Simplified Wealth of Nations by Adam Smith, Book 4, Chapter 5c: Production Bounties -- Herring Bounty
Chapter 5c: Production Bounties -- Herring Bounty
A bounty on production would more directly encourage the production of any commodity than an export bounty.
- It would impose only one tax on the people which is paid as the bounty.
- It would lower the price of the commodity in the home market.
- Instead of imposing a second tax on the people, it might at least repay them for the first tax they paid.
- Production bounties have been very rarely granted.
- The prejudices established by the commercial system taught us to believe that national wealth arises more from exportation than from production.
- Exportation has thus been more favoured as the more immediate means of bringing money into the country.
- Production bounties were found to be more liable to frauds than bounties on exportation.
- I do not know how far this is true.
- Export bounties are known to have been abused to many frauds.
- Merchants and manufacturers were the great inventors of all these expedients.
- They do not want the home market to be overstocked with their goods.
- A production bounty might create this oversupply.
- An export bounty prevents this oversupply by:
- sending the surplus abroad and
- keeping up the price of what remains at home
- Of all the expedients of the mercantile system, export bounties are their favorite.
- I knew undertakers who agree privately among themselves to give a bounty out of their own pockets to export their goods.
- This expedient succeeded so well.
- It more than doubled the price of their goods in the home market despite a very big increase in production.
- The bounty on corn production must have been wonderfully different if it lowered the money price of corn.
Production bounties have been granted sometimes.
- The tonnage bounties given to the white-herring and whale-fisheries are examples of production bounties.
- They render those goods cheaper at home than normal.
- In other respects, they have the same effects as export bounties.
- They cause some of the country's capital to be employed in bringing goods which do not repay their cost.
Those tonnage bounties do not contribute to the nation's opulence.
- However, it is perhaps thought to contribute to the nation's defence by increasing the number of its sailors and shipping.
- This could be done through such bounties at a much smaller cost than by keeping up a big navy.
Despite these favourable allegations, I believe the legislature was very grossly imposed on, because of the following.
- 29 The herring buss bounty seems too large.
- 30 From the start of the winter fishing in 1771 to its end in 1781, the tonnage bounty on the herring buss fishery was 360 pence the ton.
- During these 11 years, Scotland's herring buss fishery caught a total of 378,347 barrels.
- The herrings caught and cured at sea are called sea sticks.
- They must be repacked with salt to convert them to merchantable herrings.
- Three barrels of sea sticks are usually repacked into two barrels of merchantable herrings.
- During these 11 years:
- only 252,231.33 barrels of merchantable herrings were caught. [378,347 * 2/3]
- the tonnage bounties paid was 37,311,252 pence
- This equated to:
- 98.25 pence on every barrel of sea sticks, or [37,311,252 / 378,347]
- 147.75 pence on every barrel of merchantable herrings [37,311,252 / 252,231]
Scotch and foreign salt are used to cure these herrings.
- Both salts are delivered duty-free to the fish-curers.
- The excise duty on Scotch salt is presently 18 pence.
- The excise duty on foreign salt is 120 pence the bushel.
- A barrel of herrings requires about 1.25 bushels of foreign salt or 2 bushels of Scotch salt.
- If the herrings are to be exported, this duty is not paid.
- If they are to be consumed at home, only 12 pence per barrel is paid, regardless of the salt used.
- The 12 pence was based on the excise duty on Scotch salt.
- In Scotland, foreign salt is mostly used for the curing of fish.
- From April 5, 1771 to the April 5, 1782, 936,974 bushels of foreign salt was imported, at 84 pounds the bushel.
- 168,226 barrels of Scotch salt were delivered to the fish-curers, at 56 pounds the bushel.
- It appears that foreign salt is mainly used in the fisheries.
- There is a bounty of 32 pence on every barrel of herrings exported.
- More than 2/3 of the buss-caught herrings are exported.
- Put all these together and you will find that, during these 11 years, buss-caught herrings cured with Scotch salt and exported, cost government 215.75 pence per barrel.
- When entered for home consumption, it cost the government 171.75 pence.
- Every barrel cured with foreign salt and exported has cost government 329.75 pence.
- When entered for home consumption, it cost the government 285.75 pence.
- The price of a barrel of good merchantable herrings is about a guinea at an average.
- 32 The bounty to the white-herring fishery is a tonnage bounty.
- It is proportioned to the burden of the ship, not to her diligence or success in the fishery.
- Vessels too commonly fit out for catching the bounty, not the fish.
- In 1759, the bounty was at 600 pence the ton.
- The whole Scotland buss fishery brought in only four barrels of sea sticks.
- In that year, each barrel of sea sticks cost the government 27,300 pence in bounties.
- Each barrel of merchantable herrings cost 38,250 pence.
- 33 The tonnage bounty is given to the fishing of white-herrings, which is not well adapted to Scotland's situation.
A Herring buss (ship)
- This mode of fishing was borrowed from Holland.
- It used busses or decked vessels from 20 to 80 tons burden.
- Holland lies far from where herrings abound.
- They can only fish them from decked vessels which can carry water and provisions for a distant voyage.
- But the Hebrides, the islands of Shetland, and the northern coasts of Scotland, where herrings abound, are intersected by arms of the sea.
