Taxes on consumptions are best levied by way of excise. They have the advantage of “being paid imperceptibly,”55 since “when we buy a pound of tea we do not reflect that the most part of the price is a duty paid to the government, and therefore pay it contentedly, as though it were only the natural price of the commodity.”56 Such taxes too are less likely to ruin people than a land tax, as they can always reduce their expenditure on dutiable articles.
A fixed land tax like the English is better than one which varies with the rent like the French, and “the English are the best financiers in Europe, and their taxes are levied with more propriety than those of any other country whatever.”57 Taxes on importation are hurtful because they divert industry into an unnatural channel, but taxes on exportation are worse. The common belief that wealth consists in money has not been so hurtful as might have been expected in regard to taxes on imports, since it has accidentally led to the encouragement of the import of raw material and discouragement of the import of manufactured articles.58
From treating of revenue Adam Smith was very naturally led on to deal with national debts, and this led him into a discussion of the causes of the rise and fall of stocks and the practice of stock-jobbing.59
Under Arms he taught that at first the whole people goes out to war: then only the upper classes go and the meanest stay to cultivate the ground. But afterwards the introduction of arts and manufactures makes it inconvenient for the rich to leave their business, and the defence of the state falls to the meanest. “This is our present condition in Great Britain.”60 Discipline now becomes necessary and standing armies are introduced. The best sort of army is “a militia commanded by landed gentlemen in possession of the public offices of the nation,”61 which “can never have any prospect of sacrificing the liberties of the country.” This is the case in Sweden.
Now let us compare with this the drift of the Wealth of Nations, not as it is described in the “Introduction and Plan,” but as we find it in the body of the work itself.
Book I begins by showing that the greatest improvement in the productive powers of industry is due to division of labour. From division of labour it proceeds to money, because money is necessary in order to facilitate division of labour, which depends upon exchange. This naturally leads to a discussion of the terms on which exchanges are effected, or value and price. Consideration of price reveals the fact that it is divided between wages, profit and rent, and is therefore dependent on the rates of wages, profit and rent, so that it is necessary to discuss in four chapters variations in these rates.
Book II treats first of the nature and divisions of stock, secondly of a particularly important portion of it, namely money, and the means by which that part may be economised by the operations of banking, and thirdly the accumulation of capital, which is connected with the employment of productive labour. Fourthly it considers the rise and fall of the rate of interest, and fifthly and lastly the comparative advantage of different methods of employing capital.
Book III shows that the natural progress of opulence is to direct capital, first to agriculture, then to manufactures, and lastly to foreign commerce, but that this order has been inverted by the policy of modern European states.
Book IV deals with two different systems of political economy: (1) the system of commerce, and (2) the system of agriculture, but the space given to the former, even in the first edition, is eight times as great as that given to the latter. The first chapter shows the absurdity of the principle of the commercial or mercantile system, that wealth is dependent on the balance of trade; the next five discuss in detail and show the futility of the various mean and malignant expedients by which the mercantilists endeavoured to secure their absurd object, namely, general protectionist duties, prohibitions and heavy duties directed against the importation of goods from particular countries with which the balance is supposed to be disadvantageous, drawbacks, bounties, and treaties of commerce. The seventh chapter, which is a long one, deals with colonies. According to the forecast at the end of chapter i this subject comes here because colonies were established in order to encourage exportation by means of peculiar privileges and monopolies. But in the chapter itself there is no sign of this. The history and progress of colonies is discussed for its own sake, and it is not alleged that important colonies have been founded with the object suggested in chapter i.
In the last chapter of the Book, the physiocratic system is described, and judgement is pronounced against it as well as the commercial system. The proper system is that of natural liberty, which discharges the sovereign from “the duty of superintending the industry of private people and of directing it towards the employments most suitable to the interest of the society.”
Book V deals with the expenses of the sovereign in performing the duties left to him, the revenues necessary to meet those expenses and the results of expenses exceeding revenue. The discussion of expenses of defence includes discussion of different kinds of military organisation, courts of law, means of maintaining public works, education, and ecclesiastical establishments.
Putting these two sketches together we can easily see how closely related the book is to the lectures.
The title “Police” being dropped as not sufficiently indicating the subject, there is no necessity for the
