Upon examining this theory, when I came _An Inquiry into the Principles of Political Oeconomy (Vol. 1 of 2) Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes

calculated to influence, I found I could not make answer to the

principles I had pursued, in the most natural order in which I had been

able to deduce them: and this consideration obliged me, with regret, to

lay it aside, and to follow another, much more complex. I have already

expressed the mortification I have always had upon finding myself forced

to strike out a general rule, and this, of all others, had at first hit

my fancy the most; but I am obliged to confess, that upon a close

examination of the three propositions, I am obliged to range this

ingenious exposition of a most interesting subject, among those general

and superficial maxims which never fail to lead to error.

In order to set the matter in as clear a light as possible, I shall make

a short application of my own principles, relating to the decision of

the main question, the causes of the rise and fall of prices, and

conclude my chapter with some remarks upon the three propositions above

laid down, submitting the whole to the better judgment of my reader.

I have laid it down as a principle, that it is the complicated

operations of demand and competition, which determines the standard

price of every thing. If there be many labourers, and little demand,

work will be cheap. If the increase of riches, therefore, have the

effect of _raising_ demand, work will increase in its value, because

_there_ competition is implied; but if it has only the effect of

_augmenting_ demand, prices will stand as formerly. What then will

become of the additional quantity of coin, or paper money? I answer,

that in both cases it will enter into circulation, in proportion to the

_rise_ or _augmentation_ of demand; with this difference, that in the

first case, it will have the effect of raising prices; because the

supply is not supposed to augment in proportion: in the second, prices

will stand as they were; because the supply is supposed to augment in

proportion. These are the consequences of the augmentation of wealth,

when it has the effect of either _raising_ or _augmenting_ demand. But

if upon this revolution it be found that the state of demand remains

without any variation, then _the additional coin_ will probably be

locked up, or converted into plate; because they who have it, not being

inspired with a desire of increasing their consumption, and far less

with the generous sentiment of giving their money away, their riches

will remain without producing more effect than if they had remained in

the mine. As for the paper money, so soon as it has served the first

purpose of supplying the demand of him who borrowed it, (because he had

at that time no coin) it will return upon the debtor in it, and become

realized; because of the little use found for it in carrying on

circulation.

Let the specie of a country, therefore, be augmented or diminished, in

ever so great a proportion, commodities will still rise and fall

according to the principles of demand and competition, and these will

constantly depend upon the inclinations of those who have _property_ or

any kind of _equivalent_ whatsoever to give; but never upon the quantity

of _coin_ they are possessed of.

Let the quantity of the coin be ever so much increased, it is the desire

of spending it alone, which will raise prices. Let it be diminished ever

so low, while there is real property of any denomination in the country,

and a competition to consume in those who possess it, prices will be

high, by the means of barter, symbolical money, mutual prestations, and

a thousand other inventions. Let me give an example.

Suppose a country where prices are determined, and where the specie is

sufficient for the circulation: is it not plain, that if this country

has a communication with other nations, there must be a proportion

between the prices of many kinds of merchandize, there and elsewhere,

and that the sudden augmentation or diminution of the specie, supposing

it could _of itself_ operate the effects of raising or sinking prices,

would be restrained in its operation by foreign competition? But let us

suppose it cut off from every communication whatsoever, which seems the

only case, where this theory can operate with any appearance of

justness, will any body pretend, that the frugal or extravagant turn of

the inhabitants, will have no influence upon prices, and will it be

asserted, that no variation in the spirit of a people, as to frugality

and dissipation, can take place, except upon a variation in the quantity

of their gold and silver?

It may be answered, that as to articles of superfluity, no doubt the

genius of a people may influence prices, in combination with the

quantity of the specie; but that in articles of indispensible necessity,

they must constantly remain in proportion to the mass of riches. This I

cannot by any means admit to be just. Let me take the example of grain,

which is the most familiar. Is it not plain, from what we have said

above, that the proportion of wealth, found in the hands of the lowest

class of the people, constantly regulates the price of it; consequently,

let the rich be ever so wealthy, the price of subsistence can never rise

above the faculties of the poor. And is it not also plain, that those of

the lowest class of the people, _who purchase subsistence_, must buy it

with the returns they receive from the rich for their industry? Now if

the quantity of the wealth of the latter, does not regulate their demand

for the service of the former, must it not follow, that the price of

grain, as well as of every other thing offered to sale, must depend upon

the degree of competition among the rich for the labour of the poor,

that is, upon the demand for industry, and not on the quantity of wealth

in the country?

