The notion that money alone is wealth has been long defunct, but it has left many of its progeny behind it. Adam Smith's theory of the benefit of foreign trade was, that it afforded an outlet for the surplus produce of a country, and enabled a portion of the capital of the country to replace itself with a profit. The expression, surplus produce, seems to imply that a country is under some kind of necessity of producing the corn or cloth which it exports; so that the portion which it does not itself consume, if not wanted and consumed elsewhere, would either be produced in sheer waste, or, if it were not produced, the corresponding portion of capital would remain idle, and the mass of productions in the country would be diminished by so much. Either of these suppositions would be entirely erroneous. The country produces an exportable article in excess of its own wants from no inherent necessity, but as the cheapest mode of supplying itself with other things. If prevented from exporting this surplus, it would cease to produce it, and would no longer import anything, being unable to give an equivalent; but the labor and capital which had been employed in producing with a view to exportation would find employment in producing those desirable objects which were previously brought from abroad; or, if some of them could not be produced, in producing substitutes for them. These articles would, of course, be produced at a greater cost than that of the things with which they had previously been purchased from foreign countries. But the value and price of the articles would rise in proportion; and the capital would just as much be replaced, with the ordinary profit, from the returns, as it was when employed in producing for the foreign market. The only losers (after the temporary inconvenience of the change) would be the consumers of the heretofore imported articles, who would be obliged either to do without them, consuming in lieu of them something which they did not like as well, or to pay a higher price for them than before.
If it be said that the capital now employed in foreign [pg 388] trade could not find employment in supplying the home market, I might reply that this is the fallacy of general over-production, discussed in a former chapter; but the thing is in this particular case too evident to require an appeal to any general theory. We not only see that the capital of the merchant would find employment, but we see what employment. There would be employment created, equal to that which would be taken away. Exportation ceasing, importation to an equal value would cease also, and all that part of the income of the country which had been expended in imported commodities would be ready to expend itself on the same things produced at home, or on others instead of them. Commerce is virtually a mode of cheapening production; and in all such cases the consumer is the person ultimately benefited; the dealer, in the end, is sure to get his profit, whether the buyer obtains much or little for his money.
E converso, if for any reason, such as a removal of duties, capital should be withdrawn from the production of articles consumed at home, and imported commodities should entirely take their place, the very importation of the foreign commodities would imply that an increased corresponding production was going on in this country with which to pay for the imported goods. The capital thus thrown out of employment in an industry in which we had no comparative advantage (when competition became free) would necessarily be employed in the industries in which we had an advantage, and would supply—and the transferred capital would be the only means of supplying—the commodities which would be sent abroad to pay for those, which by the supposition are now imported, but were formerly produced at home. The result is a greater productiveness of industry, and so a greater sum from which both labor and capital may be rewarded. Whenever capital, unrestrained by artificial support, leaves one employment as unprofitable, it means that that employment is naturally, and in itself, less productive than the usual run of other industries in the country, and so less profitable to both labor and capital than the majority of other occupations.
§ 5. Indirect benefits of Commerce, Economical and Moral; still greater than the Direct.
Such, then, is the direct economical advantage of foreign trade. But there are, besides, indirect effects, which must be counted as benefits of a high order. (1) One is, the [pg 389] tendency of every extension of the market to improve the processes of production. A country which produces for a larger market than its own can introduce a more extended division of labor, can make greater use of machinery, and is more likely to make inventions and improvements in the processes of production. Whatever causes a greater quantity of anything to be produced in the same place tends to the general increase of the productive powers of the world.[267] There is (2) another consideration, principally applicable to an early stage of industrial advancement. The opening of a foreign trade, by making them acquainted with new objects, or tempting them by the easier acquisition of things which they had not previously thought attainable, sometimes works a sort of industrial revolution in a country whose resources were previously undeveloped for want of energy and ambition in the people; inducing those who were satisfied with scanty comforts and little work to work harder for the gratification of their new tastes, and even to save, and accumulate capital, for the still more complete satisfaction of those tastes at a future time.
But (3) the economical advantages of commerce are surpassed in importance by those of its effects which are intellectual and moral. It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar. Commerce is now, what war once was, the principal source of this contact. Such communication has always been, and is peculiarly in the present age, one of the primary sources of progress. Finally, (4) commerce first taught nations to see with goodwill the wealth and prosperity of one another. Before, the patriot, unless sufficiently advanced in culture to feel the world his country, wished all countries weak, poor, and ill-governed but his own: he now sees in their wealth and [pg 390] progress a direct source of wealth and progress to his own country. It is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it. And it may be said without exaggeration that the great extent and rapid increase of international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race.