The Principles of Political Economy and Taxation

By David Ricardo | Go to book overview

CHAPTER XXII

BOUNTIES ON EXPORTATION, AND PROHIBITIONS OF
IMPORTATION

A BOUNTY on the exportation of corn tends to lower its price to the foreign consumer, but it has no permanent effect on its price in the home market.

Suppose that to afford the usual and general profits of stock, the price of corn should in England be £4 per quarter; it could not then be exported to foreign countries where it sold for £3 15s. per quarter. But if a bounty of 10s. per quarter were given on exportation, it could be sold in the foreign market at £3 10s., and consequently the same profit would be afforded to the corn grower whether he sold it at £3 10s. in the foreign or at £4 in the home market.

A bounty then, which should lower the price of British corn in the foreign country below the cost of producing corn in that country, would naturally extend the demand for British and diminish the demand for their own corn. This extension of demand for British corn could not fail to raise its price for a time in the home market, and during that time to prevent also its falling so low in the foreign market as the bounty has a tendency to effect. But the causes which would thus operate on the market price of corn in England would produce no effect whatever on its natural price, or its real cost of production. To grow corn would neither require more labour nor more capital, and, consequently, if the profits of the farmer's stock were before only equal to the profits of the stock of other traders, they will, after the rise of price, be considerably above them. By raising the profits of the farmer's stock, the bounty will operate as an encouragement to agriculture, and capital will be withdrawn from manufactures to be employed on the land till the enlarged demand for the foreign market has been supplied, when the price of corn will again fall in the home market to its natural and necessary price, and profits will be again at their ordinary and accustomed level. The increased supply of grain operating on the foreign market will also lower its price in the country to which it is exported, and will thereby restrict the profits of the exporter to the lowest rate at which he can afford to trade.

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