might be possible, that if A
retained it for his own use, he might squander it unprofitably, and if
it were paid to B, he might add it to his capital, and employ it
productively. And the converse would also be possible, B might squander
it, and A might employ it productively. With a view to wealth only, it
might be equally or more desirable that A should or should not pay it;
but the claims of justice and good faith, a greater utility, are not to
be compelled to yield to those of a less; and accordingly, if the state
were called upon to interfere, the courts of justice would oblige A to
perform his contract. A debt guaranteed by the nation, differs in no
respect from the above transaction. Justice and good faith demand that
the interest of the national debt should continue to be paid, and that
those who have advanced their capitals for the general benefit, should
not be required to forego their equitable claims, on the plea of
expediency.

But independently of this consideration, it is by no means certain, that
political utility would gain any thing by the sacrifice of political
integrity; it does by no means follow, that the party exonerated from
the payment of the interest of the national debt would employ it more
productively than those to whom indisputably it is due. By cancelling
the national debt, one man's income might be raised from 1000_l. _ to
1500_l. _, but another man's would be lowered from 1500_l. _ to 1000_l. _
These two men's income now amount to 2500_l. _, they would amount to no
more then. If it be the object of Government to raise taxes, there would
be precisely the same taxable capital and income in one case, as in the
other. It is not then by the payment of the interest on the national
debt that a country is distressed, nor is it by the exoneration from
payment that it can be relieved. It is only by saving from income, and
retrenching in expenditure, that the national capital can be increased;
and neither the income would be increased, nor the expenditure
diminished by the annihilation of the national debt. It is by the
profuse expenditure of Government, and of individuals, and by loans,
that a country is impoverished; every measure therefore which is
calculated to promote public and private oeconomy will relieve the
public distress; but it is error and delusion, to suppose that a real
national difficulty can be removed, by shifting it from the shoulders of
one class of the community, who justly ought to bear it, to the
shoulders of another class, who upon every principle of equity ought to
bear no more than their share. From what I have said, it must not be
inferred that I consider the system of borrowing as the best calculated
to defray the extraordinary expenses of the state. It is a system which
tends to make us less thrifty--to blind us to our real situation. If the
expenses of a war be 40 millions per annum, and the share which a man
would have to contribute towards that annual expense were 100_l. _, he
would endeavour, on being at once called upon for his portion, to save
speedily the 100_l. _ from his income. By the system of loans he is
called upon to pay only the interest of this 100_l. _, or 5_l. _ per
annum, and considers that he does enough by saving this 5_l. _ from his
expenditure, and then deludes himself with the belief that he is as rich
as before. The whole nation, by reasoning and acting in this manner,
save only the interest of 40 millions, or two millions; and thus, not
only lose all the interest or profit which 40 millions of capital,
employed productively, would afford, but also 38 millions, the
difference between their savings and expenditure. If, as I before
observed, each man had to make his own loan, and contribute his full
proportion to the exigencies of the state, as soon as the war ceased,
taxation would cease, and we should immediately fall into a natural
state of prices. Out of his private funds, A might have to pay to B
interest for the money he borrowed of him during the war, to enable him
to pay his quota of the expense; but with this the nation would have no
concern. A country which has accumulated a large debt is placed in a
most artificial situation; and although the amount of taxes, and the
increased price of labour, may not, and I believe does not, place it
under any other disadvantage with respect to foreign countries, except
the unavoidable one of paying those taxes, yet it becomes the interest
of every contributor to withdraw his shoulder from the burthen, and to
shift this payment from himself to another; and the temptation to remove
himself and his capital to another country, where he will be exempted
from such burthens, becomes at last irresistible, and overcomes the
natural reluctance which every man feels to quit the place of his birth,
and the scene of his early associations. A country which has involved
itself in the difficulties attending this artificial system, would act
wisely by ransoming itself from them, at the sacrifice of any portion of
its property which might be necessary to redeem its debt. That which is
wise in an individual, is wise also in a nation. A man who has
10,000_l. _, paying him an income of 500_l. _, out of which he has to pay
100_l.
_ per annum towards the interest of the debt, is really worth only
8000_l. _, and would be equally rich, whether he continued to pay 100_l. _
per annum, or at once, and for only once, sacrificed 2000_l. _ But where,
it is asked, would be the purchaser of the property which he must sell
to obtain this 2000_l. _? The answer is plain: the national creditor, who
is to receive this 2000_l. _, will want an investment for his money, and
will be disposed either to lend it to the landholder, or manufacturer,
or to purchase from them a part of the property of which they have to
dispose. To such an effect the stockholders themselves would largely
contribute. Such a scheme has been often recommended, but we have, I
fear, neither wisdom enough, nor virtue enough, to adopt it. It must
however be admitted, that during peace, our unceasing efforts should be
directed towards paying off that part of the debt which has been
contracted during war; and that no temptation of relief, no desire of
escape from present, and I hope temporary distresses, should induce us
to relax in our attention to that great object. No sinking fund can be
efficient for the purpose of diminishing the debt, if it be not derived
from the excess of the public revenue over the public expenditure. It is
to be regretted, that the sinking fund in this country is only such in
name; for there is no excess of revenue above expenditure. It ought by
economy, to be made what it is professed to be, a really efficient fund
for the payment of the debt. If on the breaking out of any future war,
we shall not have very considerably reduced our debt, one of two things
must happen, either the whole expenses of that war must be defrayed by
taxes raised from year to year, or we must, at the end of that war, if
not before, submit to a national bankruptcy; not that we shall be unable
to bear any large additions to the debt; it would be difficult to set
limits to the powers of a great nation; but assuredly there are limits
to the price, which in the form of perpetual taxation, individuals will
submit to pay for the privilege merely of living in their native
country.

