We have already seen, that the benefits, derived from the division and skilful distribution of labour, form part of the motives which give rise to the exchange of commodities. No men will confine themselves to the production of one only of the various articles needed for the well-being of the individual, unless they can, by its means, provide themselves with others.
These are all obvious causes. There is another cause, which requires rather more explanation. If two countries can both of them produce two commodities, corn, for example, and cloth, but not both commodities, with the same comparative facility, the two countries will find their advantage in confining themselves, each to one of the commodities, and bartering for the other. If one of the countries can produce one of the commodities with peculiar advantages, and the other the other with peculiar advantages, the motive is immediately apparent which should induce each to confine itself to the commodity which it has peculiar advantages for producing. But the motive may no less decidedly exist, where one of the two countries has facilities superior to the other in producing both commodities.
If the cloth and the corn, each of which required 100 days' labour in Poland, required each 150 days' labour in England, it would follow, that the cloth of 150 days' labour in England, if sent to Poland, would be equal to the cloth of 100 days' labour in Poland: if exchanged for corn, therefore, it would exchange for the corn of only 100 days' labour. But the corn of 100 days' labour in Poland was supposed to be the same quantity with that of 150 days' labour in England. With 150 days' labour in cloth, therefore, England would only get as much corn in Poland as she could raise with 150 days' labour at home ; and she would, on importing it, have the cost of carriage [p. 86] besides. In these circumstances no exchange would take place.
If, on the other hand, while the cloth produced with 100 days' labour in Poland was produced with 150 days' labour in England, the corn which was produced in Poland with 100 days' labour could not be produced in England with less than 200 days' labour ; an adequate motive to exchange would immediately arise. With a quantity of cloth which England produced with 150 days' labour, she would be able to purchase as much corn in Poland as was there produced with 100 days' labour; but the quantity, which was there produced with 100 days' labour, would be as great as the quantity produced in England with 200 days' labour. England, therefore, would obtain her cloth with less labour, through the medium of her cloth.
Poland would profit in the same manner. A quantity of corn which cost her 100 days' labour, being equal to the quantity produced in England by 200 days' labour, would purchase, in England, the produce of 200 days' labour in any other commodity ; for example, in cloth. But the produce of 150 days' labour in England in the article of cloth, is equal to the produce of 100 days' labour in Poland. If, with the produce of 100 days' labour, she can purchase, not the produce of 150, but the produce of 200, she [p. 87] gains to the amount of 50 days' labour ; in other words, a third.
To produce exchange, there must be two countries, and two commodities.
When both countries can produce both commodities, it is not greater absolute, but greater relative, facility, that induces one of them to confine itself to the production of one of the commodities, and to import the other.
When a country can either import a commodity, or produce it at home, it compares the cost of producing at home with the cost of procuring from abroad; if the latter cost is less than the first, it imports.
The cost at which a country can import from abroad depends, not upon the cost at which the foreign country produces the commodity, but upon what the commodity costs which it sends in exchange, compared with the cost which it must be at to produce the commodity in question, if it did not import it.
Thus, if labour in Poland produce corn and cloth, in the ratio of eight yards to one quarter; but, in England, in the ratio of ten yards to one quarter, exchange will take place.
Generally, then, when labour produces one of two commodities in a greater ratio to the other in one than in another of two countries, it is the interest of both to exchange.