But the soundness of the principle laid down by Mr. M’Culloch as universally received, and which Mr. Senior accepts (with the qualification affecting raw produce) has not passed unchallenged.  For greater clearness I shall repeat that principle here.  “The gentlemen,” says Mr. M’Culloch, “who consume nothing in their families but what is brought from abroad are quite as good, as useful, and as meritorious subjects as they could be if they consume nothing but what is produced at home.”  And the reason for this is to be found in his Principles of Political Economy where he says that, Foreign commodities are always paid for by British commodities, therefore, the purchase of Foreign commodities encourages British industry as much as the purchase of British commodities” (Principles of Political Economy, p. 152).  The important exception to this theorem arising from the nature of the commodities exported and imported has been already dealt with.  Let us examine the vital principle of the theorem.  “The capital,” says Adam Smith, “which is employed in purchasing in one part of the country in order to sell in another, the produce of the industry of that country, generally replaces by every such operation two distinct capitals, that had both been employed in the agriculture or manufactures of that country, and thereby enables them to continue that employment.  When it sends out from the residence of the merchant a certain value of commodities it generally brings back in return at least an equal value of other commodities.  When both are the produce of domestic industry it necessarily replaces by every such operation two distinct capitals which had both been employed in supporting productive labour, and thereby enables them to continue that support.  The capital which sends Scotch manufactures to London, and brings back English corn and manufactures to Edinburgh, necessarily replaces, by every such operation, two British capitals, which had both been employed in the agriculture or manufactures of Great Britain.

“The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces too, by every such operation, two distinct capitals; but one of them only is employed in supporting domestic industry.  The capital which sends British goods to Portugal, and brings back Portuguese goods to Great Britain, replaces, by every such operation, only one British capital.  The other is a Portuguese one.  Though the returns, therefore, of the foreign trade of consumption should be as quick as those of the home trade, the capital employed in it will give but one half of the encouragement to the industry or productive labour of the country.