When a commodity is at a monopoly price, it is at the very highest price
at which the consumers are willing to purchase it. Commodities are only
at a monopoly price, when by no possible device their quantity can be
augmented; and when therefore, the competition is wholly on one
side--amongst the buyers. The monopoly price of one period may be much
lower or higher than the monopoly price of another, because the
competition amongst the purchasers must depend on their wealth, and
their tastes and caprices. Those peculiar wines, which are produced in
very limited quantity, and those works of art, which from their
excellence or rarity, have acquired a fanciful value, will be exchanged
for a very different quantity of the produce of ordinary labour,
according as the society is rich or poor, as it possesses an abundance
or scarcity of such produce, or as it may be in a rude or polished
state. The exchangeable value therefore of a commodity which is at a
monopoly price, is no where regulated by the cost of production.

Raw produce is not at a monopoly price, because the market price of
barley and wheat is as much regulated by their cost of production, as
the market price of cloth and linen. The only difference is this, that
one portion of the capital employed in agriculture regulates the price
of corn, namely, that portion which pays no rent; whereas, in the
production of manufactured commodities, every portion of capital is
employed with the same results; and as no portion pays rent, every
portion is equally a regulator of price: corn, and other raw produce,
can be augmented too in quantity, by the employment of more capital on
the land, and therefore they are not at a monopoly price. There is
competition among the sellers, as well as amongst the buyers. This is
not the case in the production of those rare wines, and those valuable
specimens of art, of which we have been speaking; their quantity cannot
be increased, and their price is limited only by the extent of the power
and will of the purchasers. The rent of these vineyards may be raised
beyond any moderately assignable limits, because no other land being
able to produce such wines, none can be brought into competition with
them.

The corn and raw produce of a country, may indeed for a time sell at a
monopoly price; but they can do so permanently only when no more
capital can be profitably employed on the lands, and when, therefore,
their produce cannot be increased. At such time, every portion of land
in cultivation, and every portion of capital employed on the land will
yield a rent, differing indeed in proportion to the difference in the
return. At such a time too, any tax which may be imposed on the farmer,
will fall on rent, and not on the consumer. He cannot raise the price of
his corn, because, by the supposition, it is already at the highest
price at which the purchasers will or can buy it. He will not be
satisfied with a lower rate of profits, than that obtained by other
capitalists, and, therefore, his only alternative will be to obtain a
reduction of rent, or to quit his employment.

