Here follow my reasons for carrying this proposition so very far, even

to the length of sacrificing a part of the inhabitants of a country to

the preservation of its wealth; and I flatter myself, that when duly

examined, I may avoid the smallest imputation of Machiavellian

principles, in consequence of so bold an assertion.

While a people are fed with the produce of their own lands, the

preservation of their numbers is quite consistent with the preservation

of their wealth. If, therefore, in such a case, their numbers should be

diminished upon a decay of foreign trade, either by their food’s being

exported, or by their lands becoming uncultivated, I should never

hesitate to lay the blame upon the statesman’s administration.

But an industrious people may (as has been said) carry their numbers far

beyond the proportion of their own subsistence. The deficiency must be

supplied from abroad, and must be paid with the balance of the trade in

their favour. Now when this balance comes to turn against them, and

when, consequently, a stop is put to the disadvantageous foreign trade,

upon the principles we have been laying down, the statesman is reduced

to this alternative; either annually to allow a part of the wealth

already got, to be exported, in order to buy subsistence for the

_surplus_ of his people, as I may call them, or to reduce their numbers

by degrees, either by encouragements given to their leaving the country,

or by establishing colonies, &c. until they are brought down to the just

proportion of national subsistence. If he prefers the first, supposing

the execution of such a plan to be possible, the consequence will be,

that so soon as all the wealth is spent, the whole society, except the

proprietors of the lands, and these who cultivate them, must go to

destruction. If he prefers the second, he remains independent of all the

world with respect to the inhabitants he preserves. They remain in a

capacity of maintaining themselves, and he may alter the plan of his

political oeconomy as best suits his circumstances, relatively to other

nations. While all his subjects are employed and provided for, he will

remain at the head of a flourishing and happy people.

It may be here objected, that the first alternative is an impossible

supposition. I allow it to be so, if you suppose it to be carried the

length to which I have traced it; because no power whatsoever in a

statesman, can go so far as to preserve numbers at the expence of the

whole riches of his people. But I can very easily suppose a case, where

numbers may be supported at an eminent loss to a state which finds

itself in the situation in which we have represented it in our

supposition.

Suppose a prince, upon the failure of his foreign trade, to increase his

army, in proportion as he finds his industrious hands laid idle by a

deficiency of demand for their labour; and let him fill his magazines

for their subsistence by foreign importation, leaving the produce of his

country to feed the rest of his subjects. By such a plan, every body

will remain employed, and also provided for, and such a prince may be

looked upon as a most humane governor. This I willingly agree to. I

should love such a prince; but the more I loved him, the more I should

regret that his project must fail, from a physical impossibility of its

being long supported; and when it comes to fail by the exhausting of his

wealth, it will not be his regrets which will give bread to his

soldiers, nor employment to his industrious subjects, who will no longer

find an equivalent for their labour.

Let this suffice at present, upon the general principles which influence

the stop necessary to be put to the importation of foreign commodities,

and to the diminution of national wealth, in the case we have had before

us.

Next as to the articles of exportation. The most profitable branches of

exportation are those of work, the less profitable those of pure natural

produce. When work cannot be exported in all its perfection, because of

its high price, it is better to export it with a moderate degree of

perfection, than not at all; and if even this cannot be done to

advantage, then will a people be obliged to renounce working except for

themselves: and then, if domestic consumption does not increase in

proportion to the deficiency of foreign demand, a certain number of

hands will be idle, and a certain quantity of natural produce will

remain upon hand. The first must disappear in a short time; they will

starve or desert; the last will become an article of exportation. Here

then is a new species of trade which takes place upon the extinction of

the other. When a nation has been forced to reduce her exportations to

articles of pure natural produce, in conformity to the principles we

have been laying down, then the plan proposed in the title of this

chapter is executed. She is then brought as low in point of trade as she

can be, but at the same time, she may enjoy her natural advantages in

spite of fortune; and in proportion to them, she may, with a good

government and frugality, retain a balance of trade in her favour, which

will constantly go on in augmenting her national wealth.

There is, therefore, a period at which foreign trade may stop in every

article, but in natural produce. I do not know whether this period be at

a great distance, when the state of trade is considered relatively to

certain nations of Europe.

Were industry and frugality found to prevail equally in every part of

the great political bodies, or were luxury and superfluous consumption,

every where carried to the same height, trade might, without any hurt,

be thrown entirely open. It would then cease to be an object of a

statesman’s care and concern. On the other hand, were all nations

equally careful to check every branch of unprofitable commerce, a

general stagnation of trade would soon be brought about. Manufactures

would no more be the object of traffic; every nation would supply

itself, and nothing would be either exported or imported but natural

productions.

But as industry and idleness, luxury and frugality, are constantly

changing their balance throughout the nations of Europe, able merchants

make it their business to inform themselves of these fluctuations, and

able statesmen profit of the discovery for the re-establishment of their

own commerce; and when they find that this can no more be carried on

with the manufactures or produce of their own country, they engage their

merchants to become carriers for their neighbours, and by these means,

form as it were a third and last entrenchment, which, while they can

defend it, will not suffer their foreign trade to be quite extinguished;

because, by this last expedient, it may continue for some time to

increase their national stock. It is in order to cut off even this

resource, that some nations lay not only importations under restraint,

but also the importers[L]. Let such precautions be carried to a certain

length on all hands, and we shall see an end to the whole system of

foreign trade, so much alamode, that it appears to become more and more

the object of the attention as well as of the imitation of all modern

statesmen.

Footnote L:

By the act of navigation in England.

------------------------------------------------------------------------

CHAP. XXV.

_When a rich Nation finds her Foreign Trade reduced to the Articles of

Natural Produce, what is the best plan to be followed? and what are the

Consequences of such a Change of Circumstances?_

There is now no more question of a trading nation; this character is

lost, the moment there is a stop put to the export of the labour and

ingenuity of her people.

The first objects of her care should be to increase, by every possible

means, the quantity of her natural produce; to be as frugal as possible

in the consumption of it, and to export the surplus to the best

advantage.

If she finds her exportation of subsistence going forward, while some of

her people remain in want, she may rest assured that industry is made to

suffer by some internal vice; and the most probable cause of such an

effect will be found to be an unequal competition between those of the

lower classes, who work for a physical-necessary. This must be removed,

and the statesman should never rest, until he has set the balance of

work and demand so far right, as to prevent at least _the scale of work_

from preponderating; for this is the door by which misery gets in among

the people.

_The scale of demand_ preponderating, will not now be so hurtful, as

this alteration of the balance will only raise prices, and accelerate

circulation, and keep the other balance, to wit, that of wealth (of

which we shall treat in the following chapter) in a constant vibration,

without diminution of the public stock.

Another object of a statesman’s care in these supposed circumstances, is

to suffer no work whatever, nor the natural produce of any other country

conducive to luxury, to be imported; for although I have said, that

superfluous consumption can do little harm when the interests of foreign

trade do not enter into the question so as to prevent exportation, by

raising prices at home; and though the importation of foreign produce,

in exchange for like commodities of national growth, does no hurt to a

state with respect to her wealth, yet if such importation be an article

of mere superfluity, I think a statesman should prudently discourage it;

because the search of superfluities is of itself a proof of a luxurious

turn, and I should wish to see this turn improved so as to promote

national purposes only, that is, to the augmentation and subsistence of

useful inhabitants.

Let me illustrate this by an example. Foreign wines, I shall suppose,

become alamode, as a part of the luxury of an elegant table. A

statesman, by his example, may discourage this, and introduce many other

articles of expence in entertainments sufficient to compensate it. The

furniture of apartments may be rendred more magnificent, ornaments of

the side board, decoration of deserts, new amusements immediately after

dinner might be introduced, which would have an air of refinement and

delicacy.

By such examples he might easily substitute one expence, which might

become a national improvement, in the place of another, where the luxury

produces no such effect. And when prodigality and expence have neither

the good effect of giving bread to the poor, nor of accelerating

circulation at home in favour of the public, I can see no reason why a

statesman should interest himself for their support; and much less, why

a speculative person, who examines only the methods of making mankind

happy by their mutual services to each other, should strain a subject,

in order to find arguments proper to make either the apology or

panegyric of the various schemes of dissipation.

I need not add, as a restriction of this principle of discouraging the

importation of foreign commodities (which become articles of a greater

superfluous home-consumption) that when such a branch of trade becomes

necessary to be carried on, in order to engage a neighbouring nation to

consume of home-superfluities; in this case, the luxury of the consumers

of the foreign produce, has an evident tendency to national improvement.

If delicate wines, and raw silk, are imported as a return for salt

herrings and raw hides, the support of such a trade is only the means of

making the rich consume these articles of home-production, by converting

them into burgundy and velvet.

These considerations regard the augmentation, or at least the

preservation of national wealth. If they are attended to, it is hardly

possible that any part of what is already acquired, can go abroad; and

in this case the whole balance of the exportation of natural produce

becomes clear gain.

There are still several things to be observed with regard to the

exportation of natural produce. Such articles as are in great abundance,

and are not produced in other countries, as wines in the southern

countries of Europe, ought always to be exported by the inhabitants,

because considerable profits must be made upon a trade where there is no

rivalship; and on such occasions, a people ought to be wise enough to

keep such profits for themselves.

But if other nations will not receive them, unless they be imported by

their own subjects, then the statesman may impose a duty upon

exportation, which is one way of sharing the profits with the carriers.

All the precaution necessary, in imposing this duty, is not to raise it

so high as to diminish the demand; nor to give an encouragement to a

neighbouring nation, to enter into competition for such a branch of

trade.

Neighbouring states which furnish the same articles of natural produce,

regulate, commonly, the duties upon exportation, in such a manner as

nearly to compensate all differences which strangers may find, between

trading with the one or with the other. Or they grant particular

privileges in point of trade, to the nations with whom they find it most

for their advantage to trade.

If the natural advantages upon such articles are less considerable, no

duty can be imposed. Exportation may then be encouraged by granting

still greater privileges to strangers or others, who may promote the

exportation at little cost to the state.

If in the last place, the natural produce of a country be common to

others, where it is perhaps equally plentiful; it will be difficult to

procure the exportation of it; and yet it may happen, that too great an

abundance of it at home, may occasion inconveniencies. In this case, the

statesman must give a premium or bounty upon exportation, as the only

method of getting rid of a superfluity, which may influence so much the

whole mass of the commodity produced, as to sink the price of the

industry of those employed in it, below the standard of their

physical-necessary. By giving, therefore, this premium, he supports

industry in that branch; he takes nothing from the national wealth; and

the exportation, which takes place in consequence of the bounty, is all

clear gain. This is an uncommon operation in trade, but it has so

intimate a connection with the doctrine of taxes, and the proper

application of public money, that I will postpone the farther

consideration of it until I come to that branch of my subject; and the

rather, that this book is swelling beyond its due proportion.

I have little occasion to speak of importations, into a country which

exports no manufactures. The ruling principle in such cases, is to

suffer no importation but what tends to encourage the exportation of the

surplus of natural produce, and which, at the same time, has no tendency

to rival any branch of domestic industry. Thus it is much better for a

northern country to pamper the taste of her rich inhabitants with wines

and spices, than to discourage agriculture by the importation of rice

and foreign grain; supposing the alternative quite optional, and the one

as well as the other to be the returns of her own superfluity.