No body ever denied, that the extraordinary demand for a commodity had

the effect of raising the price of it: and certainly no body will deny,

that the demand for a particular commodity may be greater at one time

than at another, though the same quantity of that commodity be found at

both times in the country; and the same quantity of specie likewise not

only in the country, but also in circulation.

I acknowledge that in a country where there is much coin, and where

credit is little known, a high and extraordinary demand for an article

of superfluity, may raise the price more than in another where the coin

is more scarce; because on certain occasions, the price of a thing has

no other bounds than the extent of the faculties of the buyer. In like

manner, in other countries where there is almost no coin, nor credit, it

may be impossible for the highest demand to raise the price of such

things even to the common standard established in those where there is

great wealth. But these instances appear to be too particular to serve

for the foundation of a general rule, with respect to the state of

prices in the present situation of the nations of Europe, which, less or

more, are all in communication with one another.

I cannot here omit taking notice of two very remarkable circumstances

which we learn from undoubted historical authority, which seem to

contradict one another, and to throw a great obscurity upon the

principles I have been endeavouring to explain. I shall therefore

introduce them by way of illustration, and when they are examined, I

hope they will confirm my doctrine.

The first is, that in Scotland, formerly, when coin and credit were

certainly very rare, the price of eight pounds weight of oat meal, which

is now commonly sold at eight pence sterling, was then valued at no more

than two thirds of one penny: and that a labouring man used to receive

one penny and one third of a penny sterling for his week’s subsistence;

that is to say, the value of sixteen pounds of oatmeal, which to this

day is the regulated quantity given for that purpose.

There is a very curious confirmation of the authenticity of this

computation, in an hospital at old Aberdeen; where in former times, some

proprietors of lands had settled a certain quantity of oat meal in

favours of the poor of the hospital, with a liberty to the hospital to

accept the meal in kind, or the conversion at two thirds of a penny for

every eight pounds weight. They imprudently chose the last, and to this

very day they are paid according to this standard. Now it is certainly

impossible that any degree of plenty whatsoever, or any failing of

demand, could at present reduce the price of that commodity so very low;

consequently, it may be said that it is the augmentation of wealth, not

that of demand which raises prices.

The second fact we learn from antiquity, that at the time when Greece

and Rome abounded in wealth, when every rarity, and the work of the

choicest artists was carried to an excessive price, an ox was bought for

a mere trifle, and grain was cheaper perhaps than ever it was in

Scotland.

If the application of our principles to the circumstances of those

times, produce a solution of these apparent inconsistencies; and if we

thereby can discover that the low prices of grain, both in Scotland,

where there was little money, and at Rome where there was a great deal,

was entirely owing to the little demand for articles of subsistence;

will it not follow, that our principle is just, and that the other,

notwithstanding of the ingenuity of the thought, must fail in exactness;

since it will appear, that low prices may be equally compatible with

wealth, and with poverty.

Now as to Scotland in former times, as in all countries where there is

little industry; where the inhabitants are mostly fed directly from the

earth, without any alienation of her fruits taking place; where

agriculture is exercised purely as a method of subsisting; where rents

are low, and where, consequently, the free hands, who live upon them for

the price of their industry, must be few; the demand for grain in the

public markets must be very small; consequently, prices will be very

low, whether there be little, or whether there be much money in the

country. The reason is plain. The demand is proportioned here, not to

the number of those who consume, but of those who buy: now those who

consume, are all the inhabitants, but those who buy, are only the few

industrious who are free, and who gain an independent livelihood by

their own labour and ingenuity: now the price of their week’s

subsistence was one penny one third, consequently the subsistence they

bought could not rise above this standard.

Next as to the state of Greece and Rome, where slavery was established.

Those who were fed by the labour of their own slaves, by those of the

state, or by the grain gratuitously distributed to the people, had no

occasion to go to market; consequently, they did not enter into

competition with the buyers. Farther, the simplicity of manners, and the

few manufactures then known, made wants in general less extensive;

consequently, the number of the industrious free was small, and _they_

were the only persons who _could_ have occasion to purchase food and

necessaries; consequently, the competition of the buyers must have been

small in proportion, and prices low.

