Adam Smith's Simplified Wealth of Nations, Book 4, Chapter 8c: High Duties vs The Consumption Motive
Chapter 8c: Consumption Motive
37 The exportation of raw materials is subjected to high duties, wherever they are not banned.
38 By the 8th George I. chap. 15., all British exports were rendered duty-free except for:
alum, lead, lead ore, tin, coppers, litharge of lead
wool cards, white woollen cloths, coney hair or wool, hares' wool, hair of all sorts
all kinds of skins
Except for horses, all these are either:
raw materials of manufacture
incomplete manufactures, as materials for further manufacture
instruments of trade
This statute subjects them to all the old duties, the old subsidy, and 1% outwards.
39 The same statute exempted many foreign drugs for dyers' use from all import duties.
However, each of them is afterwards subjected to an export duty.
Our dyers thought it for their interest to:
encourage the importation of those drugs by an exemption from all import duties
add a small discouragement on their exportation
They were probably disappointed in their goal.
The drug importers prevented importing more than what was needed.
The home market became always scantily supplied.
Those drugs were likely to be dearer.
40 That statute enumerated gum senega or gum arabic as among the dyeing drugs.
They could be imported duty-free.
They were subjected to a small poundage export duty.
It was 3 pence the hundredweight on re-exportation.
At that time, France had an exclusive trade to it.
Senegal was the country most productive of those drugs.
The British market could not be easily supplied by the importation from Senegal.
By the 25th Geo. II, gum senega was allowed to be imported from any part of Europe, contrary to the Act of Navigation.
The law did not mean to encourage this trade.
Contrary to the principles of the English mercantile policy, it imposed a duty of 120 pence the hundredweight on such importation.
None of this duty could be drawn back on exportation.
The successful French and Indian War, which began in 1755, gave Great Britain the same exclusive trade to the countries France had before.
Our manufacturers availed of this advantage as soon as peace was made.
They tried to establish a monopoly against gum growers and importers.
By the 5th Geo. III. chap. 37, gum senega exportation from British dominions in Africa was confined to Great Britain.
It was subjected to the same regulations as the enumerated commodities of the British colonies in America and the West Indies.
It was subjected to:
a small import duty of 6 pence the hundredweight
an enormous duty on re-exportation of 360 pence the hundredweight
Our manufacturers intended that the produce of those countries should be imported into Great Britain so that:
they could buy it at their own price
none of it should be exported again
They were disappointed in their goal.
This enormous duty caused huge export smuggling from Great Britain and Africa probably to all European manufacturing countries, especially Holland.
By the 14th Geo. III. chap. 10. this duty on exportation was reduced to 60 pence the hundredweight.
41 The old subsidy [duty] was levied according to the book of rates.
The old subsidy for beaver skins was estimated at 80 pence a piece.
Half of the old subsidy amounted only to 2 pence.
Before 1722, different subsidies and imposts were laid on their importation.
They amounted to 1/5 of 80 pence or 16-pence on each skin.
All of the subsidies, except the old subsidy, were drawn back on exportation.
This duty was thought too high.
In 1722, the export duty was reduced to 30 pence a piece.
It reduced the import duty to 6 pence.
Only half of this was drawn back on exportation.
The French and Indian War put Canada under Great Britain.
Canada was most productive of beaver.
Beaver skins were among the enumerated commodities.
Their exportation from America was confined to Great Britain.
Our manufacturers soon took advantage of this.
In 1764, the import duty on beaver skins was reduced to 1 penny.
But the export duty was raised to 7 pence each skin, without any drawback of the import duty.
By the same law, a export duty of 18 pence the pound was imposed on beaver wool or combs with no change in their import duty.
The import duty then was between 4 pence and 5 pence the piece.
42"Coals may be considered both as a material of manufacture and as an instrument of trade."
Heavy duties were imposed on coal exportation.
At present (1783) it is more than 60 pence the ton, or more than 180 pence the chaldron, Newcastle measure.
This is more than the original value of coal at the coal pit or even at the port for exportation.