I come next to the consideration of her inland trade, and consumption of

her own manufactures. Here there is no question of either an increase or

diminution of her wealth, but only of making it circulate in the best

manner to keep every body employed. Several considerations must here

influence our statesman’s conduct, and a due regard must be had to every

one of them. I shall reduce them to three different heads, and pass them

in review very cursorily, as we have already explained sufficiently the

principles upon which they depend.

_1mo._ To regulate consumption and the progress of luxury, in proportion

to the hands which are found to supply them.

_2do._ To regulate the multiplication of inhabitants according to the

extent of the fertility of the soil. These two considerations must

constantly go hand in hand.

In so far therefore, as the statesman finds his country still capable of

improvement, in so far he may encourage a demand for work, and even

countenance new branches of superfluous consumption; since the

equivalent to be given for them must of necessity prove an encouragement

to agriculture. But whenever the country becomes thoroughly cultivated

and peopled to the full proportion of its own produce, a check must be

put to multiplication, that is, to luxury, or misery and depopulation

will follow; unless indeed, we suppose that numbers are to be supported

at the expence of national wealth, the fatal consequences of which we

have already pointed out.

_3tio._ He should regulate the distribution of the classes of his

people, according to the political situation of the country.

This is the most complicated case of all. It would be imprudent, for

example, in a very small state situated on the continent, to distribute

all its inhabitants into producers and consumers, as we have called them

on several occasions; that is, into those who live upon a revenue

already acquired, and those who are constantly employed in acquiring one

by supplying the wants of the other. There must be a third class; to

wit, those who are maintained and taken care of at the expence of the

whole community, to serve as a defence. This set of men give no real

equivalent for what they receive; that is to say, none which can

circulate or pass from hand to hand; but still they are usefully

employed as members of a society mutually tied together by the band of

reciprocal dependence. Here is no vice implied; but at the same time,

the statesman must attend to the consequences of such a distribution of

classes.

The richer any state is, the more it has to fear from its neighbours:

consequently, the greater proportion of the inhabitants must be

maintained for its defence, at the expence of the industry of the other

inhabitants. This must diminish the number of free hands employed in

manufactures, and in supplying articles of consumption: consequently, it

would be imprudent to encourage the progress of luxury, while public

safety calls for a diminution of the hands which must supply it. If in

such circumstances luxury do not suffer a check, demand will rise above

the proper standard; living will become dearer daily, prices will rise,

and they will prove an obstacle to the recovery of foreign trade; an

object of which a prudent statesman will never lose sight for a moment.

It is for these and other such considerations, that many small states

are found to fortify their capital; to keep a body of soldiers in

constant pay, bearing a great proportion to the number of the

inhabitants; to form arsenals well stored with artillery, and to

institute sumptuary laws and other regulations proper to check luxury.

Nothing so wise in every respect! Their territory cannot be extended nor

improved, nor can their inhabitants be augmented, but at the expence of

their wealth; for such as gained their livelihood at the expence of

strangers, are at present out of the question. Were their own citizens

therefore permitted, out of the abundance of their wealth, to give bread

to as many as their extravagance could maintain, the public stock would

be constantly diminishing, in proportion to the foreign subsistence

imported for these supernumeraries, fed at the expence of the luxurious;

which would be just so much lost.

In other states which are extended, powerful by means of wealth, and

strong by nature and situation, whose safety is connected with the

general system of European politicks, which secures them against

conquest; such as Spain, France, Great Britain, &c. the progress of

luxury does little harm (as these territories are still capable of

infinite improvements) provided it does not descend to the lower classes

of the people.

It ought to be the particular care of a statesman to check its progress

there, otherwise there will be small hopes of ever recovering foreign

trade. Whereas, if the lower classes of a people continue frugal and

industrious, from these very circumstances trade may open anew, and be

recovered by degrees, in proportion as luxury comes to get footing in

other nations, where the common people are less laborious and frugal.

Luxury, among those who live upon a revenue already got, and who, by

their rank in the state, are not calculated for industry, has the good

effect of affording bread to those who supply them; but there never can

be any advantage in having luxury introduced among the lower classes,

because it is then only a means of rendring their subsistence more

chargeable, and consequently more precarious.

Having thus briefly laid together the principal objects of a statesman’s

care, upon the cessation of the foreign trade of his people, I shall

finish my chapter, by pointing out some general consequences which

reason and experience shew to be naturally connected with such a

revolution; not with regard to industry and inland trade, but as they

influence the spirit, government, and manners of a people.

Nothing is more certain than that the spirit of a nation changes

according to circumstances. While foreign trade flourishes, the minds of

the monied people are turned to gain. Money, in such hands, is generally

employed to procure more, not to purchase instruments of luxury; except

for the consumption of those prodigal strangers who are thereby becoming

daily poorer. It is this desire of becoming rich, which produces

frugality. A man is always frugal while he is making a fortune; another

very commonly becomes extravagant in the enjoyment of it; just so would

it be with nations, were a wise statesman never to interpose.

When, by the cessation of foreign trade, the mercantile part of a nation

find themselves cut off from the profits they used to draw from

strangers; and on the other hand, perceive the barriers of the nation

gradually shutting against every article of unprofitable correspondence,

they begin to withdraw their stocks from trade, and seek to place them

within the country. This money is often lent to landed men, hitherto

living within bounds, for two most substantial reasons. First, because

there was little money to be borrowed, from the high rate of interest,

owing to the great profits on foreign trade; and because the national

stock was then only forming. The second, because the taste of the times

was frugality. But when once the money which was formerly employed in

buying up loads of work for the foreign markets, falls into the hands of

landed men, they begin to acquire a taste for luxury. This taste is

improved and extended by an infinity of arts, which employ the hands

formerly taken up in furnishing branches of exportation. Thus by degrees

we see a rich, industrious, frugal, trading nation, transformed into a

rich, ingenious, luxurious, and polite nation.

As the statesman formerly kept his attention fixed on the preservation

of an equal balance between work and demand, and on every branch of

commerce, in order to prevent the carrying off any part of the wealth

already acquired; he must now direct his attention towards the effects

of the domestic operations of that wealth. He was formerly interested in

its accumulation; he must now guard against the consequences of this.

While the bulk of a nation’s riches is in foreign trade, they do not

circulate within the country; they circulate with strangers, against

whom the balance is constantly found. In this case, the richest man in a

state may appear among the poorest at home. In foreign countries you may

hear of the wealth of a merchant, who is your next door neighbour at

home, and who, from his way of living, you never knew to be worth a

shilling. The circulation of money for home-consumption will then be

very small; consequently, taxes must be very low; consequently,

government will be poor.

So soon as all this load of money which formerly was continually going

backwards and forwards, without almost penetrating, as one may say, into

the country, is taken out of foreign trade, and thrown into domestic

circulation, a new scene opens.

Every one now begins to appear rich. That wealth which formerly made the

admiration of foreigners, now astonishes the proprietors themselves. The

use of money, formerly, was to make more of it: the use of money now, is

to give it in exchange for those or such like commodities, which were

then consumed by strangers only.

It is this revolution in the spirit of a people, which renders the

consideration of the balance of their wealth an object of the greatest

political concern; because the constant fluctuation of it, among the

several classes of inhabitants, is what lays the foundation of public

opulence.

A government must always be respected, feared, and obeyed by the people

governed; consequently, it must be powerful, and its power must be of a

nature analogous to that of the subjects. If you suppose a great

authority vested in the grandees of a kingdom, in consequence of the

number and dependence of their vassals, the crown must have still a more

powerful vassalage at its command: if they are powerful by riches, the

crown must be rich. Without preserving this just balance, no government

can subsist. All power consists in men, or in money.

If therefore we suppose a vast quantity of wealth thrown into domestic

circulation, the statesman must follow new maxims. He must promote the

circulation of it so as to fill up the blank of foreign consumption, and

preserve all the industrious who have enriched him. The quicker the

circulation is found to be, the better opportunity will the industrious

have of becoming rich speedily; and the idle and extravagant will become

the more quickly poor. Another consequence equally certain, is, that the

quicker the circulation, the sooner will wealth become equally divided;

and the more equality there is found in wealth, the more equality will

be found in power. From these principles it will follow, that upon such

a revolution of national circumstances, a popular government may very

probably take place, if the statesman do not take proper care to prevent

it.

This is done by the imposition of taxes, and these are differently laid

on, according to the spirit of the government.

By taxes a statesman is enriched, and by means of his wealth, he is

enabled to keep his subjects in awe, and to preserve his dignity and

consideration.

By the distribution of taxes, and manner of levying them, the power is

thrown into such hands as the spirit of the constitution requires it

should be found in. Are they imposed in a monarchy where every man is

taught to tremble at the King’s name, the great men will be made rich by

his bounty, and the lower classes will be loaded and kept poor; that

they may, on easier terms, be engaged to fill those armies which the

Prince entertains to support his authority at home, and his influence

abroad.

Here independent people will always be looked upon with an evil eye, and

considered as rivals to the Prince, who ought to be the only independent

person in the state.

In limited governments, where the sovereign has not the sole power of

taxation, they will be laid on more equally, and less arbitrarily;

providing the theory of them in general be well understood. Here every

man must know _what_ he is to pay, and _when_; and the amount of the tax

must bear a proportion, on one hand, to the exigencies of the state; and

on the other, to the quantity of circulation which takes place upon the

payment of it: that is, a man must not be made to pay all the state can

demand of him for a year, upon his making a trifling, though most

essential acquisition of a necessary article of subsistence.

I think I have observed one remarkable difference in the point of view

in levying taxes in countries where these two forms of government are

established.

Under the pure monarchy, the Prince seems jealous, as it were, of

growing wealth, and therefore imposes taxes upon people, who are growing

richer. Under the limited government they are calculated chiefly to

affect those who are growing poorer.

Thus the monarch imposes a tax upon industry; where every one is rated

in proportion to the gain _he is supposed_ to make by his profession.

The poll-tax and _taille_, are likewise proportioned to the _supposed_

opulence of every one liable to them. These, with others of the same

nature, are calculated (as it is alledged) to establish an equality in

the load supported by the subjects; by making the industrious, and money

gatherers, contribute in proportion to their gains, although the capital

stock from which these profits arise be concealed from the eyes of the

public.

In limited governments, impositions are more generally laid upon

consumption. They encourage industry, and leave the full profits of it

to make up a stock for the industrious person. When the stock is made,

that is, when it ceases to grow, it commonly begins to decrease: the

number of prudent people, who live precisely upon their income, is very

small. It is therefore upon the dissipation of wealth, in the hands of

private people, that the state is enriched. Thus the career towards

poverty is only a little abridged: he who is in the way of spending his

estate will get at the end of it, if his life be spared; and therefore

there is no harm done to him, and much good done to the state, in making

a part of his wealth circulate through the public coffers.

The only precaution necessary to be taken in taxing consumption, is, to

render the impositions equal, and to prevent their affecting what is

purely necessary; or operating an unequal competition between people of

the same denomination. Such impositions have still a worse effect, than

those which fall upon growing wealth: they prevent the poor from being

able to subsist themselves. A fellow feeling excites compassion among

those of the lower classes; they endeavour to assist each other, and by

this operation, like a pack of cards, set up by children upon a table,

the first that is thrown down tumbles down another, until all are laid

flat; that is, misery invades the lower classes: more than one half of a

people.

