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    Book IV: Chapter 1

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    Chapter 24
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    That wealth consists in money, or in gold and silver, is a
    popular notion which naturally arises from the double function of
    money, as the instrument of commerce, and as the measure of
    value. In consequence of its being the instrument of commerce,
    when we have money we can more readily obtain whatever else we
    have occasion for, than by means of any other commodity. The
    great affair, we always find, is to get money. When that is
    obtained, there is no difficulty in making any subsequent
    purchase. In consequence of its being the measure of value, we
    estimate that of all other commodities by the quantity of money
    which they will exchange for. We say of a rich man, that he is
    worth a great deal, and of a poor man, that he is worth very
    little money. A frugal man, or a man eager to be rich, is said to
    love money ; and a careless, a generous, or a profuse man, is
    said to be indifferent about it. To grow rich is to get money ;
    and wealth and money, in short, are, in common language,
    considered as in every respect synonymous.

    A rich country, in the same manner as a rich man, is supposed to
    be a country abounding in money ; and to heap up gold and silver
    in any country is supposed to be the readiest way to enrich it.
    For some time after the discovery of America, the first inquiry
    of the Spaniards, when they arrived upon any unknown coast, used
    to be, if there was any gold or silver to be found in the
    neighbourhood? By the information which they received, they
    judged whether it was worth while to make a settlement there, or
    if the country was worth the conquering. Plano Carpino, a monk
    sent ambassador from the king of France to one of the sons of the
    famous Gengis Khan, says, that the Tartars used frequently to ask
    him, if there was plenty of sheep and oxen in the kingdom of
    France ? Their inquiry had the same object with that of the
    Spaniards. They wanted to know if the country was rich enough to
    be worth the conquering. Among the Tartars, as among all other
    nations of shepherds, who are generally ignorant of the use of
    money, cattle are the instruments of commerce and the measures of
    value. Wealth, therefore, according to them, consisted in cattle,
    as, according to the Spaniards, it consisted in gold and silver.
    Of the two, the Tartar notion, perhaps, was the nearest to the

    Mr Locke remarks a distinction between money and other moveable
    goods. All other moveable goods, he says, are of so consumable a
    nature, that the wealth which consists in them cannot be much
    depended on; and a nation which abounds in them one year may,
    without any exportation, but merely by their own waste and
    extravagance, be in great want of them the next. Money, on the
    contrary, is a steady friend, which, though it may travel about
    from hand to hand, yet if it can be kept from going out of the
    country, is not very liable to be wasted and consumed. Gold and
    silver, therefore, are, according to him, the must solid and
    substantial part of the moveable wealth of a nation ; and to
    multiply those metals ought, he thinks, upon that account, to be
    the great object of its political economy.

    Others admit, that if a nation could be separated from all the
    world, it would be of no consequence how much or how little money
    circulated in it. The consumable goods, which were circulated by
    means of this money, would only be exchanged for a greater or a
    smaller number of pieces; but the real wealth or poverty of the
    country, they allow, would depend altogether upon the abundance
    or scarcity of those consumable goods. But it is otherwise, they
    think, with countries which have connections with foreign
    nations, and which are obliged to carry on foreign wars, and to
    maintain fleets and armies in distant countries. This, they say,
    cannot be done, but by sending abroad money to pay them with ;
    and a nation cannot send much money abroad, unless it has a good
    deal at home. Every such nation, therefore, must endeavour, in
    time of peace, to accumulate gold and silver, that when occasion
    requires, it may have wherewithal to carry on foreign wars.

    In consequence of those popular notions, all the different
    nations of Europe have studied, though to little purpose, every
    possible means of accumulating gold and silver in their
    respective countries. Spain and Portugal, the proprietors of the
    principal mines which supply Europe with those metals, have
    either prohibited their exportation under the severest penalties,
    or subjected it to a considerable duty. The like prohibition
    seems anciently to have made a part of the policy of most other
    European nations. It is even to be found, where we should least
    of all expect to find it, in some old Scotch acts of Parliament,
    which forbid, under heavy penalties, the carrying gold or silver
    forth of the kingdom. The like policy anciently took place both
    in France and England.

    When those countries became commercial, the merchants found this
    prohibition, upon many occasions, extremely inconvenient. They
    could frequently buy more advantageously with gold and silver,
    than with any other commodity, the foreign goods which they
    wanted, either to import into their own, or to carry to some
    other foreign country. They remonstrated, therefore, against this
    prohibition as hurtful to trade.

    They represented, first, that the exportation of gold and silver,
    in order to purchase foreign goods, did not always diminish the
    quantity of those metals in the kingdom ; that, on the contrary,
    it might frequently increase the quantity ; because, if the
    consumption of foreign goods was not thereby increased in the
    country, those goods might be re-exported to foreign countries,
    and being there sold for a large profit, might bring back much
    more treasure than was originally sent out to purchase them. Mr
    Mun compares this operation of foreign trade to the seed-time and
    harvest of agriculture. "If we only behold," says he, "the
    actions of the husbandman in the seed. time, when he casteth away
    much good corn into the ground, we shall account him rather a
    madman than a husbandman. But when we consider his labours in the
    harvest, which is the end of his endeavours, we shall find the
    worth and plentiful increase of his actions."