43 The exportation of the instruments of trade is commonly restrained by absolute prohibitions.
By the 7th and 8th of William III. chap. 20. sect. 8, the exportation of frames or engines for knitting gloves or stockings is prohibited under the penalty of:
The forfeiture of such frames or engines
half to the king
the other half to the person who shall inform about it
By the 14th Geo. III. chap. 71, the exportation of any utensils used in the cotton, linen, woollen, and silk manufactures is prohibited under the penalty of:
the forfeiture of such utensils
£200 to be paid by the offender
£200 to be paid by the master of the ship which loads such utensils
Ban On The Export Of Skill44 Such heavy penalties were imposed on the exportation of the dead instruments of trade.
The living instrument, the artificer, was also not allowed to go free.
By the 5 Geo. I. chap. 27. any person convicted of enticing any artificer of British manufactures to go overseas to practise or teach his trade is liable:
for the first offence:
a fine not exceeding £100
three months imprisonment until the fine shall be paid
for the second offence:
a fine at the court's discretion
12 months imprisonment until the fine shall be paid
By the 23 Geo. II. chap. 13, this penalty is increased.
For the first offence:
£500 pounds for every artificer enticed
12 months imprisonment until the fine shall be paid
For the second offence:
two years imprisonment until the fine shall be paid.
45 In the first of those two statutes, an enticed artificer, or one proven to go overseas, may give security at the court's discretion that he shall not go overseas.
He may be imprisoned until he can give such security.
46 If any artificer has gone and is teaching his trade overseas, he will be warned by:
any of his Majesty's ministers or consuls abroad
one of his Majesty's secretaries of state
If he does not return within six months after such warning:
He is declared incapable of taking any legacy devised to him within this kingdom.
be executor or administrator to any person
take any lands within this kingdom by descent, device, or purchase
He forfeits to the king all his lands, goods, and chattels.
He is declared an alien and put out of the king's protection.
47 Such regulations are contrary to the artificier's liberty which we seem so very jealous of.
His liberty is so plainly sacrificed to the interests of our merchants and manufacturers.
48 The laudable motive of all these regulations is to extend our own manufactures by the depression of those of all our neighbours.
It ends the troublesome competition of rivals as much as possible.
Our master manufacturers think it reasonable that they should have the monopoly of all their countrymen.
They all try to confine the knowledge of their employments to as few as possible by:
restraining the number of apprentices which can be employed at one time
imposing the necessity of a long apprenticeship in all trades
They are unwilling that any part of this few should go abroad to instruct foreigners.
The Consumption Motive Vs. The Producer Motive
49"Consumption is the sole end and purpose of all production;"
the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer."
"The maxim is so perfectly self-evident that it would be absurd to attempt to prove it."
"But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer;"
"it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce."
50The interest of the home consumer is sacrificed to the interest of the producer in the restraints on the importation of foreign commodities which can compete with our own.
It is for the benefit of the producer that the home consumer is obliged to pay that higher price which this monopoly almost always occasions.
51 Bounties on the exportation of local produce are granted.for the benefit of the producer.
The home-consumer is obliged to pay:
The tax for paying the bounty
The greater tax arising from the higher price of the commodity at home
52 By the famous treaty of commerce with Portugal, high import duties prevent us from buying French wines from France.
Our own climate does not produce wine.
We must buy it at worse quality from distant country [Portugal] than the nearer country [France] so that our producers may export their produce [woollen manufactures] into the distant country on more advantageous terms.
Our consumers also must pay the increased price of those produce [woollen manufactures] at home caused by this forced exportation.
53 In the laws for our American and West Indian colonies, the interest of the home-consumer has been sacrificed to the interest of the producer with more profusion than all our other commercial regulations.
A great empire [America] was established for the sole purpose of raising up a nation of customers [Americans].
They must buy all the goods from the shops of our British producers.
For the sake of that little price increase which this monopoly might afford our producers, the home-consumers have been burdened with the expence of maintaining and defending that empire.
More than £200 million has been spent in the last two wars for this purpose only.
A new debt of more than £170 million has been contracted over all that was spent for the same purpose in former wars.
The interest of this debt alone is greater than:
the total extraordinary profit which it ever pretended to make by the monopoly of the colony trade.
the total value of the colony trade.
the total value of the goods annually exported to the colonies.
54 The contrivers of this whole mercantile system were not the consumers.
The interest of the consumers was entirely neglected.
The contrivers were the producers.
Their interest was so carefully attended to.
Among producers, our merchants and manufacturers were the principal architects.
In the mercantile regulations in this chapter, the interest of our manufacturers was most attended to.
The interest of other sets of producers, not so much of the consumers, was sacrificed to it.