In which we explore the curious errors and omissions in Adam Smith’s Wealth of Nations herring thinking
Adam Smith shouldn’t be confused with the Adam Smith Istitute. He showed more concern for the poor. The simplistic dogmas of neoliberalism and contemporary free market advocates aren’t entirely down to him, but let’s not get carried away. His disingenuous thoughts on the herring do give pause for thought.
He published An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. For the 1784 edition he added to Book IV some new paragraphs and a set of figures concerned with the herring fishery. They argued against the ‘bounties’, which subsidised the larger, decked vessels of the herring buss fishery. He was against subsidies in principle. Instead of leaving things there, however, he advocated a shift towards subsidising the smaller, deckless ‘boat fishery’.
Today’s free marketeers still quote Smith’s herring buss quip, It has, I am afraid, been too common for the vessels to fit out for the sole purpose of catching, not the fish but the bounty. It’s hard not to hear the pleasure he took in his witticism. But it doesn’t really stand.
Bounties & The Historical Context
Smith on Bounties
Born in Kirkcaldy, where his father was, among other things, Comptroller of the Customs, Smith grew up with the herring fishery of the Forth on his doorstep. In 1778 he was appointed Commissioner of Customs in Edinburgh. He knew about tax and subsidy.
Herring buss bounties were introduced in 1750, but tweaked and adjusted in subsequent legislation. There were two, one on the buss’ tonnage (encouraging investment in larger boats) and one on each exported barrel of white (salted) herring.
Smith’s general view was that bounties subsidise businesses which aren’t profitable enough. Take away the subsidy and the merchant’s own interest would soon oblige him to employ his stock in another way. Elsewhere in Book IV, Smith explains how by acting in his own interest (pursuing the greatest profit) each individual is led by an invisible hand to make the choices which are, in fact best for the nation. He similarly argues that in intending to advance the interest of the society, the individual usually doesn’t. Back to the herrings: the effect of the bounties… 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.
It’s a gratuitous swipe, but in The Theory of Moral Sentiments (1759) Smith had seen how the rich, are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants.
The House of Stuart
Smith is credited with introducing the laissez-faire understandings of herring economics which bore fruit in the C19th. Up until the C17th English monarchs had generally adopted laissez-faire herring thinking. It was Stuarts in Scotland who were the great interventionists.
They wanted, but were too weak to challenge the Dutch for the vast wealth generation of the busses, assembling off Shetland in June each year and then worked both west and east coasts of Britain. James III of Scotland encouraged buss building in the 1470s. James V launched an ineffectual war (1532 – 41) over an unenforceable prohibition of Dutch fishing within a 14 mile limit.
When James VI became James I of England, his inherited herring enthusiasm led to a clamour for investment in British busses. In a vain effort to save his neck Sir Walter Raleigh made extensive calculations on subject in Observations Touching Trade and Commerce. The 1607 edition of Camden’s Britannia saw new paragraphs making clear, the self-evident divine providence of the herring shoals was aimed specifically at the British, not the Dutch exchequer.
In 1614, Tobias Gentleman published England’s Way to Win Wealth, and Employ Ships and Marriners, outlining the national benefits which would accrue. Between 1697 and 1718 James Puckle published various versions of England’s Path to Wealth and Honour, in a Dialogue Between and Englishman and a Dutchman. A posthumous edition was published in 1750. It is hard to imagine Adam Smith was unaware of the wider case.
The Case for the Busses
The Case for a British Herring Buss Fleet
Dutch economic and imperial success was seen by the Dutch themselves and by British buss advocates, as enabled by the virtuous intersection of three factors:
i) The fleet was able to stay at sea, following the sequential appearances of the herring shoals (these were mistakenly thought of a single Grand Migration at the time, but the busses effectively exploited them, none-the-less);
ii) Quality controlled gutting, rapid salting and barreling onboard delivered a premium product for both the Dutch home market and a spectacular export trade;
iii) Fishermen trained in handling larger vessels provided a pool of skilled seamen, which, in turn, facilitated the development of their maritime empire (investment in which also drew on the herring-generated wealth created by their Grand Fishery).