Add to this, the reflections which naturally present themselves upon

examining the nature of providing the markets. These were supplied

partly from the surplus produced upon the lands of the great men,

laboured by slaves; who being fed from the lands, the surplus cost in a

manner nothing to the proprietors; and as the number of those who had

occasion to buy, were very few, this surplus was sold cheap. Besides,

the grain distributed to the people gratis, must necessarily have kept

down the market, as a part of it would naturally, sometimes, be found

superfluous to those who received it; and consequently, come to be sold

in competition with that raised at private expence.

But when a fine mullet was brought to market, or when an artist appeared

with a curious piece of work, the case was very different. There was

plenty of money in the country, in the hands of the rich, who all

appeared in competition for the preference; consequently, prices rose to

an extravagant height. The luxury of those times, though excessive, was

confined to a few, and as money, in general, circulated but slowly

through the hands of the multitude, it was constantly stagnating in

those of the rich, who found no measure, but their own caprice, in

regulating the prices of what they wished to possess, and had money to

purchase.

From what has been said, it appears, that the riches of a country has no

determined influence upon prices; although, I allow, they may

accidentally affect them: and if we depart from the principles above

laid down, to wit, that prices are regulated by the complicated

operation of demand and competition, in order, to follow the other, we

must add a restriction (which I observe Mr. Hume has attended to on one

occasion, although he has lost sight of it on several others) to wit,

_that the price of every commodity is in proportion to the sum of money

circulating in the market for that commodity_; which is _almost_ my

proposition in other words: for the money to be employed in the purchase

of any commodity, is just the measure of the demand. But even here, the

money in the market _destined_ only for the purchase of a particular

commodity, does not regulate the price of it. Nothing but the finishing

of the transaction, that is, the convention between the buyer and

seller, can determine the price, and this must depend upon inclination,

not weight of money, as an example will make plain.

I shall suppose grain to have been at forty shillings _per_ quarter, in

a country market, for several months together, where the ordinary demand

for the current consumption is twenty quarters every market day. If at

any time an extraordinary demand should happen, which may exceed all

that is to be found in the market, there will be a competition among the

buyers, which will have the effect of raising the market. Now, according

to the doctrine of our learned authors, it may be said, that the corn

rises in proportion to the quantity of the specie which is in the

market, and that it is because of this increase of specie, that the

grain rises in its price. I answer, first, allowing this to be true, can

it be said, that a particular temporary, or perhaps accidental demand

for a few quarters of corn, more than usual, implies any augmentation of

the quantity of money in the country, or indeed the smallest variation

either upon the total consumption, or quantity of grain contained in it?

For if the demand has risen in one market, it must probably have

diminished in another, as the same inhabitants cannot consume in two

places. This I think every person must be convinced of, without farther

illustration. But I say farther, that prices will not rise in proportion

to the money in the market; but in proportion to the desire of acquiring

grain in those who have that money.

Suppose the whole quantity of grain in the market to be thirty quarters;

if there be no demand for more, these will be sold at forty shillings,

as the twenty quarters would have been. But suppose the demand to be for

sixty quarters, and that there is a hundred and twenty pounds sterling

ready to be employed for corn, does it follow, that grain will rise to

four pounds a quarter, because the money in the market bears this

proportion to the quantity of grain? Certainly not.

We must therefore, I think, adopt the other principle, and follow the

proportions of demand and competition; and then we shall find, that if

the sellers want to raise their price up to the proportion of the

specie, all demand will cease, as effectually as if it had never been

made; and the sellers will afterwards be obliged to accept of such a

moderate augmentation as shall be in proportion _to the urgency of the

demand_, but never in proportion _to the money_ ready to be employed.

The circulation of every country, as we have shewn above, must ever be

_in proportion to the industry of the inhabitants, producing the

commodities which come to market_: whatever part of these commodities is

consumed by the very people who produce them, enters not into

circulation, nor does it in anywise affect prices. If the coin of a

country, therefore, falls below the _proportion_[M] of the produce of

industry _offered to sale_, industry itself will come to a stop; or

inventions, such as symbolical money, will be fallen upon to provide an

equivalent for it. But if the specie be found above the proportion of

the industry, it will have no effect in raising prices, nor will it

enter into circulation: it will be hoarded up in treasures, where it

must wait not only the call of a desire in the proprietors to consume,

but of the industrious to satisfy this call.