    They represented, secondly, that this prohibition could not
    hinder the exportation of gold and silver, which, on account of
    the smallness of their bulk in proportion to their value, could
    easily be smuggled abroad. That this exportation could only be
    prevented by a proper attention to what they called the balance
    of trade. That when the country exported to a greater value than
    it imported, a balance became due to it from foreign nations,
    which was necessarily paid to it in gold and silver, and thereby
    increased the quantity of those metals in the kingdom. But that
    when it imported to a greater value than it exported, a contrary
    balance became due to foreign nations, which was necessarily paid
    to them in the same manner, and thereby diminished that quantity
    : that in this case, to prohibit the exportation of those metals,
    could not prevent it, but only, by making it more dangerous,
    render it more expensive: that the exchange was thereby turned
    more against the country which owed the balance, than it
    otherwise might have been; the merchant who purchased a bill upon
    the foreign country being obliged to pay the banker who sold it,
    not only for the natural risk, trouble, and expense of sending
    the money thither, but for the extraordinary risk arising from
    the prohibition; but that the more the exchange was against any
    country, the more the balance of trade became necessarily against
    it; the money of that country becoming necessarily of so much
    less value, in comparison with that of the country to which the
    balance was due. That if the exchange between England and
    Holland, for example, was five per cent. against England, it
    would require 105 ounces of silver in England to purchase a bill
    for 100 ounces of silver in Holland: that 105 ounces of silver in
    England, therefore, would be worth only 100 ounces of silver in
    Holland, and would purchase only a proportionable quantity of
    Dutch goods ; but that 100 ounces of silver in Holland, on the
    contrary, would be worth 105 ounces in England, and would
    purchase a proportionable quantity of English goods; that the
    English goods which were sold to Holland would be sold so much
    cheaper, and the Dutch goods which were sold to England so much
    dearer, by the difference of the exchange : that the one would
    draw so much less Dutch money to England, and the other so much
    more English money to Holland, as this difference amounted to:
    and that the balance of trade, therefore, would necessarily be so
    much more against England, and would require a greater balance of
    gold and silver to be exported to Holland.

    Those arguments were partly solid and partly sophistical. They
    were solid, so far as they asserted that the exportation of gold
    and silver in trade might frequently be advantageous to the
    country. They were solid, too, in asserting that no prohibition
    could prevent their exportation, when private people found any
    advantage in exporting them. But they were sophistical, in
    supposing, that either to preserve or to augment the quantity of
    those metals required more the attention of government, than to
    preserve or to augment the quantity of any other useful
    commodities, which the freedom of trade, without any such
    attention, never fails to supply in the proper quantity. They
    were sophistical, too, perhaps, in asserting that the high price
    of exchange necessarily increased what they called the
    unfavourable balance of trade, or occasioned the exportation of a
    greater quantity of gold and silver. That high price, indeed, was
    extremely disadvantageous to the merchants who had any money to
    pay in foreign countries. They paid so much dearer for the bills
    which their bankers granted them upon those countries. But though
    the risk arising from the prohibition might occasion some
    extraordinary expense to the bankers, it would not necessarily
    carry any more money out of the country. This expense would
    generally be all laid out in the country, in smuggling the money
    out of it, and could seldom occasion the exportation of a single
    sixpence beyond the precise sum drawn for. The high price of
    exchange, too, would naturally dispose the merchants to endeavour
    to make their exports nearly balance their imports, in order that
    they might have this high exchange to pay upon as small a sum as
    possible. The high price of exchange, besides, must necessarily
    have operated as a tax, in raising the price of foreign goods,
    and thereby diminishing their consumption. It would tend,
    therefore, not to increase, but to diminish, what they called the
    unfavourable balance of trade, and consequently the exportation
    of gold and silver.

    Such as they were, however, those arguments convinced the people
    to whom they were addressed. They were addressed by merchants to
    parliaments and to the councils of princes, to nobles, and to
    country gentlemen; by those who were supposed to understand
    trade, to those who were conscious to them selves that they knew
    nothing about the matter. That foreign trade enriched the
    country, experience demonstrated to the nobles and country
    gentlemen, as well as to the merchants ; but how, or in what
    manner, none of them well knew. The merchants knew perfectly in
    what manner it enriched themselves, it was their business to know
    it. But to know in what manner it enriched the country, was no
    part of their business. The subject never came into their
    consideration, but when they had occasion to apply to their
    country for some change in the laws relating to foreign trade. It
    then became necessary to say something about the beneficial
    effects of foreign trade, and the manner in which those effects
    were obstructed by the laws as they then stood. To the judges who
    were to decide the business, it appeared a most satisfactory
    account of the matter, when they were told that foreign trade
    brought money into the country, but that the laws in question
    hindered it from bringing so much as it otherwise would do. Those
    arguments, therefore, produced the wished-for effect. The
    prohibition of exporting gold and silver was, in France and
    England, confined to the coin of those respective countries. The
    exportation of foreign coin and of bullion was made free. In
    Holland, and in some other places, this liberty was extended even
    to the coin of the country. The attention of government was
    turned away from guarding against the exportation of gold and
    silver, to watch over the balance of trade, as the only cause
    which could occasion any augmentation or diminution of those
    metals. From one fruitless care, it was turned away to another
    care much more intricate, much more embarrassing, and just
    equally fruitless. The title of Mun's book, England's Treasure in
    Foreign Trade, became a fundamental maxim in the political
    economy, not of England only, but of all other commercial
    countries. The inland or home trade, the most important of all,
    the trade in which an equal capital affords the greatest revenue,
    and creates the greatest employment to the people of the country,
    was considered as subsidiary only to foreign trade. It neither
    brought money into the country, it was said, nor carried any out
    of it. The country, therefore, could never become either richer
    or poorer by means of it, except so far as its prosperity or
    decay might indirectly influence the state of foreign trade.

