SMITH, Adam (1723-1790), Scottish economist. Autograph letter signed ("Adam Smith") to William Eden, Lord Auckland (1744-1814), Edinburgh, 3 January 1780. 4 pages, 4to, minor fraying at right-hand margin, old tape repair to edge of page 4.
ADVICE FROM ADAM SMITH ON OPENING MARKETS, ELIMINATING TAXES AND BOOSTING THE BRITISH ECONOMY AT THE HEIGHT OF THE AMERICAN WAR
A pithy, delightfully anecdotal letter to Eden, Chief Secretary to the Earl of Carlyle, Lord Lieutenant of Ireland. Smith specifies means by which Britain's public revenue might be increased without levying heavy taxes on the populace. Smith, whose classic Wealth of Nations had been published only four years earlier, congratulates Eden on the unexpected success of a recent pamphlet, about which he "was not a little anxious," since it "abused no party and no person...and represented the state of public affairs as less desperate than it is commonly believed to be. The nation, I hope, is coming both into better humour & better spirits...."
But, he continues, "the difficulty of either inventing new taxes or increasing the old, is, I apprehend, the principal cause of our embarrassment. Besides a strict attention to oeconomy, there appears to me to be three very obvious methods by which the public revenue can be increased without laying any new burthen on the people. The first is repeal of all bounties upon exportation...When we cannot find taxes to carry on a defensive war; our merchants ought not to complain. Second is a repeal of all prohibitions of importation, wether absolute or circumstantial, and the substitution of moderate and reasonable duties...A prohibition can answer no purpose but that of monopoly. No revenue can arise from it, but in consequence of its violation and of the forfeiture of the prohibited goods." He details the effects of such a policy, citing Dutch cured Herrings--a prohibited commodity--as an example. If, he argues, a sensible duty was imposed on the Dutch product, it would stimulate the British curers to improve the inferior domestic product, so that "our fisheries may then rival the Dutch in foreign Markets, where at present they cannot."
And, he adds, "prohibitions do not prevent the importation of the prohibited goods." He relates that "about a week after I was made a Commissioner of the Customs, upon looking over the list of prohibited goods..., and upon examining my own wearing apparel, I found, to my great astonishment, that I had scarce a stock, a cravat, a pair of ruffles, or a pocket handkerchief which was not prohibited to be worn or used in G. Britain. I wished to set an example and burned them all. I will not advise you to examine either your own or Mrs. Eden's apparel or household furniture, lest you be brought into a scrape of the same kind...."
"The third is a repeal of the prohibition of exporting wool and a substitution of a pretty high duty in the room [place] of it. The price of wool is now lower than in the time of Edward III; because now it is confined to the market of Great Britain; whereas then the market of the world was open to it. The low price of wool tends to debase the quality of the commodity...By this prohibition, besides, the interest of the growers is sacrificed to the interest of the manufacturer. A real tax is laid upon the one for the benefit of the other."
In closing, Smith offers hearty congratulations upon the unexpected good temper of Ireland, and advised Eden "not to disappoint the people in any one thing they have given them the reason to expect. Give them as much more as you will, but never throw out a single hint that you wish to give them one thing less...."
Provenance: The Roy P. Crocker Collection (sale, Sotheby Park Bernet, 28 November 1979, lot 312, $12,500).