From these principles (which I have been obliged to anticipate) we may

gather the necessity of taxes, in states where foreign trade begins to

decay. Without them, there is no security for a government against the

power of domestic wealth. Formerly, Princes lived upon their domain, or

patrimonial estate. What domain would be sufficient, at present, to

support the expence of government? And if a government is not able to

hold the reins of every principle of action within the state, it is no

government, but an idol, that is, an object of a voluntary respect. The

statesman, therefore, must hold the reins; and not commit the management

of the horses to the discretion of those whom he is employed to conduct.

Another consequence of taxes, is, that the more luxury prevails, the

more the state becomes rich: if luxury, therefore, breeds

licentiousness, it at the same time provides a curb against its bad

effects.

This augmentation of wealth produces a double advantage to the

statesman: for besides the increase of the public revenue, the progress

of luxury changing the balance of wealth constantly, by removing it from

the rich and extravagant, to the poor and laborious, renders those who

were formerly rich, and consequently powerful, dependent upon him for

their support. By the acquisition of such persons, he gains additional

credit, and supports his authority. Thus wealth and power circulate, and

go hand in hand.

It may be asked, how these principles can be reconciled with the vigour

and strength commonly found in the government of flourishing trading

nations; for in such we must suppose few taxes? consequently, a poor and

therefore a weak government; and a rich, consequently, a powerful

people?

I answer, that under such circumstances, a people are commonly taken up

with their trade, and are therefore peaceable; and as their wealth does

not appear, being constantly in circulation with strangers, the

influence of it is not felt at home. While wealth is employed in pursuit

of farther gains, it cannot give power; consequently, as to all

political effects at home, it is as if it did not exist; and therefore

there is no occasion for the state to be possessed of a wealth they have

no occasion to employ. If such a nation be attacked by her enemies, she

becomes wealthy in an instant, every one contributes to ward off the

common danger: but if, on the contrary, her tranquillity is disturbed at

home, the rebellion generally proves successful; which is a confirmation

of the principles laid down. I might illustrate this by many historical

remarks. I shall only suggest to my reader, to examine the nature of the

Dutch revolutions, and to compare the success of rebellions in France

and England, during the last century, with others of a fresher date.

Here the reader may consult the learned Mr. Hume’s observation upon the

commencement of the civil war. _History of Great Britain_, Vol. I. p.

325.

When, therefore, foreign trade has ceased for some time, and luxury has

filled up the void, a considerable part of national wealth begins to

circulate through the public treasury. It is natural then for great men

to resort to court, in order to partake of the profits of government;

and for the statesman to be fond of attaching such people to his

interest, in order to be a constant check upon the turbulent spirit,

which new gotten wealth may excite in the minds of one set of people,

and desperate fortunes in those of others.

While there was little circulation of money in Europe, and few taxes,

there was small profit to be made in following of Kings. These were more

formidable to their enemies, than profitable to their friends. The great

men of the state lived upon their lands, and their grandeur resembled

that of the Prince; it consisted in the number and dependence of their

vassals; who got as little by their Lord, as he did by the King. The

poor in those days were plundered of the little money they had, by the

great; now the great are stripped of the largest sums, by the numbers of

poor, who demand from them on all hands, the just equivalent of their

industry.

When Princes find their great men all about them, all asking, and all

depending for different marks of their favour, they may perceive the

great change of their situation, produced by luxury, and a swift

circulation. This revolution has not been sudden, it has been the work

of several centuries; and I think we may distinguish three different

stages during this period.

The first during the grandeur of the feudal government: then the great

Barons were to be consulted, and engaged to concur in the King’s wars,

because it was they who paid the expence, and suffered the greatest

loss. These are called by some the days of liberty; because the states

of every country in Europe, almost, were then in all their glory: they

are called so with great reason, when we consider the condition of the

great only.

In those days there were seldom any troubles or disturbances in the

state, seldom any civil wars levied against the King, but such as were

supported by the grandees; who, either jealous of their own just rights,

or ambitious of acquiring others at the expence of the crown, used to

compel their vassals, or engage them by the constitutional influence

they had over them, to disturb the public tranquillity.

The second stage, I think, may be said to have begun with the times of

industry, and the springing up of trade. Such Princes, whose subjects

began to enrich themselves at the expence of other nations, found, on

one side, the means of limiting the power of the great lords, in favour

of the extension of public liberty. The lords, on the other side, when

they wanted to disturb the public tranquillity, did not, as formerly,

vindicate their own privileges, so much as they combined with the

people, and moved them to revolt, on popular considerations.

This may be called the period of confusion, out of which has arisen

certain determined forms of government; some drawing nearer to the

monarchical, others nearer to the popular form, according as the power

of Princes has been more or less able to support itself, during the

shock of the revolution, and the overturn of the balance between public

and private opulence.

The third and last stage, of which I shall speak at present, may be

fixed at that period when the proportion of the public revenue became

adequate to the mass of national wealth; when general laws were made to

govern, and not the arbitrary power of the great. The grandees now, from

being a bridle on royal authority, are often found dependent upon it for

their support. The extraordinary flux of money into the treasury,

enables Princes to keep splendid courts, where every kind of pleasure

and amusement is to be had. This draws together the rich men of the

state. The example of the sovereign prompts these to an imitation of his

expence, this imitation increases consumption, which in its turn

augments the King’s income, as it diminishes that of every other person.

When the great men of a kingdom have exhausted their estates, in paying

a regular court to the Prince, they employ the credit they have acquired

with him during the time of their dissipation, to obtain marks of his

favour, in order to support them in their decline. By these they are

enabled to live in as much state as before. They find no difference in

their situation; unless perhaps they should accidentally reflect, that

the fund which produced their former opulence, was in their own

possession; whereas that of their present wealth is in the hands of

their master.

To compensate this difference, they are made to acquire, by the favour

of the court, advantages which they never could have enjoyed from the

largest independent fortune.

The luxurious system of living, every where introduced, draws the

wealthy together, either in the capital or in other great cities of the

kingdom; where every one compares the expence and figure he makes, with

that of others who are about him. A person honoured with the King’s

favour, of the same quality with another, acquires, by this

circumstance, a great superiority. He commands, I shall suppose, in a

place; he is the person to whom people must apply, in order to obtain

favours, perhaps justice; he is adorned with a title, or outward mark of

distinction, which procure him respect and consideration; and, which is

still more, he is on the road to a farther elevation. It requires a

great stock both of philosophy and good sense, not to be dazzled with

these advantages. Independency, compared with them, is but a negative

happiness. To be truly happy, we must have power, and have other people

to depend on us.

------------------------------------------------------------------------

CHAP. XXVI.

_Of the Vibration of the Balance of Wealth between the Subjects of a

modern State._

We have frequently mentioned this balance, as an object of great

importance to a statesman who is at the head of a luxurious nation;

which having lost its foreign trade, has substituted, in the place of

it, an extensive inland commerce. This will supply the loss of the

former, so far, as equally to provide employment, and, consequently,

subsistence, to every one inclined to be industrious; although it must

prove quite ineffectual for augmenting the national wealth already

acquired.

I shall first explain what I mean by the balance of wealth vibrating

between the members of a society, and from that will be seen why I rank

this also among the political balances of a modern state.

It has been observed in the beginning of the nineteenth chapter, that

the great characteristic of what we call liberty, is the circulation of

an adequate equivalent for every service.

By wealth, I understand this circulating adequate equivalent.

The desires of the rich, and the means of gratifying them, make them

call for the services of the poor: the necessities of the poor, and

their desire of becoming rich, make them chearfully answer the summons;

they submit to the hardest labour, and comply with the inclinations of

the wealthy, for the sake of an equivalent in money.

This permutation between the two classes, is what we call circulation;

and the effects produced by it, upon the political situation of the

parties at the precise time of the circulation, and the consequences

after it is compleatly effected, explains what is called the balance of

wealth.

To render our ideas more correct, let us consider the money on one side,

and the prestations, as the civilians call them, or performances of any

kind, on the other, as _reciprocal_ equivalents for one another; and

then let us examine the nature of those prestations which tend to put

these equivalents into circulation; that is to say, what are the things

which money can purchase.

These we may divide, with the lawyers, into corporeal and incorporeal.

The corporeal may again be divided into consumable and inconsumable; and

the incorporeal into personal service, and what the lawyers call _jura_,

rights in or to any thing whatever. I cannot fully explain myself

without the help of this distribution.

Let us next consider the effects of the circulation of money, as it has

for its object, the acquisition of the four several species here laid

down.

1. Of inconsumable things. 2. Of things consumable. 3. Of personal

service. 4. Of rights acquired in or to any thing whatever.

I. The only thing inconsumable is the surface of the earth. This must

not be taken in a philosophical, and far less in a chemical sense. A

thing is consumed, so far as it concerns our inquiry, the moment it

becomes useless, or even when it is lost.

The surface of the earth, therefore, is the only thing inconsumable;

because, generally speaking, it never can cease to be useful, and never

can be lost; it may be changed, but the earth must always have a

surface. What is said of the surface, may be understood likewise of that

small part of its body accessible to man, for supplying him with what he

finds useful there, as the produce of mines.

Next to the earth itself, nothing is less consumable than her metals,

consequently coin may very properly be classed under the head of things

inconsumable; although it may be lost, and even worn out in circulation.

Let us now consider the effects of circulation in the purchase of land.

(A), I shall suppose, has a piece of land, and (B) has one thousand

pounds weight of gold coin, which the laws of society have constituted

to be an adequate circulating equivalent for every thing vendible. They

agree to make an exchange. Before the exchange the balance of their

wealth is equal; the coin is worth the land, the land is worth the coin;

the exchange makes no alteration, nor has it the effect of making any

afterwards; the new landlord may apply himself to the improvement of the

soil, the monied man to the turning of his thousand weight of gold coin

to the best advantage; consequently, by this transaction, no vibration

of the balance seems to be affected.

If coin itself be the object of sale, the consequences are much the

same. (A) has a guinea, (B) has twenty one shillings, the exchange they

make produces no alteration in their circumstances. The same holds good

in other species of circulation, such as the transmission of money by

inheritance. (A) dies and leaves his money to (B); here the possessor of

the money only changes his name, perhaps his inclinations, and that is

all. In like manner a person pays his debts, and withdraws his bond, or

other security; no balance is affected by this circulation, matters

stand between the parties just as before.

The nature, therefore, of circulation, when one inconsumable commodity

is given for another, is, that it operates no vibration in the balance

of wealth between the parties; because, in order to produce this, one

must remain richer than he was before, and the other proportionally

poorer.

II. Under the second head of alienation, to wit, that of consumable

commodities, is comprehended every thing corporeal, except money, and

land, which money may purchase. In these, two things deserve attention.

First, the simple substance, or the production of nature; the other, the

modification, or the work of man. The first I shall call the _intrinsic

worth_, the other, the _useful value_. The value of the first, must

always be estimated according to its usefulness after the modification

it has received is entirely destroyed, and when by the nature of the

thing both must be consumed together, then the total value is the sum of

both. The value of the second must be estimated according to the labour

it has cost to produce it. An example will make this plain.

