Factor (trade)

“ No extension of foreign trade will immediately increase the amount of value in a country, although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour, which is given in exchange for them, we should have no greater value, if by the discovery of new markets, we obtained double the quantity of foreign goods in exchange for a given quantity of ours. ”

“ This law of International Values is but an extension of the more general law of Value, which we called the Equation of Supply and Demand.270 We have seen that the value of a commodity always so adjusts itself as to bring the demand to the exact level of the supply. But all trade, either between nations or individuals, is an interchange of commodities, in which the things that they respectively have to sell constitute also their means of purchase: the supply brought by the one constitutes his demand for what is brought by the other. ”

“ The first branch of foreign trade, which is the export and import of goods, depends on the money. if one half of the people are imployed, and the whole product and manufacture consumed; more money, by imploying more people, will make an overplus to export: if then the goods [Pg 24] imported ballance the goods exported, a greater addition to the money will imploy yet more people, or the same people before employed to more advantage; which by making a greater, or more valuable export, will make a ballance due. ”

“ So long as foreign trade, and expence kept equal, exchange was at the par: but when a people imported for a greater value, or had other occasions abroad, more than their export, and the expence of foreigners among them would ballance; there was a necessity of sending out the ballance in money or bullion, and the merchant or gentleman who owed, or had occasion for money abroad, to save the trouble, expence and hazard of sending it out, gave so much per cent to another, as the trouble, expence and hazard was [Pg 39] valued at. thus exchange rose above the par, and became a trade. ”

“ The phrase “balance of trade,” then, appears to be an application of a trader’s language in his own business to the larger affairs of nations or rather of the aggregate of individuals in a nation engaged in foreign trade. A trader in his own books sets his sales against his purchases, and the amount by which the former exceed the latter is his trade balance or profit. What is true of the individual, it is assumed, must be true of a nation or of the aggregate of individual traders in a nation engaged in the foreign trade. ”

“ Every country exports and imports the very same things, and in the very same quantity, under the one system as under the other. In a barter system, the trade gravitates to the point at which the sum of the imports exactly exchanges for the sum of the exports: in a money system, it gravitates to the point at which the sum of the imports and the sum of the exports exchange for the same quantity of money. ”

“ The effects, therefore, of a capital employed in such a round-about foreign trade of consumption, are, in every respect, the same as those of one employed in the most direct trade of the same kind, except that the final returns are likely to be still more distant, as they must depend upon the returns of two or three distinct foreign trades. ”

“ The case which we have just examined, is an example in how remarkable a manner every cause which materially influences exports, operates upon the prices of imports. According to the ancient theory of the balance of trade, and to the associations of the generality of what are termed practical men to this day, the sole benefit derived from commerce consists in the exports, and imports are rather an evil than otherwise. ”

“ If, therefore, it be asked what country draws to itself the greatest share of the advantage of any trade it carries on, the answer is, the country for whose productions there is in other countries the greatest demand, and a demand the most susceptible of increase from additional cheapness. In so far as the productions of any country possess this property, the country obtains all foreign commodities at less cost. ”

“ If East-India goods that sell for a 1000 lib. in England, are only worth abroad 800 lib, the duty payed at their entry being return’d, and more given as a draw-back to encourage the export, their vent abroad will be more profitable than in England.
A people may consume more of their own or foreign goods, than the value of the product, manufacture, and profits by trade; but their trade is not disadvantageous, it is their too great consumption: and the too great consumption of the product and manufacture of the country, may be as hurtful as that of foreign goods ”

“ VI.8 But, although international and interlocal trade will never bring about exact uniformity of price levels, it will, to the extent that it exists, produce an adjustment of these levels toward uniformity by regulating in the manner already described the distribution of money. If one commodity enters into international trade, it alone will suffice, though slowly, to act as a regulator of money distribution; for in return for that commodity, money may flow and, as the price level rises or falls, the quantity of that commodity sold may be correspondingly adjusted. ”

“ The causes which bring money into or carry it out of a country through the exchanges, to restore the equilibrium of trade, and which thereby raise its value in some countries and lower it in others, are the very same causes on which the local value of money would depend, if it were never imported except as a merchandize, and never except directly from the mines. ”

“ Capital, in its monetary form of transfer, is as much a commodity as the more usual articles of trade; and when a country lends large sums to another country, the same effects are produced on the rates of exchange for the time being, and more protractedly on the general course of import and export, as would be produced by an equivalent amount of goods exported by the borrowing country. The imports of the borrower, during the period of expenditure of the loans, will increase; and the exports, though they may not diminish, will lose in some measure their previous proportion to the imports. ”

“ Nothing is so complex as the interests of trade. The importation of a commodity may first advance the interest of those at home, who furnish the commodities exported, of which the importation is the return. The importation may be useful for the advancement of manufactures, providing it consist in matter fit for them; yet if the whole manufacture 506produced from it be for home-consumption, the national interest will, on the whole, be hurt by the importation. ”

“ But whatever raises in any country the ordinary rate of profit higher than it otherwise would be, necessarily subjects that country both to an absolute, and to a relative disadvantage in every branch of trade of which she has not the monopoly. ”

