An Outline of the Scottish Economy in the Eighteenth Century

Introduction

An introduction to an outline of the economic history of Scotland in the 18th century is a proper place to make reference to the Scottish Enlightenment in general and to the sciences of political economy, history and philosophy in particular.

Undoubtedly,thinkers like David Hume (1711-1776), Adam Smith (1723-1790), James Mill (1773-1836) and his son John Stuart Mill (1806-1873) contributed heavily to the development of these sciences. It is almost superfluous to point out that people like Hume, Smith and the Mills had close contact with each other and with many interesting persons of their time.

David Hume "was the younger son of Joseph Hume, the modestly circumstanced laird of Nairwells, a small place adjoining the village of Chirnside about nine miles distant on the Scottish side from Berwick-upon-Tweed."^[1] He entered Edinburgh University at the tender age of 12 and left it when he was 14 or 15 years old.

Neither in 1744 nor in the 1750ies was he successful in getting appointed to the chair of moral philosophy at Edinburgh and the chair of logic at Glasgow University.

By the time Hume applied for these posts his work "A Treatise of Human Nature", 3 vols. and his "Essays, Moral and Political", 2 vols. had appeared in 1739/40 and 1740-41 respectively. Subsequently, his critics regarded him as an atheist or as an heretic. In 1752 Hume became keeper of the Advocates library at Edinburgh and during the time he held this office he wrote his "History of England" covering the years from 54 B.C. until 1688.

Hume‘s economic views are incorporated in his "Political Discourses", which were published in 1752. It seems evident that Hume had been influenced for example by George Berkley (1685-1753), who was an Irish philosopher and Anglican bishop.

In addition Hume discussed matters concerning political economy with Adam Smith, who was 12 years his junior.

Hume‘s main contentions can be summarized as follows. First, he held that wealth does not consists of money but of commodities.

Second, he recommended that the amount of money in circulation should be kept related to the amount of goods in the market.

Third, he maintained that a low rate of interest is not a sign of superabundance of money but of booming trade.

Fourth, he believed rightly that no nation can go on exporting only for bullion.

Fifth, he held that each nation has special advantages of raw materials, climate and skill, so that a free interchange of products (with some exceptions) is mutually beneficial.

Sixth, he alleged that poor nations impoverish the countries with which they trade because poor countries are not able to take part in an exchange of products on equal terms. In addition Hume welcomed advance beyond an agricultural to an industrial economy.^[2]

Adam Smith was the son of the comptroller of the customs at Kirkcaldy, Fife. In 1737 Smith was studying moral philosophy at Glasgow University. In 1740 he entered Balliol College, Oxford and he withdrew from it in 1746. "In 1748 he began delivering public lectures in Edinburgh under the patronage of Lord Kames."^[3]

In 1751 Smith was appointed professor of logic at Glasgow University transferring in 1752 to the chair of moral philosophy. At the end of 1763 Smith obtained a post as a tutor to the young duke of Buccleuch and resigned his professorship. Subsequently, he travelled widely with his pupil, mostly in France, where he met important physiocrats and intellectuals including Turgot, D‘Alembert, Helvetius and Quesnay. When Smith returned back to Kirkcaldy he devoted much of the next ten years on his magnum opus entitled "An Inquiry into the Nature and Causes of the Wealth of Nations" which appeared in 1776. In 1778 he was appointed to a comfortable post as commissioner of customs in Scotland. Smith died in Edinburgh in 1790 after a painful illness. "He had apparently devoted a considerable part of his income to numerous secret acts of charity."^[4]

Smith‘s opus "An Inquiry into the Wealth of Nations" is subdivided into five books.

