"I have already had occasion to remark," observes M. Say, "in speaking of what is improperly called the balance of trade, that if it suits a merchant better to export the precious metals to a foreign country than any other goods, it is also the interest of the state that he should export them, because the state only gains or loses through the channel of its citizens; and in what concerns foreign trade, that which best suits the individual, best suits also the state; therefore, by opposing obstacles to the exportation which individuals would be inclined to make of the precious metals, nothing more is done, than to force them to substitute some other commodity less profitable to themselves, and to the state. It must however be remarked, that I say only in what concerns foreign trade; because the profits which merchants make by their dealings with their countrymen, as well as those which are made in the exclusive commerce with colonies, are not entirely gains for the state. In the trade between individuals of the same country, there is no other gain but the value of an utility produced; Que la valeur d'une utilité produite."[40] Vol. i. p. 401. I cannot see the distinction here made between the profits of the home and foreign trade. The object of all trade is to increase productions. If for the purchase of a pipe of wine, I had it in my power to export bullion, which was bought with the value of the produce of 100 days' labour, but Government, by prohibiting the exportation of bullion, should oblige me to purchase my wine with a commodity bought with the value of the produce of one hundred and five days' labour, the produce of five days' labour is lost to me, and, through me, to the state. But if these transactions took place between individuals, in different provinces of the same country, the same advantage would accrue both to the individual, and, through him, to the country, if he were unfettered in his choice of the commodities, with which he made his purchases; and the same disadvantage, if he were obliged by Government to purchase with the least beneficial commodity. If a manufacturer could work up with the same capital, more iron where coals are plentiful, than he could where coals are scarce, the country would be benefited by the difference. But if coals were no where plentiful, and he imported iron, and could get this additional quantity, by the manufacture of a commodity, with the same capital and labour, he would in like manner benefit his country by the additional quantity of iron. In the 6th Chap. of this work, I have endeavoured to shew that all trade, whether foreign or domestic, is beneficial, by increasing the quantity, and not by increasing the value of productions. We shall have no greater value, whether we carry on the most beneficial home and foreign trade, or in consequence of being fettered by prohibitory laws, we are obliged to content ourselves with the least advantageous. The rate of profits, and the value produced, will be the same. The advantage always resolves itself into that which M. Say appears to confine to the home trade; in both cases there is no other gain but that of the value of an utilité produite.
CHAPTER XXI.
ON BOUNTIES ON PRODUCTION.
It may not be uninstructive to consider the effects of a bounty on the production of raw produce and other commodities, with a view to observe the application of the principles which I have been endeavouring to establish, with regard to the profits of stock, the annual produce of the land and labour, and the relative prices of manufactures and raw produce. In the first place, let us suppose that a tax was imposed on all commodities, for the purpose of raising a fund to be employed by Government, in giving a bounty on the production of corn. As no part of such a tax would be expended by Government, and as all that was received from one class of the people, would be returned to another, the nation collectively would neither be richer nor poorer, from such a tax and bounty. It would be readily allowed, that the tax on commodities by which the fund was created, would raise the price of the commodities taxed; all the consumers of those commodities therefore would contribute towards that fund; in other words, their natural or necessary price being raised, so would too their market price. But for the same reason that the natural price of those commodities would be raised, the natural price of corn would be lowered; before the bounty was paid on production, the farmers obtained as great a price for their corn as was necessary to repay them their rent and their expenses, and afford them the general rate of profits; after the bounty, they would receive more than that rate, unless the price of corn fell by a sum at least equal to the bounty. The effect then of the tax and bounty, would be to raise the price of commodities in a degree equal to the tax levied on them, and to lower the price of corn by a sum equal to the bounty paid. It will be observed too, that no permanent alteration could be made in the distribution of capital between agriculture and manufactures, because as there would be no alteration, either in the amount of capital or population, there would be precisely the same demand for bread and manufactures. The profits of the farmer would be no higher than the general level, after the fall in the price of corn; nor would the profits of the manufacturer be lower after the rise of manufactured goods; the bounty then would not occasion any more capital to be employed on the land in the production of corn, nor any less in the manufacture of goods. But how would the interest of the landlord be affected? On the same principles that a tax on raw produce would lower the corn rent of land, leaving the money rent unaltered, a bounty on production, which is directly the contrary of a tax, would raise corn rent, leaving the money rent unaltered.[41] With the same money rent the landlord would have a greater price to pay for his manufactured goods, and a less price for his corn; he would probably therefore be neither richer nor poorer.
