The Simplified Wealth of Nations by Adam Smith -- Book 3, Chapter 4a: How commerce contributes to economic development
Chapter 4a: How commerce contributed to economic development
1 The increase and riches of commercial and manufacturing towns contributed to the improvement and cultivation of their countries in three ways.
2 They encouraged its cultivation and improvement by affording a great and ready market for the rude produce of the country.
This benefit was not even confined to their own countries.
It extended to all countries they dealt with.
To those other countries, those towns afforded a market for their rude or manufactured produce.
They encouraged the industry and improvement of all.
The country of those towns, however, derived the greatest benefit from this market.
Its rude produce was charged with less carriage.
The traders could pay the growers a better price yet make it as cheap to the consumers of distant countries.
3 The wealth acquired by the city people was frequently used to purchase uncultivated land.
Merchants commonly want to become country gentlemen.
They are generally the best of all improvers when they do.
A merchant is used to employing his money in profitable projects.
A country gentleman is used to employing his money in expence and very seldom expects to see his money once he parts with it.
Those different habits naturally affect their temper and disposition in business.
A merchant is commonly a bold undertaker.
A country gentleman a timid undertaker.
The merchant is not afraid to spend a large capital at once to improve his land when there is a prospect of gain.
The country gentleman seldom ventures to employ it in this way.
If he improves at all, it is commonly with what he can save out of his annual revenue and not with a capital.
The operations of merchants are much more spirited than those of country gentlemen.
This can be observed in mercantile towns in an unimproved country.
The habits of order, economy, and attention, which mercantile business naturally forms a merchant, render him much fitter to execute any project of improvement, with profit and success.
4 Commerce and manufactures gradually introduced order, good government, and the liberty and security of individuals, among the people of the countryside.
They lived before in a continual state of war with their neighbours and were servile to their superiors.
This by far was the most important of all their effects, though it has been the least observed.
Mr. Hume was the only writer to notice it.
5 In a country which has neither foreign commerce nor finer manufactures, a great proprietor has nothing to exchange for the excess produce of his lands.
He consumes such excess in rustic hospitality at home.
If this surplus is sufficient to maintain 100 or 1,000 men, he can use it to maintain only 100 or 1,000 men.
He is surrounded with many retainers and dependants at all times
In return, they must obey him, for the same reason that soldiers must obey the prince who pays them.
Before the extension of commerce and manufacture in Europe, the hospitality of the rich and the great, from the sovereign down to the smallest baron, exceeded everything we can think of today.
Westminster Hall was the dining-room of William Rufus.
It was frequently, perhaps, not be too large for his company.
It was reckoned a piece of magnificence in Thomas Becket that he strewed the floor of his hall with clean hay so that the knights and squires who could not get seats might not spoil their fine clothes when they sat down on the floor to eat their dinner.
The great Earl of Warwick entertained 30,000 people every day at his manors.
Though this number may have been exaggerated, it must have been very great.
A hospitality nearly of the same kind was exercised not many years ago in the highlands of Scotland.
It seems to be common in all nations where commerce and manufactures are little known.
Doctor Pococke has seen an Arabian chief dine in the streets of a town where he came to sell his cattle.
He invited all passengers, even common beggars, to sit down with him and partake of his banquet.
6 The occupiers of land were as dependent on the great proprietor as his retainers.
The occupiers who were not serfs were tenants at will.
They paid a rent less than the subsistence the land provided.
A crown, half a crown, a sheep, a lamb, was some years ago in the highlands of Scotland a common rent for lands which maintained a family.
In some places it is so at this day.
Money there at present will not purchase more commodities than in other places.
In a country where the surplus produce of a large estate must be consumed on the estate itself, it will be more convenient for the proprietor that it be consumed at a distance from his house if its consumers were his retainers or menial servants.
He is saved from the embarrassment of too large a company or too large a family.
A tenant at will who has sufficient land to maintain his family in exchange for a quit-rent, is dependent on the proprietor as any servant or retainer.
He must obey him with as little reserve.
Such a proprietor feeds his servants and retainers at his own house and feeds his tenants at their houses.
The subsistence of both is derived from his bounty.
Its continuance depends on his pleasure.
7 The power of the ancient barons was founded on the authority the great proprietor had over their tenants and retainers.
They became the judges in peace and the leaders in war of all who dwelt on their estates.
They could maintain order and execute the law within their respective demesnes.
Each of them could turn the whole force of all the people against the injustice of anyone.
No other persons had sufficient authority to do this.
The king in particular had not.
In those ancient times, the king was the greatest proprietor in his dominions.
Other great proprietors paid certain respects to him for the sake of common defence against their common enemies.
It would have cost the king the same effort to extinguish a civil war to enforce payment of a small debt within his lands by his own authority.
Because all its people were armed and accustomed to stand by one another.
He abandoned the administration of justice to those who were capable of administering it, for the same reason of leaving the command of the militia to those whom that militia would obey.
8 It is a mistake to imagine that those territorial jurisdictions originated from the feudal law.
Several centuries before the feudal law was known in Europe, the great proprietors of land possessed all rights allodially:
The highest civil and criminal jurisdictions
The power of levying troops
Making by-laws for the government of their own people
The authority and jurisdiction of the Saxon lords in England were as great before the Conquest as that of the Norman lords after it.
But the feudal law was not the common law of England until after the conquest.
The most extensive authority and jurisdictions were possessed by the great French lords allodially long before the feudal law was introduced there.