Book I tackles problems like the division of labour, value and distribution. Here he differentiates between value in exchange and value in use. In addition he distinguishes between natural price and market price. "Natural price is the long run competitive equilibrium price determined by cost of production, while market price is the short run price determined by supply and demand."^[5]

Labour is being defined by Smith as a measure or standard of value. With his description of the relationship between wages, profit, price and rent Smith anticipated David Ricardo‘s theory. ‚...high and low wages and profits are the causes of high or low price; high or low rent is the effect of it.‘^[6] According to Smith incomes can be analysed as wages, profits or rents which form ‚the three great, original and constituent orders of every civilized society from whose revenue that of every other order is ultimately derived.‘^[7]

Book II deals with the headings Capital, Saving, and Investment. The original title of Smith‘s second book is "Of the Nature, Accumulation and Employment of Stock".

The term ‚stock‘ refers to both consumers‘ and producers‘ capital. The category ‚capital‘ is subcategorised into fixed and circulating capital. In addition Smith distinguishes between productive and unproductive labour. Sometimes Smith seems to be inclined to adopt the peculiar definition of the physiocrats according to which only agricultural labour is productive. To modern people the Smithian assertion that all services except for retailing are unproductive sounds quite strange indeed, because in modern European societies the bulk of the working population is being occupied in the services sector. As regards financial state action Smith seems to be favouring a legal maximum rate of interest rather than permitting complete freedom.

Book III is entitled "Of the different Progress of Opulence in Different Nations". Here Smith is illustrating the exchange of goods and services between town and country with the help of a selective survey of European economic history. Again, Smith is expressing his view that it is in agriculture that investment is most advantageous to society. However, the scholar criticizes that various internal and external obstructions as regards land tenure, primogeniture and tariffs and export taxes "have distorted the natural order and prevented the invisible hand from harmonizing the private and social gains from investment."^[8]

In Book IV entitled "Of Systems of Political Economy" Smith argues for a free choice of occupation by the removal of apprenticeship restrictions and for free trade in land by the abolition of primogeniture and entails (dt. Fideikommiß).

As regards foreign trade the scholar criticizes duties, bounties and monopolistic privileges of the chartered companies. Concerning tariffs Smith recommends circumspection and gradualness in the removal of restrictions because widespread unemployment is to be avoided. Furthermore, Smith holds the view that complete free trade in Great Britain will be utopian. As regards the colonial trade the scholar is attacking all nationalistic and monopolistic restrictions because only a minority might benefit from them. Politically and economically speaking, Smith is suggesting a free-trade association of independent partners, whereby the mother country and her colonies might become ‚faithful, affectionate, and generous allies‘.^[9]

In Book V entitled "Of the Revenue of the Sovereign or Commonwealth" Smith is dealing with the role of the state as regards taxation and public debts. The first responsibility of the state is to maintain the defence of the nation. The second task of the state is to provide justice and civil government and, more particularly, to see to the defence of the rich against the poor. However, it cannot be alleged that Smith had a bias against the poor, because in another place in his book Smith favours for example proportionality as regards taxation. The third responsibility of the state is to erect and maintain public institutions which ought to be beneficial to the majority of the citizens. Here Smith expressly mentions the provision of roads, harbours, educational facilities and banks.^[10]

Next, James Mill‘s book "Elements of Political Economy" which appeared in 1821 must be mentioned. James Mill was born on April 6, 1773, at Northwater Bridge, in the parish of Logie-Pert, Forfarshire, the son of a shoemaker. The views Mill held in his "Elements of Political Economy" seemed to have been influenced by both the demographer Thomas Robert Malthus (1766-1834) and the political economist David Ricardo (1772-1823).

First, Mill maintained that the chief problem of political reformers is to limit the increase of the population on the assumption that capital does not naturally increase at the same rate as the population. Second, Mill held that the value of a thing depends entirely on the quantity of labour put into it. Third, the scholar found ‚that what is now known as the unearned increment of land is a proper object for taxation.’^[11] [unearned increment tax = dt. Wertzuwachssteuer; E: capital gains tax]

After having reviewed some contentions of only three political economists, we might now look at some important features in the development of the economy of Scotland in the 18th century.

