Chapter 3d, Part 2: France & England; Balance of Produce & Consumption41
Because of these maxims, the commerce between France and England has been subjected to so many discouragements and restraints. 42
The very same circumstances which would have rendered free commerce so advantageous to both, have created the principal obstructions to that commerce.
- Being neighbours, they are necessarily enemies.
- The wealth and power of each becomes more formidable to the other.
- What increases the national friendship only inflames national animosity.
- They are both rich and industrious nations.
- The merchants and manufacturers of each dread the competition of the other.
- The violence of national animosity excites, inflames, and is inflamed by mercantile jealousy.
- The traders of both countries announced falsely the certain ruin of each, from that unfavourable balance of trade which they pretend would be caused by free trade.
All European commercial countries were told by the pretended doctors of this system of the approaching ruin from an unfavourable balance of trade. 44
There is another balance which is very different from the balance of trade.
- It creates the prosperity or decay of every nation as it is either favourable or unfavourable.
- This is the balance of the annual produce and consumption.
If the exchangeable value of the annual produce exceeds the value of the annual consumption, the society's capital must annually increase in proportion to this excess.
- In this case, the society lives within its revenue.
- What is annually saved out of its revenue is naturally added to its capital.
- Its savings are employed to further increase the annual produce.
- On the contrary, if the exchangeable value of the annual produce falls short of the annual consumption, the society's capital must annually decay in proportion to this deficiency.
- In this case, the society's expence exceeds its revenue and encroaches on its capital.
- Its capital must decay and together with it the exchangeable value of the annual produce of its industry.
This balance of produce and consumption is entirely different from the balance of trade
- It might take place in a nation which:
- has no foreign trade
- was entirely separated from all the world
- It may take place in the whole planet with its wealth, population, and improvement gradually increasing or decaying.
The balance of produce and consumption may be constantly in favour of a nation, even though the balance of trade
is generally against it.
- A nation may import a greater value than it exports for half a century.
- The gold and silver which comes into it during an this time may be all immediately sent out of it.
- Its circulating coin may gradually decay.
- Paper money may substitute in its place.
- It may even have rising foreign debts.
- Yet its real wealth, the exchangeable value of the annual produce of its lands and labour, may increase in a much greater proportion.
- The state of our North American colonies and the trade they carried on with Great Britain serves as a proof of this.
Next: Chapter 4: Drawbacks