    A country that has no mines of its own, must undoubtedly draw its
    gold and silver from foreign countries, in the same manner as one
    that has no vineyards of its own must draw its wines. It does not
    seem necessary, however, that the attention of government should
    he more turned towards the one than towards the other object. A
    country that has wherewithal to buy wine, will always get the
    wine which it has occasion for ; and a country that has
    wherewithal to buy gold and silver, will never be in want of
    those metals. They are to be bought for a certain price, like all
    other commodities; and as they are the price of all other
    commodities, so all other commodities are the price of those
    metals. We trust, with perfect security, that the freedom of
    trade, without any attention of government, will always supply us
    with the wine which we have occasion for; and we may trust, with
    equal security, that it will always supply us with all the gold
    and silver which we can afford to purchase or to employ, either
    in circulating our commodities or in other uses.

    The quantity of every commodity which human industry can either
    purchace or produce, naturally regulates itself in every country
    according to the effectual demand, or according to the demand of
    those who are willing to pay the whole rent, labour, and profits,
    which must be paid in order to prepare and bring it to market.
    But no commodities regulate themselves more easily or more
    exactly, according to this effectual demand, than gold and silver
    ; because, on account of the small bulk and great value of those
    metals, no commodities can be more easily transported from one
    place to another ; from the places where they are cheap, to those
    where they are dear ; from the places where they exceed, to those
    where they fall short of this effectual demand. If there were in
    England, for example, an effectual demand for an additional
    quantity of gold, a packet-boat could bring from Lisbon, or from
    wherever else it was to be had, fifty tons of gold, which could
    be coined into more than five millions of guineas. But if there
    were an effectual demand for grain to the same value, to import
    it would require, at five guineas a-ton, a million of tons of
    shipping, or a thousand ships of a thousand tons each. The navy
    of England would not be sufficient.

    When the quantity of gold and silver imported into any country
    exceeds the effectual demand, no vigilance of government can
    prevent their exportation. All the sanguinary laws of Spain and
    Portugal are not able to keep their gold and silver at home. The
    continual importations from Peru and Brazil exceed the effectual
    demand of those countries, and sink the price of those metals
    there below that in the neighbouring countries. If, on the
    contrary, in any particular country, their quantity fell short of
    the effectual demand, so as to raise their price above that of
    the neighbouring countries, the government would have no occasion
    to take any pains to import them. If it were even to take pains
    to prevent their importation, it would not be able to effectuate
    it. Those metals, when the Spartans had got wherewithal to
    purchase them, broke through all the barriers which the laws of
    Lycurgus opposed to their entrance into Lacedaemon. All the
    sanguinary laws of the customs are not able to prevent the
    importation of the teas of the Dutch and Gottenburg East India
    comnpanies; because somewhat cheaper than those of the British
    company. A pound of tea, however, is about a hundred times the
    bulk of one of the highest prices, sixteen shillings, that is
    commonly paid for it in silver, and more than two thousand times
    the bulk of the same price in gold, and, consequently, just so
    many times more difficult to smuggle.

    It is partly owing to the easy transportation of gold and silver,
    from the places where they abound to those where they are wanted,
    that the price of those metals does not fluctuate continually,
    like that of the greater part of other commodities, which are
    hindered by their bulk from shifting their situation, when the
    market happens to be either over or under-stocked with them. The
    price of those metals, indeed, is not altogether exempted from
    variation ; but the changes to which it is liable are generally
    slow, gradual, and uniform. In Europe, for example, it is
    supposed, without much foundation, perhaps, that during the
    course of the present and preceding century, they have been
    constantly, but gradually, sinking in their value, on account of
    the continual importations from the Spanish West Indies. But to
    make any sudden change in the price of gold and silver, so as to
    raise or lower at once, sensibly and remarkably, the money price
    of all other commodities, requires such a revolution in commerce
    as that occasioned by the discovery of America.

    If, not withstanding all this, gold and silver should at any time
    fall short in a country which has wherewithal to purchase them,
    there are more expedients for supplying their place, than that of
    almost any other commodity. If the materials of manufacture are
    wanted, industry must stop. If provisions are wanted, the people
    must starve. But if money is wanted, barter will supply its
    place, though with a good deal of inconveniency. Buying and
    selling upon credit, and the different dealers compensating their
    credits with one another, once a-month, or once a-year, will
    supply it with less inconveniency. A well-regulated paper-money
    will supply it not only without any inconveniency, but, in some
    cases, with some advantages. Upon every account, therefore, the
    attention of government never was so unnecessarily employed, as
    when directed to watch over the preservation or increase of the
    quantity of money in any country.

    No complaint, however, is more common than that of a scarcity of
    money. Money, like wine, must always be scarce with those who
    have neither wherewithal to buy it, nor credit to borrow it.
    Those who have either, will seldom be in want either of the
    money, or of the wine which they have occasion for. This
    complaint, however, of the scarcity of money, is not always
    confined to improvident spendthrifts. It is sometimes general
    through a whole mercantile town and the country in its
    neighbourhood. Over-trading is the common cause of it. Sober men,
    whose projects have been disproportioned to their capitals, are
    as likely to have neither wherewithal to buy money, nor credit to
    borrow it, as prodigals, whose expense has been disproportioned
    to their revenue. Before their projects can be brought to bear,
    their stock is gone, and their credit with it. They run about
    everywhere to borrow money, and everybody tells them that they
    have none to lend. Even such general complaints of the scarcity
    of money do not always prove that the usual number of gold and
    silver pieces are not circulating in the country, but that many
    people want those pieces who have nothing to give for them. When
    the profits of trade happen to be greater than ordinary
    over-trading becomes a general error, both among great and small
    dealers. They do not always send more money abroad than usual,
    but they buy upon credit, both at home and abroad, an unusual
    quantity of goods, which they send to some distant market, in
    hopes that the returns will come in before the demand for
    payment. The demand comes before the returns, and they have
    nothing at hand with which they can either purchase money or give
    solid security for borrowing. It is not any scarcity of gold and
    silver, but the difficulty which such people find in borrowing,
    and which their creditor find in getting payment, that occasions
    the general complaint of the scarcity of money.