Exploiting the Shoals
Smith’s analysis restricts any understanding of buss economics to activity in Scottish waters. This seems wilful at the very least: the busses were developed to exploit Britain’s entire eastern seaboard and much of the west.
And the sins of omission go further. J Travis Jenkins, in The Herring and the Herring Fisheries (1927), accuses him of deliberate manipulation of statistics. For the purposes of making a claim for the bounty, buss owners only submitted the returns on the first fishing voyage of the year – which would be in Scottish waters. The busses made between two and three voyages a year.
Smith bases his calculation of bounties and resulting barrels exclusively on the submitted returns.
The bounty legislation introduced leverage: in order to receive the subsidy, busses had to adopt appropriate curing procedures. Smith doesn’t refer to the problem in The Wealth of Nations, but it’s clear, from a letter to William Eden in 1780, he was fully aware of it: Dutch cured Herrings are so vastly superior to British cured you can scarcely imagine the difference.
Dutch protectionism banned the import of foreign salted herring and, in emulation, the British strategy included a ban on the Dutch product. In his letter Smith argues that if the ban was lifted, the competition it introduced would rapidly improve British curing.
Even without the competition, you’d think Smith’s invisible hand might have made some headway over the previous 300 years. He may have had second thoughts on opening such a barrel of worms.
Navies and Empires
On the relationship between the buss fishery, naval logistics and maritime empires, he is grudging: it may perhaps be thought that (the bounties) contribute to (the nation’s) defence by augmenting the number of its sailors and shipping. Either way, he dismisses the argument: the cost was greater than could be justified by the benefit.
Quite apart from the Scottish-Dutch war of the 1530s, there had been three Anglo-Dutch wars in the C17th, all related to the herring fishery and the wresting of empire-building naval supremacy. And a fourth Anglo-Dutch war, over their support for American independence, was actually in progress in the early 1780s. Along with the American war itself, this will have severely disrupted Scotland’s lucrative (but not quality dependent) herring trade with the slave plantations.
Apart from the effect on the cost of barrels, Smith makes no mention of these wars. In the context of all the other naval investment, a subsidised pool of buss-trained seamen may legitimately have been thought a worthwhile expense, but…
First, the herring buss bounty seems too large, Smith argues.
The misleading figures at the end of Book IV cover an eleven year period, 1771 to 1781. The average annual subsidy for each buss comes to £71. In 1696, James Puckle calculated the capital outlay on building a herring buss at £500; repairs and renewals £80 pa; materials and supplies £335 pa.
Puckle’s calculations give an eleven year cost of £5,065. Allowing or not allowing for 75 years of inflation, average bounty receipts against costs over that period would be £788: significant, but not disproportionate. If the thought was that the subsidy was enabling the development of an empire, it’s chicken feed.
I’m not suggesting all the wealth expropriated from the British Empire between 1750 and, say, 1950 was down to enlightened herring fishery subsidy (however tempting). But if we just adopt Smith’s narrow focus on Scotland the returns could be seen as huge enough.
‘Secondly’ and ‘Thirdly’
Smith’s next arguments are about busses versus the boat fishery. Secondly, the bounty… is proportioned to the burden of the ship, not to her diligence or success; and, Thirdly, the mode of fishing… seems not so well adapted to the situation of Scotland.
Smith asserts the herring buss bounty ruined the boat fishery through unfair commercial advantage. Between ten and fifteen years ago, he says, it hadn’t been entirely ruined. On the basis of statistics purporting to demonstrate the inefficiency of the busses, this could be seen as having your cake and eating it, but it also ignores other factors.
