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duties and taxes, and by the profusion or scarcity of paper in eirculation in these countries respectively.

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If, for instance, there subsist between two countries a mutual prohibition of the produce and manufactures of each other, it is evident that the prices of the one may be out of all proportion to those of the other. If Britain were to prohibit the wines of France, and France in return to prohibit the hardware of England, as many pots and pans might, after a short period, be procured in England for a small quantity of claret, as would in France exchange for a very large quantity of the same wine. Should the exportation of silver be prohibited from South America, and the prohibition be rendered effectual, an ounce of silver might come to be of as much value in Europe, as a pound of it would be in that country.

Duties on foreign commodities have a similar effect with prohibition, though in a less degree, enhancing the price of the article on which they are levied, to the consumer, and thereby diminishing the extent of that consumption. If Britain were to lay a duty of fifty per cent. on the importation of all foreign commodities, it is evident that no merchant could, without loss, import any article into Britain to be exchanged for gold and silver, unless such article were at least fifty per cent. dearer in Britain than in the country from which it was imported; and therefore that no gold and silver would be exported from Britain, until the value of these metals had in Britain sunk so low as to be at most only two thirds of their value in respect to some other commodity in some other country.

Duties on importation therefore tend to diminish the value of the precious metals in the home market and consequently to raise the money price of labor there.

Taxes such as those of the excise, which tend to increase the money price of the home produce (if not drawn back on exportation of that produce) affect the value of the precious metals in two different and opposite ways: 1st. By increasing the price of other commodities in proportion to that of gold and silver in the homé market, they tend to depress the value of these metals, and consequently to raise the money price of labor. And 2dly. By increasing the value of the home produce in proportion to that of the precious metals, the exportation of the latter is encouraged instead of the former, which must necessarily tend to raise the value of gold and silver in the home market, and thereby to diminish the money rate of wages.

In countries where penal laws exist against melting the current coin, the multiplication of paper currency may have a temporary, but it can hardly have a very permanent, influence in depreciating

the precious metals. Its effects on the price of modities shall be treated of hereaftery, portapos 5291 at nousiva 25X13 0116 25 com15-9090 lada 91sd), pusseal not.I CHAP, IV. Of the Effects of Taxes • nouidudorq

IT rarely happens that the government of any country can levy any tax, which shall ultimately be paid by the people of an independent foreign country, because few countries produce exclusively any particular commodity, for which no convenient substitute can be found in another. The Chinese exact as tax, or duty, Ton the exportation of tea, and if such tax be kept sufficiently low, it may fall entirely on the consumer; but if pushed too far, more might be lost by the diminution of the demand, than would be gained by the augmentation of the duty. Till of date, Britain enjoyed the monopoly of plumbago, or black lead; on the exportation of which a duty might have been levied, which must have been altogether borne by foreign countries. Our wool is said to have been in great demand on the continent, on account of its superior softness; so much so, that it would have borne a duty on exportation; but with the short-sighted monopolizing spirit which has ever actuated all mercantile governments, we have rather chosen to retain our wool at home, to the evident discouragement of our agriculture. While foreigners, by our ill-judged policy, have been stimulated to make exertions for the improvement of their breeds of sheep, which have not failed to be ultimately successful. The objects, however, on which a duty can be beneficially levied on exportation are generally few in number, and inconsiderable in total value.

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All such taxes as cannot, by means of a monopoly, be levied on foreigners, must of course fall on the people of the country in which they are levied, and they must be paid out of some one or more of the three sources of income; the wages of labor, the rent of land, or the profits of stock. Such as fall on the wages of labor, those paid either directly or indirectly by the laborer, and which he cannot get back by a proportionate increase of his wages, render him less able to support a family, and consequently discourage population: they also render him less industrious, by diminishing the reward of industry. They consequently strike at the very root of the prosperity, the happiness, and the strength of the State; for the prosperity of a state is alone constituted by its production exceeding its consumption, and whatever tends to discourage the industry of its inhabitants, must of course, in a like proportion, diminish the produce of their labor. Those taxes, on the other hand, which fall on the rent of land, or on the profits of stock, have no such direct tendency to diminish the population, or to discourage the industry of the country, because the landed proprietor generally spends the whole or nearly the whole of his

income, in a manner as little ber eficial to the State, as if it were paid from the public treasury, and for the public service. A part, and usually a part only, of the income of the capitalist is spent in the same manner as that of the lauded proprietor, and the rest is commonly appropriated to the augmentation of the capital of the individual and of the State, to diminish which would no doubt be attended with the most serious injury to the community at large. And at first sight it may appear, that such taxes as fall on the profits of stock would have an inevitable tendency to obstruct the accumulation of capital: yet experience teaches us that capitalists generally regulate their rate of living so much by the rate of their profits, that that part of them which is usually appropriated to the augmentation of their capital, is little affected thereby. Before the revolution in Holland, the common interest of money was from two to two and a half per cent.; and the rate of mercantile profit might probably be nearly double that of the interest of money. At Cadiz, during the same period, it was generally supposed that the mercantile rate of profit was not less than twenty per cent. per annum; yet the accumulation of wealth was hardly less rapid at that time at Amsterdam than at Cadiz. In the former city, however, a merchant who possessed a hundred thousand pounds capital, did not live more expensively than one who possessed only a tenth part of that wealth did in the latter.