“ All allocations of Wealth, from the two primary ones—Wages and Rent—to the least of all that are secondary to either of those two, are made through Trade, and in the course of Trade are measured by comparisons of Value, which is the universal regulator of Trade. And as in Production so in Distribution, for Value measurements Money is the more or less stable yardstick and Money terms the spokesmen. ”

“ It must not however be forgotten, that even in the countries of most active competition, custom also has a considerable share in determining the profits of trade. There is sometimes an idea afloat as to what the profit of an employment should be, which though not adhered to by all the dealers, nor perhaps rigidly by any, still exercises a certain influence over their operations. ”

“ It has indeed been contended, that the great profits which are sometimes made by particular merchants in foreign trade, will elevate the general rate of profits in the country, and that the abstraction of capital from other employments, to partake of the new and beneficial foreign commerce, will raise148 prices generally, and thereby increase profits. ”

“ Foreign trade, then, though highly beneficial to a country, as it increases the amount and variety of the objects on which revenue may be expended, and affords, by the abun155dance and cheapness of commodities, incentives to saving, and to the accumulation of capital, has no tendency to raise the profits of stock, unless the commodities imported be of that description on which the wages of labour are expended. ”

“ The countries not possessing a native supply, could obtain it only by what was called a favourable balance of trade, that is to say, by exporting to a value exceeding that of their imports, and receiving the difference in money. ”

“ Out of worldwide Trade, which, like Trade in narrower circles is effected by means of Money terms in books of account and through the medium of drafts by creditors upon debtors, a subclassification has evolved in Economics of the business-customs type. This subclassification alludes to a situation in Trade between the people in the aggregate of one country and those of the other countries of the world, in which the balance for that country is at any given time on the credit side. Its exports exceed its imports. ”

“ Beside the improvements in arts and machinery, there are various other causes which are constantly operating on the natural course of trade, and which interfere with the equilibrium, and the relative value of money.171 Bounties on exportation or importation, new taxes on commodities, sometimes by their direct, and at other times by their indirect operation, disturb the natural trade of barter, and produce a consequent necessity of importing or exporting money, in order that prices may be accommodated to the natural course of commerce ”

“ VI.13 Our present interest in international trade, however, is mainly directed to its effects on international price levels. Except for the export or import of money to adjust the price levels, international trade is at bottom merely an interchange of goods. Where the price level is not concerned, the money value of the goods sold by a country will exactly equal the value of those bought. ”

“ The excess of the value of imports over that of exports, which is regarded by some as an adverse and alarming symptom in British trade, is in large part readily accounted for on the ground of shipping receipts, insurance returns, interest on capital employed in foreign trade, merchants' profits, and the income derived from foreign investments. ”

“ You will allow that profits will be higher in the one country than the other. You will allow, too, that money may be nearly of the same value in both, if we choose anything else as a measure of value but labour. You will further agree that there might be an extensive trade between such countries. If a man sent a pipe of wine from the potato [271] country, which cost £100 and which might be sold at £110 in the wheat country, you would say that the wine was at a higher value in the country from which it was exported, merely because, in that country, it could command more labour. ”

“ This makes a grand total for business done at present prices (MV + M'V' or PT) of 387 billions, or more than a billion a day. The size of this aggregate will probably astonish most readers. In the absence of actual statistics we have heretofore little realized the colossal proportions of our trade. Probably few persons outside of statisticians would have imagined that our import and export trade, which has filled so large a place in our political vision, sinks into utter insignificance as compared with the internal trade of the country. ”

“ Prices must consequently be lower in all other countries, and higher with us, than before the opening of the new branch of trade; and we therefore obtain the commodities of other countries at a less cost, both as we pay less money for them, and as that money is lower in value. ”

“ A nation may gain where the merchant loses, but wherever the merchant gains, the nation gains equal, and so much more, as the maintenance and wages of the people employ’d and the duty on the goods amounts to. if a ship insur’d is lost, the nation loses, and the merchant loses nothing; but in that case the insurer is the merchant, and loses equal to the nation.
As trade depends on money, so the encrease or decrease of the people depends on trade. ”

“ If those two or three distinct foreign trades should happen to be carried on by two or three distinct merchants, of whom the second buys the goods imported by the first, and the third buys those imported by the second, in order to export them again, each merchant, indeed, will, in this case, receive the returns of his own capital more quickly; but the final returns of the whole capital employed in the trade will be just as slow as ever. ”

“ If England were that country, she might not be able to sell, but she would be able to buy, because importable commodities would not be raised in price. Under these circumstances nothing but money could be exported in return for foreign com217modities, but this is a trade which could not long continue; a nation cannot be exhausted of its money, for after a certain quantity has left it, the value of the remainder will rise, and such a price of commodities will be the consequence, that they will again be capable of being profitably exported. ”

“ Thus trade becomes both import and export. The first step is for the tradesman or his representative to travel about peddling goods, or for an owner of wares or money to offer capital to an itinerant merchant with the object that the latter may divide the profits with him later on. ”