Mr. Buchanan considers corn and raw produce as at a monopoly price,
because they yield a rent: all commodities which yield a rent, he
supposes must be at a monopoly price; and thence he infers, that all
taxes on raw produce would fall on the landlord, and not on the
consumer. "The price of corn," he says, "which always affords a rent,
being in no respect influenced by the expenses of its production, those
expenses must be paid out of the rent; and when they rise or fall,
therefore, the consequence is not a higher or a lower price, but a
higher or a lower rent. In this view, all taxes on farm servants,
horses, or the implements of agriculture, are in reality land-taxes; the
burden falling on the farmer during the currency of his lease, and on
the landlord, when the lease comes to be renewed. In like manner all
those improved implements of husbandry which save expense to the farmer,
such as machines for threshing and reaping, whatever gives him easier
access to the market, such as good roads, canals, and bridges, though
they lessen the original cost of corn, do not lessen its market price.
Whatever is saved by those improvements, therefore, belongs to the
landlord as part of his rent. "

It is evident that if we yield to Mr. Buchanan the basis on which his
argument is built, namely, that the price of corn always yields a rent,
all the consequences which he contends for would follow of course. Taxes
on the farmer would then fall not on the consumer but on rent; and all
improvements in husbandry would increase rent: but I hope I have made it
sufficiently clear, that until a country is cultivated in every part,
and up to the highest degree, there is always a portion of capital
employed on the land which yields no rent, and that it is this portion
of capital, the result of which, as in manufactures, is divided between
profits and wages, that regulates the price of corn. The price of corn
then, which does not afford a rent, being influenced by the expenses of
its production, those expenses cannot be paid out of rent. The
consequence therefore of those expenses increasing, is a higher price,
and not a lower rent. [21]

It is remarkable that both Adam Smith and Mr. Buchanan, who entirely
agree that taxes on raw produce, a land-tax, and tithes, all fall on
the rent of land, and not on the consumers of raw produce, should
nevertheless admit that taxes on malt would fall on the consumer of
beer, and not on the rent of the landlord. Adam Smith's argument is so
able a statement of the view which I take of the subject of the tax on
malt, and every other tax on raw produce, that I cannot refrain from
offering it to the attention of the reader.

"The rent and profits of barley land must always be nearly equal to
those of other equally fertile, and equally well cultivated land. If
they were less, some part of the barley land would soon be turned to
some other purpose; and if they were greater, more land would soon be
turned to the raising of barley. When the ordinary price of any
particular produce of land is at what may be called a monopoly price, a
tax upon it necessarily reduces the rent and profit[22] of the land
which grows it. A tax upon the produce of those precious vineyards, of
which the wine falls so much short of the effectual demand, that its
price is always above the natural proportion to that of other equally
fertile, and equally well cultivated land, would necessarily reduce the
rent and profit[22] of those vineyards. The price of the wines being
already the highest that could be got for the quantity commonly sent to
market, it could not be raised higher without diminishing that quantity;
and the quantity could not be diminished without still greater loss,
because the lands could not be turned to any other equally valuable
produce. The whole weight of the tax, therefore, would fall upon the
rent and profit;[23] properly upon the _rent_ of the vineyard. " "But the
ordinary price of barley has never been a monopoly price; and the rent
and profit of barley land have never been above their natural proportion
to those of other equally fertile and equally well cultivated land. The
different taxes which have been imposed upon malt, beer, and ale, _have
never lowered the price of barley_; have never reduced the rent and
profit[24] of barley land. The price of malt to the brewer has
constantly risen in proportion to the taxes imposed upon it; and those
taxes, together with the different duties upon beer and ale, have
constantly either raised the price, or, what comes to the same thing,
reduced the quality of those commodities to the consumer. The final
payment of those taxes has fallen constantly upon the consumer, and not
upon the producer. " On this passage Mr. Buchanan remarks, "A duty on
malt never could reduce the price of barley, because, unless as much
could be made of barley by malting it as by selling it unmalted, the
quantity required would not be brought to market. It is clear,
therefore, that the price of malt must rise in proportion to the tax
imposed on it, as the demand could not otherwise be supplied. The price
of barley, however, is just as much a monopoly price as that of sugar;
they both yield a rent, and the market price of both has equally lost
all connexion with the original cost. "

