Adam Smith wrote about the absurdities of the mercantile system, like how it sought ot promote some industries yet hinder others.
Chapter 8: Conclusion on the Mercantile System
Shortened by: Juan
1 The mercantile system proposes to enrich every country through two great engines:
- The encouragement of exportation
- The discouragement of importation
But the mercantile system follows an opposite plan with some commodities:
- To discourage exportation
- To encourage importation
It pretends that its ultimate object is always the same -- to enrich the country by an advantageous balance of trade.
- It discourages the exportation of raw materials and the instruments of trade, in order to:
- give our own workers an advantage, and
- enable them to undersell those of other nations in all foreign markets.
- It proposes to increase the quantity and value of most exported goods by restraining the exportation of some other goods.
- It encourages the importation of raw materials so that our own people can:
- work them up more cheaply, and
- prevent a greater and more valuable importation of the manufactured goods.
- I cannot see any encouragement given to the importation of the instruments of trade, at least in our Statute Book.
When manufactures have advanced to a certain greatness, the development of the instruments of trade becomes itself the object of many very important manufactures.
- To encourage the importation of such instruments would be to interfere too much with the interest of those manufactures.
- Such importation has frequently been banned.
- The importation of wool cards, except from Ireland, or when brought in as wreck or prize goods, was banned by 1463.
- This ban was renewed by 1597.
- It has been made perpetual by subsequent laws.
2 The importation of raw materials was sometimes encouraged by:
- bounties, and
- an exemption from the duties to which other goods are subject.
3 The importation of the following was encouraged by an exemption from all duties, if properly entered at the custom house:
- Sheep's wool
- Cotton wool
- Undressed flax
- Most of the dying drugs
- Most of the undressed hides from Ireland or the British colonies
- Sealskins from the British Greenland fishery
- Pig and bar iron from the British colonies
- Several other raw materials
The private interest of our merchants and manufacturers might have extorted these exemptions and other commercial regulations from the legislature.
- They are perfectly just and reasonable.
- If they could be extended to all the other materials of manufacture, consistent with the necessities of the state, the public would certainly be a gainer.
4 In some cases, the avidity of our great manufacturers extended these exemptions much beyond their needed raw materials.
- By 1750, Chap. 46, a small duty of 1 penny the pound was imposed on the importation of foreign brown linen yam.
- Its previous duty was:
- 6 pence the pound on sail yarn
- 12 pence the pound on all French and Dutch yarn
- 640 pence on the hundredweight of all spruce or Muscovia yarn.
- But our manufacturers were not satisfied with this reduction.
- The 1755 Chap. 15 removed this small duty.
The making of linen yarn needs more work than the making of linen cloth from linen yarn.
- To keep one weaver in employment, the following are needed:
- Flax-dressers, and
- Three or four spinners
- More than 4/5 of the work needed for making linen cloth is employed in making linen yarn.
- But our spinners are poor people.
- They are women scattered in different parts of the country, without support or protection.
- Our master manufacturers profit by the sale of the complete work of the weavers, not the spinners.
- It is the interest of our manufacturers to sell the complete work as dear and to buy the the materials as cheap as possible.
- They sell their own goods as dear as possible by extorting from the legislature:
- Bounties on the exportation of their linen
- High duties on the importation of all foreign linen
- A total prohibition of the home consumption of some French linen
- By encouraging the importation of foreign linen yarn, they bring it into competition with the yarn made by our own people.
- Our manufacturers can buy the work of the poor spinners as cheap as possible.
- They are as intent to keep down the wages of their own weavers as they keep down the earnings of the poor spinners.
- They try to:
- raise the price of the complete work, or
- lower the price of the raw materials for their own benefit.
- "It is the industry which is carried on for the benefit of the rich and the powerful that is principally encouraged by our mercantile system."
- The industry which is carried on for the benefit of the poor and the indigent is too often neglected or oppressed.
5 The bounty on linen exportation and the exemption of foreign yarn from import duties were granted only for 15 years.
- They were continued by two different prolongations.
- They will expire with the end of the parliament session immediately following June 24, 1786.
Bounties On The Importation Of Raw Materials
6 The encouragement given by bounties to the importation of manufacturing materials was confined to those imported from our American plantations.
