In Defence of Shopkeepers and Tradesmen

Oh, dear, another example of an inappropriate quotation from Smith. This time it is bashing shopkeepers, to make a point about Bank of England interests rates:

“Bank of England's Rate Schism Is Poised to Widen” by Mark Gilbert from Blomberg News on Blomberg.com:

“More than 50,000 Britons draw income from selling secondhand goods on Internet sites such as EBay Inc., the London-based Centre for Economics and Business Research said this week. Adam Smith's ``nation of shopkeepers'' is becoming a race of junk dealers. No wonder the U.K. economy is heading into the ditch.”

“If people realize that they have sellable goods sitting in their cupboards, it ought to increase consumers' confidence just like any other unexpected boost to wealth,'' said CEBR economist Laura Phaff in a press release. With the health of the U.K. economy depending on such shaky foundations as rising stocks, a declining pound and digging secondhand trinkets out of the attic to flog them over the Internet, the Bank of England is unlikely to stop for long at a 4.5 percent rate.”

For one thing Adam Smith was not disparaging about Britain being a nation of shopkeepers (I think it might have been Napoleon). Smith’s comments were critical of others: “The prejudices of some political writers against shopkeepers and tradesmen, are altogether without foundation.” Presumably, we can add Mark Gilbert to the ‘political writers’ who are prejudiced against them.

Smith adds that the number of shopkeepers and tradesmen ‘can never be multiplied so as to hurt the public, though they may so as to hurt one another.’ "Wealth of Nations", II.v.7: page 361)

He also objected to the ideas of ‘founding an Empire’ for the purpose of selling goods to the colonists (he had in mind the American colonies) ad forcing them to buy only from the mother country’s shops. For this ‘may at first sight appear a project only for a nation of shop keepers, adding that it would be ‘extremely fit for a nation whose government is influenced by shopkeepers.’ (“Wealth of Nations”, IV.vii.c)

The stupid prejudices against shopkeepers and tradesmen developed into a social prejudice in the 19th century; to be whispered to be ‘in trade’ was social death. Somebody had a go at a Sainsbury’s political ambitions recently with the remark about him being ‘in trade’, and I have heard several 'high' Tories remark, disparagingly, about Margaret Thatcher being the daughter of a ‘man in trade’. Such remarks, in my view qualify as idiocies of the moment – how long would any of us have survived without shopkeepers and tradesmen?

However, Mark Gilbert raises a separate issue. E-bay and “digging secondhand trinkets out of the attic to flog them over the Internet” may not be significant in the great scheme of things, but people disposing of surplus items, on e-Bay, car boot sales, small ads, and to neighbours for cash, perform a most useful service. When Patricia and I were setting up home together we bought many basic items from such sources (not eBay, as this was some time before the Internet), many of which we still have and will keep.

This trade increases the net welfare of two sets of people: those who acquire the goods and make more use of them than the previous owners, and the previous owners who make better use, for them, of the cash they receive. And mostly it is kept out of the remit of government.

Whatever adds to net welfare is beneficial; if it is picked up in the National Income stats it adds to growth, or compensates for its decline (second-hand sales transform stock into revenue).