It appears then to be the opinion of Mr. Buchanan, that a tax on malt
would raise the price of malt, but that a tax on the barley from which
malt is made, would not raise the price of barley; and therefore, if
malt is taxed, the tax will be paid by the consumer; if barley is taxed,
it will be paid by the landlord, as he will receive a diminished rent.
According to Mr. Buchanan then, barley is at a monopoly price, at the
highest price which the purchasers are willing to give for it; but malt
made of barley is not at a monopoly price, and consequently it can be
raised in proportion to the taxes that may be imposed upon it. This
opinion of Mr. Buchanan of the effects of a tax on malt appears to me to
be in direct contradiction to the opinion he has given of a similar tax,
a tax on bread. "A tax on bread will be ultimately paid, not by a rise
of price, but by a reduction of rent. "[25] If a tax on malt would raise
the price of beer, a tax on bread must raise the price of bread.

The following argument of M. Say is founded on the same views as Mr.
Buchanan's: "The quantity of wine or corn which a piece of land will
produce, will remain nearly the same, whatever may be the tax with which
it is charged. The tax may take away a half, or even three-fourths of
its net produce, or of its rent if you please, yet the land would
nevertheless be cultivated for the half or the quarter not absorbed by
the tax. The rent, that is to say the landlord's share, would merely be
somewhat lower. The reason of this will be perceived, if we consider,
that in the case supposed, the quantity of produce obtained from the
land, and sent to market, will remain nevertheless the same. On the
other hand the motives on which the demand for the produce is founded
continue also the same.

"Now, if the quantity of produce supplied, and the quantity demanded,
necessarily continue the same, notwithstanding the establishment or the
increase of the tax, the price of that produce will not vary; and if the
price do not vary, the consumer will not pay the smallest portion of
this tax.

"Will it be said that the farmer, he who furnishes labour and capital,
will, jointly with the landlord, bear the burden of this tax? certainly
not; because the circumstance or the tax has not diminished the number
of farms to be let, nor increased the number of farmers. Since in this
instance also the supply and demand remain the same, the rent of farms
must also remain the same. The example of the manufacturer of salt, who
can only make the consumers pay a portion of the tax, and that of the
landlord who cannot reimburse himself in the smallest degree, prove the
error of those who maintain, in opposition to the economists, that all
taxes fall ultimately on the consumer. "--Vol. ii. p. 338.

If the tax "took away half, or even three-fourths of the net produce of
the land," and the price of produce did not rise, how could those
farmers obtain the usual profits of stock who paid very moderate rents,
having that quality of land which required a much larger proportion of
labour to obtain a given result, than land of a more fertile quality? If
the whole rent were remitted, they would still obtain lower profits
than those in other trades, and would therefore not continue to
cultivate their land, unless they could raise the price of its produce.
If the tax fell on the farmers, there would be fewer farmers disposed to
hire farms; if it fell on the landlord, many farms would not be let at
all, for they would afford no rent. But from what fund would those pay
the tax who produce corn without paying any rent? It is quite clear that
the tax must fall on the consumer. How would such land, as M. Say
describes in the following passage, pay a tax of one-half or
three-fourths of its produce?

"We see in Scotland poor lands thus cultivated by the proprietor, and
which could be cultivated by no other person. Thus too we see in the
interior provinces of the United States vast and fertile lands, the
revenue of which alone would not be sufficient for the maintenance of
the proprietor. These lands are cultivated nevertheless, but it must be
by the proprietor himself, or, in other words, he must add to the rent,
which is little or nothing, the profits of his capital and industry, to
enable him to live in competence. It is well known that land, though
cultivated, yields no revenue to the landlord when no farmer will be
willing to pay a rent for it: which is a proof that such land will give
only the profits of the capital and of the industry necessary for its
cultivation. "--_Say_, Vol. ii. p. 127.