1. The Scottish Demographic Development in the 18th

 Century

It has been suggested that the overall Scottish population amounted to 1,265,000 in 1755 and the census of 1801 put the population at roughly 1,600,000.^[12]

The population of Edinburgh rose from about 40,000 in 1722 to 51,000 in 1755.^[13] Glasgow‘s population rose from 12,766 in 1718 to 83,769 in 1801.^[14] In 1811 Glasgow and Edinburgh had more than 100,000 inhabitants each.^[15]

In 1755 51% of the entire Scottish population inhabited the Highlands, while 37% lived in the central counties and 11% in the Lowland counties.^[16] According to estimates roughly 50,000 people were forced to emigrate from the Highlands via Edinburgh or Glasgow to the USA or Canada in the last third of the 18th century.

The causes for this migration were various ranging from consolidation of holdings and increased rents to the extension of sheep farming. However, in the seasonal migration within Scotland many more people were involved. It had become a custom that young people from the Highlands or the Islands sought work in the Lowlands or even in the southern uplands at harvest time. The reason for this migration was that wages in the southern regions tended to be higher. In the last fifteen years of the eighteenth century the expanding cotton industry too in Lanarkshire and around Glasgow and Paisley attracted much labour from the Highlands.

Both in Edinburgh and Glasgow housing conditions must have been in an appalling state in the middle of the 18th century. The lack of sanitation was remarkable, sewage and water pipes were non-existent. The prevailing architecture in the bigger burghs were tenement houses 10 storeys high at the front and 15 storeys high at the rear in which families were crammed into two or three-roomed flats. Water was first only available at the public wells or obtainable from the conduits in the main street. But things became better in the second half of the century when metal pipes for conveying water supplies were laid. People used to throw their filth out of the windows, but were sometimes friendly enough to give warning cries such as "Gardyloo".^[17]

It is no wonder that bad housing conditions and lack of sanitation pushed up child mortality. In 1791 for example of 1,508 deaths recorded in the City Parish of Glasgow 46% were children under ten.^[18] "In Edinburgh from 1740 to 1742, years of general dearth, 2700 out of a total population of 40,000 died from smallpox, and of these more than half were children under five."^[19] From 1793 to 1802 36% of all deaths in Glaswegian children under the age of ten was due to smallpox.

Dr. Jenner‘s method of vaccination helped to reduce that figure to 9% in the period from 1803-1812.^[20]

2. Some Economic Consequences of the Parliamentary Union

 of 1707

The Treaty of Union was approved by the Scottish Parliament article by article and on 16 January 1707 the entire treaty was passed by 110 to 69 votes. Although the union of the parliaments caused mob violence in Glasgow, Edinburgh and Dumfries and some merchants too were dissatisfied with the terms of the treaty, the union was nevertheless brought into effect in the end.

Consequently, the two kingdoms were united into one with a common flag, a common great seal and a common coinage. The Scottish representation in the Parliament was to be based on population (perhaps five to one) and on taxable capacities (perhaps thirty-six to one).^[21]

The Act of Union stipulated that Scotland was to share the common public burdens.

One of these was the service of the National Debt which amounted to £ 18,000,000 in England and to £ 160,000 in Scotland. In exchange of her services Scotland was conceded a lump sum of £ 398, 085 known as the Equivalent. It was also agreed upon in the treaty that Scotland was to receive an annual payment of £ 2000 for seven years to foster Scottish manufactures and fisheries. Scotland was also promised a further payment at the end of seven years to balance the increased revenue to be expected from Scottish customs and excise.

One part of the Equivalent was used to recompense holders of Darien stock from the losses they had sustained. The Darien scheme had been ventured by a "Company trading to Africa and the Indies" which was authorized by the English crown in 1695. The foundation of such a company reflected the Scottish desire for a colony and for the expansion of trade. After the English shareholders had withdrawn their stock from the joint venture, Scottish stockholders financed the ships, sailors and outfit themselves. The aggregate capital of the company amounted to £ 400,000 equivalent to almost the entire value of the coinage of Scotland. To cut a longer story short, the settlements of New Edinburgh and Fort St. Andrew founded on the isthmus of Darien, places which nowadays belong to Panama, had to be abandoned in 1700, because a) the climate was murderous and b) the Scottish met the fierce attack of the Spanish. The Darien Company collapsed in 1704 and £ 153,448 were lost beyond recovery.^[22]

