Istvan Hont
Michael Ignatieff
Wealth & Virtue

Hume had taken it for granted that magistrates had the right to open private granaries and distribute grain to the poor at set prices, not merely in a situation of actual starvation, but 'even in less urgent necessities'. He had used this example to argue that the ' rules of equity or justice depend entirely on the particular state and condition in which men are placed'. In situations of 'extreme necessity' it was 'perfectly useless' to insist on maintaining an unlimited right of private property. Smith followed this line, but seems to have closed off the case of 'less urgent' necessities. Only actually impending starvation appears to qualify as the' case of most urgent necessity' which would justify the suspension of property right in grain.

Even more striking was his endorsement of the role of grain merchants in rationing supply. By holding back supply in expectation of higher price, merchants helped to restrict demand and conserve supply for periods of still more acute shortage. Smith admitted it was 'avarice' to 'raise the price of corn somewhat higher than the scarcity of the season requires', but this at least prevented the premature dumping of grain at low prices, which would result in famine when supplies ran out at the end of the season. Now, as Smith himself said, not even stock-jobbing drew more odium to the whole market system of a commercial society than grain speculators. To endorse such speculation was to go further in justifying the ways of the invisible hand than anyone but the Physiocrats dared to go.

The adequate subsistence of the poor, like everything else in the Smithian system, depended on growth led by increasing productivity in manufacturing. The only way agricultural surplus could be induced was if manufacturing sectors of the town produced goods which would serve as an incentive for production of food for sale. A manufacturing country could free itself of dependence on the uncertain bounty of its own domestic harvest cycle by developing manufactured goods to trade for food in the international market. The ability of the domestic wage-labourers to purchase this imported food depended in turn on investment in the division of labour in manufacturing. Only if the unit labour costs of manufactured goods for export were driven down could the real wages of the poor continue to rise. If landlords and poor consumers alike paid less for their manufactured goods at home, they had more income available for agricultural investment and consumption of food. The proper role of the state, therefore, was not to regulate prices but to remove obstacles like the bounty and the import duty system which would upset the proper division of labour between town and country, driving investment capital into agriculture away from manufacturing. The Smithian solution to agricultural productivity, therefore, was profoundly counterintuitive—to expand the manufacturing sector and to induce the agricultural sector to produce surpluses in exchange for finished goods. While almost all of his contemporaries, even the Physiocrats, were obsessed by the vulnerability of the economy to the vagaries of the harvest cycle and the uncertain bounties of the earth, Smith was looking forward to an international division of labour in which developed economies like England would use their manufacturing capacity to draw themselves forever beyond the closed limits of nature. In his view, the key to growth lay in a natural distribution of resources and a division of labour between town and country. Neither the Colbertists nor the Physiocrats had understood the delicate interdependence of manufacturing and agricultural sectors; the one bent the rod of policy too far towards agriculture, the other bent it too far towards manufacture. In the 'natural course of things' the optimum distribution of labour and investment between sectors would establish itself of its own accord. Such an analysis, it hardly needs saying, simply dismissed as misguided moralizing the entire civic moralist and Country party jeremiad on the 'parasitical' and 'corrupting' growth of towns.

  The World was all before them, where to choose
Their place of rest, and Providence their guide:
They, hand in hand, with wand'ring steps and slow,

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Through Eden took their solitary way.