CHAPTER XVI.

POOR RATES.


We have seen that taxes on raw produce, and on the profits of the
farmer, will fall on the consumer of raw produce; since unless he had
the power of remunerating himself by an increase of price, the tax would
reduce his profits below the general level of profits, and would urge
him to remove his capital to some other trade. We have seen too that he
could not, by deducting it from his rent, transfer the tax to his
landlord; because that farmer who paid no rent, would, equally with the
cultivator of better land, be subject to the tax, whether it were laid
on raw produce, or on the profits of the farmer. I have also attempted
to shew, that if a tax were general, and affected equally all profits,
whether manufacturing or agricultural, it would not operate either on
the price of goods or raw produce, but would be immediately, as well as
ultimately, paid by the producers. A tax on rent, it has been observed,
would fall on the landlord only, and could not by any means be made to
devolve on the tenant.

The poor rate is a tax which partakes of the nature of all these taxes,
and under different circumstances falls on the consumer of raw produce
and goods, on the profits of stock, and on the rent of land. It is a tax
which falls with peculiar weight on the profits of the farmer, and
therefore may be considered as affecting the price of raw produce.
According to the degree in which it bears on manufacturing and
agricultural profits equally, it will be a general tax on the profits of
stock, and will occasion no alteration in the price of raw produce and
manufactures. In proportion to the farmer's inability to remunerate
himself, by raising the price of raw produce, for that portion of the
tax which peculiarly affects him, it will be a tax on rent, and will be
paid by the landlord. To know then the operation of the poor rate at any
particular time, we must ascertain whether at that time it affects in
an equal or unequal degree the profits of the farmer and manufacturer;
and also whether the circumstances be such as to afford to the farmer
the power of raising the price of raw produce.

The poor rates are professed to be levied on the farmer in proportion to
his rent; and accordingly, the farmer who paid a very small rent, or no
rent at all, should pay little or no tax. If this were true, poor rates,
as far as they are paid by the agricultural class, would entirely fall
on the landlord, and could not be shifted to the consumer of raw
produce. But I believe that is not true; the poor rate is not levied
according to the rent which a farmer actually pays to his landlord; it
is proportioned to the annual value of his land, whether that annual
value be given to it by the capital of the landlord or of the tenant.

If two farmers rented land of two different qualities in the same
parish, the one paying a rent of 100_l. _ per annum for 50 acres of the
most fertile land, and the other the same sum of 100_l. _ for 1000 acres
of the least fertile land, they would pay the same amount of poor
rates, if neither of them attempted to improve the land; but if the
farmer of the poor land, presuming on a very long lease, should be
induced at a great expense to improve the productive powers of his land,
by manuring, draining, fencing, &c. , he would contribute to the poor
rates, not in proportion to the actual rent paid to the landlord, but to
the actual annual value of the land. The rate might equal or exceed the
rent; but whether it did or not, no part of this rate would be paid by
the landlord. It would have been previously calculated upon by the
tenant; and if the price of produce were not sufficient to compensate
him for all his expenses, together with this additional charge for poor
rates, his improvements would not have been undertaken. It is evident
then that the tax in this case is paid by the consumer; for if there had
been no rate, the same improvements would have been undertaken, and the
usual and general rate of profits would have been obtained on the stock
employed, with a lower price of corn.