Taxes which fall on the rent of land exclusively, must uuquestionably discourage the improvement of the soil; the most stable, and generally one of the most beneficial improvements which can be effected in any State; but if such taxes be counteracted by equal ones on the profits of stock employed in every other way, much, if not all, their bad effects will be obviated. It is true that all taxes on the profits of stock excite men to remove their capital to other countries, where their burthens may be lighter, and their profits, and consequent enjoyments, greater; but as it is impossible so to regulate taxes, as to do away all the evils attending a great public expenditure, so the utmost that human wisdom can effect where such an expenditure is necessary, is to supply it in the least onerous way possible. And when we consider the great disparity in the rates of profit which subsisted at the same time in places at so moderate a distance from each other as Cadiz and Amsterdam, it will lessen the apprehension of any great proportion of capital being removed from one country to another, in consequence of taxes affecting the profits of stock. A small additional security to property will, in the opinion of most men, compensate a very considerable deficiency in the profits arising from it.

Taxes, when not equally levied on every article of consumption, tend to derange the relative proportions of the prices of different articles of consumption, and thereby to give an undue preference

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to one above another, the consequence of which is, to turn some part, at least, of the industry of the country from the employments most beneficial to the State, into such as are less so; for the capitalist will always employ his wealth, and the laborer his work, in such manners, as they respectively may judge most for their individual advantage, and the advantage of the aggregate individuals of the society, forms the advantage of the State. Whatever regulas tion, therefore, drives, either the capital or the labor of individuals from that channel in which they would naturally flow, must turn them into some other, which these individuals, at least, consider less profitable, and which will probably be found to be so. It is hardly possible so to adjust taxes on consumable commodities of home produce as that they shall not be liable, both to the objection of turning the industry of the country into occupations less advantageous than those in which it would naturally have been employed, but also of falling with greater or less weight on the laboring classes of society; even the tax on carriages, which appears to affect the laboring classes as little as any one can do, still must in a certain (though small) degree diminish the general rate of wages, by preventing so many people from being employed in making carriages as there otherwise would be. But where a tax affects the laborer, (and it is hardly possible to imagine one, which shall not either mediately or immediately affect him) one of three things must take place; he must either enjoy so much less of the conveniences of life as he contributes towards the tax, or he must raise the price of his labor in proportion to his contribution, or lastly (and which is most commonly the case,) he must furnish to his contribution, partly by the resignation of some of his conveniences, and partly by a rise of his wages. So far as his contribution is furnished by the former expedient, so far the general prosperity of the country is injured, so far industry is discouraged by the diminu tion of its reward; so far the incitements to marriage, and the means of supporting a family are taken from the laborer, and so far the population of the country is consequently discouraged and its means of defence against a foreign enemy reduced. On the other hand, so far as the laborer can remove the burthen of the tax from himself, and by a proportionate advance of wages, transfer it to the consumer, the inconvenience or injury to the State is comparatively small. The produce of almost all taxation is employed exclusively in the maintenance of unproductive labor, and consequently its direct tendency is to impoverish the State; but so far as the wages of labor have been augmented in due proportion to increased taxation, the burthen will fall mostly, if not wholly, on, the rent of land and the profits of stock; and as a great proportion of these are commonly expended not only on unproductive labor, but on such as gives a fashion to expense and dissipation, such

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taxes may in some cases have rather a good than a bad effect, they may tend on the one hand more to repress luxury, than they do on the other to impoverish the State.

While all foreign commodities are subjected to duties in exact proportion to those levied, directly or indirectly, on home produce and manufactures, the price of every article will retain its natural proportion to that of every other; and if the wages of labor have, at the same time, risen precisely in proportion to the burthens laid, directly or indirectly, on the labor, the price of every article will continue in its natural proportion to that of every other; every thing will be exactly so much dearer than it was before, as the amount of the impost paid on it; the laborer will get higher wages than before; but as he will have a proportionably higher price to pay for every article of consumption, he will be neither richer nor poorer. The whole amount of the imposts would fall on the rent of land and the profits of stock; the rich would be deprived of a part of the means of their former enjoyment, which would be transferred from supporting one species of unproductive labor, to support that of another, perhaps equally little injurious to the morality and happiness of the people. But should it even be the wish, still it would be found extremely difficult for any government to apportion the taxes and duties so that the natural proportion of the price of any one article should not thereby be altered from that which it would otherwise bear to the price of some other article. A very contrary policy, however, has been adopted by almost all European nations; the production or importation of certain things have been encouraged by bounties, while others have been loaded with heavy duties, or banished by prohibitions ; and thus great part of the labor of the community has been turned from those occupations which were most profitable to it, into others which were far less so. The rage of most of the European States has been to become manufacturers for the supply of foreign countries; the rude produce of land has therefore been admitted into most of them freely, while all foreign manufactures were either prohibited or highly taxed. The consequences have been, the depreciation of the rude produce of land in proportion to all other commodities, and the consequent discouragement from employing either capital or labor in the cultivation of the soil: the increase of the population of the towns has been promoted at the expense of that of the country, and thereby a considerable degeneracy of the species has probably been effected. Almost every European country having adopted a similar policy, the bad effects of it have consequently been lest conspicuous in any particular one; and as the richest countries have at all times (in consequence of those riches) been able the farthest to extend their manufactures,

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