THE IMMORTAL ADAM SMITH, PART 7

To prohibit by a perpetual law the importation of foreign corn and cattle is in reality to enact that the population and industry of the country shall at no time exceed what the rude produce of its own soil can maintain. (Wealth of Nations, IV.ii.22)

Thus far, we have surveyed the first few paragraphs (1 to 16) of Book IV, Chapter 2 of The Wealth of Nations, including what I have christened Adam Smith’s “First” and Second” Laws, the invisible hand metaphor, and the idea of absolute advantage. In the next few paragraphs (17 to 22), Smith turns his attention to food markets and concludes that graziers, butchers, and farmers “can have nothing to fear from the freest importation” of cattle, salt, and corn (WN, IV.ii.20). Why not? Because the costs of transporting such goods from one country to another are high relative to whatever absolute advantage one country may have over another in cattle ranching or salt and corn production:

“If the importation of foreign cattle, for example, were made ever so free, so few could be imported that the grazing trade of Great Britain could be little affected by it. Live cattle are, perhaps, the only commodity of which the transportation is more expensive by sea than by land. By land they carry themselves to market. By sea, not only the cattle, but their food and their water too, must be carried at no small expence and inconveniency.” (WN, IV.ii.17)

“Salt provisions are not only a very bulky commodity, but when compared with fresh meat, they are a commodity both of worse quality, and as they cost more labour and expence, of higher price.” (WN, IV.ii.19)

“Even the free importation of foreign corn could very little affect the interest of the farmers of Great Britain. Corn is a much more bulky commodity than butcher’s meat. A pound of wheat at a penny is as dear as a pound of butcher’s meat at fourpence. The small quantity of foreign corn imported even in times of the greatest scarcity may satisfy our farmers that they can have nothing to fear from the freest importation.” (WN, IV.ii.20)

Next, Smith compares and contrasts two major groups of market participants and draws some generalizations about these two groups. According to the Scottish philosopher-economist, “farmers and country gentlemen … are the least subject to the wretched spirit of monopoly” (WN, IV.ii.21), but “merchants and manufacturers”, by contrast, “seem to have been the original inventors of those restraints upon the importation of foreign goods which secure to them the monopoly of the home-market” (ibid.), or in the immortal words of Adam Smith:

“Country gentlemen and farmers are, to their great honour, of all people, the least subject to the wretched spirit of monopoly…. Farmers and country gentlemen, on the contrary, are generally disposed rather to promote than to obstruct the cultivation and improvement of their neighbours’ farms and estates. They have no secrets such as those of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours and of extending as far as possible any new practice which they have found to be advantageous.” (WN, IV.ii.21)

But even more importantly, Smith provides a proto-Marxist explanation for this stark difference between monopoly-loving “merchants and manufacturers” on the one hand and public-spirited “farmers and country gentlemen” on the other. For Smith, where you stand on the issue of the free trade depends on where you sit, so to speak, i.e. town or country:

“Country gentlemen and farmers, dispersed in different parts of the country, cannot so easily combine as merchants and manufacturers, who, being collected into towns, and accustomed to that exclusive corporation spirit which prevails in them, naturally endeavour to obtain against all their countrymen the same exclusive privilege which they generally possess against the inhabitants of their respective towns.” (ibid.)

I will resume my multi-part series on the “Immortal Adam Smith” in the next day or two. In the meantime, I can’t help but notice the irony of Smith’s analysis here: today, it is the farm lobby that has most-successfully lobbied the Congress for perverse subsidies and obscene quotas and tariffs on imports!