Smith thereupon asks whether these protective measures, by giving an artificial direction to industry, are likely to be of general benefit to society. The first answer is that in business every man seeks his own advantage, that every man knows his own business best, and that “the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to society.” Though intending only his own gain, he is “led by an invisible hand to promote an end which was no part of his intention.” Indeed the selfish trader—the economic man, if you like—promotes the interest of society far more effectually than those who affect to trade for the public good. Is it not evident that the individual himself, though he may make mistakes, can judge best how and where to employ his own labour or capital? The statesman or lawgiver who attempted to direct private people how to manage their business and spend their money would not only be overloaded with work, but would be assuming an authority “which could safely be trusted, not only to no single person, but to no council or senate whatever.” From this consideration we pass almost insensibly into the argument from the division of labour.
“It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy. The taylor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a taylor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for.
“What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.”
Capital and industry are certainly not employed to the greatest advantage when they are directed to objects which under natural conditions could be bought cheaper than they could be made. It is true, he adds, anticipating the infant industry argument of Alexander Hamilton, List, and Mill, that “by means of such regulations a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap or cheaper than in the foreign country.” But cui bono? Even in this case “it will by no means follow that the sum total either of its industry or of its revenue can ever be augmented by any such regulation.” One immediate effect of such regulations must be to diminish the revenue of the society, “and what diminishes its revenue is certainly not very likely to augment its capital faster than it would have augmented of its own accord had both capital and industry been left to find out their natural employments.”
But though reason led him by every road to a complete system of liberty as the true end of commercial policy, he despaired of its adoption. “To expect indeed that freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it.” Even if public prejudice were overcome, the resistance of private interests would be unconquerable. The landlords indeed had not yet acquired a strong interest in protection. At that time the home supply of wheat and oats in ordinary years was sufficient, or nearly so, for the requirements of the population, and prices were much about the same in England as in other European countries. The moving spirits of protection were master manufacturers, who, “like an overgrown standing army,” had begun to intimidate the legislature.
“The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more, if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.”
Under these circumstances it is very surprising that Adam Smith should have chosen to submit the corn laws to so long and destructive an analysis. He seems to have foreseen that the great battle for which he was sounding the advance would ultimately rage round a question then almost academic, and that cheap food would be the keystone of the free trade argument.
After several years’ experience as a customs official, Adam Smith took the opportunity in his third edition (1784) of considerably enlarging the Wealth of Nations; and, among other important additions, he inserted at the end of Book IV. a new chapter, entitled “Conclusion of the Mercantile System.” It is a deeply instructive recital of the extremities of absurdity into which the British legislature had suffered itself to be led blindfold by a false theory and powerful interests. The encouragement of exportation, and the discouragement of importation, were the two great engines by which the mercantile system proposed to enrich every country; but with regard to some particular commodities, it followed an opposite plan: discouraging exports, and encouraging imports. Thus it penalised or prohibited the exportation of machinery, wool, and coal; nor was the living instrument, the artificer, allowed to go free. Two statutes had been passed in the reigns of George I. and II. to prevent any British artificer going abroad under penalty of being declared an alien, and forfeiting all his goods and chattels. “It is unnecessary, I imagine, to observe how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers.” Smith is very sarcastic about regulations whose “laudable motive” was to extend British manufactures, not by improving them, but by depressing those of our neighbours, and by putting an end as much as possible to the troublesome competition of such odious rivals. He then lays down a maxim “so perfectly self-evident, that it would be absurd to attempt to prove it”:—
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
This golden rule was everywhere violated by the mercantile system, which seemed to consider production the ultimate object of all industry. But the worst of all its inventions was the colonial monopoly. “In the system of laws which has been established for the management of our American and West Indian colonies, the interest of the home consumer has been sacrificed to that of the producer with a more extravagant profusion than in all our other commercial regulations.” If there was anything more odious to Adam Smith than a protective duty, it was the discriminating or preferential duty which had been invented for the purpose of tying up the trade between Great Britain and her colonies. Both his “Utopias” were projected for the express purpose of putting an end to a colonial system which he regarded as a dead weight upon both the mother country and her dependencies.
The theory that Smith grew more protectionist as he grew older might be dismissed now that we have considered the lectures, and compared the first and third editions of the finished work. But it is possible that a very desperate casuist might still find one more plea to urge. He might say: granted that Smith remained to the last a theoretical free trader, yet he frankly admitted it to be a Utopian project, and he would not, as a responsible official, have advised its adoption. Did he not accept a Crown appointment under Lord North’s protectionist administration, and did he not spend the last years of his life as a principal instrument in collecting the proceeds of a highly protectionist tariff? Nay, further, did he not take a carnal satisfaction in the leaps and bounds by which the revenue under his charge was at that time advancing? In December 1785 he wrote to William Eden:—