goods somewhere by which she may get £5,000 for this purpose. If France gives her a monopoly of the cloth market, she will readily export cloth for this purpose; but if the trade is free, the competition of other countries may prevent the natural price of cloth in England from being sufficiently low to enable her to get £5,000 by the sale of cloth, and to obtain the usual profits by such an employment of her stock, The industry of England must be employed, then, on some other commodity; but there may be none of her productions which, at the existing value of money, she can afford to sell at the natural price of other countries. What is the consequence? The wine drinkers of England are still willing to give £5,000 for their wine, and consequently £5,000 in money is exported to France for that purpose. By this exportation of money its value is raised in England, and lowered in other countries; and with it the natural price of all commodities produced by British industry is also lowered. The advance in the value of money is the same thing as the decline in the price of commodities. To obtain £5,000, British commodities may now be exported; for at their reduced natural price they may now enter into competition with the goods of other countries. More goods are sold, however, at the low prices to obtain the £5,000 required, which, when obtained, will not procure the same quantity of wine; because, whilst the diminution of money in England has lowered the natural price of goods there, the increase of money in France has raised the natural price of goods and wine in France. Less wine, then, will be imported into England, in exchange for its commodities, when the trade is perfectly free, than when she is peculiarly favoured by commercial treaties. The rate of profits, however, will not have varied; money will have altered in relative value in the two countries, and the advantage gained by France will be the obtaining a greater quantity of English, in exchange for a given quantity of

market price labor no affected just more fluctuat

French, goods, while the loss sustained by England will consist in obtaining a smaller quantity of French goods in exchange for a given quantity of those of England.

Foreign trade, then, whether fettered, encouraged, or free, will always continue, whatever may be the comparative difficulty of production in different countries; but it can only be regulated by altering the natural price, not the natural value, at which commodities can be produced in those countries, and that is effected by altering the distribution of the precious metals. This explanation confirms the opinion which I have elsewhere given, that there is not a tax, a bounty, or a prohibition, on the importation or exportation of commodities, which does not occasion a different distribution of the precious metals, and which does not, therefore, every where alter both the natural and the market price of commodities.

It is evident, then, that the trade with a colony may be so regulated, that it shall at the same time be less beneficial to the colony, and more beneficial to the mother country, than a perfectly free trade. As it is disadvantageous to a single consumer to be restricted in his dealings to one particular shop, so is it disadvantageous for a nation of consumers to be obliged to purchase of one particular country. If the shop or the country afforded the goods required the cheapest, they would be secure of selling them without any such exclusive privilege; and if they did not sell cheaper, the general interest would require that they should not be encouraged to continue a trade which they could not carry on at an equal advantage with others. The shop, or the selling country, might lose by the change of employments, but the general benefit is never so fully secured, as by the most productive distribution of the general capital; that is to say, by an universally free trade.

An increase in the cost of production of a commodity, if it be an article of the first necessity, will not necessarily

diminish its consumption; for although the general power of the purchasers to consume, is diminished by the rise of any one commodity, yet they may relinquish the consumption of some other commodity whose cost of production has not risen. In that case, the quantity supplied and the quantity demanded, will be the same as before; the cost of production only will have increased, and yet the price will rise, and must rise, to place the profits of the producer of the enhanced commodity on a level with the profits derived from other trades.

M. Say' acknowledges that the cost of production is the foundation of price, and yet in various parts of his book he maintains that price is regulated by the proportion which demand bears to supply. The real and ultimate regulator of the relative value of any two commodities, is the cost of their production, and not the respective quantities which may be produced, nor the competition amongst the purchasers.

§ 121. According to Adam Smith, the colony trade, by being one in which British capital only can be employed, has raised the rate of profits of all other trades; and as, in his opinion, high profits, as well as high wages, raise the prices of commodities, the monopoly of the colony trade has been, he thinks, injurious to the mother country; as it has diminished her power of selling manufactured commodities as cheap as other countries. He says, that "in consequence of the monopoly, the increase of the colony trade has not so much occasioned an addition to the trade which Great Britain had before, as a total change in its direction. Secondly, this monopoly has necessarily contributed to keep up the rate of profit in all the different branches of British trade, higher than it naturally would have been, had all nations been allowed a free trade to the British colonies.” 2 "But whatever raises in any country

1 1 [See quotations, p. 374, etc.] 2 [Bk. iv., c. vii., p. 246 b.]

the ordinary rate of profit higher than it otherwise would be, necessarily subjects that country both to an absolute, and to a relative disadvantage in every branch of trade of which she has not the monopoly. It subjects her to an absolute disadvantage, because in such branches of trade, her merchants cannot get this greater profit without selling dearer than they otherwise would do, both the goods of foreign countries which they import into their own, and the goods of their own country which they export to foreign countries. Their own country must both buy dearer and sell dearer; must both buy less and sell less; must both enjoy less and produce less than she otherwise would do."1

"Our merchants frequently complain of the high wages of British labour as the cause of their manufactures being undersold in foreign markets; but they are silent about the high profits of stock. They complain of the extravagant gain of other people, but they say nothing of their own. The high profits of British stock, however, may contribute towards raising the price of British manufacture in many cases as much, and in some perhaps more, than the high wages of British labour.""

I allow that the monopoly of the colony trade will change, and often prejudicially, the direction of capital; but from what I have already said on the subject of profits, it will be seen that any change from one foreign trade to another, or from home to foreign trade, cannot, in my opinion, affect the rate of profits. The injury suffered will be what I have just described; there will be a worse distribution of the general capital and industry, and, therefore, less will be produced. The natural price of commodities will be raised, and, therefore, though the consumer will be able to purchase to the same money value, he will obtain a less quantity of commodities. It will be 1 [Bk. iv., c. vii., p. 246 b.] * [Bk. iv., c. vii., p. 247 a.] . [Cf. § 83, note, p. 211.]

.

seen too, that if it even had the effect of raising profits, it would not occasion the least alteration in prices; prices being regulated neither by wages nor profits.

And does not Adam Smith agree in this opinion, when he says, that "the prices of commodities, or the value of gold and silver as compared with commodities, depends upon the proportion between the quantity of labour which is necessary in order to bring a certain quantity of gold and silver to market, and that which is necessary to bring thither a certain quantity of any other sort of goods ?' That quantity will not be affected, whether profits be high or low, or wages low or high. How then can prices be raised by high profits?