Adam Smith's Simplified Wealth of Nations, Book 4, Chapter 8: Conclusion on Mercantilism

Chapter 8a: Conclusion on Mercantilism

1 The mercantile system proposes to enrich every country through two great engines:

  1. The encouragement of exportation
  2. The discouragement of importation

But the mercantile system follows an opposite plan with some commodities:

  1. To discourage exportation
  2. To encourage importation

It pretends that its ultimate object is always the same -- to enrich the country by an advantageous balance of trade.

When manufactures have advanced to a certain greatness, the development of the instruments of trade becomes itself the object of many very important manufactures.

2 The importation of raw materials was sometimes encouraged by:

3 The importation of the following was encouraged by an exemption from all duties, if properly entered at the custom house:

The private interest of our merchants and manufacturers might have extorted these exemptions and other commercial regulations from the legislature.

4 In some cases, the avidity of our great manufacturers extended these exemptions much beyond their needed raw materials.

  • But our manufacturers were not satisfied with this reduction.
  • The making of linen yarn needs more work than the making of linen cloth from linen yarn.
  • More than 4/5 of the work needed for making linen cloth is employed in making linen yarn.
  • But our spinners are poor people.
  • Our master manufacturers profit by the sale of the complete work of the weavers, not the spinners.
  • By encouraging the importation of foreign linen yarn, they bring it into competition with the yarn made by our own people.
  • 5 The bounty on linen exportation and the exemption of foreign yarn from import duties were granted only for 15 years.

    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:

    These bounties were extended to those imported into England from Scotland: These bounties continued without variation until they were allowed to expire:

    8 The bounties on the importation of tar, pitch, and turpentine had several alterations.

  • Afterwards:
  • 9 The second bounty on materials importation was granted by the 1748 chap. 30 on the importation of indigo from the British plantations.

    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.

    11 The fourth bounty on materials importation was granted by the 1765 chap. 45 on the importation of wood from America.

    12 The fifth bounty of this kind was granted by the 1769 chap. 38 on the importation of raw silk from the British plantations.

  • Silk-worm management and silk preparation need so much hand labour.
  • 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.

    14 The seventh and last bounty of this kind was granted by the 1779 chap. 37 on the importation of hemp from Ireland.

  • 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.

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    Next: Chapter 8b: Export Bans