Note 186-3 — Chapter IV

Abolition of the English corn laws! Foreign commerce when very advantageous, always adds to the well-being of the people; to the rate of interest, however, only to the extent that articles which are calculated to satisfy the wants of the working class become cheaper in consequence; and this in turn lowers the rate of wages. Let us suppose that a country had hitherto purchased yearly 10,000 barrels of wine for $1,000,000. It might now happen that, in consequence of an advantageous commercial treaty, for instance, the 10,000 barrels might be obtained for $500,000. If, after this, wine-drinkers want to spend $1,000,000 for wine as they did before, they of course double their consumption of wine, but the rate of interest remains unchanged. If, on the other hand, they leave their consumption of wine where it was before and apply the saved half million to effect an increased demand for home products, the capital required for this production is set free at the same time. Hence, the relation between the supply and demand for capital has not changed, abstraction made of certain difficulties in the transaction. Compare Ricardo, Principles, ch. 7, rectifying Adam Smith, Wealth of Nat., I, ch. 9.