The intrinsic worth of any silk, woollen, or linnen manufacture, is less

than the primitive value employed, because it is rendred almost

unserviceable for any other use but that for which the manufacture is

intended. But the intrinsic substance of a loaf of bread loses nothing

by the modification, because the last cannot be consumed without the

first. In a piece of silver plate curiously wrought, the intrinsic worth

subsists entire, and independent of the useful value, because it loses

nothing by the modification. The intrinsic value, therefore, is

constantly something real in itself: the labour employed in the

modification represents a portion of a man’s time, which having been

usefully employed, has given a form to some substance which has rendred

it useful, ornamental, or in short, fit for man, mediately or

immediately.

Let us now apply these distinctions to the different circumstances which

attend consumption, in order to perceive their effects.

The consumption of the intrinsic value of any commodity, takes place the

moment the matter employed begins to diminish, and is compleated so soon

as it is consumed totally. The consumption of the useful value proceeds

in like manner, in proportion as the use it is put to makes the value of

it diminish, or disappear altogether.

Let us next take an example, and examine the effects of circulation in

the purchase of things consumable, as to the vibration of the balance of

wealth. (A) has a piece of coin, (B) has something which his labour has

produced; they make an exchange. (A) hitherto has neither gained or

lost, neither has (B); but (A) begins to make use of what he had

purchased with his coin, and in using it a part disappears; that moment

the balance begins to turn against him. (B) on the other hand, exchanges

his piece of coin with another, whom we shall call (C), and gets in

return a piece of wood; if (B) puts this piece of wood into the fire, in

proportion as the wood consumes, the balance is returning to its level

between (A) and (B), and is changing in favour of (C). If (B), instead

of burning his wood, makes a beam of it for supporting his house, the

balance will turn more slowly, because the wood is then longer in

consuming: but if he makes some useful piece of furniture of one part of

his wood, he may warm himself with the remaining part of it, and with

the coin he gets for his work, may buy a beam for his house, and even

food to eat. If (B) stops at this period, and works no more, he will

find himself just upon a level with (A); so soon as his fire is burnt

out, his beam rotten, and his food consumed, and the whole balance will

be found in favour of (C), providing that by his industry he has been

able to procure for himself all necessaries, and preserve the piece of

coin entire. Here then is the spur to industry; to wit, the acquisition

of this balance, which gives a relative superiority even among those of

the lowest classes, and determines their rank as well as their

political-necessary, according to the principles laid down in the

twenty-first chapter.

The essential characteristic of this vibration of the balance of wealth,

is the change in the relative proportion of riches between individuals.

But it must be observed, that under this second species we are to

consider the change of proportion no farther than as it is produced by

the circulation of a free adequate equivalent, of such a nature as to be

transferable to another hand without any diminution. The consumption,

therefore, is the only thing which makes the balance turn. While the

consumable commodity remains entire in the hands of the purchaser, he

still remains possessor of the value, and may, by inverting the

operation, return to the possession of the same species of wealth he had

before.

Here it may he asked, if money be absolutely necessary for producing a

vibration of this balance by the means of consumption. We may easily

conceive the greatest inequality between the numbers of a state, without

supposing the existence of money. We may suppose the property of lands

unequally divided, and a great surplus of subsistence found in the hands

of one individual, which may by him be given in exchange for the produce

of industry. Under such circumstances then it may be asked, if without

money there can be no such thing as a vibration in the balance of

wealth; supposing in this case, the term _wealth_ to imply, in general,

the means of purchasing whatever man can perform or produce.

I answer, that no doubt the balance may be susceptible of small

vibrations, because even in the exchange of consumable commodities, the

consumption may go on faster on one side than on the other; but I think,

unless the inconsumable fund of wealth (which is what gives the

superiority, and which in the example alledged, we supposed to be coin)

can be made to change hands according to the adequate proportion of the

consumption made, we cannot say properly, that a vibration can be

operated in any considerable degree.

Let us suppose (A) to be a proprietor of a bit of land, and (B) an

industrious workman; in order that (B) may purchase the land of (A,) it

must be supposed that (A) is very extravagant, and that he inclines to

consume a much greater proportion of work than what is equivalent to all

the surplus-produce of his land. Now in order to supply (A) to the value

of the land itself, (B) must distribute his work to many different

persons, and take in exchange, not such things as he has use for

himself, but such as may be found useful to (A). But so soon as (A) has

paid to (B) the whole surplus of his land, what fund of credit will he

find in order to engage (B) to furnish more? He cannot pay him in land,

because this fund is not susceptible of circulation; and every expedient

that could be fallen upon to keep accounts clear between them, is

neither more or less than the introduction of _money_, either _real_ or

_symbolical_. These terms must be explained.

By real money, is meant what we call coin, or a modification of the

precious metals, which by general agreement among men, and under the

authority of a state, carries along with it its own intrinsic value.

By symbolical money, I understand what is commonly called credit, or an

expedient for keeping accounts of debt and credit between parties,

expressed in those denominations of money which are realized in the

coin. Bank notes, credit in bank, bills, bonds, and merchants books

(where credit is given and taken) are some of the many species of credit

included under the term _symbolical money_.

In the example before us, we may suppose that (A) having no more

circulating equivalent to give (B) for his work, and being desirous to

consume of it to the value of his land, shall agree to issue notes of

hand, every one of which shall carry in it a right to an acre of land,

to a fruit tree, to ten yards of the course of a river, &c. and that

every such parcel of property, shall be esteemed at a certain proportion

of work. This agreement made, he goes on with his consumption, and pays

regularly, and adequately, the value of what he receives; and in

proportion as consumption proceeds on the side of (A), the balance of

wealth must turn in favour of (B); whereas while (A) kept his bit of

land, and (B) his faculty of working up an equivalent for the surplus of

it, the balance stood even; because the land on one hand, and the

industry on the other, produced adequate equivalents for each other. The

produce of both was consumable, and supposed to be consumed; which

operation being over, the land and the industry remained as before,

ready to produce anew. Here then is the effect of credit or symbolical

money; and here I ask, whether or not the notes of hand given by (A) to

(B), do not contain as real a value, as if he had given gold or silver?

and farther, whether or not it appears, that the country where they live

becomes any richer by this invention? does this note any more than

declare who is the proprietor of the value contained?

Nothing is so easy as to invent a money which may make land circulate as

well as houses, and every other thing which is of a nature to preserve

the same value during the time of circulation. Whatever has a value, may

change hands for an equivalent, and whenever this value is determined,

and cannot vary, it may be made to circulate; and in the circulation to

produce a vibration in the balance of wealth, as well as a pound of gold

or silver made into coin.

Those nations, therefore, who only circulate their metals, confine

industry to the proportion of the mass of them. Those who would

circulate their lands, their houses, their manufactures, nay their

personal service, even their hours, might produce an encouragement for

industry far beyond what could be done by metals only. And this may be

done, when the progress of industry demands a circulation beyond their

power.

This anticipation of the subject of the following book, is here thrown

in, only to enable my reader to form to himself an idea of the extent of

the subject we are at present upon, and to help him to judge to what

length luxury, that is consumption, maybe carried. Since, by what we

have said, it appears that there is no impossibility for a people to

throw the whole intrinsic value of their country into circulation. All

may be cut into paper, as it were, or stamped upon copper, tin, or iron,

and made to pass current as an adequate equivalent for the produce of

industry; and as there is no bounds to be set to consumption and

prodigality, it might he possible, by such an invention, in the compass

of a year, to circulate an equivalent in consumable commodities produced

by industry, for the whole property of the most extended and most

wealthy kingdom. That this is no chimerical supposition, appears plain

by the activity of many modern geniuses, who, in an inconsiderable space

of time, find means to get through the greatest fortunes; that is to

say, in our language, they throw them into circulation by the means of

the symbolical money of bonds, mortgages, and accounts. But does this

species of circulation increase the riches of a state? surely no more

than it would increase the riches of France or England, to carry all the

plate in the two kingdoms to be coined at the mint. The use of

symbolical money is no more than to enable those who have effects, which

by their nature cannot circulate (and which, by the bye, are the

principal cause of inequality) to give an adequate circulating

equivalent for the services they demand, to the full extent of all their

worth. In other words, it is a method of melting down, as it were, the

very causes of inequality, and of rendring fortunes equal.

The patrons therefore of Agrarian laws and of universal equality,

instead of crying down luxury and superfluous consumption, ought rather

to be contriving methods for rendring them more universal. If they blame

what is called perpetual substitutions of property or entails (made by

parents in favour of their posterity as yet unborn) because they are in

some respects prejudicial to industry; they should not, I think, find

fault with that charming leveler _dissipation_, that nurse of industry,

and the only thing intended to be prevented by such dispositions.

Some have persuaded themselves, that an equality of fortune would banish

luxury and superfluous consumption. Among the rest, is M. de

Montesquieu, an author for whom I have the highest esteem, and who has,

in this respect, been copied by many others. But I never found his idea

set in a clear light. Equality of fortune would certainly change the

nature of luxury, it would diminish the consumption of some, and would

augment the consumption of others; but without making people idle, it

could never destroy industry itself, and while this subsists in an equal

degree, there must be the same quantity of what it produces regularly

consumed. Farther, this proposition never can be advanced, but on the

supposition that the luxurious person, that is the consumer, must be

richer than he who supplies him. This I cannot by any means admit to be

true. Must the carter who drinks a pot of beer be richer than the

alehouseman? Must a country girl who buys a bit of ribband, be richer

than the haberdasher who sells it? Must the beau be richer than his

taylor? the traveller than the banker who gives him his money? the

client than the lawyer? the sick than the physician?

How then does it appear that equality must prevent luxury, unless we

suppose every one confined to an absolute physical-necessary, and either

deprived of the faculty of contriving, or of the power of acquiring any

thing beyond it. This principle Lycurgus alone laid down for the basis

of his republic; and yet riches were known in Sparta as well as poverty.

Absolute equality, _de facto_, is an absurd supposition, if applied to

human society. Must not frugality amass, and prodigality dissipate?

These opposite dispositions, are of themselves sufficient to destroy at

once, the best regulations for supporting equality, and, when carried to

a certain length, must substitute in its place as great an inequality as

the quantity of circulation is capable to produce. Whatever circulates,

may stagnate. Why was there so great equality at Sparta? because there

was little circulation. Why are the Capucins in a state of perfect

equality? because among them there is no circulation at all.

If therefore such variations in the balance of wealth depend on the

difference of _genius_ among men, what scheme can be laid down for

preserving equality, better than that of an unlimited industry

equivalent to an universal circulation of all property, whereby

dissipation may correct the effects of hoarding, and hoarding again

those of dissipation? This is the most effectual remedy both against

poverty and overgrown riches; because the rich and the poor are thereby

perpetually made to change conditions. In these alterations in their

respective situations, the parties who are changing by degrees, must

surely in their progress towards a total alteration, become, at one time

or other, upon a level, that is, to an equality; as the buckets in a

well meet, before they can pass one another.

_3tio._ The first species of things incorporeal, which may be purchased

with money, is personal service; such as the attendance of a menial

servant, the advice of a physician, of a lawyer, the assistance of

skilful people in order to acquire knowledge, the service of those

employed in the administration of public affairs at home and abroad, or

for the defence of a kingdom by sea, or land; the residence of great men

at court, who do honour to princes, and make their authority respected;

and even when money is given to procure amusement, pleasure, or

dissipation, when no durable and transferable value is given in return.