Footnote M:

Let it be observed, that _proportion_, here, does not mean _value_.

We may therefore conclude, in consequence of the principles we have laid

down, that whatever be the quantity of money in any nation, in

correspondence with the rest of the world, there never can remain, _in

circulation_, but a quantity nearly proportional to the consumption of

the rich, and to the labour and industry of the poor inhabitants. The

value of each particular species of which consumption is determined by a

complication of circumstances at home and abroad; consequently, the

proportion is not determined by the _quantity_ of money actually in the

country.

If the contrary is maintained, and if it be affirmed that the proportion

between specie and manufactures is reciprocal and determined, then I am

authorised to draw this conclusion, to wit: That if the _greatest_

produce of industry _must_ be sold for _what specie_ is found in the

country, _let the sum be ever so small_, so in like manner, the

_smallest_ produce of industry _must_ be sold for _all the specie_ found

in the country, _let the sum be ever so great_. Consequently, in the

first case, we must suppose, that the industrious will never seek for a

better price from abroad; and in the second, that the monied people

_must_ spend all they have in supplying their most moderate wants, and

never seek for cheaper merchandize than what they can find at home.

Consequently, there can be no foreign trade, nor can there ever be any

hoarding.

I shall now conclude my chapter, with a few observations upon the three

propositions as they stand in their order.

PROP. 1. Prices are in proportion to the plenty of money. And thus the

augmenting even of fictitious wealth, such as paper, affects the state

of prices, according to its quantity.

From this Mr. Hume disapproves of the introduction of paper money, when

specie is wanting, and says, that if nothing were allowed to circulate

but gold and silver, the quantity being less, prices would be lower.

This is neither more or less, in my humble opinion, than a project to

destroy credit, with a view to support trade and industry. Because it

would effectually prevent any person from making a consumption, except

at the time he happened to be provided with ready money. Does the paper

money in England, keep up the prices of grain at present, January 1759?

And will not every article of necessaries fall, in a short time, as low

in that country as in any other in Europe, if the same measures continue

to be followed?

Were all paper money in that kingdom proscribed at once, no doubt the

prices of many things would fall very considerably; but such a fall

would neither be universal or equable. The reason of this fall would not

be, because the specie would become proportionally divided among all the

inhabitants, according to the value of their property; nor because of

the small quantity of it, since prices abroad would still regulate many

at home: but because of the sudden revolution, and the violent overturn

thereby produced on the balance of work and demand. The scale of the

first would preponderate to such a degree, that those classes of the

industrious, who work for daily subsistence in furnishing superfluities,

would enter into so strong a competition with one another, that their

work would fall to nothing, while subsistence would remain at the price

of exportation. If it be asked what could occasion this difference. I

answer, because the workmen who supply superfluities, adapted to the

state of their nation, would find no more demand for them, from the want

of credit, or of a circulating fund to buy with, and strangers would not

profit of the fall in the price of a superfluity not adapted to their

own taste; but they would very willingly become purchasers of every

bushel of grain become superfluous, by starving so many of the

inhabitants; and this would keep the price of subsistence upon a pretty

even level with that of other countries.

But if we suppose all communication cut off with strangers, would this

proportion between money and prices then hold true? By no means. Here is

the reason: there are many ways of alienating goods or natural produce,

without the assistance of specie. Immense quantities of both may be

consumed by barter, or in lieu of service, where money is never heard

of: now all this portion alienated, enters into the mass of what is

called produce and manufactures which come to market; but can have no

influence upon the specie, nor can specie have any upon it, since the

money remains inactive during those operations.

Another reason is, that there is no such thing as preserving specie in

an equal repartition, so as to serve the occasions of every body in

proportion to their worth. The reason is manifest: money, like every

other thing, will come into the hands of those who give the greatest

value for it, and when the quantity of it is small in any country, where

nothing can be procured without it, such proprietors of lands as have

the greatest desire to consume, will purchase the specie at a higher

interest, or with more of their lands than others.

