BOUNTY, a sum of money paid by government to the persons engaged in certain branches of commerce, manuflic tures, or other branch of industry.
The question of bounties and their im policy is discussed by Adam Smith in his of Nations,' book iv. chap. 5; and the subject has also been treated in a very complete manner by the late Mr. Ricardo in his Principles of Political Economy and Taxation.' When Postle thwaite published his Dictionary of Com merce,' in 1774, bounties were "very nu merous" After the publication of Adam Smith's work bounties began to be re garded with less favour, and have at length sunk into complete discredit. They are now no longer relied upon as a means of furthering the true interests of commerce. The policy of bounties was very materially connected with the opinions of a former day respecting the balance of trade. [BALANCE OF TRADE.] It was thought that they operated in turning the balance in our favour. Adam Smith remarks : — " By means of bounties our merchants and manu facturers, it is pretended, will be en abled to sell their goods as cheap or cheaper than their rivals in the foreign markets We cannot (he adds) force foreigners to buy their goods, as we have done our own countrymen. The next best expedient, it has been thought, therefore, is to pay them for buying." Bounties in truth effect nothing more than this. The propositions maintained by Adam Smith are, that every trade is in a natural state when goods are sold for a price which replaces the whole capital employed in preparing and sending them to the market with something in addition in the shape of profit. Such a trade needs no bounties. Individual interest is sufficient to prompt men to engage in carrying it on. On the other hand, when goods are sold at a price which does not replace the cost of the raw material, the wages of labour and all the incidental expenses which have been incurred in bringing them into a state fit for the market, together with the manufacturer's profits ; that is, when they are sold at a loss, the manufacturer will cease to pro duce an unprofitable article, and this particular branch of industry will soon extinct. It perhaps happens that the general interests of the country are thought to be peculiarly connected with the species of industry in question, and that it therefore behoves government to take means for preventing its falling into decay. At this point commences ti.e operation of bounties, which are devised for the purpose of producing an equili brium between the cost of production, the market-price, and a remunerating price, the last of which alone promotes the con.
staid activity of every species of industry. Smith observes, "The bounty is given in order to make up this loss, and to encou rage a man to continue or perhaps to begin a trade of which the expense is supposed to be greater than the returns ; of which every operation eats up a part of the capital employed in it, and which is of such a nature, that if all other trades resembled it, there would soon be no capital left in the country." And he adds :—" The trades, it is to be observed, which are carried on by means of boun ties are the only ones which can be car ried on between two nations for any con siderable time together, in such a manner as that one of them shall always and regularly lose, or sell its goods for less than they really cost . . . . The effect of bounties, therefore, can only be to force the trade of a country into a channel much less advantageous than that in which it would naturally run of its own accord." One of the most striking instances of the failure of the bounty system occurred about the middle of the last century in connexion with the white herring fishery. Tempted by liberal bounties persons rashly ventured into the business without a knowledge of the mode of carrying it on in the most economical and judicious manner, and in no very long space of time a joint-stock of 500,000/. was nearly all lost.
The bounty on the exportation of corn was given up in 1815 [Coax TRADE], and that on the exportation of herrings, linen, and several other articles ceased in 1830. In 1824 the sums paid as bounties for promoting fisheries, linen manufactures, &c. in the United Kingdom was 536,228/. ; 273,269/ in 1828; 170,9991. in 1831; and in 1832 and 1833 the sums of 76,572/. and 14,713/. respectively.
Bounties are not now allowed on any article of export ; but in some cases it is believed that DRAWBACKS constitute in reality to bounty, being greater than the duty which has been paid on the article. The drawback on refined sugar, for in stance, has been fixed at a certain amount proportioned to the quantity of raw sugar supposed to have been used, which is cal culated at 34 cwts. of raw to 20 Cwts. of refined ; but by improvements in the mode of refining, a less quantity of raw sugar may be required in manufacturing 20 cwts. of refined sugar ; and the drawback on the difference is in reality a bounty.