These were terrible examples of over-trading indeed; the men were tempted by the high price which the government gave for their goods, and which they were obliged to give, because of the badness of the public credit at that time; but this was not sufficient to make good the loss sustained in the sale of the tallies, so that even they that sold and were able to stand without ruin, were yet great sufferers, and had enough to do to keep up their credit.
This was the effect of giving over-much credit; for though it was the government itself which they trusted, yet neither could the government itself keep up the sinking credit of those whom it was indebted to; and, indeed, how should it, when it was not able to support its own credit? But that by the way. I return to the young tradesman, whom we are now speaking about.
It is his greatest prudence, therefore, after he has considered his own fund, and the stock he has to rest upon – I say, his next business is to take care of his credit, and, next to limiting his buying-liberty, let him be sure to limit his selling. Could the tradesman buy all upon credit, and sell all for ready money, he might turn usurer, and put his own stock out to interest, or buy land with it, for he would have no occasion for one shilling of it; but since that is not expected, nor can be done, it is his business to act with prudence in both parts – I mean of taking and giving credit – and the best rule to be given him for it is, never to give so much credit as he takes, by at least one-third part.
By giving credit, I do not mean, that even all the goods which he buys upon credit, may not be sold upon credit; perhaps they are goods which are usually sold so, and no otherwise; but the alternative is before him thus – either he must not give so much credit in quantity of goods, or not so long credit in relation to time – for example:
Suppose the young tradesman buys ten thousand pounds' value of goods on credit, and this ten thousand pounds are sold for eleven thousand pounds likewise on credit; if the time given be the same, the man is in a state of apparent destruction, and it is a hundred to one but he is blown up: perhaps he owes the ten thousand pounds to twenty men, perhaps the eleven thousand pounds is owing to him by two hundred men – it is scarce possible that these two hundred petty customers of his, should all so punctually comply with their payments as to enable him to comply with his; and if two or three thousand pounds fall short, the poor tradesman, unless he has a fund to support the deficiency, must be undone.
But if the man had bought ten thousand pounds at six or eight months' credit, and had sold them all again as above to his two hundred customers, at three months' and four months' credit, then it might be supposed all, or the greatest part of them, would have paid time enough to make his payments good; if not, all would be lost still.
But, on the other hand, suppose he had sold but three thousand pounds' worth of the ten for ready money, and had sold the rest for six months' credit, it might be supposed that the three thousand pounds in cash, and what else the two hundred debtors might pay in time, might stop the months of the tradesman's creditors till the difference might be made good.
So easy a thing is it for a tradesman to lose his credit in trade, and so hard is it, once upon such a blow, to retrieve it again. What need, then, is there for the tradesman to guard himself against running too far into debt, or letting other people run too far into debt to him; for if they do not pay him, he cannot pay others, and the next thing is a commission of bankrupt, and so the tradesman may be undone, though he has eleven thousand pounds to pay ten with?
It is true, it is not possible in a country where there is such an infinite extent of trade as we see managed in this kingdom, that either on one hand or another it can be carried on, without a reciprocal credit both taken and given; but it is so nice an article, that I am of opinion as many tradesmen break with giving too much credit, as break with taking it. The danger, indeed, is mutual, and very great. Whatever, then, the young tradesman omits, let him guard against both his giving and taking too much credit.
But there are divers ways of over-trading, besides this of taking and giving too much credit; and one of these is the running out into projects and heavy undertakings, either out of the common road which the tradesman is already engaged in, or grasping at too many undertakings at once, and having, as it is vulgarly expressed, too many irons in the fire at a time; in both which cases the tradesman is often wounded, and that deeply, sometimes too deep to recover.
The consequences of those adventures are generally such as these: first, that they stock-starve the tradesman, and impoverish him in his ordinary business, which is the main support of his family; they lessen his strength, and while his trade is not lessened, yet his stock is lessened; and as they very rarely add to his credit, so, if they lessen the man's stock, they weaken him in the main, and he must at last faint under it.
Secondly, as they lessen his stock, so they draw from it in the most sensible part – they wound him in the tenderest and most nervous part, for they always draw away his ready money; and what follows? The money, which was before the sinews of his business, the life of his trade, maintained his shop, and kept up his credit in the full extent of it, being drawn off, like the blood let out of the veins, his trade languishes, his credit, by degrees, flags and goes off, and the tradesman falls under the weight.
Thus I have seen many a flourishing tradesman sensibly decay; his credit has first a little suffered, then for want of that credit trade has declined – that is to say, he has been obliged to trade for less and less, till at last he is wasted and reduced: if he has been wise enough and wary enough to draw out betimes, and avoid breaking, he has yet come out of trade, like an old invalid soldier out of the wars, maimed, bruised, sick, reduced, and fitter for an hospital than a shop – such miserable havoc has launching out into projects and remote undertakings made among tradesmen.
But the safe tradesman is he, that avoiding all such remote excursions, keeps close within the verge of his own affairs, minds his shop or warehouse, and confining himself to what belongs to him there, goes on in the road of his business without launching into unknown oceans; and content with the gain of his own trade, is neither led by ambition or avarice, and neither covets to be greater nor richer by such uncertain and hazardous attempts.
CHAPTER VII
OF THE TRADESMAN IN DISTRESS, AND BECOMING BANKRUPT
In former times it was a dismal and calamitous thing for a tradesman to break. Where it befell a family, it put all into confusion and distraction; the man, in the utmost terror, fright, and distress, ran away with what goods he could get off, as if the house were on fire, to get into the Friars14 or the Mint; the family fled, one one way, and one another, like people in desperation; the wife to her father and mother, if she had any, and the children, some to one relation, some to another. A statute (so they vulgarly call a commission of bankrupt) came and swept away all, and oftentimes consumed it too, and left little or nothing, either to pay the creditors or relieve the bankrupt. This made the bankrupt desperate, and made him fly to those places of shelter with his goods, where, hardened by the cruelty of the creditors, he chose to spend all the effects which should have paid the creditors, and at last perished in misery.
But now the case is altered; men make so little of breaking, that many times the family scarce removes for it. A commission of bankrupt is so familiar a thing, that the debtor oftentimes causes it to be taken out in his favour, that he may sooner be effectually delivered from all his creditors at once, the law obliging him only to give a full account of himself upon oath to the commissioners, who, when they see his integrity, may effectually deliver him from all further molestation, give him a part even of the creditors' estate; and so he may push into the world again, and try whether he cannot retrieve his fortunes by a better management, or with better success for the future.
Some have said, this law is too favourable to the bankrupt; that it makes tradesmen careless; that they value not breaking at all, but run on at all hazards, venturing without forecast and without consideration, knowing they may come off again so cheap and so easy, if they miscarry. But though I cannot enter here into a long debate upon that subject, yet I may have room to say, that I differ from those people very much; for, though the terror of the commission is in some measure abated, as indeed it ought to be, because it was