money) 'than our own commodities will pay for is the sure and only way for a nation to grow rich.' The error of confounding wealth with money was thus inextricably associated in Locke's mind with the valuable truth which asserts that capital has its origin in saving. The weak and the sound sides of his reasoning become alternately predominant, and he might be quoted by the advocates as well as by the opponents of a sound commercial system. 8. Another form in which the Balance of Trade theory presented itself is given by Charles Davenant, the most conspicuous writer on economical subjects during the first years of the eighteenth century. Davenant, a writer very inferior to Locke in robust common sense, had the equivocal advantage of an official position (he was Inspector-General of exports and imports at the time of his death in 1714), which gave him much acquaintance with the details of commerce. The advantage was equivocal, because it enabled him to lose himself more systematically in statistical labyrinths. Yet Davenant sees through the simpler forms of the fallacy, though he unconsciously slips back so soon as he takes to his ledgers and his tabular returns. He protests steadily against the doctrine, expounded by his antagonist, Pollexfen, that 'gold and silver is the only, or most useful, treasure in a nation.' His view is the inverse. 'Gold and silver,' he says, are indeed the measure of trade, but the spring and original of it in all nations is the natural or artificial products of the country; that is to say, what their land or what their labour and industry produces.' Money, he adds, 'is at bottom no more than the counters with which men in their dealings have been accustomed to reckon,' 3 and he presently defines wealth in the widest phase to consist of everything 'which maintains the prince and the general body of his people in plenty, ease and safety.'4 Even perishable goods' form part of the national wealth if convertible, though not converted, into gold and silver.3 Industry and skill are more truly wealth than the possession of gold and silver mines. Nay, as it is not the taking in of a great deal of food,' but a 'good digestion and distribution,' that nourishes the body, so a people may have a surfeit of Ib. i. 355. • Ib. i. 382. • Ib. i. 381. Locke, iv. 72. 2 Davenant's Works, i. 354. the precious metals, if they be not properly assimilated. The nations which have the most of them, like Persia, may be the poorest; for trade and industry may produce incomparably more wealth than can be dug out of mines.1 Adam Smith could hardly have denounced more pointedly the fundamental fallacy of the mercantile system. And, like Adam Smith, Davenant infers the general inutility of high duties and prohibitions. And yet we find him intermingling his sounder views with the most grotesque fallacies. He estimates, for example, that the Dutch by simply raising the price of pepper might enjoy an annual income of 2,498,8367., and infers that if they monopolised the East India trade they could drain the rest of Europe of six millions annually.' If France became their masters, this vast revenue in the hands of our natural enemies, must prove our ruin.' 3 Whatever country enjoyed that trade must give laws to the rest of Europe.' And thus the fate of the world hung upon pepper. 9. Davenant, in fact, is unable to shake off the illusions of the counting-house. The cash balances must be the barometer which shows success in trade. His essay upon the East India trade, for example, is directed against a proposal which was then very popular for excluding Indian silks from the market for the benefit of our manufacturers. Some of his reasoning is sound enough; such as the argument that we had better get our silks in exchange for the wool which is our natural product, than make worse silks by greater labour, or the argument that to prohibit Indian silk will only lead to our buying dearer silk elsewhere.5 But he prefers the favourite method of reasoning which amounted in substance to giving a forged discharge to a forged bond. He tries to prove not that the test of a balance of trade is fallacious, but that it tells upon his side. He admits that the East India trade is on the whole a loss to Europe at large, because we export solid bullion in return for perishable goods. But it is practically impossible, though it might be theoretically desirable, to staunch the drain; whilst, by taking part in the trade, we may contrive to divert into our own coffers some part of the stream of precious metals which flows from the Continent towards the East.' In fact, we make up for our own losses by re-exporting some of the Indian goods, and to such purpose that our whole trade produces an annual return of 2,000,000/2 The various currents of this trade are so mutually interdependent that we cannot venture to cut off any one, which, considered by itself, might appear to involve a loss. 10. By such arguments as these, which long passed current in economical discussions, believers in the Balance of Trade frequently evaded some of the awkward consequences of their own opinions, and even appeared as consistent opponents of prohibition. Merchants easily assumed their own balances to be a sufficient test of the national prosperity, but when the theories thus framed were applied to limit their own dealings and to prevent them from importing the most advantageous articles of commerce, they naturally found more or less ingenious modes of meeting the awkward inference. It was better, they admitted, to import gold than silk; but by some dexterous manipulation it must be shown that the importation of silk would enable them to get more gold. And such arguments had the merit in theory of at least calling attention to the complexity of the commercial operations which