There is a kind of resemblance between the species here enumerated, and

what we called the _useful value_ in consumable commodities. In the one

and the other, there is an equivalent given for a man’s time usefully

employed; but the difference between them lies in this: that the _useful

value_ being supported, or having for a substratum, as the schoolmen

call it, the intrinsic substance, is thereby rendred permanent and

vendible; whereas here, for want of a permanent and transferable

substance, the personal services though producing advantages which are

sufficiently felt, cannot however be transferred for the adequate price

they cost.

The circulation produced by this third species of acquisition, operates

an instantaneous vibration of the balance. The moment the personal

service is performed, it may be said to be consumed; and although the

purchaser has received a just equivalent for the money given, and in

some cases may even be thereby put in a situation to indemnify himself

of all his expence, by performing the like services to others, yet every

body must perceive that such services cannot properly be considered as a

circulation of the former.

_4to._ The acquisition of the other species of things incorporeal, that

is, rights, produces little more balance, when an adequate circulating

equivalent is given for them, than the sale of land; because a right

implies no more than a power to use, that is, to consume; and by the

use, the right is not diminished: it is balanced by the use of the

money; the money therefore and the right being both permanent, there is

no vibration in the scales. Of this species are all servitudes; the

purchasing of privileges or immunities, even the lending of money at

interest, may here not improperly be classed.

Here it will, perhaps, be alledged, that an example be given, where the

creation of such a right, though purchased with an adequate circulating

equivalent, produces the greatest vibration in the balance of wealth

possible. It is when a state contracts debts, and when the public

creditors acquire a right to general impositions on the people for the

payment of their interest.

This objection requires a little explanation, and I have proposed it

chiefly for the sake of introducing an illustration of my subject.

If it be said, that in this example a vibration in the balance of wealth

_within the state_ is implied, then I say that it must take place either

1st. between the creditors and the state, or 2d. between the state and

the people, or 3d. between the creditors and the people. But,

_1mo._ The creditors acquire no balance against the state, because they

have given one inconsumable commodity for another; to wit, money for an

annual income. The money is worth the income, the income is worth the

money. If therefore any change in the balance comes afterwards to take

place, it must be in consequence of other operations quite independent

of this transaction. But let us suppose, which is but too frequently the

case, that here money must be considered as a consumable commodity,

because it is only borrowed to be spent. In this light does not the

creditor seem to acquire a balance in his favour against the state, so

soon as the money is actually spent. I answer in the negative: because a

state by expending the money borrowed, remains with respect to the

creditors just as wealthy as before. It is the people who pay the

interest, for which the state gives them in return no adequate

_transferable_ equivalent.

_2do._ Here it is urged, that this being the case, the state has

acquired a balance against the people according to the principles above

laid down, where it was said, that upon occasions, where money is given

for personal service, and where nothing transferable is given in return,

the balance turns instantaneously in favour of him who received the

money.

To this I answer, that as to the interest paid by the people, the state

does not receive it for herself, but for the creditors. The personal

services are then supposed to be already paid for, and the vibration has

taken place before the interest becomes due. Therefore the balance does

not turn between the state and the people.

In levying of taxes which are destined to pay the interest of money

already spent, the public gives no adequate equivalent on one hand; and

on the other, it is not enriched with respect to the people, any more

than it was impoverished with respect to the creditors, by spending the

money borrowed; and since there is no reciprocal change in the situation

of the two parties, I do not see how we can infer any vibration in the

balance of wealth between them. We shall presently see between whom the

balance is made to vibrate.

_3tio._ The balance between the creditors and the people is what at

first sight appears to be principally affected; because the first

receive a constant retribution from the latter, in consequence of the

loan. But neither is any true vibration found here, either adequate to

the loan, or to the money spent. _1mo._ Because the creditors themselves

are part of the people who contribute towards all impositions on

consumptions, which are commonly the most regular, the most permanent,

and the most familiarly appropriated for the payment of the interest.

_2do._ Because the money spent by the state, if spent at home, returns

to other hands indeed, but still returns to the people, of whom we are

here speaking. And _3tio._ because there is no transaction at all

between the creditors and the people.

Objection. By this way of reasoning it would appear, that the exhausting

a people by taxes, makes no vibration in the balance of their wealth.

Answer. If the people be exhausted, it must be by enriching strangers.

This case should at present be excluded, as we have laid aside the

consideration of foreign relations. But allowing this circumstance also

to be implied in the objections made, I agree that every penny of money

sent out of a country, for no real and permanent equivalent received in

return, operates a vibration in the wealth between nation and nation;

but none between subject and subject. To this it is answered, that when

taxes are high, many people are ruined while others are enriched. This

operates a vibration. I allow it; but then I reply, that by the very

supposition in every such case, the money must remain at home; whereas

in the former, it was supposed to be expended abroad. Now we are not at

present examining the effects of debts and taxes, in changing the

balance between man and man, but only between the three cumulative

interests above specified, the state, the people, and the creditors.

Let me now ask, what is the effect of taxes on the vibration of the

balance of wealth between individuals?

I answer, that whoever pays a tax, appears to pay for a personal

service. He receives no corporeal equivalent which can be alienated by

him for the same value; and he who is employed by the state, and is paid

with the produce of taxes, acquires a balance in his favour against

those who pay them. When the amount of taxes goes abroad for foreign

services, there can be no alteration upon the balance at home, as has

been said; neither is there any when it remains at home: the people and

the creditors are as rich as before. Let this suffice at present, as to

the effects of debts and taxes upon the balance of national wealth.

Industry is the only method of making wealth circulate, so as to change

its balance between the parties; all kinds of circulation which operate

no such change, are foreign to the present purpose.

A man dies and leaves his wealth to another, no body loses by this, but

he who is no more; a second pays his debts, neither debtor, or creditor

can be said to change circumstances by the operation. A merchant buys a

quantity of merchandize for ready money, he thereby loses no balance of

his wealth; it is true he has given money for consumable effects; but

the balance does not operate until the consumption takes place, and as

he is not supposed to buy in order to consume, I rank this branch of

circulation among those which do not influence the balance.

Thus we find two different kinds of circulation in a state; one which

makes the balance turn, and one which does not. These objects are of no

small consequence to be attended to in the right imposition of taxes, as

shall, in its proper place, be more fully explained. At present it is

sufficient to observe, that the proper time of laying on taxes is at the

time of circulation: because the imposition may then be always exactly

proportioned to the sum circulating; consequently, to the faculties of

the persons severally interested.

In all excises, or taxes upon consumption, it is the money of the

consumer which is taxed, in the instant of the payment; so that he

against whom the balance is to turn, has the additional load to pay.

This species of tax, imposed at the time of circulation, is what

produces the largest sums to a state. I never heard of a proper

expedient for taxing the person in whose favour the balance is to turn,

though from the principles which are afterwards to be laid down, we may

perhaps discover one.

As for the other species of circulation, where the balance does not

turn, it is not so much the custom to impose very considerable taxes

upon it: there are however several examples to be met with which point

out how they may be imposed. The casualties paid upon the change of

vassals, or upon the fall of lives, in leases upon upon lands in

England; the confirmation of testaments in Scotland; investitures in

Germany; the _centiéme denier_, the _lods et ventes_, and the _control_

upon the acts of notaries in France; the emoluments of the _Rota_ in

Spain, and in many Roman Catholic countries, are of this species. Upon

the same principle, taxes more or less considerable might be laid upon

every branch of this kind of circulation; for which purpose, it would be

highly necessary to find out all the ramifications of it, by analysing

it to the bottom, as we have hitherto run through it very superficially.

------------------------------------------------------------------------

CHAP. XXVII.

_Circulation and the Balance of Wealth, objects worthy of the attention

of a modern Statesman._

Having explained the nature of circulation, and of this balance, we are

next to point out the objects of a statesman’s attention concerning

them.

I. _He ought to form to himself a clear and distinct idea of the nature,

properties, and effects of circulation; a word frequently made use of

without much meaning, and in a vague and undetermined sense._

The term _circulation_ is, perhaps, one of the most expressive in any

language, and is therefore easily understood. It represents the

successive transition of money, or transferable commodities, from hand

to hand, and their return, as it were in a circle, to the point from

which they set out. This is the rough idea which every one, who

understands the word at all, must form of its meaning. But a statesman’s

perceptions must be more accurate as well as more complex.

He must combine the consequences which result from this successive

transition, and attend to the effects produced by it. He must not only

consider the money, which is a permanent value, passing from hand to

hand, but weigh the consequences of the variety of consumption which it

draws along with it, in its progress.

Before a guinea can travel from London to York, it may be the means of

consuming a thousand times its value, and as much more, before it can

return to London again. Every stop the guinea makes in its course, marks

a want of desire to consume, in him who possesses it. If, therefore, in

any country, there were but one guinea in circulation, all consumption

would stop (or barter would take place) the moment it fell into the

hands of a miser. This leads us to the second object of a statesman’s

attention.

II. _He ought at all times to maintain a just proportion between the

produce of industry, and the quantity of circulating equivalent, in the

hands of his subjects, for the purchase of it; that, by a steady and

judicious administration, he may have it in his power at all times,

either to check prodigality and hurtful luxury, or to extend industry

and domestic consumption, according as the circumstances of his people

shall require the one or the other corrective, to be applied to the

natural bent and spirit of the times._

For this purpose, he must examine the situation of his country,

relatively to three objects, viz. the propensity of the rich to consume;

the disposition of the poor to be industrious; and the proportion of

circulating money, with respect to the one and the other.

If the quantity of money in circulation is below the proportion of the

two first, industry will never be able to exert itself; because the

equivalent in the hands of the consumers, is then below the proportion

of their desires to consume, and of those of the industrious to produce.

Let me illustrate this by a familiar example taken from a party at

quadrille.

When, on dealing the cards, every one puts in a fish into the stake,

according to the old English fashion, a very few are sufficient for the

circulation of the game: but when you play the aces, the consolation and

the multiplication of beasts according to the French custom, you must

have a box with contracts, fishes, and counters; so reducing all to the

lowest denomination, every player has occasion for above five hundred

marks. It is therefore plain, that the number of marks must be in

proportion to the circulation of the game. But at play, as in a state,

circumstances render this circulation very irregular. Fortune may run so

equally among the players, during a considerable time, that none of them

may have occasion to pay away above the value of a hundred counters, and

while this equality continues, there is not found the smallest

interruption in the circulation. But let one of the players have a run

of luck, you will soon see three of the boxes empty, and all the

circulating marks heaped up before the winner. Fortune at quadrille,

forms stagnations of the circulating equivalent, as industry and

frugality form them in a state. At this period of the game, must not the

players stop, or must they not fall upon a way of drawing back their

marks into circulation? If they borrow back from the winner, this

represents loan. If they buy back their marks with money from their

purses, it represents what I call throwing solid property into

circulation.

From this familiar example, we may judge how necessary it is that the

circulating fund be constantly kept up to the proportion of the

occasions for it. It is impossible to determine the proportion of coin

necessary for carrying on the circulation of a country, especially of

one where neither loan, or paper credit, that is the melting down of

solid property, are familiarly known. Here is the reason: the solution

of the question does not depend upon the quantity of coin alone, but

also upon the disposition of those who are the possessors of it; and as

these are constantly changing, the question thereby becomes insoluble.

It is, therefore, the business of a statesman, who intends to promote

circulation, to be upon his guard against every cause of stagnation; and

when he has it not in his power to remove these political obstructions,

as I may call them, by drawing the coin of the country out of its

repositories; he ought (in proportion as the other political interests

of his people are found to require it) to facilitate the introduction of

symbolical money to supply its place.