This alone is sufficient to prove that the repartition of specie can

never be in proportion to property; and this also destroys the

supposition of prices rising and falling, according to the proportion of

it, even in a country cut off from every foreign communication. Here is

the proof: any individual who has, by mortgaging his lands, got together

a large proportion of the specie of his country, will raise prices in

his neighbourhood, by making an extraordinary demand for work; and the

rest of the same country, drained of their circulating value, must

diminish their demand; consequently, prices will fall elsewhere. I now

come to the second proposition.

The coin and current money of a country, is the _representation_ of all

its labour and commodities; so that in proportion as there is more or

less of this _representation_, a greater or less quantity of it will go

for the same quantity of the thing represented.

To this _representation_ I cannot agree, and I apprehend it to be the

source of error. A proper equivalent for labour and manufactures, may,

in one sense, be called a _representation_; but there is no necessity

for this equivalent to consist in coin. Are not meat and clothes an

equivalent for personal service? Is not a free house and a bit of land,

a very good equivalent for all the manufactures a country weaver can

work up for me who am his landlord? If there were not one penny of coin

in a country, would it follow, that there could be no alienation, or

that every thing might there be got for nothing?

Coin has an intrinsic value; and when it comes into a country, it adds

to the value of the country, as if a portion of territory were added to

it: but it has no title to represent any thing vendible, by preference,

or to be considered as the only equivalent for all things alienable. It

is made a common price, on no other account than because of its rarity,

its solidity, its being of a nature to circulate, and to suffer a

correct division without end, and to carry its value along with it,

which is a proper equivalent for every thing; and at the same time it is

by its nature little liable to vary.

Were, indeed, a statesman to perform the operation of circulation and

commerce, by calling in, from time to time, all the proprietors of

specie in one body, and all those of alienable commodities, workmen, &c.

in another; and were he, after informing himself of the respective

quantities of each, to establish a general tariff of prices, according

to our author’s rule; this idea of _representation_ might easily be

admitted; because the parcels of manufactures would then seem to be

adapted to the pieces of the specie, as the rations of forage for the

horses of an army are made larger or smaller, according as the magazines

are well or ill provided at the time: but has this any resemblance to

the operations of commerce?

The idea of coin being the _representation_ of all the industry and

manufactures of a country, is pretty; and has been invented for the sake

of making a general rule for operating an easy distribution of things

extremely complex in their nature. From this comes error. We substitute

a complex term, sometimes in one sense, and sometimes in another, and we

draw conclusions as if it expressed a fixed and determined idea.

If in algebra, _x_, _y_, _z_, &c. ever stood for more than a single

idea, the science would become useless; but as they never represent but

the very same notion, they never change their nature through all manner

of transpositions.

It is not the same of terms in any other science, as abundantly appears

from the question now before us: coin is called a _representation_,

because it is an equivalent; and because it is a _representation_, it

must bear an exact proportion to the thing represented. And since in

some particular examples, this representation _appears_ to hold;

therefore the rule is made general, although circumstances may be

different. If, for example, a merchant, or a private person, has upon

hand a thousand pounds worth of grain, no doubt that the thousandth part

of the merchandize is worth the thousandth part of the sum; because both

are determined in their quantity and quality: but the parcels of this

corn, though exactly proportioned to the price of the whole, do not draw

their value from this proportion, but from the total value of the whole

mass; which is determined from the complicated operations of demand and

competition, as has been said, and not from the specie of the country,

which can bear no proportion either to the quantity or quality of the

grain.

There may be vast quantities of coin in a country of little industry;

and, _vice versa_, coin is constantly an _equivalent_, but never a

_representation_, more than any other equivalent which may be contrived.

Were the doctrine of this second proposition true, every commodity in a

country should be sold like a parcel of the grain in the foregoing

example, by the rule of three; as the property of all the labour and

manufactures of the country is to the part I intend to alienate, so is

all the gold and silver in the country to the part I am entitled to

receive. This way of regulating prices may be very ingenious, but it is

not very common. I now proceed to the third and last proposition.

Increase the commodities, they become cheaper: increase the money, they

rise in their value.

This proposition is much too general: the first part of it is commonly

true, the last part is more commonly false.