Another part of the Equivalent was to be used to redeem the Scottish national debt and a third part was to go into the pockets of individuals who might lose money due to the standardization of the coinage.^[23]

The treaty of union also stipulated in article 4 that all ships owned by Scotsmen were to enjoy the privileges of the English Navigation system. In article 8 the free import of foreign salt into Scotland was granted for seven years and the same article stipulated that Scotland was to receive a rebate on imported salt used to cure fish for export.^[24]

3. Some Developments of the Scottish Agriculture and

 Fishery in the 18th Century

The old Scottish agricultural system that prevailed in most regions at the start of the 18th century before the improving movement of the 1720ies set in was characterized by three forms of land tenure.

First, there was a form of land tenure called steel-bow tenure which was comparable to the French métayage, Italian mezzadria or German Teilbau. According to that arrangement which was really a labour contract the tenant was expected to work both the land that was leased out to him and the land that was reserved for the proprietor. The annual yield of the crop was divided into halves of which one was to go into the barn of the sharecropper and the other half into the barn of the lessor. In the Highlands the crop consisted mostly of bere which was a crude fourrowed sort of barley and of grey and black oats. The advantage of the steel-bow tenure for the tenant was that the lessor provided for some working as well as fixed capital.

The second form of tenure was that of tacksmen who sublet parts of their own land to subtenants. The tacksmen who were usually related to the chief of a clan represented the officers of the clan who would mobilize their subtenants in times of inter-clan feuds or, as in 1715 and in 1745, against the supporters of the House of Hannover. This does not mean, by the way, that all clans supported the cause of the House of Hannover. Rather the clans were split in the issue just as the leaders decided. For the subtenants, as could be imagined, the system proved less pleasing because they were expected to pay high rents to the tacksmen.

The most characteristic form of tenure at the start of the 18th century was a system that worked with different runrigs or strips of land leased out to a number of subtenants collectively who would live in villages, the so-called fermetouns. The runrigs ranging from ¼ to ½ acre [1 acre ~ 4000 square metres] were held in turn by different tenants.

The most prominent sorts of cereals that were grown in the Highlands were of inferior quality as was the soil in most of these regions that was and often still is swampy and stony. In these barren areas grey and black oats and bere were the usual crops. Economically more important for cottars, tenants and landlords alike was the keeping of black cattle. In accordance with a very old international system called transhumance (from the Spanish verb trashumar = to migrate) a large part of the community moved together with their cattle into the hills at the start of the summer. In the Highlands the people would live in shielings, small hovels, while the cattle might look for some nice juicy summer grass. Names like Glenshiel remind modern visitors of Scotland of regions where the old system of transhumance was practised. The growing of wheat was confined to the richer soils that prevail in the Lothians, in Ayrshire and along the Firths on the east coast. Flax was certainly also grown for the domestic manufacture of linen, but the potato was only introduced in the 1720ies.

It is customary to describe the old Scottish agricultural system in terms of infield and outfield. The infield was the land closest to the farm steading comprising about one fifth of the total arable average. Each year one third of the infield was fertilized with all dung available and sown with barley or bere, while the other two unmanured thirds were sown with oats. In some regions other rotation principles occurred, like in Ayrshire, where in one year all three thirds of the infield might lie fallow. The outfield was not in continuous cultivation. Some parts of the outfield were cropped and the rest was left to cattle or sheep to graze on. It depended on the quality of the soil whether that part of the outfield where cereals were grown could be cropped in four or five successive years. The Lothians, the Moray Firth and Banffshire belonged to the more fertile regions, whereas for example the northwestern Highlands comprising much of Invernessshire, Ross and Cromarty and Sutherland offered less fertile soil except for the straths.

