The Principles of Political Economy and Taxation

By David Ricardo | Go to book overview

CHAPTER VII

ON FOREIGN TRADE

No extension of foreign trade will immediately increase the amount of value in a country, although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour which is given in exchange for them, we should have no greater value if, by the discovery of new markets, we obtained double the quantity of foreign goods in exchange for a given quantity of ours. If by the purchase of English goods to the amount of £I000 a merchant can obtain a quantity of foreign goods, which he can sell in the English market for £I200, he will obtain 20 per cent. profit by such an employment of his capital; but neither his gains, nor the value of the commodities imported, will be increased or diminished by the greater or smaller quantity of foreign goods obtained. Whether, for example, he imports twenty-five or fifty pipes of wine, his interest can be no way affected if at one time the twenty-five pipes, and at another the fifty pipes, equally sell for £I200. In either case his profit will be limited to £200, or 20 per cent. on his capital; and in either case the same value will be imported into England. If the fifty pipes sold for more than £I200, the profits of this individual merchant would exceed the general rate of profits, and capital would naturally flow into this advantageous trade, till the fall of the price of wine had brought everything to the former level.

It has indeed been contended that the great profits which are sometimes made by particular merchants in foreign trade will elevate the general rate of profits in the country, and that the abstraction of capital from other employments, to partake of the new and beneficial foreign commerce, will raise prices generally, and thereby increase profits. It has been said, by high authority, that less capital being necessarily devoted to the growth of corn, to the manufacture of cloth, hats, shoes, etc., while the demand continues the same, the price of these

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