Moreover, it is worthy of notice (though it is so after themanner of those who, like Adam Smith, make their strong points inmaintaining paradoxical opinions) that this renowned author, inspite of all his arguments against the existence of a balance oftrade, maintains, nevertheless, the existence of a thing which hecalls the balance between the consumption and production of anation, which, however, when brought to light, means nothing elsebut our actual balance of trade.A nation whose exports and importstolerably well balance each other, may rest assured that, inrespect of its national interchange, it does not consume much morein value than it produces, while a nation which for a series ofyears (as the United States of America have done in recent years)imports larger quantities in value of foreign manufactured goodsthan it exports in value of products of its own, may rest assuredthat, in respect to international interchange, it consumesconsiderably larger quantities in value of foreign goods than itproduces at home.For what else did the crises of France(1786-1789), of Russia (1820-1821), and of the United States since1833, prove?
In concluding this chapter we must be permitted to put a fewquestions to those who consider the whole doctrine of the balanceof trade as a mere exploded fallacy.
How is it that a decidedly and continuously disadvantageousbalance of trade has always and without exception been accompaniedin those countries to whose detriment it existed (with theexception of colonies) by internal commercial crises, revolutionsin prices, financial difficulties, and general bankruptcies, bothin the public institutions of credit, and among the individualmerchants, manufacturers, and agriculturists?
How is it that in those nations which possessed a balance oftrade decidedly in their favour, the opposite appearances havealways been observed, and that commercial crises in the countrieswith which such nations were connected commercially, have onlyaffected such nations detrimentally for periods which passed awayvery quickly?
How is it that since Russia has produced for herself thegreatest part of the manufactured goods which she requires, thebalance of trade has been decidedly and lastingly in her favour,that since that time nothing has been heard of economicalconvulsions in Russia, and that since that time the internalprosperity of that empire has increased year by year?
How is it that in the United States of North America the sameeffects have always resulted from similar causes? How is it that inthe United States of North America, under the large importation ofmanufactured goods which followed the 'Compromise bill,' thebalance of trade was for a series of years so decidedly adverse tothem, and that this appearance was accompanied by such great andcontinuous convulsions in the internal economy of that nation?
How is it that we, at the present moment, see the United Statesso glutted with primitive products of all kinds (cotton, tobacco,cattle, corn, &c.) that the prices of them have fallen everywhereone-half, and that at the same time these states are unable tobalance their exports with their imports, to satisfy their debtcontracted with England, and to put their credit again on soundfooting?
How is it, if no balance of trade exists, or if it does notsignify whether it is in our favour or not, if it is a matter ofindifference whether much or little of the precious metals flows toforeign countries, that England in the case of failures of harvests(the only case where the balance is adverse to her) strives, withfear and trembling, to equalise her exports with her imports, thatshe then carefully estimates every ounce of gold or silver which isimported or exported, that her national bank endeavours mostanxiously to stop the exportation of precious metals and to promotetheir importation -- how is it, we ask, if the balance of trade isan 'exploded fallacy,' that at such a time no English newspaper canbe read wherein this 'exploded fallacy' is not treated as a matterof the most important concern to the nation?
How is it that, in the United States of North America, the samepeople who before the Compromise bill spoke of the balance of tradeas an exploded fallacy, since the Compromise bill cannot ceasespeaking of this exploded fallacy as a matter of the utmostimportance to their country?
How is it, if the nature of things itself always suffices toprovide every country with exactly the quantity of precious metalswhich it requires, that the Bank of England tries to turn thisso-called nature of things in her own favour by limiting hercredits and increasing her rates of discount, and that the Americanbanks are obliged from time to time to suspend their cash paymentstill the imports of the United States are reduced to a tolerablyeven balance with the exports?
NOTES:
1.Wealth of Nations, book IV.chapter iii.