Scotland’s feudal structure had been an obstacle to development: the laird owned the fisherman’s house; the laird financed the building of the fisherman’s boat. With no capital asset against which to borrow, modernisation depended on a landlord’s financial situation and priorities.
This was changing. Boat ownership was moving towards the curers. The economy was not strong, however: the disastrous impact of Darien, Scotland’s own 1690s attempt at empire, was followed by the failure of two Jacobite rebellions and the exile of a significant proportion of the Highland aristocracy. Both public and private investment in the capacity of the Scottish herring industry was conceived in the same terms as the Marshall Plan after World War II.
The Scottish west coast fisheries were dependent particularly on the slave plantation market for red herring. For eight of the between ten and fifteen years this was disrupted by war.
Smith admits that a noted rise in price might have been caused by the real scarcity of herrings upon the coast of Scotland. Some fishing communities would travel to other inshore grounds, but mostly they worked local populations. In an open boat the options are limited. If the herring don’t appear roughly when and where they are expected, it’s hard to adapt.
Jean Dunlop’s The British Fisheries Society, 1786 – 1893 pictures the new fishing community established at Ullapool almost requiring herrings to swim up the loch and knock on its front doors before it would even bother. The Society’s consideration of soil quality and acreage allocated to each household was finely judged – too rich / too large, there was no incentive to fish; too poor / too small, if the herrings didn’t turn up there was starvation. There was, in fact, starvation.
It’s almost an argument for some kind of larger, decked vessel, which could stay at sea in most weathers, seek out the vagrant inshore herring, benefit from the plentiful offshore populations, follow the herring down the east coast to the rich grounds of the Dogger Bank and beyond, down the west coast to the Isle of Man and Irish waters.
It’s true the smaller boats were adapted to conditions in the lochs, firths and inshore waters. Over the C19th, further adaptation led to real design innovation – the Fifie, the Baldie, the Zulu: the small boats acquired decks and doubled in size.
It’s also true that the Dutch needed to cure the herring at sea, because they were a long way from home. There was no need to do this when you were fishing relatively close to your own coastline. A solution had already been found, however, in the French-style, three-masted lugger: smaller than the buss, but large enough to attract the bounty; fully-decked and fast.
The lugger could stay at sea, gutting and salting onboard, or race for shore and sell to the fresh market and the onshore curers. It was so fast, in fact, it could outrun His Majesty’s Revenue Cutters, enabling income diversification. It doesn’t seem to have reached Scotland until the late C18th, but, working its way up from The Channel, it been replacing busses from the 1750s.
Fourthly, Smith argues, in many parts of Scotland, during certain seasons of the year, herrings make no inconsiderable part of the food of the people.
The failures of his invisible hand apart, Smith genuinely offered more than just the crocodile tears today’s neo-liberals shed at the thought of the poor. Although the price of herring had gone up, he recognises other factors affecting this. He restricts himself to the accusation that price had not gone down as a result of the bounties. If there is to be a subsidy, he argues, it should benefit the poor. After more than two hundred years, it’s still a refreshing concept.
By switching subsidy from the busses (focused on export) to a revived boat fishery (bringing the herring immediately to shore for curing and fresh fish sales) prices would be lowered in the home market, Smith argues.
Forget the luggers for a moment, the buss fishery by definition did not compete in the fresh market. At the time of Smith’s writing, however, the boat fishery’s engagement with the salt herring market had also been massively advantaged by the White Herring Fishery Act passed in 1778. It is hard to get your head round parliament’s acquiescence, but, at the prompting of the MP for Glasgow, seemingly concerned with his constituents’ winter fishing, the authorised starting date for the British buss fleet had been put back from June to October. Fishermen were as flexible then as now with regulations, but this would have removed over half the potential catch.
Smith doesn’t comment on the most interesting aspect of the figures he presents: the radical drop in busses and buss-caught barrels of herring between 1778 and 1781. Decline sets in with 1777’s figures (possibly due to the American War), but the acceleration is marked, then, year on year. A possible explanation for the statistical misdemeanours, raised by Jenkins, might be that, at the time of writing, busses were only able to make one official voyage – after the most profitable Scottish season was over.