That authority and those jurisdictions all flowed from the state of property and manners described above.
Without remounting to the remote antiquities of the French or English monarchies, we may find in much later times many proofs that such effects must always flow from such causes.
It is not 30 years ago since Mr. Cameron of Lochiel used to exercise the highest criminal jurisdiction over his own people.
He was a gentleman of Lochabar in Scotland
He did not have any legal warrant
He was not a lord of regality, nor a tenant in chief
He was a vassal of the Duke of Argyle and not much a justice of peace.
He is said to have done so with great equity, though without any of the formalities of justice.
It is not improbable that the state of that part of the country at that time made it necessary for him to assume this authority to maintain the public peace.
That gentleman, whose rent never exceeded 500 pounds a year, carried in 1745, 800 of his own people into the rebellion with him.
9 The introduction of the feudal law was an attempt to moderate the authority of the great allodial lords.
It established a regular subordination with a long train of services and duties, from the king down to the smallest proprietor.
During the minority of the proprietor, the rent and the management of his lands, fell into the hands of his immediate superior.
The rent of and the management of the lands of all great proprietors fell into the hands of the king.
The king was charged with the maintenance and education of the pupil.
The king, as guardian, had the right of disposing of him in marriage in a way suitable to his will.
This institution strengthened the authority of the king
It weakened the authority of the great proprietors.
However, it could not do either sufficiently for establishing order and good government in the country.
Because it could not sufficiently alter that state of property and manners from which the disorders arose.
The authority of government still continued to be too weak in the head and too strong in the inferior members.
The excessive strength of the inferior members was the cause of the weakness of the head.
After the institution of feudal subordination, the king was as incapable of restraining the violence of the great lords as before.
They still continued to make war at their own discretion, on one another and on the king.
The open country still continued to be a scene of violence, rapine, and disorder.
10"But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about."
These gradually furnished the great proprietors with something for which they could exchange their surplus produce.
They gained something they could consume themselves without having to share it with tenants or retainers.
"All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."
As soon as they could find a method of consuming the whole value of their rents themselves, they had no need to share them with others.
For a pair of diamond buckles, they exchanged the maintenance of 1,000 men for a year and the authority it gave them.
The buckles, however, were to be all their own.
No other human creature could have any share of them.
Whereas in the more ancient method of expence they must have shared with at least 1,000 people.
This difference was perfectly decisive with the judges.
Thus, for the gratification of the meanest, most sordid and most childish of vanities, they gradually bartered their whole power.
11 In a country with no foreign commerce nor finer manufactures, a man of £10,000 a year can only employ his revenue in maintaining, perhaps, 1,000 families who are all at his command.
Presently in Europe, a man of £10,000 a year can spend his whole revenue without directly maintaining 20 people.
He can spend it without being able to command more than 10 footmen not worth the commanding.
Indirectly, perhaps, he maintains more people than he could have done by the ancient method of expence.
Though the quantity of precious productions he buys is very small, the number of workmen employed in making them must have been very great.
Its great price arises from their wages and the profits of all their immediate employers.
By paying that price, he indirectly pays all those wages and profits.
He thus indirectly contributes to maintain all the workmen and their employers.
He generally contributes a very small proportion to each, perhaps:
10% to a very few,
1% to many,
less than 0.1% or even 0.01% of their whole annual maintenance
Though he contributes to the maintenance of them all, they are all independent of him because they can all be maintained without him.
12 When great proprietors of land spend their rents in maintaining their tenants and retainers, they maintain all their own tenants and retainers.
But when they spend them in maintaining tradesmen and artificers, they all may maintain more people than those maintained by wasteful rustic hospitality.
Each of them taken singly, contributes a very small share to the maintenance of any individual of this greater number.
Each tradesman or artificer derives his subsistence from the employment of a thousand different customers.
He is not absolutely dependent on any one of them, though in some measure obliged to them all.
13 The personal expence of the great proprietors gradually increased in this manner.
It was impossible that the number of their retainers should not as gradually diminish till they were at last dismissed altogether.
They gradually dismissed their unnecessary tenants.
Farms were enlarged, and the occupiers of land, notwithstanding the complaints of depopulation, reduced to the number necessary for cultivating it, according to the imperfect state of cultivation and improvement in those times.
A greater surplus was obtained for the proprietor by:
The removal of unnecessary mouths
Exacting from the farmer the full value of the farm
The merchants and manufacturers soon furnished him with a method of spending on his own person.
The proprietor was desirous to raise his rents above what his lands could afford.
His tenants could agree to this on one condition only:
That they should possess the land until they can recover with profit their expences in improving the land.
The expensive vanity of the landlord made him willing to accept this condition and hence the origin of long leases.
14 Even a tenant at will who pays the full value of the land, is not dependent on the landlord.
The pecuniary advantages they receive from one another are mutual and equal
Such a tenant will expose neither his life nor his fortune in the service of the proprietor.
But if he has a long term lease, he is independent
His landlord must not expect from him any service beyond what is expressly stipulated in the lease or imposed on him by the law.
15 The great proprietors could no longer interrupt justice or disturb the peace of the country when their tenants became independent and their retainers were dismissed.
They became as insignificant as any substantial burgher or tradesman in a city.
Because they sold their birth-right, in the wantonness of plenty, for trinkets and baubles which are not the serious pursuits of men.
Unlike Esau who sold his for a mess of pottage in time of hunger and necessity.
A regular government was established in the country as well as in the city, nobody having sufficient power to disturb its operations in the one any more than in the other.