7 The first bounties of this kind were granted at the beginning of the present century on the importation of naval stores from America including:
- Timber fit for masts, yards, and bowsprits
These bounties were extended to those imported into England from Scotland:
- 240 pence the ton on masting-timber
- 1,440 pence the ton on hemp
These bounties continued without variation until they were allowed to expire:
- The bounty on hemp expired on January 1. 1741
- The bounty on masting-timber expired on the end of the parliament session immediately following June 24, 1781.
8 The bounties on the importation of tar, pitch, and turpentine had several alterations.
- the bounty on tar and pitch was 960 pence the ton, and
- the bounty on turpentine was 720 pence the ton.
- The 960 pence tar bounty was confined to those prepared in a particular way,
- the bounty on other good, clean, merchantable tar was reduced to 484 pence the ton,
- the pitch bounty was reduced to 240 pence, and
- the turpentine bounty was reduced to 360 pence the ton.
9 The second bounty on materials importation was granted by the 1748 chap. 30 on the importation of indigo from the British plantations.
- When the plantation indigo was worth 3/4 the price of the best French indigo, this act entitled it to a bounty of 6 pence the pound.
- This bounty was also granted for a limited time.
- It was continued by several prolongations, but was reduced to 4 pence the pound.
- It was allowed to expire with the end of the session of parliament which followed March 25, 1781.
10 The third bounty on materials importation was that granted by the 1764 chap. 26. on the importation of hemp or undressed flax from the British plantations.
- (It was the time when we were beginning to court and quarrel with our American colonies)
- This bounty was granted for 21 years, from the June 24, 1764 to June 24, 1785.
- For the first seven years, it was at the rate of 1,920 pence the ton.
- For the second seven years, it was at 1,440 pence the ton.
- For the third seven years, it was at 960 pence the ton.
- It was not extended to Scotland.
- Scotland's climate is not very fit for hemp (although a few hemp of inferior quality is sometimes raised there).
- Such a bounty on the importation of Scotch flax into England would have been too great a discouragement to the native produce of the southern United Kingdom.
11 The fourth bounty on materials importation was granted by the 1765 chap. 45 on the importation of wood from America.
- It was granted for nine years, from January 1, 1766 to January 1, 1775.
- During the first three years, it was at the rate of 240 pence for every 120 good deals.
- For every load with 50 cubic feet of other squared timber, at the rate of 144 pence.
- For the second three years, it was at the rate of 180 pence for deals.
- For other squared timber at the rate of 96 pence.
- For the third three years, it was at the rate of 120 pence for deals.
- For other squared timber at the rate of 60 pence.
12 The fifth bounty of this kind was granted by the 1769 chap. 38 on the importation of raw silk from the British plantations.
- It was granted for 21 years, from January 1, 1770 to January 1, 1791.
- For the first seven years, it was at the rate of 6,000 pence for every 24,000 pence value.
- For the second seven years, it was at 4,800 pence.
- For the third seven years, it was at 3,600 pence.
- Silk-worm management and silk preparation need so much hand labour.
- Labour is very dear in America, that even this great bounty was not likely to produce any considerable effect.
13 The sixth bounty of this kind was granted by 1771 chap. 50 for the importation of pipe, hogshead, and barrel staves and heading from the British plantations.
- It was granted for nine years, from January 1, 1772 to January 1, 1781.
- For the first three years, it was for a certain amount of each, at the rate of 1,440 pence.
- For the second three years, it was at 960 pence.
- For the third three years, it was at 480 pence.
14 The seventh and last bounty of this kind was granted by the 1779 chap. 37 on the importation of hemp from Ireland.
- It was granted in the same way as the importation of hemp and undressed flax from America.
- It was granted for 21 years, from the June 24, 1779 to June 24, 1800, divided into three periods of seven years each.
- At each of those periods, the rate of the Irish bounty is the same with the rate of the American bounty.
- Unlike the American bounty, it does not extend to the importation of undressed flax.
- It would have been too great a discouragement to the cultivation of flax in Great Britain.
- When this last bounty was granted, the British and Irish legislatures were not in better humour with one another than the British and Americans were.
- It is to be hoped that this boon to Ireland was granted under more fortunate auspices than all those bounties to America.
Next: Export Bans
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