Bounties on the exportation of any domestic commodity are objectionable both because, like all merca… — Adam Smith

Bounties on the exportation of any domestic commodity are objectionable both because, like all mercantile expedients, they force industry into less advantageous channels, and because any trade that can exist only by means of a bounty is inherently a losing one; the corn export bounty is even worse, since it cannot in any way increase the production of corn, while imposing heavy taxes and slightly depressing the real value of silver and general industry.

By Adam Smith, from La Richesse des nations

Key Arguments

Smith generalizes: 'Bounties upon the exportation of any homemade commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord;'
They are further 'liable, ... to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade.'
He then singles out the corn bounty: 'The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production.'
In demanding the bounty, country gentlemen 'loaded the public revenue with a very considerable expense: they imposed a very heavy tax upon the whole body of the people; but they did not, in any sensible degree, increase the real value of their own commodity;'
Moreover, 'by lowering somewhat the real value of silver, they discouraged, in some degree, the general industry of the country, and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depend upon the general industry of the country.'
He also notes that, unlike merchants and manufacturers, who 'commonly' understand their own interest, the country gentlemen, 'though they acted in imitation of our merchants and manufacturers, ... did not act with that complete comprehension of their own interest, which commonly directs the conduct of those two other orders of people.'

Source Quotes

The real value of corn does not vary with those variations in its average money price, which sometimes occur from one century to another; it is the real value of silver which varies with them. Bounties upon the exportation of any homemade commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord; and, secondly, to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production.

Bounties upon the exportation of any homemade commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord; and, secondly, to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade. The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production. When our country gentlemen, therefore, demanded the establishment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not act with that complete comprehension of their own interest, which commonly directs the conduct of those two other orders of people.

When our country gentlemen, therefore, demanded the establishment of the bounty, though they acted in imitation of our merchants and manufacturers, they did not act with that complete comprehension of their own interest, which commonly directs the conduct of those two other orders of people. They loaded the public revenue with a very considerable expense: they imposed a very heavy tax upon the whole body of the people; but they did not, in any sensible degree, increase the real value of their own commodity; and by lowering somewhat the real value of silver, they discouraged, in some degree, the general industry of the country, and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depend upon the general industry of the country. To encourage the production of any commodity, a bounty upon production, one should imagine, would have a more direct operation than one upon exportation.

Key Concepts

Bounties upon the exportation of any homemade commodity are liable, first, to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord;
and, secondly, to the particular objection of forcing it not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade.
The bounty upon the exportation of corn is liable to this further objection, that it can in no respect promote the raising of that particular commodity of which it was meant to encourage the production.
They loaded the public revenue with a very considerable expense: they imposed a very heavy tax upon the whole body of the people; but they did not, in any sensible degree, increase the real value of their own commodity;
and, instead of advancing, retarded more or less the improvement of their own lands, which necessarily depend upon the general industry of the country.

Context

Near the end of this section of the chapter, Smith summarizes his theoretical and practical objections to export bounties in general and the corn bounty in particular, criticizing landowners’ political choices as contrary to their real interest and to national prosperity.