    It would be too ridiculous to go about seriously to prove, that
    wealth does not consist in money, or in gold and silver ; but in
    what money purchases, and is valuable only for purchasing. Money,
    no doubt, makes always a part of the national capital ; but it
    has already been shown that it generally makes but a small part,
    and always the most unprofitable part of it.

    It is not because wealth consists more essentially in money than
    in goods, that the merchant finds it generally more easy to buy
    goods with money, than to buy money with goods ; but because
    money is the known and established instrument of commerce, for
    which every thing is readily given in exchange, but which is not
    always with equal readiness to be got in exchange for every
    thing. The greater part of goods, besides, are more perishable
    than money, and he may frequently sustain a much greater loss by
    keeping them. When his goods are upon hand, too, he is more
    liable to such demands for money as he may not be able to answer,
    than when he has got their price in his coffers. Over and above
    all this, his profit arises more directly from selling than from
    buying; and he is, upon all these accounts, generally much more
    anxious to exchange his goods for money than his money for goods.
    But though a particular merchant, with abundance of goods in his
    warehouse, may sometimes be ruined by not being able to sell them
    in time, a nation or country is not liable to the same accident,
    The whole capital of a merchant frequently consists in perishable
    goods destined for purchasing money. But it is but a very small
    part of the annual produce of the land and lahour of a country,
    which can ever be destined for purchasing gold and silver from
    their neighbours. The far greater part is circulated and consumed
    among themselves; and even of the surplus which is sent abroad,
    the greater part is generally destined for the purchase of other
    foreign goods. Though gold and silver, therefore, could not be
    had in exchange for the goods destined to purchase them, the
    nation would not be ruined. It might, indeed, suffer some loss
    and inconveniency, and be forced upon some of those expedients
    which are necessary for supplying the place of money. The annual
    produce of its land and labour, however, would be the same, or
    very nearly the same as usual ; because the same, or very nearly
    the same consumable capital would be employed in maintaining it.
    And though goods do not always draw money so readily as money
    draws goods, in the long-run they draw it more necessarily than
    even it draws them. Goods can serve many other purposes besides
    purchasing money, but money can serve no other purpose besides
    purchasing goods. Money, therefore, necessarily runs after goods,
    but goods do not always or necessarily run after money. The man
    who buys, does not always mean to sell again, but frequently to
    use or to consume ; whereas he who sells always means to buy
    again. The one may frequently have done the whole, but the other
    can never have done more than the one half of his business. It is
    not for its own sake that men desire money, but for the sake of
    what they can purchase with it.

    Consumable commodities, it is said, are soon destroyed; whereas
    gold and silver are of a more durable nature, and were it not for
    this continual exportation, might be accumulated for ages
    together, to the incredible augmentation of the real wealth of
    the country. Nothing, therefore, it is pretended, can be more
    disadvantageous to any country, than the trade which consists in
    the exchange of such lasting for such perishable commodities. We
    do not, however, reckon that trade disadvatageous, which consists
    in the exchange of the hardware of England for the wines of
    France, and yet hardware is a very durable commodity, and were it
    not for this continual exportation, might too be accumulated for
    ages together, to the incredible augmentation of the pots and
    pans of the country. But it readily occurs, that the number of
    such utensils is in every country necessarily limited by the use
    which there is for them ; that it would be absurd to have more
    pots and pans than were necessary for cooking the victuals
    usually consumed there; and that, if the quantity of victuals
    were to increase, the number of pots and pans would readily
    increase along with it ; a part of the increased quantity of
    victuals being employed in purchasing them, or in maintaining an
    additional number of workmen whose business it was to make them.
    It should as readily occur, that the quantity of gold and silver
    is, in every country, limited by the use which there is for those
    metals ; that their use consists in circulating commodities, as
    coin, and in affording a species of household furniture, as
    plate; that the quantity of coin in every country is regulated by
    the value of the commodities which are to be circulated by it;
    increase that value, and immediately a part of it will be sent
    abroad to purchase, wherever it is to be had, the additional
    quantity of coin requisite for circulating them : that the
    quantity of plate is regulated by the number and wealth of those
    private families who choose to indulge themselves in that sort of
    magnificence; increase the number and wealth of such families,
    and a part of this increased wealth will most probably be
    employed in purchasing, wherever it is to be found, an additional
    quantity of plate ; that to attempt to increase the wealth of any
    country, either by introducing or by detaining in it an
    unnecessary quantity of gold and silver, is as absurd as it would
    be to attempt to increase the good cheer of private families, by
    obliging them to keep an unnecessary number of kitchen utensils.
    As the expense of purchasing those unnecessary utensils would
    diminish, instead of increasing, either the quantity or goodness
    of the family provisions; so the expense of purchasing an
    unnecessary quantity of gold and silver must, in every country,
    as necessarily diminish the wealth which feeds, clothes, and
    lodges, which maintains and employs the people. Gold and silver,
    whether in the shape of coin or of plate, are utensils, it must
    he remembered, as much as the furniture of the kitchen. Increase
    the use of them, increase the consumable commodities which are to
    be circulated, managed, and prepared by means of them, and you
    will infallibly increase the quantity ; but if you attempt by
    extraordinary means to increase the quantity, you will as
    infallibly diminish the use, and even the quantity too, which in
    those metals can never be greater than what the use requires.
    Were they ever to be accumulated beyond this quantity, their
    transportation is so easy, and the loss which attends their lying
    idle and unemployed so great, that no law could prevent their
    being immediately sent out of the country.