If the boat fishery was not able to take advantage of such a situation, it suggests the busses weren’t the problem.
If investment, naturally and unaided, followed opportunity, the failure of the boat fishery in the home market could only have been down to three factors: the difficulties created for fishing communities when the herring grounds shifted; the limitations of the fresh herring market before the invention of the railways; the tax on salt.
There was salt duty exemption on exported herring, not on home market production. Buss or boat, fishermen dealing with gluts and scarcities needed to work both markets. Salt was stored under lock and key in customs houses. A fishing community only got a customs house if it was large enough to justify the investment. Many fishing communities weren’t. Just getting hold of salt was an added cost.
In a letter to Sir John Sinclair, Smith made clear his disapproval of all taxes that may affect the necessary expenses of the poor. In an advocacy for the needs of the boat fishery, the absence of any address the salt question has to be a sin of omission. Elsewhere, The Wealth of Nations looks at taxes on consumable commodities, but doesn’t take any particular exception salt. In the new herring paragraphs he only notes the loss of tax revenue through exemption as additional subsidy.
Salt taxes in the UK weren’t abolished until 1825.
Opportunities & Actions
Even allowing for the growth of the British fleet, there was an historically low number of busses operating on the herring grounds. In 1620, the Dutch had 2,000 in their Grand Fishery. Worn down and broken by the attritional wars with Britain, by 1736 they had 300; by 1779, 162.
Smith talks of a scarcity of herrings. He doesn’t acknowledge that part of the argument for the buss bounty had been as cushion to investment in lean years. The fish were probably just elsewhere, but even if they weren’t, the opposition’s weakness had to present an investment opportunity. In 1776, the high watermark in Smith’s eleven year survey, there were only 294 British busses. Even in a bad year this represented a catch capacity considerably below the scale of the resource.
In his focus on the home market, Smith either doesn’t grasp or chooses to ignore the size of the Grand Fishery, which Britain had been assiduously trying to wrest from the Dutch. In today’s money, at its peak the Dutch valued it at over £100 million. In the peak year of 1913, the Scottish summer herring fishing alone saw a catch of 1.324 million crans (approx. 1.6 billion herrings). The total catch in England and Wales was 2 million crans (2.4 billion herrings). British herring exports, adjusted for inflation, were worth approximately £600 million.
Encouragement for the buss fishery was clumsy. Britain was good at red herring: ungutted, it was so heavily salted and smoked there was flexibility on how fresh the fish was. Almost everything else about the English and Scottish herring industry had been clumsily addressed for 300 years. The bounties were part of an attempt at finally liberating an economic potential, around which there could be little argument. The boat fishery Smith was looking at simply couldn’t exploit the full scale of it.
Bounties for the Boat Fishery
In a 1786 letter to Henry Beaufoy, MP for Yarmouth and chairman of the parliamentary Fisheries Committee, Smith writes, I am very happy that you approve of my Idea with regard to the Herring fishery.
The committee and the subsequent legislation actually went for an extension of the bounty to the smaller boats, rather than any switch away from the busses. It was a good idea. Some commentators are happy credit Smith with it, although this may be over-generous.
It’s hard to imagine Smith’s great mind coming up with a solution, which involved either the extension of subsidies or a switch in their focus. As the lesser of two evils (clearly bringing benefits to the fishermen in economic difficulty) he could justify to himself the idea of a switch. According to his principles and arguments, however, removing the subsidy from the busses would be enough. An invisible hand would take care of the rest.
It’s also hard to imagine that the idea was not already on the table. The failure of the 1745 Jacobite Rebellion had generated emigration. The evictions of The Clearances, which began in the 1750s, were adding to the problem. Population maintenance and growth was seen as fundamental to the modernisation of the Scottish economy.