A great political genius is better discovered by the extent of his

perceptions, than by the minute exactness of them in every part of the

detail. It is far better for a statesman to be able to discern (though

superficially) every object of government under all its relations, than

to be able to trace any one with the greatest accuracy. This is apt to

occupy him too much, and no one relation should ever engross his whole

attention.

I cannot omit in this place taking notice of a very judicious remark of

M. de Melon, an eminent political French writer, who was employed by the

Duke of Orleans in state affairs, during his regency of the kingdom.

“It belongs only (says he) to one who has had the direction of every

branch of government to lay down a general plan of administration, and

even then, one must not expert from such a person, very particular

details with respect to many objects, of which he himself is entirely

ignorant, and which he has been obliged to confide to the care of others

subordinate to him. A person who can stoop to a minute exactness in

small affairs, proves commonly very unequal to the administration of

great ones. It is enough for such a person to know principles by

experience and reflection, and to apply fundamental maxims as occasion

requires.”

I apply this observation to the point in hand. A statesman who allows

himself to be entirely taken up in promoting circulation, and the

advancement of every species of luxurious consumption, may carry matters

too far, and destroy the industry he wishes to promote. This is the

case, when the consequences of domestic consumption raises prices, and

thereby hurts exportation.

A principal object of his attention must therefore be, to judge when it

is proper to encourage consumption, in favour of industry; and when to

discourage it, in favour of a reformation upon the growth of luxury.

If the country he governs be in a state of simplicity, and that he

wishes to awaken a taste for industry and refinement, he must, as has

been said, encourage domestic consumption, for the sake of multiplying,

and giving bread to the industrious; he must facilitate circulation, by

drawing into the hands of the public what coin there is in the country,

in case he finds any part of it locked up; and he must supply the actual

deficiency of the metals, by such a proportion of paper credit, as may

abundantly supply the deficiency.

In every country where simplicity prevails, and where there is any

considerable quantity of coin, a great proportion of it must be locked

up: because the consumption there must be small; consequently, little

circulation; consequently, either little coin, or many treasures. In

such cases, therefore, a statesman must engage the possessors of these

riches to part with them, at the desire of those who can give security

for their worth: and he must establish the standard of an annual

retribution for the loan. If this be difficult to be brought about, from

the want of confidence in the monied men, he may, in their favour,

contrive expedients to become the borrower himself, at the expence of

the alienation of certain rights, or the creation of new privileges, in

lieu of interest; and when he has engaged them to part with their coin,

he may lend it out to such as have both solid property and a desire to

consume; but who, for want of a circulating fund to purchase

superfluities, have hitherto lived in simplicity.

The introduction, therefore, of loans upon interest, is a very good

expedient to accelerate circulation, and give birth to industry.

OBJ. But here it is objected, that such a plan is looked upon by some

nations to be contrary to the precepts of the christian religion, and

therefore a statesman cannot permit it.

To this I can make no answer, because I am no casuist; but I can propose

an expedient which will supply the defect of borrowing at interest; and

as it may serve to illustrate the principles I am now upon, I shall here

introduce it.

The intention of permitting loans upon interest, is not to provide a

revenue to those who have ready money locked up, but to obtain the use

of a circulating equivalent to those who have a sufficient security to

pledge for it. If the statesman, therefore, shall find himself withheld

by the canons of his church, from drawing the coin of his subjects into

circulation, by permitting the loan of it upon interest, nothing is more

easy than to invent another species of circulation, where no interest at

all is necessary.

Let him open an office, where every proprietor of lands may receive, by

virtue of a mortgage thereon, a certain proportional value of

circulating paper of different denominations, the most proper for

circulation. He may therein specify a term of payment in favour of the

debtor, to give him an opportunity to call in his obligation, and

relieve the engagement of his property. But that term being elapsed, the

land is to belong to the creditor, or the paper to become payable by the

state, if required, which may in consequence become authorised either to

sell the land engaged, or to retain a proportional value of the income,

or of the property of the land itself, as shall be judged most

expedient.

Farther, let him constitute a real security for all debts upon every

species of solid property, with the greatest facility in the liquidation

of them, in favour of those who shall have given credit to the

proprietors for merchandise of any kind. To compass this, let all

entails, substitutions, and _fidei commissa_, or trusts, restraining the

alienation of land-property, be dissolved; and let such property be

rendred as saleable as houshold furniture. Let such principles influence

the spirit of the government; let this sort of paper credit be modified

and extended according to circumstances, and a taste for consumption

will soon take place.

The greatest of all obstacles to industry in its infancy, is the general

want of credit on both sides. The consumers having no circulating value,

the difficulty of liquidating what they owe by the alienation of their

lands, prevents their getting credit; and the many examples of

industrious people giving way, on account of bad payments, discourages

others from assisting them in the beginning of their undertaking.

From these principles we may gather, that a statesman who intends to

increase industry and domestic consumption, should set out by providing

a circulating fund of one kind or other, which ought always to be ready,

and constantly at the command of those who have any sort of real

equivalent to give for the consumption they incline to make: for as

specie may often times be wanting, a contrivance must be fallen upon

immediately to supply that want.

The utility of this kind of credit, or paper money, is principally at

the instant of its entring into circulation, because it is then only

that it supplies the want of real specie; and by this invention, the

desire to consume creates, as it were, the circulating equivalent,

without which the alienation of the produce of industry would not have

taken place; consequently, the industry itself would have suffered a

check.

But in the after circulation of this paper money from hand to hand, this

utility comes to cease; because the subsequent consumer, who has another

man’s paper to give in exchange, is already provided with a circulating

equivalent, and therefore were it not for the wearing of the specie, or

difficulty of procuring it, it is quite indifferent both to the state,

as well as to circulation, whether this paper continues to pass current,

or whether it be taken up, and realized by the debtor, and gold and

silver be made to circulate in its place.

Let me now endeavour, to make this whole doctrine still more plain, by

an example.

Suppose a country where there is a million of pieces of gold employed

necessarily in carrying on the ordinary circulation, a million of pieces

of the same value locked up, because the proprietors have no desire to

spend them. Suppose the revenue of the solid property of the country to

be worth also a million a year; and that if the fund itself could be

sold, it might be worth twenty millions of the same specie. Suppose no

such thing as credit or paper money to be known, and that every man who

inclines to make any consumption, must be provided previously with a

part of the circulating million, before he can satisfy his inclination.

Under these circumstances, the statesman resolves to establish industry,

and finding that by his people’s taking a taste for a greater

consumption, the million which was formerly sufficient for carrying on

circulation, is no longer so; he proposes to those who have the other

million locked up, to borrow it from them at _5 per cent._ and the

better to engage them to comply with his proposal, he offers to impose

duties upon the whole of the inhabitants to the annual amount of fifty

thousand pieces of gold, to be paid annually to the creditors, in return

for their treasure. If this scheme be adopted, he may lend out his

million in small sums, to every one who inclines to borrow, upon good

security; or by premiums and other encouragements given to his infant

manufactures, he may throw it into the hands of the public, that is,

into circulation. Here is one method of increasing the quantity of a

circulating fund, when an augmentation upon the consumption of the

produce of industry comes to demand it.

But let us now suppose this regular plan of borrowing to be contrary to

what is called the constitution of the state, to religion, or to the

spirit of the people, what must be done to supply the place of such a

scheme?

The statesman must then fall upon another contrivance, by extending the

use of pledges, and instead of moveables, accept of lands, houses, &c.

The _Monte pieta_ at Rome issues paper money upon moveable security

deposited in their hands. Let the statesman, without exacting interest,

do the same upon the lands of his subjects, the best of all securities.

While the lands subsist, this paper money must retain its value; because

I suppose the regulations to be such as to make it convey an

indisputable right to the lands engaged. The advantage of such an

establishment will be, that as formerly no man could purchase the

smallest produce of industry, without having a part of the circulating

million of pieces of gold; every body now who has an inclination to

consume, may immediately procure paper money in proportion to his worth,

and receive in return whatever he desires to possess.

Now let me suppose that this paper money shall in time, and from the

growing taste for superfluities, amount to the value of five millions of

pieces of gold. I ask, whether the real value of this paper is any way

diminished, because it exceeds, by far, all the gold and silver in the

country, and consequently cannot all at once be liquidated by the means

of the coin? Certainly not: because it does not draw its value from any

representation of these metals, but from the lands to which it conveys a

right. Next, I ask, if the country is thereby become any richer? I

answer, also, in the negative: because the property of the lands, if

sold, being supposed worth twenty millions, the proprietors of the paper

are here supposed to have acquired, by their industry, five millions of

the twenty; and no more than the remaining fifteen millions belong to

the landlords.

Let us now suppose a million of this paper money to fall into the hands

of those who have no inclination to spend it. This is the case of the

frugal, or money hoarding persons, and they will naturally chuse to

realize their paper, by taking possession of the lands represented by

it. The moment this operation takes place, the million of paper money is

annihilated, and the circulating capital is reduced to four millions of

paper, and one million of specie. Suppose, on the other hand, that those

who have treasures which they cannot lend at interest, seeing a paper

money in circulation, which conveys a right to solid property, shall

purchase it with their million of pieces of gold, and then lay hold of a

proportional part of the land: what effect will this double operation

produce upon the circulating fund? I answer, that instead of being

composed as formerly, of one million of coin and five millions of paper,

it will, at first, on the buying up of the paper, consist of two

millions of coin and five millions of paper; and so soon as the million

of paper bought up comes to be realized upon the land, and thereby

extinguished, the circulating coin will be two millions, and the paper

will be reduced to four. Here then is a very rational method of drawing

all the coin of the country from the treasures of the frugal, without

the help of interest. Let me take one step farther, and then I will

stop, that I may not too far anticipate the subject of the following

book.

I suppose, that the statesman perceiving that the constant circulation

of the coin insensibly wears it away, and reflecting that the value of

it is entirely in proportion to its weight, and that the diminution of

the mass must be an effectual diminution of the real riches of his

country, shall call in the metals and deposit them in a treasure, and

shall deliver, in their place, a paper money having a security upon the

coin locked up. Is it not plain, that while the treasure remains, the

paper circulated will carry along with it as real (though not so

intrinsic) a value as the coin itself could have done? But if this

treasure comes to be spent, what will the case be then? It is evident,

that the paper conveying a right to the coin, will then as effectually

lose its value, as the other species of paper conveying a right to the

lands, and issued, as we have supposed, by the proprietors of them,

would have done, had an earthquake swallowed up, or a foreign conqueror

seized the solid property engaged as a security for this paper.

The expedient, therefore, of symbolical money, which is no more than a

species of what is called credit, is principally useful to encourage

consumption, and to increase the demand for the produce of industry. And

the bringing the largest quantity of coin possible into a country,

cannot supply the want of it in this respect; because the credit is

constantly at hand to every one who has property, and the other may fail

them on a thousand occasions. A man who has credit may always purchase,

though he may be many times without a shilling in his pocket.

Whenever, therefore, the interest of a state requires that the rich

inhabitants should increase their consumption, in favour of the

industrious poor; then the statesman should fall upon every method to

maintain a proportion between the progress of industry, and the gradual

augmentation of the circulating fund, by enabling the inhabitants to

throw with ease their solid property into circulation whenever coin is

found wanting. Here entails are pernicious.