Now whether such a measure would have any operation on the wages of labour, would depend on the question, whether the labourer, in purchasing commodities, would pay as much towards the tax, as he would receive from the bounty, in the low price of his food. If these two quantities were equal, wages would continue unaltered; but if the commodities taxed were not those consumed by the labourer, his wages would fall, and his employer would be benefited by the difference. But this is no real advantage to his employer; it would indeed operate to increase the rate of his profits, as every fall of wages must do; but in proportion as the labourer contributed less to the fund from which the bounty was paid, and which, let it be remembered, must be raised, his employer must contribute more; in other words, he would contribute as much to the tax by his expenditure, as he would receive in the effects of the bounty and the higher rate of profits together. He obtains a higher rate of profits to requite him for his payment, not only of his own quota of the tax, but of his labourer's also; the remuneration which he receives for his labourer's quota appears in diminished wages, or, which is the same thing, in increased profits; the remuneration for his own appears in the diminution in the price of the corn which he consumes, arising from the bounty.
Here it will be proper to remark the different effects produced on profits from an alteration in the real labour value of corn, and an alteration in the relative value of corn, from taxation and from bounties. If corn is lowered in price by an alteration in its labour price, not only will the rate of the profits of stock be altered, but the absolute profits also; which does not happen, as we have just seen, when the fall is occasioned artificially by a bounty. In the real fall in the value of corn, arising from less labour being required to produce one of the most important objects of man's consumption, labour is rendered more productive. With the same capital the same labour is employed, and an increase of productions is the result; not only then will the rate of profits, but the absolute profits of stock be increased; not only will each capitalist have a greater money revenue, if he employs the same money capital, but also when that money is expended, it will procure him a greater sum of commodities; his enjoyments will be augmented. In the case of the bounty, to balance the advantage which he derives from the fall of one commodity, he has the disadvantage of paying a price more than proportionally high for another; he receives an increased rate of profits in order to enable him to pay this higher price; so that his real situation is in no way improved: though he gets a higher rate of profits, he has no greater command of the produce of the land and labour of the country. When the fall in the value of corn is brought about by natural causes, it is not counteracted by the rise of other commodities; on the contrary, they fall from the raw material falling from which they are made: but when the fall in corn is occasioned by artificial means, it is always counteracted by a real rise in the value of some other commodity, so that if corn be bought cheaper, other commodities are bought dearer.
This then is a further proof, that no particular disadvantage arises from taxes on necessaries, on account of their raising wages and lowering the rate of profits. Profits are indeed lowered, but only to the amount of the labourer's portion of the tax, which must at all events, be paid either by his employer, or by the consumer of the produce of the labourer's work. Whether you deduct 50l. per annum from the employer's revenue, or add 50l. to the prices of the commodities which he consumes, can be of no other consequence to him or to the community, than as it may equally affect all other classes. If it be added to the prices of the commodity, a miser may avoid the tax by not consuming; if it be indirectly deducted from every man's revenue, he cannot avoid paying his fair proportion of the public burthens.
A bounty on the production of corn then, would produce no real effect on the annual produce of the land and labour of the country, although it would make corn relatively cheap, and manufactures relatively dear. But suppose now that a contrary measure should be adopted, that a tax should be raised on corn for the purpose of affording a fund for a bounty on the production of commodities.