    It is not always necessary to accumulate gold and silver, in
    order to enable a country to carry on foreign wars, and to
    maintain fleets and armies in distant countries. Fleets and
    armies are maintained, not with gold and silver, but with
    consumable goods. The nation which, from the annual produce of
    its domestic industry, from the annual revenue arising out of its
    lands, and labour, and consumable stock, has wherewithal to
    purchase those consumable goods in distant countries, can
    maintain foreign wars there.

    A nation may purchase the pay and provisions of an army in a
    distant country three different ways ; by sending abroad either,
    first, some part of its accumulated gold and silver ; or,
    secondly, some part of the annual produce of its manufactures ;
    or, last of all, some part of its annual rude produce.

    The gold and silver which can properly be considered as
    accumulated, or stored up in any country, may be distinguished
    into three parts ; first, the circulating money; secondly, the
    plate of private families; and, last of all, the money which may
    have been collected by many years parsimony, and laid up in the
    treasury of the prince.

    It can seldom happen that much can be spared from the circulating
    money of the country ; because in that there can seldom be much
    redundancy. The value of goods annually bought and sold in any
    country requires a certain quantity of money to circulate and
    distribute them to their proper consumers, and can give
    employment to no more. The channel of circulation necessarily
    draws to itself a sum sufficient to fill it, and never admits any
    more. Something, however, is generally withdrawn from this
    channel in the case of foreign war. By the great number of people
    who are maintained abroad, fewer are maintained at home. Fewer
    goods are circulated there, and less money becomes necessary to
    circulate them. An extraordinary quantity of paper money of some
    sort or other, too, such as exchequer notes, navy bills, and bank
    bills, in England, is generally issued upon such occasions, and,
    by supplying the place of circulating gold and silver, gives an
    opportunity of sending a greater quantity of it abroad. All this,
    however, could afford but a poor resource for maintaining a
    foreign war, of great expense, and several years duration.

    The melting down of the plate of private families has, upon every
    occasion, been found a still more insignificant one. The French,
    in the beginning of the last war, did not derive so much
    advantage from this expedient as to compensate the loss of the

    The accumulated treasures of the prince have in former times
    afforded a much greater and more lasting resource. In the present
    times, if you except the king of Prussia, to accumulate treasure
    seems to be no part of the policy of European princes.

    The funds which maintained the foreign wars of the present
    century, the most expensive perhaps which history records, seem
    to have had little dependency upon the exportation either of the
    circulating money, or of the plate of private families, or of
    the treasure of the prince. The last French war cost Great
    Britain upwards of £90,000,000, including not only the
    £75,000,000 of new debt that was contracted, but the additional
    2s. in the pound land-tax, and what was annually borrowed of the
    sinking fund. More than two-thirds of this expense were laid out
    in distant countries; in Germany, Portugal, America, in the ports
    of the Mediterranean, in the East and West Indies. The kings of
    England had no accumulated treasure. We never heard of any
    extraordinary quantity of plate being melted down. The
    circulating gold and silver of the country had not been supposed
    to exceed £18,000,000. Since the late recoinage of the gold,
    however, it is believed to have been a good deal under-rated. Let
    us suppose, therefore, according to the most exaggerated
    computation which I remember to have either seen or heard of,
    that, gold and silver together, it amounted to £30,000,000. Had
    the war been carried on by means of our money, the whole of it
    must, even according to this computation, have been sent out and
    returned again, at least twice in a period of between six and
    seven years. Should this be supposed, it would afford the most
    decisive argument, to demonstrate how unnecessary it is for
    government to watch over the preservation of money, since, upon
    this supposition, the whole money of the country must have gone
    from it, and returned to it again, two different times in so
    short a period, without any body's knowing any thing of the
    matter. The channel of circulation, however, never appeared more
    empty than usual during any part of this period. Few people
    wanted money who had wherewithal to pay for it. The profits of
    foreign trade, indeed, were greater than usual during the whole
    war, but especially towards the end of it. This occasioned, what
    it always occasions, a general over-trading in all the ports of
    Great Britain; and this again occasioned the usual complaint of
    the scarcity of money, which always follows over-trading. Many
    people wanted it, who had neither wherewithal to buy it, nor
    credit to borrow it ; and because the debtors found it difficult
    to borrow, the creditors found it difficult to get payment. Gold
    and silver, however, were generally to be had for their value, by
    those who had that value to give for them.

    The enormous expense of the late war, therefore, must have been
    chiefly defrayed, not by the exportation of gold and silver, but
    by that of British commodities of some kind or other. When the
    government, or those who acted under them, contracted with a
    merchant for a remittance to some foreign country, he would
    naturally endeavour to pay his foreign correspondent, upon whom
    he granted a bill, by sending abroad rather commodities than gold
    and silver. If the commodities of Great Britain were not in
    demand in that country, he would endeavour to send them to some
    other country in which he could purchase a bill upon that
    country. The transportation of commodities, when properly suited
    to the market, is always attended with a considerable profit;
    whereas that of gold and silver is scarce ever attended with any.
    When those metals are sent abroad in order to purchase foreign
    commodities, the merchant's profit arises, not from the purchase,
    but from the sale of the returns. But when they are sent abroad
    merely to pay a debt, he gets no returns, and consequently no
    profit. He naturally, therefore, exerts his invention to find out
    a way of paying his foreign debts, rather by the exportation of
    commodities, than by that of gold and silver. The great quantity
    of British goods, exported during the course of the late war,
    without bringing back any returns, is accordingly remarked by the
    author of the Present State of the Nation.