On the other hand, when luxury begins to make too great a progress, and

when it threatens to be prejudicial to foreign trade, then might solid

property be rendred more unwieldy; and entails might then become useful:

all moveable debts, except bills of exchange in foreign circulation,

might be stripped of their privileges, and particularly, as in France,

of the right of arresting the person of the debtor. Usury ought then to

be punished severely; even something like the _Senatus Consultum

Macedonianum_, which made the contract of loan void on the side of the

borrowers, while they remained under the power of their fathers, might

be introduced. Merchants accounts should no more be allowed to enjoy a

preference to other debts; but on the contrary, be made liable to a

short prescription. In a word, domestic circulation should be clogged,

and foreign circulation accelerated. When foreign trade again comes to a

stop, then the former plan may be taken up a-new, and domestic

circulation accelerated and facilitated, in proportion as the produce of

industry and taste of superfluity require it.

III. _A statesman ought carefully to distinguish between those branches

of circulation which operate a vibration in the balance of wealth, and

those_ _which do not, in order to regulate the taxes which he may think

proper to lay upon his people._

In treating of this third object of a statesman’s attention, I shall

confine myself to the application of those principles which point out

the necessity of taxation among a luxurious people, become wealthy by

the means of trade, where the industrious can no longer be made to

subsist but by means of a great domestic circulation, which is the

object of our present inquiry.

In every case where the balance of wealth is made to vibrate by

circulation, there is an opportunity of imposing a tax upon

consumptions, perfectly proportioned to the quantity of the circulation.

Now by the imposition of taxes, and the right employment of the amount

of them, a statesman has it in his power to retard or to promote the

consumption of any branch of industry. By the imposition of duties he

may either check luxury when he finds it calling off too many hands from

other more necessary occupations; or by granting premiums, he may

promote consumption or exportation upon branches where it is expedient

to increase the hands employed, which last is the reverse of taxation;

or in the third place, when foreign trade begins to bear a small

proportion to domestic consumption, he may profit of luxury, and draw a

part of the wealth of the luxurious into the public treasure, by

_gently_ augmenting the impositions upon it; for when taxes are gently

increased, consumption is not checked; consequently, this is the proper

method to be followed, when luxury does no harm. But when it proves

hurtful, the rise in the impositions should be sudden, that they may

operate the effects of violent revolutions which are always accompanied

with inconveniencies, and on such occasions every inconvenience will

mark the success of the operation. An example will make this plain.

If you want to check the drinking of spirituous liquors, let every

alteration of your oeconomy concerning them, either as to the

impositions upon the consumption, or regulations in the retailing them,

proceed by jerks as it were; if you want to increase the revenue, from

the propensity people have to poison themselves with spirits, your

augmentations and alterations may be gentle and progressive.

Here let me observe by the way, that the best method for a statesman to

curb any sort of vice among his people, is to set out by facilitating

the gratification of it, in order to bring it once upon a regular and

systematical footing, and then by sudden and violent revolutions in the

administration of the oeconomy of it, to destroy it and root it out.

Were all the strumpets in London received into a large and convenient

building, whither the dissolute might repair for a while with secrecy

and security, in a short time, no loose women would be found in the

streets. And it cannot be doubted, but that by having them all together

under certain regulations, which might render their lives more easy than

they are at present, the progress of debauchery, and its hurtful

consequences, might in a great measure be prevented. At Paris, they are

to be found in their houses, because the police never troubles them

there while they commit no riot or disturbance. But when they are

persecuted in their habitations, they break forth into the streets, and

by the open exercise of their profession, the delicacy of modesty is

universally hurt and but too frequently blunted, and the example that

those prostitutes openly set to their own sex, debauches more women than

all the rakes in town do.

I hope this digression will not be misconstructed into an apology for

public stews, where, in place of following good regulations for

suppressing the vices with which they are filled, the principal object

is frequently to encourage the abuses for the sake of making them turn

to account as a branch of revenue. Such a plan of administration

represents a statesman who turns against his people, those arms which he

had provided for their defence. My intention is very different, it is to

curb vice as much as possible, and to shut up what cannot be rooted out

within the bounds of order, and to remove it as a nusance from the eyes

of the public, and from the contagious imitation of the innocent. I now

come to the object of a statesman’s attention, relative to that branch

of circulation which implies no vibration of the balance of wealth

between the parties concerned.

The more perfect and the more extended any statesman’s knowledge is of

the circumstances and situation of every individual in the state which

he governs, the more he has it in his power to do them good or harm. I

always suppose his inclinations to be virtuous and benevolent.

The circulation of large sums of money brings riches to light for a

moment, which before and after are commonly hid from the eyes of the

public. Those branches of property therefore, which have once made their

appearance in this species of circulation, should not be lost sight of

until they come naturally to melt away, by returning into the other

branch of which we have been speaking; that is, until they are fairly

spent, and the balance be made to turn against the former proprietors of

them. After this revolution, they will circulate for a while in small

sums, and remain imperceptible, but in time they will come to form new

stagnations; then they will be lent out again, or employed in the

purchase of lands; and falling once more under the eyes of the state,

they will again become an object of the same attention as formerly.

Nothing is more reasonable, than that all property which produces an

annual determined income, should be made to contribute to the common

burthens of a state. But those taxes which are intended to operate upon

so moveable a property as ready money, ought to be imposed with a most

gentle hand, and even so as not to appear directly to affect it. The

statesman here must load his wealthy citizens with duties, as Horace

loads his sovereign with adulation, never addressing his compliments

directly to the emperor, but conveying them to him in the most elegant

manner, through the channel of an interposed person. Thus people

possessing large capitals of ready money, which in a moment they can

transport beyond the reach of the most extended jurisdiction, may have

certain privileges granted them which may attach them to the country (in

England, for example, a vote in a county or burrow) and then in

consequence of their rank, not because of their money, be made to come

under a sort of capitation, or other similar imposition bearing another

name. Might not the creditors of that nation be represented in

parliament, and in consequence of so great a privilege, and the

additional security thereby granted to the funds, be made afterwards to

come under taxations as well as other proprietors of a determined

revenue. An admirable hint for the imposition of such taxes, is to be

met with in a certain great European monarchy, where the highest order

of knighthood is distinguished with a ribband, a star, and a pension of

about an hundred and thirty pounds sterling a year. But so soon as any

one is raised to that dignity, he pays exactly that very sum in lieu of

capitation. The pension was given by the prince who instituted the

order; the capitation followed in a subsequent reign, and now appears

rather a mark of distinction than a burthen.

IV. _The next object of a statesman’s attention proper to be taken

notice of, is the different political considerations which must occur to

him when he compares the turning of the balance of wealth against the

industrious members of a state, with those vibrations which take place

against the not working part of the inhabitants. In other words, the

different effect of taxes, as they severally affect those who consume in

order to reproduce, and those who consume in order to gratify their

desires._

The one and the other consumption implies a vibration in the balance of

wealth, and whenever there is a vibration, there we have said that a

proportional tax may be imposed.

But as the intention of taxes, as I understand them, is only to advance

the public good (by throwing a part of the wealth of the rich into the

hands of the industrious poor, and not to exhaust one part of a nation

to enrich another, no necessary article of consumption should be taxed

to an industrious person, but in such a way as to enable him to draw

back the full amount of it, from those who consume his work. By this

means, the whole load of taxes must fall upon the other category of

inhabitants, to wit, those who live upon the produce of a fund already

acquired.

Let me here observe, by the way, that if taxes are rightly laid on, no

industrious person, any more than another who lives upon his income,

will ever be able to draw back one farthing of such impositions as he

has paid _upon his consumption of superfluity_. This shall in its proper

place be made sufficiently plain; at present it would be a superfluous

anticipation of the doctrine of taxation, to point out the methods of

compassing this end. My intention at present is only to recapitulate the

objects of a statesman’s attention, with regard to the consequences of

circulation, and the vibrations of the balance of wealth; and having

shewn how nearly those principles are connected with those of taxation,

this alone is sufficient to shew their importance.

V. _A statesman ought to attend to the difference between the foreign

and domestic circulation of the national wealth._

This object, though in part relative to foreign commerce, must not be

passed over without observation. In fact, there is no nation entirely

deprived of foreign communications; therefore, although a statesman, who

is at the head of a luxurious people, may act in general as if there

were none at all, yet still he must be attentive to the consequences of

circulation with his neighbours, in so far as it takes place.

Every commercial correspondence with foreign nations, not carried on by

the exchange of consumable commodities, must produce a vibration of the

balance of wealth, either in favour or prejudice of the interest we have

in our eye. But it does not follow, because there is a vibration, that

therefore a statesman has the same liberty of imposing taxes upon every

article of consumption, as if the two scales were vibrating within the

country subject to his administration.

When the consumers are his subjects, he may safely impose the tax, and

if he raises it by degrees, so high as to diminish the consumption, and

reduce the amount of the imposition, he will probably gain on the other

hand, by discouraging the foreign importation, and by keeping the

nation’s wealth at home, more than he possibly could have got by the

amount of his tax, in consequence of the dissipation of it.

When the foreigners are the consumers, the case is very different: for

you cannot oblige a man who is not your subject, to pay beyond the

advantage he gains by your correspondence. It is therefore, as has been

said, only upon the exportation of goods, where the nation has great

natural advantages over her neighbours, that any duty can be raised.

VI. The last object I shall mention as worthy of a statesman’s

attention, is, _the rules of conduct he should prescribe to himself, as

to the extending or contracting taxation, according as he finds a

variation in the proportion between the_ _FOREIGN_ _and_ _DOMESTIC_

_circulation of his country_.

For this purpose he must know exactly the proportions of the one and the

other; he must compare the quantity of domestic consumption, with the

produce of industry and quantity of importations.

If domestic consumption be equal to the sum of both, the country must

annually lose the value imported. In this case, taxes are to be raised

by sudden jerks, especially upon importations; not to increase the

produce of them, but to prevent the increase of luxury, and dissipation

of national wealth.

If domestic consumption do not exceed the produce of industry, this will

prove that exportation is at least equal to importation. In this case

the exportation must be supported; and when that can no otherwise be

done, a part of the taxes levied upon home consumption must be

distributed in premiums upon the articles of exportation; and when this

also becomes ineffectual, then all importations for consumption must be

cut off, according to the principles above laid down.

If the domestic consumption should really fall short of the produce of

industry, it marks a flourishing foreign trade. Prices then must be kept

low, as has been abundantly explained; consequently, there will be less

profit from taxes; because every penny imposed, which affects the price

of exportable goods, must be refunded out of the net produce of them,

and all the expence of collecting that part is entirely lost to the

public: the remainder, therefore, will be greater or less, according as

foreign trade is great or small.

In proportion, therefore, as domestic circulation gains ground upon the

foreign, taxes become necessary; in order, with the amount of them, to

correct the bad effects of luxury, in raising prices, by giving larger

premiums to support exportation. And in proportion as a statesman’s

endeavours to support the trade of his country becomes ineffectual, from

the growing taste of dissipation in his subjects, the utility of an

opulent exchequer will be more and more discovered; as he will be

thereby enabled to support his authority against the influence of the

great load of riches thrown into domestic circulation, and to defend his

luxurious and wealthy subjects from the effects of the jealousy of those

nations which enriched them.

