Adam Smith, “Conclusion of the Mercantile System” from “The Wealth of Nations” (Book 4, Chapter 7), 1776

Adam Smith, “Conclusion of the Mercantile System” from “The Wealth of Nations” (Book 4, Chapter 7), 1776

  • The mercantile system encourages exportation but discourages importation but changes things around when it comes to commodities
    • It claims to have the goal of enriching the empire through an advantageous balance of trade to give its own workmen an advantage in underselling in foreign markets & on the other hand, restraining foreign trade in domestic markets
    • It encourages the importation of commodities to be used for manufacture so that their own people can work them up more cheaply & provide a greater value of exportation
    • But we don’t see the importation of the instruments of trade. That might interfere with the manufacture too much – it might make the manufacture have to compete & therefore become less profitable with lower prices
      • That is why this form of importation is prohibited. It wrecks “prize goods”
      • The exportation of the tools of trade aren’t restrained, they’re outright prohibited. Heavy penalties are laid on those who attempt to export capital to foreign lands – fines & prison terms
  • These restrictions in importation & exportation really only harm the interests of merchants & manufacturers.
    • The motives behind the restrictions & bans were ultimately for the benefit of the nation but only through harming our neighbors. They looked to end any “troublesome” competition through a monopoly. The guild system seeks to restrict the number of workers in the industry & the amount of competition to keep prices & profits high. They would hate to see any guild member trained by masters go abroad & help the foreign competition.
  • Consumption is the sole purpose of all production. While the interests of the producer should be looked after, but only insofar as to help the consumer. In the mercantile system, the interests of the consumer are almost always last behind the producer. Production is seen as the most important thing, not consumption
    • Restraining the importation of foreign commodities that compete with our domestic production. But it would help the consumer at the expense of the producer. For all this restriction, the consumer has a higher price that goes to the producer. Plus, the consumer has to pay a tax, which is higher due to a higher price.
    • Our treaty with Portugal has the consumer paying fewer duties on products our own country doesn’t produce but we have to buy it from a distant country. The home country consumer just has to deal with this because this is the only free trade agreement that allows English consumers to buy products on advantageous terms.
  • But the series of laws that set up the mercantile system for the management of our American & West Indian colonies disadvantages the home consumer through commercial regulations. This great empire was built by raising up a nation of consumers – now obliged to buy products from the shops of the different produces all the goods could supply them with.
    • The enhancement in price a monopoly forces burdens the consumer with the expense of maintaining & defending an empire to provide profit for producers.
    • Past wars were fought, costing over £200 million & put us £170 million in debt. All to maintain extraordinary profit of few at the expense of millions of consumers.
    • The whole mercantile system was designed by the producers at the expense of the consumers

Author: knowit68

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