    Besides the three sorts of gold and silver above mentioned, there
    is in all great commercial countries a good deal of bullion
    alternately imported and exported, for the purposes of foreign
    trade. This bullion, as it circulates among different commercial
    countries, in the same manner as the national coin circulates in
    every country, may be considered as the money of the great
    mercantile republic. The national coin receives its movement and
    direction from the commodities circulated within the precincts of
    each particular country ; the money in the mercantile republic,
    from those circulated between different countries. Both are
    employed in facilitating exchanges, the one between different
    individuals of the same, the other between those of different
    nations. Part of this money of the great mercantile republic may
    have been, and probably was, employed in carrying on the late
    war. In time of a general war, it is natural to suppose that a
    movement and direction should be impressed upon it, different
    from what it usually follows in profound peace, that it should
    circulate more about the seat of the war, and be more employed in
    purchasing there, and in the neighbouring countries, the pay and
    provisions of the different armies. But whatever part of this
    money of the mercantile republic Great Britain may have annually
    employed in this manner, it must have been annually purchased,
    either with British commodities, or with something else that had
    been purchased with them ; which still brings us back to
    commodities, to the annual produce of the land and labour of the
    country, as the ultimate resources which enabled us to carry on
    the war. It is natural, indeed, to suppose, that so great an
    annual expense must have been defrayed from a great annual
    produce. The expense of 1761, for example, amounted to more than
    £19,000,000. No accumulation could have supported so great an
    annual profusion. There is no annual produce, even of gold and
    silver, which could have supported it. The whole gold and
    silver annually imported into both Spain and Portugal, according
    to the best accounts, does not commonly much exceed £6,000,000
    sterling, which, in some years, would scarce have paid four
    months expense of the late war.

    The commodities most proper for being transported to distatnt
    countries, in order to purchase there either the pay and
    provisions of an army, or some part of the money of the
    mercantile republic to be employed in purchasing them, seem to be
    the finer and more improved manufactures; such as contain a great
    value in a small bulk, and can therefore be exported to a great
    distance at little expense. A country whose industry produces a
    great annual surplus of such manufactures, which are usually
    exported to foreign countries, may carry on for many years a very
    expensive foreign war, without either exporting any considerable
    quantity of gold and silver, or even having any such quantity to
    export. A considerable part of the annual surplus of its
    manufactures must, indeed, in this case, be exported without
    bringing back any returns to the country, though it does to the
    merchant ; the government purchasing of the merchant his bills
    upon foreign countries, in order to purchase there the pay and
    provisions of an army. Some part of this surplus, however, may
    still continue to bring back a return. The manufacturers during;
    the war will have a double demand upon them, and be called upon
    first to work up goods to be sent abroad, for paying the bills
    drawn upon foreign countries for the pay and provisions of the
    army: and, secondly, to work up such as are necessary for
    purchasing the common returns that had usually been consumed in
    the country. In the midst of the most destructive foreign war,
    therefore, the greater part of manufactures may frequently
    flourish greatly; and, on the contrary, they may decline on the
    return of peace. They may flourish amidst the ruin of their
    country, and begin to decay upon the return of its prosperity.
    The different state of many different branches of the British
    manufactures during the late war, and for some time after the
    peace, may serve as an illustration of what has been just now

    No foreign war, of great expense or duration, could conveniently
    be carried on by the exportation of the rude produce of the soil.
    The expense of sending such a quantity of it into a foreign
    country as might purchase the pay and provisions of an army would
    be too great. Few countries, too, produce much more rude produce
    than what is sufficient for the subsistence of their own
    inhabitants. To send abroad any great quantity of it, therefore,
    would be to send abroad a part of the necessary subsistence of
    the people. It is otherwise with the exportation of manufactures.
    The maintenance of the people employed in them is kept at home,
    and only the surplus part of their work is exported. Mr Hume
    frequently takes notice of the inability of the ancient kings of
    England to carry on, without interruption, any foreign war of
    long duration. The English in those days had nothing wherewithal
    to purchase the pay and provisions of their armies in foreign
    countries, but either the rude produce of the soil, of which no
    considerable part could be spared from the home consumption, or a
    few manufactures of the coarsest kind, of which, as well as of
    the rude produce, the transportation was too expensive. This
    inability did not arise from the want of money, but of the finer
    and more improved manufactures. Buying and selling was transacted
    by means of money in England then as well as now. The quantity of
    circulating money must have borne the same proportion, to the
    number and value of purchases and sales usually transacted at
    that time, which it does to those transacted at present ; or,
    rather, it must have borne a greater proportion, because there
    was then no paper, which now occupies a great part of the
    employment of gold and silver. Among nations to whom commerce and
    manufactures are little known, the sovereign, upon extraordinary
    occasions, can seldom draw any considerable aid from his
    subjects, for reasons which shall be explained hereafter. It is
    in such countries, therefore, that he generally endeavours to
    accumulate a treasure, as the only resource against such
    emergencies. Independent of this necessity, he is, in such a
    situation, naturally disposed to the parsimony requisite for
    accumulation. In that simple state, the expense even of a
    sovereign is not directed by the vanity which delights in the
    gaudy finery of a court, but is employed in bounty to his
    tenants, and hospitality to his retainers. But bounty and
    hospitality very seldom lead to extravagance; though vanity
    almost always does. Every Tartar chief, accordingly, has a
    treasure. The treasures of Mazepa, chief of the Cossacks in the
    Ukraine, the famous ally of Charles XII., are said to have been
    very great. The French kings of the Merovingian race had all
    treasures. When they divided their kingdom among their different
    children, they divided their treasures too. The Saxon princes,
    and the first kings after the Conquest, seem likewise to have
    accumulated treasures. The first exploit of every new reign was
    commonly to seize the treasure of the preceding king, as the most
    essential measure for securing the succession. The sovereigns of
    improved and commercial countries are not under the same
    necessity of accummlating treasures, because they can generally
    draw from their subjects extraordinary aids upon extraordinary
    occasions. They are likewise less disposed to do so. They
    naturally, perhaps necessarily, follow the mode of the times ;
    and their expense comes to be regulated by the same extravagant
    vanity which directs that of all the other great proprietors in
    their dominions. The insignificant pageantry of their court
    becomes every day more brilliant; and the expense of it not only
    prevents accumulation, but frequently encroaches upon the funds
    destined for more necessary expenses. What Dercyllidas said of
    the court of Persia, may be applied to that of several European
    princes, that he saw there much splendour, but little strength,
    and many servants, but few soldiers.