- These arms run into the land and are called sea-lochs.
- The herrings live in these sea-lochs in certain seasons.
- I am assured that the visits of herrings and other fishes are not regular and constant.
- A boat fishery seems the best mode adapted to Scotland's situation.
- In boat fishery, the fishers carry the herrings on shore to be cured or consumed fresh as fast as they are taken.
- But the great encouragement of a bounty of 360 pence the ton to the buss fishery is necessarily a discouragement to the boat fishery.
- The boat fishery has no bounty.
- It cannot bring its cured fish to market on the same terms as the buss fishery.
- Before the establishment of the buss bounty, the boat fishery was very big.
- It employed the same number of seamen as the buss fishery presently employs.
- The boat fishery is almost entirely gone now.
- I do not know exactly how large the boat fishery was before the bounty because no account was taken by the customs officers.
- 34 In many parts of Scotland during certain seasons, herrings make a big part of the people's food.
- A bounty which lowered their price in the home market might contribute much to the relief of many people.
- But the herring buss bounty contributes to no such good purpose.
- It has ruined the boat fishery which was best adapted to supply the home market.
- The additional bounty of 32 pence the barrel on exportation carries more than 2/3 of the produce of the buss fishery abroad.
- Before the establishment of the buss bounty 30-40 years ago, the common price of white herrings was 180 pence the barrel.
- Before the boat fishery was entirely ruined 10-15 years ago, the price was from 204-240 pence the barrel.
- In the last five years, it has been at an average of 300 pence the barrel.
- This high price may have been due to the real scarcity of the herrings on the coast of Scotland.
- I must observe too that:
- The cask or barrel is usually sold with the herrings.
- The price of casks has doubled from 36 pence to 72 pence since the start of the American war.
- These former prices are not uniform and consistent.
- I was assured that more than 50 years ago, a guinea or 252 pence was the usual price of a barrel of good merchantable herrings.
- This may still be its average price.
- I think all accounts agree that the price was not lowered in the home market in consequence of the buss bounty.
When the undertakers of fisheries sell their fish at a higher price because of such bounties, we might expect that their profits would be very great.
- I believe their profits are generally very small.
- "The usual effect of such bounties is to encourage rash undertakers to adventure in a business which they do not understand."
- What they lose by their own negligence more than compensates what they can gain by the government's liberality.
- In 1750, the 23rd George II chap. 24. created a joint-stock company.
- Before that, the same act gave the bounty of 360 pence the ton to encourage the white herring fishery.
- This company had a capital of £500,000.
- Its subscribers were entitled to £3 a year for 14 years, for every £100 they subscribed and paid in.
- This £3 was to be paid by the receiver-general of the customs in equal half-yearly payments.
- This was above all the other encouragements:
- the tonnage bounty,
- the export bounty of 32 pence the barrel, and
- the delivery of British and foreign salt duty free.
- Besides this big company, the residence of its governor and directors was to be in London.
- It was declared lawful to form different fishing-chambers in all the kingdom's outports provided:
- not less than £10,000 was subscribed into the capital of each chamber, and
- the amount subscribed was to be managed at its own risk, profit, and loss.
- The same annuity and the same encouragements of the big company were given to those inferior chambers.
- The subscription of the big company was soon filled up.
- Several fishing-chambers were formed.
- Despite all these encouragements, almost all those big and small companies lost all or most of their capitals.
- The white-herring fishery is now almost entirely done by private adventurers.
If any manufacture was necessary for national defence, it might not always be prudent to depend on our neighbours for its supply.
- If such manufacture could not be supported at home, it might be reasonable to tax all other industries to support it.
- The export bounties on British-made sail-cloth and gunpowder may perhaps be vindicated on this principle.
It can very seldom be reasonable to tax the people's industry to support some class of manufacturers.
- Yet in the wantonness of great prosperity, the public enjoys a greater revenue than it knows what to do with it.
- Giving such bounties to their favourite manufactures may be as natural as to incur any other idle expence.
- In public and private expences, great wealth may frequently be admitted as an apology for great folly.
- But it would be absurd to continue such profusion in times of difficulty and distress.
38 A bounty is sometimes no more than a drawback.
- A drawback is not liable to the same objections as a proper bounty.
- For example, the bounty on exported refined sugar may be considered as a drawback of the duties on brown and muscovado sugars from which it is made.
- The bounty on exported processed silk may be considered a drawback of the duties on imported raw silk.
- The bounty on exported gunpowder may be considered a drawback of the duties on imported brimstone and saltpetre.
- In the language of the customs, those allowances are only called drawbacks when they are given to goods exported in the same form as they were imported.
- When that form has been altered as to come under a new denomination, they are called bounties.
39 Premiums given by the public to artists and manufacturers who excel in their occupations are not liable to the same objections as bounties.
- Premiums keep up the emulation of those workers by encouraging extraordinary dexterity and ingenuity.
- Premiums are not big enough to turn more of the country's capital towards any employment than normal.
- They do not overturn the natural balance of employments.
- They render the work done in each employment as perfect and complete as possible.
- The cost of premiums is very trifling.
- The cost of bounties is very great.
- The corn bounty alone has cost the public more than £300,000 in one year.
Next: Chapter 5d: Digression on the Wheat Trade