Whether through the work of the British Fisheries Society or through independent investment, the herring was seen as the solution. New communities, new harbours, new customs houses would be built. Without the means to fish, however, none of this would work. The busses, largely, weren’t community-based. There was one at Ullapool, but it really only worked to facilitate the boat fishery. In order to realise fishery-based modernisation ambitions, there had to be a broadening of the bounty distribution.
It also has to be said, if Smith had been engaged in the original thinking, one would assume he would have been able to come up with better arguments than those he published.
In a 1787 letter to Beaufoy, he dismisses the ambitions of the British Fisheries Society. Investors will lose every shilling… I have not the smallest doubt. He wasn’t that far wide of the mark, but the indication is that while investors might have liked a return, they were largely content to see their investment as philanthropy.
Perhaps Smith saw support for a (temporarily) subsidised boat fishery as a trade off against securing political engagement with his wider thinking. Beaufoy described himself as a friend rather than a follower of Pitt the Younger, but was connected. Pitt became Chancellor of the Exchequer in 1782, then also Prime Minister in December 1983. In the 1786 letter to Beaufoy Smith writes:
I think myself much honoured by the slightest mark of Mr Pitts approbation. You may be assured that the long and strict friendship in which I have lived with some of his opponents, does not hinder me from discerning courage, activity, probity, and public spirit in the great outlines of his administration.
In the herring paragraphs he added to The Wealth of Nations, he may have been courting (carefully not alienating) government interest. Herrings were on the agenda.
At the same time, Smith was a respected thinker. Beaufoy and the Fisheries Committee probably valued Smith’s contribution for the credence it offered for at least part of what they were trying to set in motion. They also drew on the reports of the philanthropist John Knox and the economist James Anderson, both of whom shared a concern for Scotland’s small fishing communities and the needs of the boat fishery.
The bounties were gradually phased out in the early C19th, finally disappearing altogether in 1829.
Acknowledgements, Articles & Books
Big thanks to Alison Rieser of the University of Hawaii for sending me her The Herring Enlightenment: Adam Smith and the reform of British fishing subsidies, 1783 – 1799. Apart from the richness of the article itself, it was there I came across the beautiful cartoon of Adam Smith walking in a bubble of his own thoughts.
Adam Smith: Two Letters to Henry Beaufoy MP, David R Raynor (Scottish Journal of Political Economy, Vol 43, No 5, 1996)
Dutch Herring, an Environmental History, c 1600 – 1860, Bo Poulsen (2008)
England’s Interest, or, A Brief Discourse of the Royal Fishery in a Letter to a Friend, James Puckle (1696)
England’s Path to Wealth and Honour, James Puckle (1700)
Observations Touching Trade and Commerce, Sir Walter Raleigh (published posthumously, 1653)
Sailing Drifters, Edgar March (1969)
The British Fisheries Society, 1786 – 1893, Jean Dunlop (1978)
The British Herring Industry – The Steam Drifter Years, 1900 – 1960, Christopher Unsworth (2013)
The Herring and Herring Fisheries, J. Travis Jenkins (1927)
The Herring and the Herring Fishery, JW de Caux (1881)
The Herring Enlightenment: Adam Smith and the reform of British fishing subsidies, 1783 – 1799, Alison Rieser (The International Journal of Maritime History, Vol 29 (3), 2017)
The Herring; Its Effect on the History of Britain, AM Samuel (1918)
The Herring, It’s Natural History and National Importance, John Michell (1864)
The History of the Dutch Sea Fisheries, Anthony Beaujon (1884)
The Ring-Net Fishermen, Angus Martin (1981)
The Royal Fishery Companies of the Seventeenth Century, John Elder (1912)
The Sea Fisheries of Scotland, James Coull (1996)
The Theory of Moral Sentiments, Adam Smith (1759)
The Wealth of Nations, Adam Smith (1784)