    The importation of gold and silver is not the principal, much
    less the sole benefit, which a nation derives from its foreign
    trade. Between whatever places foreign trade is carried on, they
    all of them derive two distinct benefits from it. It carries out
    that surplus part of the produce of their land and labour for
    which there is no demand among them, and brings back in return
    for it something else for which there is a demand. It gives a
    value to their superfluities, by exchanging them for something
    else, which may satisfy a part of their wants and increase their
    enjoyments. By means of it, the narrowness of the home market
    does not hinder the division of labour in any particular branch
    of art or manufacture from being carried to the highest
    perfection. By opening a more extensive market for whatever part
    of the produce of their labour may exceed the home consumption,
    it encourages them to improve its productive power, and to
    augment its annual produce to the utmost, and thereby to increase
    the real revenue and wealth of the society. These great and
    important services foreign trade is continually occupied in
    performing to all the different countries between which it is
    carried on. They all derive great benefit from it, though that in
    which the merchant resides generally derives the greatest, as he
    is generally more employed in supplying the wants, and carrying
    out the superfluities of his own, than of any other particular
    country. To import the gold and silver which may be wanted into
    the countries which have no mines, is, no doubt a part of the
    business of foreign commerce. It is, however, a most
    insignificant part of it. A country which carried on foreign
    trade merely upon this account, could scarce have occasion to
    freight a ship in a century.

    It is not by the importation of gold and silver that the
    discovery of America has enriched Europe. By the abundance of the
    American mines, those metals have become cheaper. A service of
    plate can now be purchased for about a third part of the corn, or
    a third part of the labour, which it would have cost in the
    fifteenth century. With the same annual expense of labour and
    commodities, Europe can annually purchase about three times the
    quantity of plate which it could have purchased at that time. But
    when a commodity comes to be sold for a third part of what bad
    been its usual price, not only those who purchased it before can
    purchase three times their former quantity, but it is brought
    down to the level of a much greater number of purchasers, perhaps
    to more than ten, perhaps to more than twenty times the former
    number. So that there may be in Europe at present, not only more
    than three times, but more than twenty or thirty times the
    quantity of plate which would have been in it, even in its
    present state of improvement, had the discovery of the American
    mines never been made. So far Europe has, no doubt, gained a real
    conveniency, though surely a very trifling one. The cheapness of
    gold and silver renders those metals rather less fit for the
    purposes of money than they were before. In order to make the
    same purchases, we must load ourselves with a greater quantity of
    them, and carry about a shilling in our pocket, where a groat
    would have done before. It is difficult to say which is most
    trifling, this inconveniency, or the opposite conveniency.
    Neither the one nor the other could have made any very essential
    change in the state of Europe. The discovery of America, however,
    certainly made a most essential one. By opening a new and
    inexhaustible market to all the commodities of Europe, it gave
    occasion to new divisions of labour and improvements of art,
    which in the narrow circle of the ancient commerce could never
    have taken place, for want of a market to take off the greater
    part of their produce. The productive powers of labour were
    improved, and its produce increased in all the different
    countries of Europe, and together with it the real revenue and
    wealth of the inhabitants. The commodities of Europe were almost
    all new to America, and many of those of America were new to
    Europe. A new set of exchanges, therefore, began to take place,
    which had never been thought of before, and which should
    naturally have proved as advantageous to the new, as it certainly
    did to the old continent. The savage injustice of the Europeans
    rendered an event, which ought to have been beneficial to all,
    ruinous and destructive to several of those unfortunate