it was sought to regulate by rash empirical measures. The stream of gold, it was true, could not be directed hither and thither at the arbitrary pleasure of the legislator. Unluckily, however, there were other questions of more importance in which the merchants' theories coincided only too well with the selfish prejudices of the time. Davenant accepts without hesitation the protectionist theory, which justified the English colonial policy. To prevent English merchants from importing what they pleased was a grievance which no abstract theory could be permitted to justify; but a theory which justified restraints upon colonial planters and merchants was doubly welcome. If, he says, the colonies fall into the practice of trading independently of England, the plantations which now are a main branch of our strength may come to be turned against us.' In a tract on the plantation trade he considers at length our American policy, and some of his political views are enlightened and liberal. He proposes, for 1 Davenant, i. 90, 91. 3 Ib. i. 395. example, a scheme for a colonial union which might have placed the imperial relations of the country on a sounder footing. It is his fundamental principle that the colonial trade must be made to centre in England; but there was as yet little danger that the American colonies should rival us in manufactures which, as he says, are the natural product of a rich and numerous people on a limited territory; and thus, whilst approving the principle that we should not encourage a possible rival, his argument is chiefly directed against excessive restriction.3 There was, however, a colony nearer to our shores (he argues elaborately that it is rightfully regarded as a colony) in regard to which his policy was narrower and more acceptable. He had gradually, he says, been forced to the conclusion, from which his general dislike to restrictions had for some time withheld him,' that England ought to prohibit the exportation of Irish woollens. His reason, given with unconscious effrontery, is simply that Ireland is naturally adapted for the woollen manufacture, and might, therefore, supplant us in foreign markets. Now as the balance of our trade depended chiefly upon our exports of woollens, we should thus be ruined for the benefit of Ireland. English capital would speedily flow into that country, and our poverty be coincident with Irish wealth. When the doctrine of the Balance of Trade came into conflict with the immediate interests of the English merchant, it could be evaded under at dexterous manipulation of figures; when it appeared to fall in with his interests, it could sometimes be so manipulated as to conceal its injurious effect upon the rest of the nation, or upon our customers; but when it sanctioned the practice of national robbery, it was put forward most audaciously as a justification for undisguised selfishness. Ireland was to be ruined for the profit of English manufacturers and merchants. A policy begotten of ignorance and rapacity bore its natural fruits before the end of the century both in Ireland and America; and the revolt of the injured was probably more efficacious than the protest of speculative observers. II. I must, however, confine myself to the speculative opposition to these doctrines. The Balance of Trade theory s Ib. ii. 251, &c. 1 Davenant, ii. 41. 2 Ib. ii. 22. 3 Ib. ii. 37. was confuted by more than one acute reasoner, whose arguments fell dead upon his contemporaries. In the same year with Locke's 'Considerations' appeared a pamphlet by Sir Dudley North, called 'Discourses upon Trade.' It was speedily suppressed, for some reason which does not appear. North's main argument is a significant one, which was afterwards applied more fully by Hume and Tucker. The whole world, he says, may be considered for purposes of trade as a single country. Now, any argument which would be good for limiting trade as between France and England, would be good for limiting it between Yorkshire and Middlesex. If it would be palpable injury to any given town to cut off its intercourse with its neighbours, the injury must be the same in the case of a whole district or nation. This confutation is perfect considered as an ad hominem argument; it throws the burden of proof upon those who advocate restriction; and forces them, at least, to mould their reasoning in such a form that it shall not be as applicable to the restrictions which they condemn as to those which they defend. It illustrates, too, the spontaneous disappearance of many commercial fallacies so soon as the field of observation is widened. Look at the restrictions from both sides, and the illusions, generated so long as they are contemplated simply from the merchants' or the national point of view, vanish by the simple change of perspective. North, moreover, adds some very good arguments against the usury laws and other quackery of state influence. Money, he says, is a commodity like any other, and attempts to keep it to ourselves are 'labours to hedge in the cuckoo a phrase used in the same connection by Locke in the same year. 13 1 12. A still more remarkable argument, however, appeared in the Considerations on the East India Trade,' published by an anonymous author in 1701. The singular acuteness 2 Ib. p. 528. ''Select Tracts,' p. 522. Ib. p. 542; Locke, iv. 17. Mr. McCulloch suggests-though he admits that it is a mere guess-that the author may have been a Mr. Henry Martyn, who wrote a paper or two in the 'Spectator.' As Martyn was a contributor to the British Merchant,' which was meant to support the very principles confuted by the author of the tract, the conjecture seems to be very doubtful (see Chalmers's biographical preface in the 'Spectator,' and McCulloch's introductory discourse to the Wealth of Nations,' p. xxxv.) |