Nor would it make the slightest difference in this question, if the
landlord had made these improvements himself, and had in consequence
raised his rent from 100_l. _ to 500_l. _; the rate would be equally
charged to the consumer; for whether he should expend a large sum of
money on his land, would depend on the rent, or what is called rent,
which he would receive as a remuneration for it; and this again would
depend on the price of corn, or other raw produce, being sufficiently
high not only to cover this additional rent, but also the rate to which
the land would be subject. But if at the same time all manufacturing
capital contributed to the poor rates, in the same proportion as the
capital expended by the farmer or landlord in improving the land, then
it would no longer be a partial tax on the profits of the farmer's or
landlord's capital, but a tax on the capital of all producers; and
therefore it could no longer be shifted either on the consumer of raw
produce or on the landlord. The farmer's profits would feel the effect
of the rate no more than those of the manufacturer; and the former could
not, any more than the latter, plead it as a reason for an advance in
the price of his commodity. It is not the absolute, but the relative
fall of profits, which prevents capital from being employed in any
particular trade: it is the difference of profit which sends capital
from one employment to another.

It must be acknowledged however, that in the actual state of the poor
rates, a much larger amount falls on the farmer than on the
manufacturer, in proportion to their respective profits; the farmer
being rated according to the actual productions which he obtains, the
manufacturer only according to the value of the buildings in which he
works, without any regard to the value of the machinery, labour, or
stock, which he may employ. From this circumstance it follows, that the
farmer will be enabled to raise the price of his produce by this whole
difference. For since the tax falls unequally, and peculiarly on his
profits, he would have less motive to devote his capital to the land,
than to employ it in some other trade, unless the price of raw produce
were raised. If on the contrary, the rate had fallen with greater weight
on the manufacturer than on the farmer, he would have been enabled to
raise the price of his goods by the amount of the difference, for the
same reason that the farmer, under similar circumstances, could raise
the price of raw produce. In a society therefore, which is extending its
agriculture, when poor rates fall with peculiar weight on the land, they
will be paid partly by the employers of capital in a diminution of the
profits of stock, and partly by the consumer of raw produce in its
increased price. In such a state of things, the tax may, under some
circumstances, be even advantageous rather than injurious to landlords;
for if the tax paid by the cultivator of the worst land, be higher in
proportion to the quantity of produce obtained, than that paid by the
farmers of the more fertile lands, the rise in the price of corn, which
will extend to all corn, will more than compensate the latter for the
tax. This advantage will remain with them during the continuance of
their leases, but it will afterwards be transferred to their landlords.
This then would be the effect of poor rates in an advancing society; but
in a stationary, or in a retrograde country, so far as capital could not
be withdrawn from the land, if a further rate were levied for the
support of the poor, that part of it which fell on agriculture would be
paid, during the current leases, by the farmers, but at the expiration
of those leases it would almost wholly fall on the landlords. The
farmer, who during his former lease, had expended his capital in
improving his land, if it were still in his own hands, would be rated
for this new tax according to the new value which the land had acquired
by its improvement, and this amount he would be obliged to pay during
his lease, although his profits might thereby be reduced below the
general rate of profits; for the capital which he has expended may be so
incorporated with the land, that it cannot be removed from it. If indeed
he, or his landlord, (should it have been expended by him) were able to
remove this capital, and thereby reduce the annual value of the land,
the rate would proportionably fall, and as the produce would at the same
time be diminished, its price would rise; he would be compensated for
the tax, by charging it to the consumer, and no part would fall on rent;
but this is impossible, at least with respect to some proportion of the
capital, and consequently in that proportion the tax will be paid by the
farmers during their leases, and by landlords at their expiration. This
additional tax, as far as it fell unequally on manufacturers, would
under such circumstances be added to the price of their goods; for there
can be no reason why their profits should be reduced below the general
rate of profits, when their capitals might be easily removed to
agriculture. [26]




CHAPTER XVII.

ON SUDDEN CHANGES IN THE CHANNELS OF TRADE.


