An Inquiry into the Principles of Political Oeconomy (Vol. 1 of 2) / Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes

by Sir James Steuart

So soon as all foreign trade comes to a stop, without a scheme for recalling it, and that domestic consumption has filled up its place in consuming the work, and giving bread to the industrious, we find ourselves obliged to reason again upon the principles of the first book. The statesman has once more both the producers and the consumers under his care. The consumers can live without employment, the producers cannot. The first seldom have occasion for the statesman’s protection; the last constantly stand in need of it. There is a perpetual fluctuation in the balance between these two classes, from which a multitude of new principles arise; and these render the administration of government infinitely more difficult, and require superior talents in the person who is at the helm. I shall here only point out the most striking effects of the fluctuation and overturn of this new balance, which in the subsequent chapters shall be more fully illustrated.

1mo. In proportion as the consumers become extravagant, the producers become wealthy; and when the former become bankrupts, the latter fill their place.

2do. As the former become frugal and oeconomical, the latter languish; when those begin to hoard, and to adopt a simple life, these are extinguished: all extremes are vicious.

3tio. If the produce of industry consumed in a country, surpass the income of those who do not work, the balance due by the consumers must be paid to the suppliers by a proportional alienation of their funds. This vibration of the balance, gives a very correct idea of what is meant by relative profit and loss. The nation here loses nothing by the change produced.

4to. When, on the other hand, the annual produce of industry consumed in a country, does not amount to the value of the income of those who do not work, the balance of income saved, must either be locked up in chests, made into plate, lent to foreigners, or fairly exported as the price of foreign consumption.

5to. The scales stand even when there is no balance on either side; that is, when the domestic consumption is just equivalent to the annual income of the funds. I do not pretend to decide at present whether this exact equilibrium marks the state of perfection in a country where there is no foreign trade, (of which we are now treating) or whether it be better to have small vibrations between the two scales; but I think I may say, that all subversions of the balance on either side cannot fail to be hurtful, and therefore should be prevented.

Let this suffice at present, upon a subject which shall be more fully treated of afterwards. Let us now fix our attention upon the interests of a people entirely taken up in the prosecution of foreign trade. So long as this spirit prevails, I say, it is the duty of a statesman to encourage frugality, sobriety, and an application to labour in his own people, and to excite in foreign nations a taste for superfluities as much as possible.

While a people are occupied in the prosecution of foreign trade, the mutual relations between the individuals of the state, will not be so intimate as when the producers and consumers live in the same society; such trade implies, and even necessarily creates a chain of foreign dependencies; which work the same effect, as when the mutual dependence subsisted among the citizens. Now the use of dependencies, I have said, is to form a band of society, capable of making the necessitous subsist out of the superfluities of the rich, and to keep mankind in peace and harmony with one another.

Trade, therefore, and foreign communications, form a new kind of society among nations; and consequently render the occupation of a statesman more complex. He must, as before, be attentive to provide food, other necessaries and employment for all his people; but as the foreign connections make these very circumstances depend upon the entertaining a good correspondence with neighbouring nations, he must acquire a proper knowledge of their domestic situation, so as to reconcile, as much as may be, the interests of both parties, by engaging the strangers to furnish articles of the first necessity, when the precious metals cannot be procured; and to accept, in return, the most consumable superfluities which industry can invent. And, last of all, he must inspire his own people with a spirit of emulation in the exercise of frugality, temperance, oeconomy, and an application to labour and ingenuity. If this spirit of emulation is not kept up, another will take place; for emulation is inseparable from the nature of man; and if the citizens are not made to vie with one another, in the practice of moderation, the wealth they must acquire, will soon make them vie with strangers, in luxury and dissipation.

While a spirit of moderation prevails in a trading nation, it may rest assured, that in as far as it excels the nations with whom it corresponds[it corresponds] in this particular, so far will it increase the proportion of its wealth, power, and superiority, over them. These are lawful pursuits among men, when purchased by success in so laudable an emulation.