The farm implements most common were the old Scots plough, the harrow, the flail, the sickle and the scythe. The old Scots plough was made entirely of wood except for the share, the coulter and the bridle. The plough was so heavy that in Aberdeenshire a team of eight oxen was needed to work it. In the Lowlands oxen and horses were used to keep the monstrous implement moving.^[25]

In June 1723 the "Society for Improving in the Knowledge of Agriculture" was founded in Edinburgh. Among its three hundred members dukes and peers, judges and professors were included. A flow of literature was subsequently produced giving advice on how farming could be done more profitably. For example Lord Kames published in 1766 a book entitled "The Gentleman Farmer, being an attempt to improve agriculture by subjecting it to the test of rational principles."

Already in 1716 the Earl of Rothes had introduced the turnip on his estates. As the century dragged on these two crops, namely the potato and the turnip helped immensely to nourish ever increasing numbers of people and sheep alike. The initiative to improve agricultural standards was taken thus by substantial landlords. As one example of such an improver John Cockburn might be referred to. On his estate in Aberdeenshire near the River Don he rebuilt a village called Ormiston. He granted feus on generous terms to his tenants willing to build houses. Flax growing, spinning and weaving was encouraged and a bleachfield was erected, too. A whisky distillery and a brewery was added to the village. In addition enclosure was practised with the help of embankments and hedges. Turnips, barley, potatoes, new sorts of clover and grasses were grown. However, like many other early improvers Cockburn went bankrupt. He was forced to sell all his lands to the Earl of Hopetoun.^[26]

The invasion of sheep farther north of the Borders commenced by 1762. The introduction of sheepfarming on a grand scale could only be handled by substantial landlords equipped with the necessary capital. First, sheep-farming spread from Annandale in Dumfriesshire to Dumbartonshire, Argyllshire and Perthshire. Until 1820 this business had reached the northern counties and the Outer Hebrides. The establishment of large sheep-farms went hand in hand with the consolidation of holdings, the eviction and displacement of tenants. Between 1810-20 these clearances were effected in a particularly ruthless and high handed fashion on the huge estates of the Duke of Sutherland comprising over one million acres by 1800. 2000 people from Strathnaver alone were removed and resettled on the east coast between Brora and Helmesdale. There the people were expected to scrape a living as herring fishers, in the infant textile industry or in the coal-pits at Brora or from a plot of land leased out to them. It is no wonder that the displaced people interpreted Dunrobin castle, the residence of the Duke of Sutherland, as a symbol of tyranny.^[27]

The woolen industry spread along the River Tweed and developed at Galashiels, Aberdeen and Stirling. But English dealers working for the wool staplers of Leeds and Halifax also purchased wool on Lowland markets for the woolen industry in Yorkshire. "The price of wool almost doubled in the ten years ending in 1795."^[28]

The mutton was primarily sold in the rising cities like Glasgow, Paisley and Kilmarnock, but filled shops as far as in the Newcastle area as well.

Next, some words must be spent on the Scottish cattle trade. The cattle trade offered a source of income for big landowners, lairds, tacksmen and for numerous cottars and for dealers, drovers and some banks. According to estimates the value of cattle sent from the Highlands to England in 1795 was between £ 200,000 and £ 300,000.^[29]

In the first half of the 18th century Crieff in Perthshire was the leading cattle market, but the business shifted later to the Falkirk tryst. In 1794 about 60,000 head of cattle were sold at Falkirk.^[30]

Rising prices for cattle was due to the high demand for salted meat which was the standard diet for the navy which was involved in various wars throughout the 18^th century. Drovers and dealers purchased black cattle in countries as far apart as Caithness and the Outer Hebrides. Cottars and crofters were usually paid by the drovers in promissory bills. Only a small part of the price was paid in cash. When Dr. Johnson and James Boswell visited Sky in 1772, they found that rents were paid in drovers‘ bills. Alternatively, the bills could be discounted at a bank. The droving period lasted from May to October. The cattle that was bought on the islands of the Outer Hebrides, for example, was shipped first to Dunvegan or Uig in Sky and from there drovers and cattle followed the traditional track by Glengarry, Spean Bridge, Killin or Glen Moriston, Fort Williams and Dalwhinnie until they reached Crieff or Falkirk.^[31]