To conclude, the exportation of work, and the supporting a superiority

in the competition of foreign markets (as has been said, and as shall be

farther explained) seem to be the most rational inducements to engage a

statesman to begin a scheme of imposing considerable taxes upon his

people, while they enjoy any share of foreign commerce. If such taxes

continue to subsist after the extinction of it, and are then found

necessary; this necessity is itself a consequence of the change made on

the spirit and manners of a people become rich and luxurious.

The charge of government, under such circumstances, must greatly

increase, as well as the price of every thing. Is it not very natural,

that he who is employed by the state should receive an equivalent

proportioned to the value of his services? Is it to be supposed, that a

person born in a high rank, who, from this circumstance alone, acquires

an advantage, in most nations, hardly to be made up by any acquired

abilities, will dedicate his time and his attendance for the

remuneration which might satisfy his inferiors? The talents of great men

deserve reward as much as those of the lowest among the industrious; and

the state is with reason made to pay for every service she receives.

This circulation of an adequate equivalent, we have said to be the

palladium of liberty, the band of gentle dependence among freemen; and

the same spirit ought to animate every part of the political body. That

_nothing is to be done for nothing_, is a fundamental political maxim in

every free government, and obligations, not liquidated by a just

equivalent, form pretensions beyond their worth; and are constantly

accompanied with discontent at one time or other.

Another use of taxes, after the extinction of foreign trade, is to

assist circulation, by performing, as it were, the function of the heart

of a child, when at its birth that of the mother can be of no farther

life to it. The public treasure, by receiving from the amount of taxes,

a continual flux of money, may throw it out into the most proper

channels, and thereby keep that industry alive, which formerly

flourished, and alone depended upon the prosperity of foreign commerce.

In proportion, therefore, as a statesman perceives the rivers of wealth,

(as we have called them above) which were in brisk circulation with all

the world, begin to flow abroad more slowly, and to form stagnations,

which break out into domestic circulation, he ought to set a plan of

taxation on foot, as a fund for premiums to indemnify exportation for

the loss it must sustain from the rise of prices, occasioned by luxury;

and also for securing the state itself, against the influence of

domestic riches, as well as for recompensing those who are employed in

its service.

This system ought to be carried on and extended, in proportion to the

decay of foreign trade; and when this comes in a manner to cease, then

the increase of taxes, and the judicious application of them, going hand

in hand, the state itself will support circulation, by receiving with

one hand, and giving out with the other; until by a prudent management

under the care and direction of an able statesman, through time and

perseverance, every internal vice be corrected, and foreign commerce be

made to flourish once more, from the principles we have been laying

down, and from what may be farther said to illustrate them in the

subsequent books of this inquiry.

While industry is kept alive there is still ground for hope. Manners

change, and the same luxury which extinguished foreign trade, by calling

home the wealth employed in that species of circulation, may afterwards,

by keeping industry alive at home, and by throwing a sufficient power of

wealth into the hands of a good statesman, render the recovery of that

trade no difficult project, to one who has an instrument in his

possession, so irresistible in removing every obstacle in the way of his

undertaking.

This represents a new circulation; to wit, that of the spirit and

manners of a people, who, under the government of able statesmen, may

prosper in every situation; and since, from the nature of man, no

prosperity can be permanent, the next best thing to be done, is, to

yield to the force which cannot be resisted; and, by address and

management, reconduct a people to the height of their former prosperity,

after having made them travel (as I may say) with as little

inconvenience as possible, through all the stages of decline.

------------------------------------------------------------------------

CHAP. XXVIII.

_Circulation considered with regard to the rise and fall of the Price of

Subsistence and Manufactures._

The intention of this chapter is to apply the principles we have been in

search of, to the solution of some questions, which have been treated by

those great masters of political reasoning, Messrs. de Montesquieu and

Hume. The ideas they have broached are so pretty, and the theory they

have laid down for determining the rise and fall of prices so simple,

and so extensive, that it is no wonder to see it adopted by almost every

one who has writ after them.

I have not forgot how much I was pleased when first I perused these

authors, from the easy distribution which a general theory enabled me to

make of certain classes of my ideas then lying without order, in that

great repository of human crudities, the memory; which frequently

retains more materials, than people, commonly, have either time, or

perhaps capacity rightly to digest.

I am very far from pretending to any superiority of understanding over

those gentlemen whose opinions I intend to review: accident alone has

led me to a more minute examination of the particular circumstances,

upon which they have founded their general combinations; and in

consequence of my inquiries, I think I have discovered, that in this, as

in every other part of the science of political oeconomy, there is

hardly such a thing as a general rule to be laid down.

There is no real or adequate proportion between the value of money and

of goods; and yet in every country we find one established. How is this

to be accounted for?

We have, in the fourth chapter of this book, already inquired into the

principles which point out the influence of trade upon the variation of

the price of goods; but the question now comes to be, how to fix and

determine the fundamental price, which is the object of variation. It

has been said, that the price of a manufacture is to be known by the

expence of living of the workman, the sum it costs him to bring his work

to perfection, and his reasonable profit. We are now to examine what it

is, which in all countries must determine the standard prices of these

articles of the first necessity; since the value of them does

necessarily influence that of all others.

The best way to come at truth, in all questions of this nature, is, to

simplify them as much as possible, that they may be first clearly

understood.

Whenever a question arises about price, an alienation is necessarily

implied; and when we suppose a common standard in the price of any

thing, we must suppose the alienation of it to be frequent and familiar.

Now I must here observe, that in countries where simplicity reigns

(which are those where the decision of this question ought regularly to

be sought for, since it is there only where a complication of

circumstances do not concur to raise the prices of subsistence) it is

hardly possible to determine any standard for the price of articles of

the first necessity.

Let us examine the state of those hunting Indians who live by their bow,

and of other nations where the inhabitants exercise, I may say

universally, that species of agriculture which I have called a direct

method of subsistence, and we shall find, that the articles of food and

necessaries are hardly found in commerce: no person purchases them;

because the principal occupation of every body is to procure them for

himself. What answer would a Scotch highlander have given any one, fifty

years ago, who would have asked him, for how much he sold a quart of his

milk, a dozen of his eggs, or a load of his turf? In many provinces,

unacquainted with trade and industry, there are many things which bear

no determined price; because they are seldom or never sold.

Sale alone can determine prices, and frequent sale can only fix a

standard. Now the frequent sale of articles of the first necessity marks

a distribution of inhabitants into _labourers_, and what we have called

_free hands_. The first are those who produce the necessaries of life;

the last are those who must buy them: and as the fund with which they

purchase is produced from their industry, it follows, that without

industry there can be no sale of articles of subsistence; consequently,

no standard price determined.

Another consequence of this reasoning, is, that the sale of subsistence

implies a superfluity of it in the hands of the seller, and a proper

equivalent for it in the hands of the buyer; and when the equivalent is

not money, it also implies a superfluity of the produce of some sort of

industry; consequently, by the exchange of superfluities upon certain

articles, a man procures to himself a sufficiency upon every one. This

represents that gentle dependence which unites the members of a free

society.

Does it not follow from this analysis of the question, that the prices

of articles of the first necessity, depend rather upon the occupation

and distribution of the classes of inhabitants, than either upon the

abundance of those necessaries, or of the money to purchase them; since

many examples may be found, where these articles have borne little or no

price, even in countries where money was not wanting. The reason

therefore of low prices, is not the vast abundance of the things to be

sold, but the little occasion any body has to buy them; every one being

provided for them in one way or other, without being obliged to go to

market.

How many familiar examples occur every where of this oeconomy! do we not

find in every country, even when the numbers of the industrious free are

multiplied exceedingly, more than one half of the inhabitants fed

directly from the earth? The whole class of farmers does not go to

market for subsistence. Ask a country gentleman the expence of his

living, he will tell you the sum of money he yearly spends, perhaps the

quantity of his rents in kind, which he consumes in his house, and the

rent of the lands he holds himself in farm; but it will never come into

his head to reckon the value of every chicken, sheep, or bullock, with

which his farm provides him, which he consumes without estimation, and

which in many countries he could not dispose of for any determined

value.

From this I still conclude, that it is only in countries of industry

where the standard prices of articles of the first necessity can be

determined; and since in these, many circumstances concur to render them

either higher or lower than in other countries, it follows, that in

themselves they bear no determined proportion whatsoever, to the

quantity of gold and silver in the country, as I hope presently to make

still more evident.

What is it then which determines the standard value of these articles,

in countries of industry? Here follows, in my humble opinion, the best

answer to this question.

The standard price of subsistence is determined from two considerations.

The first from the number of those who are obliged to buy, that is to

say, of those who have them not of their own, and who are not provided

with them, in lieu of service, by those who have. The second is, from

the degree of employment found for those who are obliged to purchase

them.

The _number_ of the buyers of subsistence, nearly determines the

_quantity_ sold; because it is a necessary article, and must be provided

in a determined proportion for every one: and the more the sale is

frequent, the more the price is determined. Next as to the standard:

this, I apprehend, must depend upon the faculties of the buyers; and

these again must be determined by the extent of those of the greatest

numbers of them; that is to say, by the extent of the faculties of the

lower classes of the people. This is the reason why bread, in the

greatest famine, never can rise above a certain price; for did it exceed

the faculties of the great classes of a people, their demand must be

withdrawn, which would leave the market overstocked for the consumption

of the rich; consequently, such persons, who in times of scarcity are

forced to starve, can only be such whose faculties fall, unfortunately,

below the standard of those of the great class: consequently, in

countries of industry, the price of subsistence never can rise beyond

the powers to purchase of that numerous class who enjoy

physical-necessaries; consequently, never to such an immoderate height

as to starve considerable numbers of the people; a thing which very

commonly happens in countries where industry is little known, where

multitudes depend merely upon the charity of others, and who have no

resource left, so soon as this comes to fail them.

The faculties, therefore, of those who labour for a physical-necessary,

must, in industrious nations, determine the standard value of

subsistence, and the value in money which they receive for their work,

will determine the standard of their faculties, which must rise or fall

according to the proportion of the demand for their labour.

By this exposition of the matter, I do not pretend to have dissipated

every obscurity. The question still remains complex, as the nature of it

requires it should do; and the solution of it depends upon farther

considerations, which now lead me to the examination of the doctrine of

Messrs. de Montesquieu and Hume, concerning the influence of riches upon

the increase of prices. I shall begin by shortly laying this doctrine

before my readers, in three propositions.

_1mo._ The prices (say they) of commodities, are always proportioned to

the plenty of money in the country. So that the augmentation of wealth,

even fictitious, such as paper, affects the state of prices, _in

proportion_ to its quantity.

_2do._ The coin and current money in a country, is the representation of

all the labour and commodities of it. So that _in proportion_ as there

is more or less of this representation, (money) there goes a greater of

less quantity of the thing represented (commodities, &c.) to the same

quantity of it. From this it follows, that

_3tio._ Increase commodities, they become cheaper; increase money, they

rise in their value.

Nothing can be more beautiful than these ideas. They appear at first

sight, sufficiently extensive to comprehend every variation of

circumstances which can happen. Who was the first author of this

doctrine, I cannot say. I find it in Mr. Locke, and in the Spectator for

the 19th of October, 1711; but they have been beautifully illustrated by

Monsr. de Montesquieu; and Mr. Hume has extended the theory, and

diversified it prettily in his political discourse; which have done much

honour to that gentleman, and drawn the approbation of the learned world

so much, that there is hardly a nation in Europe which has not the

pleasure of reading them in their own language.