A great manufacturing country is peculiarly exposed to temporary
reverses and contingencies, produced by the removal of capital from one
employment to another. The demands for the produce of agriculture are
uniform, they are not under the influence of fashion, prejudice, or
caprice. To sustain life, food is necessary, and the demand for food
must continue in all ages, and in all countries. It is different with
manufactures; the demand for any particular manufactured commodity, is
subject not only to the wants, but to the tastes and caprice of the
purchasers. A new tax too may destroy the comparative advantage which a
country before possessed in the manufacture of a particular commodity;
or the effects of war may so raise the freight and insurance on its
conveyance, that it can no longer enter into competition with the home
manufacture of the country to which it was before exported. In all such
cases, considerable distress, and no doubt some loss, will be
experienced by those who are engaged in the manufacture of such
commodities; and it will be felt not only at the time of the change, but
through the whole interval during which they are removing their
capitals, and the labour which they can command, from one employment to
another.

Nor will distress be experienced in that country alone where such
difficulties originate, but in the countries to which its commodities
were before exported. No country can long import unless it also exports,
or can long export unless it also imports. If then any circumstance
should occur, which should permanently prevent a country from importing
the usual amount of foreign commodities, it will necessarily diminish
the manufacture of some of those commodities which were usually
exported; and although the total value of the productions of the country
will probably be but little altered, since the same capital will be
employed, yet they will not be equally abundant and cheap; and
considerable distress will be experienced through the change of
employments. If by the employment of 10,000_l. _ in the manufacture of
cotton goods for exportation, we imported annually 3000 pair of silk
stockings of the value of 2000_l. _, and by the interruption of foreign
trade we should be obliged to withdraw this capital from the manufacture
of cotton, and employ it ourselves in the manufacture of stockings, we
should still obtain stockings of the value of 2000_l. _ provided no part
of the capital were destroyed; but instead of having 3000 pair, we might
only have 2,500. In the removal of the capital from the cotton to the
stocking trade, much distress might be experienced, but it would not
considerably impair the value of the national property, although it
might lessen the quantity of our annual productions.

The commencement of war after a long peace, or of peace after a long
war, generally produces considerable distress in trade. It changes in a
great degree the nature of the employments to which the respective
capitals of countries were before devoted; and during the interval while
they are settling in the situations which new circumstances have made
the most beneficial, much fixed capital is unemployed, perhaps wholly
lost, and labourers are without full employment. The duration of this
distress will be longer or shorter according to the strength of that
disinclination, which most men feel to abandon that employment of their
capital to which they have long been accustomed. It is often protracted
too by the restrictions and prohibitions, to which the absurd jealousies
which prevail between the different states of the commercial
commonwealth give rise.

The distress which proceeds from a revulsion of trade, is often mistaken
for that which accompanies a diminution of the national capital, and a
retrograde state of society; and it would perhaps be difficult to point
out any marks by which they may be accurately distinguished.

When, however, such distress immediately accompanies a change from war
to peace, our knowledge of the existence of such a cause will make it
reasonable to believe, that the funds for the maintenance of labour have
rather been diverted from their usual channel than materially impaired,
and that after temporary suffering, the nation will again advance in
prosperity. It must be remembered too that the retrograde condition is
always an unnatural state of society. Man from youth grows to manhood,
then decays, and dies; but this is not the progress of nations. When
arrived to a state of the greatest vigour, their further advance may
indeed be arrested, but their natural tendency is to continue for ages,
to sustain undiminished their wealth, and their population.

In rich and powerful countries where large capitals are invested in
machinery, more distress will be experienced from a revulsion in trade,
than in poorer countries where there is proportionally a much smaller
amount of fixed, and a much larger amount of circulating capital, and
where consequently more work is done by the labour of men. It is not so
difficult to withdraw a circulating as a fixed capital, from any
employment in which it may be engaged. It is often impossible to divert
the machinery which may have been erected for one manufacture, to the
purposes of another; but the clothing, the food, and the lodging of the
labourer in one employment may be devoted to the support of the labourer
in another, or the same labourer may receive the same food, clothing,
and lodging, whilst his employment is changed. This, however, is an evil
to which a rich nation must submit; and it would not be more reasonable
to complain of it, than it would be in a rich merchant to lament that
his ship was exposed to the dangers of the sea, whilst his poor
neighbour's cottage was safe from all such hazard.