    The discovery of a passage to the East Indies by the Cape of Good
    Hope, which happened much about the same time, opened perhaps a
    still more extensive range to foreign commerce, than even that of
    America, notwithstanding the greater distance. There were but two
    nations in America, in any respect, superior to the savages, and
    these were destroyed almost as soon as discovered. The rest were
    mere savages. But the empires of China, Indostan, Japan, as well
    as several others in the East Indies, without having richer mines
    of gold or silver, were, in every other respect, much richer,
    better cultivated, and more advanced in all arts and
    manufactures, than either Mexico or Peru, even though we should
    credit, what plainly deserves no credit, the exaggerated accounts
    of the Spanish writers concerning the ancient state of those
    empires. But rich and civilized nations can always exchange to a
    much greater value with one another, than with savages and
    barbarians. Europe, however, has hitherto derived much less
    advantage from its commerce with the East Indies, than from that
    with America. The Portuguese monopolized the East India trade to
    themselves for about a century ; and it was only indirectly, and
    through them, that the other nations of Europe could either send
    out or receive any goods from that country. When the Dutch, in
    the beginning of the last century, began to encroach upon them,
    they vested their whole East India commerce in an exclusive
    company. The English, French, Swedes, and Danes, have all
    followed their example; so that no great nation of Europe has
    ever yet had the benefit of a free commerce to the East Indies.
    No other reason need be assigned why it has never been so
    advantageous as the trade to America, which, between almost every
    nation of Europe and its own colonies, is free to all its
    subjects. The exclusive privileges of those East India companies,
    their great riches, the great favour and protection which these
    have procured them from their respective governments, have
    excited much envy against them. This envy has frequently
    represented their trade as altogether pernicious, on account of
    the great quantities of silver which it every year exports from
    the countries from which it is carried on. The parties concerned
    have replied, that their trade by this continual exportation of
    silver, might indeed tend to impoverish Europe in general, but
    not the particular country from which it was carried on ;
    because, by the exportation of a part of the returns to other
    European countries, it annually brought home a much greater
    quantity of that metal than it carried out. Both the objection
    and the reply are founded in the popular notion which I have been
    just now examining. It is therefore unnecessary to say any thing
    further about either. By the annual exportation of silver to the
    East Indies, plate is probably somrwhat dearer in Europe than it
    otherwise might have been ; and coined silver probably purchases
    a larger quantity both of labour and commodities. The former of
    these two effects is a very small loss, the latter a very small
    advantage ; both too insignificant to deserve any part of the
    public attention. The trade to the East Indies, by opening a
    market to the commodities of Europe, or, what comes nearly to the
    same thing, to the gold and silver which is purchased with those
    commodities, must necessarily tend to increase the annual
    production of European commodities, and consequently the real
    wealth and revenue of Europe. That it has hitherto increased them
    so little, is probably owing to the restraints which it
    everywhere labours under.

    I thought it necessary, though at the hazard of being tedious, to
    examine at full length this popular notion, that wealth consists
    in money or in gold and silver. Money, in common language, as I
    have already observed, frequently signifies wealth ; and this
    ambiguity of expression has rendered this popular notion so
    familiar to us, that even they who are convinced of its
    absurdity, are very apt to forget their own principles, and, in
    the course of their reasonings, to take it for granted as a
    certain and undeniable truth. Some of the best English writers
    upon commerce set out with observing, that the wealth of a
    country consists, not in its gold and silver only, but in its
    lands, houses, and consumable goods of all different kinds. In
    the course of their reasonings, however, the lands, houses, and
    consumable goods, seem to slip out of their memory; and the
    strain of their argument frequently supposes that all wealth
    consists in gold and silver, and that to multiply those metals is
    the great object of national industry and commerce.

    The two principles being established, however, that wealth
    consisted in gold and silver, and that those metals could be
    brought into a country which had no mines, only by the balance of
    trade, or by exporting to a greater value than it imported ; it
    necessarily became the great object of political economy to
    diminish as much as possible the importation of foreign goods for
    home consumption, and to increase as much as possible the
    exportation of the produce of domestic industry. Its two great
    engines for enriching the country, therefore, were restraints
    upon importation, and encouragement to exportation.

    The restraints upon importation were of two kinds.

    First, restraints upon the importation of such foreign goods for
    home consumption as could be produced at home, from whatever
    country they were imported.

    Secondly, restraints upon the importation of goods of almost all
    kinds, from those particular countries with which the balance of
    trade was supposed to be disadvantageous.

    Those different restraints consisted sometimes in high duties,
    and sometimes in absolute prohibitions.

    Exportation was encouraged sometimes by drawbacks, sometimes by
    bounties, sometimes by advantageous treaties of commerce with
    foreign states, and sometimes by the establishment of colonies in
    distant countries.

    Drawbacks were given upon two different occasions. When the home
    manufactures were subject to any duty or excise, either the whole
    or a part of it was frequently drawn back upon their exportation
    ; and when foreign goods liable to a duty were imported, in order
    to be exported again, either the whole or a part of this duty was
    sometimes given back upon such exportation.

    Bounties were given for the encouragemnent, either of some
    beginning manufactures, or of such sorts of industry of other
    kinds as were supposed to deserve particular favour.

    By advantageous treaties of commerce, particular privileges were
    procured in some foreign state for the goods and merchants of the
    country, beyond what were granted to those of other countries.

    By the establishment of colonies in distant countries, not only
    particular privileges, but a monopoly was frequently procured for
    the goods and merchants of the country which established them.

    The two sorts of restraints upon importation above mentioned,
    together with these four encouragements to exportation,
    constitute the six principal means by which the commercial system
    proposes to increase the quantity of gold and silver in any
    country, by turning the balance of trade in its favour. I shall
    consider each of them in a particular chapter, and, without
    taking much farther notice of their supposed tendency to bring
    money into the country, I shall examine chiefly what are likely
    to be the effects of each of them upon the annual produce of its
    industry. According as they tend either to increase or diminish
    the value of this annual produce, they must evidently tend either
    to increase or diminish the real wealth and revenue of the
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