From contingencies of this kind, though in an inferior degree, even
agriculture is not exempted. War, which in a commercial country,
interrupts the commerce of states, frequently prevents the exportation
of corn from countries where it can be produced with little cost, to
others not so favourably situated. Under such circumstances an unusual
quantity of capital is drawn to agriculture, and the country which
before imported becomes independent of foreign aid. At the termination
of the war, the obstacles to importation are removed, and a competition
destructive to the home-grower commences, from which he is unable to
withdraw, without the sacrifice of a great part of his capital. The best
policy of the state would be, to lay a tax, decreasing in amount from
time to time, on the importation of foreign corn, for a limited number
of years, in order to afford to the home-grower an opportunity to
withdraw his capital gradually from the land. In so doing the country
might not be making the most advantageous distribution of its capital,
but the temporary tax to which it was subjected, would be for the
advantage of a particular class, the distribution of whose capital was
highly useful in procuring a supply of food when importation was
stopped. If such exertions in a period of emergency were followed by
risk of ruin on the termination of the difficulty, capital would shun
such an employment. Besides the usual profits of stock, farmers would
expect to be compensated for the risk which they incurred of a sudden
influx of corn, and therefore the price to the consumer, at the seasons
when he most required a supply, would be enhanced, not only by the
superior cost of growing corn at home, but also by the insurance which
he would have to pay, in the price, for the peculiar risk to which
this employment of capital was exposed. Notwithstanding then, that it
would be more productive of wealth to the country, at whatever sacrifice
of capital it might be done, to allow the importation of cheap corn, it
would perhaps be advisable to charge it with a duty for a few years.

In examining the question of rent, we found, that with every increase in
the supply of corn, and with the consequent fall of its price, capital
would be withdrawn from the poorer land; and land of a better
description, which would then pay no rent, would become the standard by
which the natural price of corn would be regulated. At 4_l. _ per
quarter, land of an inferior quality, which may be designated by No. 6,
might be cultivated; at 3_l. _ 10_s. _ No. 5; at 3_l. _ No. 4, and so on.
If corn, in consequence of permanent abundance, fell to 3_l. _ 10_s. _ the
capital employed on No. 6 would cease to be employed; for it was only
when corn was at 4_l. _ that it could obtain the general profits, even
without paying rent: it would therefore be withdrawn to manufacture
those commodities with which all the corn grown on No. 6 would be
purchased and imported. In this employment it would necessarily be more
productive to its owner, or it would not be withdrawn from the other;
for if he could obtain more corn by growing it on land for which he paid
no rent, than by manufacturing a commodity with which he purchased it,
its price could not be under 4_l. _

It has, however, been said that capital cannot be withdrawn from the
land; that it takes the form of expenses, which cannot be recovered,
such as manuring, fencing, draining, &c. , which are necessarily
inseparable from the land. This is in some degree true; but that capital
which consists of cattle, sheep, hay and corn ricks, carts, &c. may be
withdrawn; and it always becomes a matter of calculation whether these
shall continue to be employed on the land, notwithstanding the low price
of corn, or whether they shall be sold, and their value transferred to
another employment.

Suppose, however, the fact to be as stated, and that no part of the
capital could be withdrawn; the farmer would continue to raise corn, and
precisely the same quantity too, at whatever price it might sell; for it
could not be his interest to produce less, and if he did not so employ
his capital, he would obtain from it no return whatever. Corn could not
be imported, because he would sell it lower than 3_l. _ 10_s. _ rather
than not sell it at all, and by the supposition the importer could not
sell it under that price. Although then the farmers, who cultivated land
of this quality, would undoubtedly be injured by the fall in the
exchangeable value of the commodity which they produced,--how would the
country be affected? We should have precisely the same quantity of every
commodity produced, but raw produce and corn would sell at a much
cheaper price. The capital of a country consists of its commodities, and
as these would be the same as before, reproduction would go on at the
same rate. This low price of corn would however only afford the usual
profits of stock to the land, No. 5, which would then pay no rent, and
the rent of all better land would fall: wages would also fall, and
profits would rise.