What can increase commodities, but a demand for them? If the demand be

equal to the augmentation, there will be no alteration in the price.

Let extraordinary plenty increase subsistence, it will naturally fall in

the price; but it may be hoarded up, and made to rise in spite of the

plenty; it may be demanded from abroad; this also will make it rise.

Let the production of superfluities, not exportable, be produced by

workmen whose branch is overstocked, prices will undoubtedly fall.

The same observations are true of a diminution in the quantity of

commodities. If this diminishes by degrees, from a diminution of demand,

the price of them will not rise.

If the quantity of subsistence falls below the necessary consumption of

the inhabitants, prices will undoubtedly rise.

If the articles of superfluity are diminished, prices will only rise in

proportion to the eagerness to buy, that is, to the competition, not to

the deficiency. On the other hand, as to coin or money,

Increase the money, nothing can be concluded as to prices, because it is

not certain, that people will increase their expences in proportion to

their wealth; and although they should, the moment their additional

demand has the effect of producing a sufficient supply, prices will

return to the old standard.

But diminish the quantity of specie _employed in circulation_, you both

retard this, and hurt the industrious; because we suppose the former

quantity exactly sufficient to preserve both in the just proportion to

the desires and wants of the inhabitants.

These are but a few of the numberless modifications necessary to be

applied to this general rule; and I hope what I have said, will justify

the observation I have made on the whole doctrine; to wit, that it is

much more specious than solid, in every one of its three branches.

Let me just propose one question more upon this subject, and then I

shall conclude.

Suppose the specie of Europe to continue increasing in quantity every

year, until it amounts to ten times the present quantity, would prices

rise in proportion?

I answer, that such an augmentation might happen, without the smallest

alteration upon prices, or that it might occasion a very great one,

according to circumstances. If industry increases to ten times what it

is at present, that is to say, were the produce of it increased to ten

times its present value, according to the actual standard of prices, the

value of every manufacture and produce might remain without alteration.

This supposition is possible; because no man can tell to what extent

demand may carry industry. If, on the other hand, the scale of demand

could be supposed to preponderate, so as to draw all the wealth into

circulation, without having the effect of augmenting the supply (which I

take to be impossible) then prices would rise to ten times the present

standard, at least in many articles.

This solution is entirely consistent both with Mr. Hume’s principle and

mine; because nothing is so easy in an hypothesis, as to establish

proportions between things, which in themselves are beyond all the

powers of computation.

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

CHAP. XXIX.

_Circulation with foreign Nations, the same thing as the Balance of

Trade._

We have endeavoured to shew in a former chapter, how the circulation of

money, given in exchange for consumable commodities, produces a

vibration in the balance of domestic wealth: we are now to apply the

same principles to the circulation of foreign trade; in order to find

out, if there can really be such a thing as a balance upon it, which may

enrich one country, and impoverish another.

It has been said, that when money is given for a consumable commodity,

the person who gets it acquires a balance in his favour, so soon as he

with whom he has exchanged, has begun to consume.

That if two consumable commodities are exchanged, the balance comes to a

level, when both are consumed. That it is only the wealth which is found

in circulation, which can change its balance, and the remainder must be

found locked up, made into plate, or employed in foreign trade. And it

has been observed, that the quantity of money found in circulation, is

ever in proportion to the sale of the produce of industry and

manufactures; and that when the quantity of metals is not sufficient to

carry on a circulation, proportioned to the demands of those who have

any real equivalent to give, that symbolical money may be made to fill

up the void, when the interest of the state comes to require it.

We have also laid it down as a kind of general rule, that while luxury

only tends to keep up demand to the reasonable proportion of power and

inclination in the industrious part of a people to supply it, that then

it is advantageous to a nation; and that so soon as it begins to make

the scale of home-demand preponderate, by forming a competition among

the natives, to consume what strangers seek for, that then it is

hurtful, and has an evident tendency to root out foreign trade. These

principles are all analogous to one another, and should be retained

while we examine the question before us.

I must still add, that the fluctuation of the balance of wealth is

constantly inclining in favour of the industrious, and against the idle

consumer. This however admits of a restriction, viz. The industrious

must be supposed to be frugal; and the idle, extravagant. For if the

industrious man consumes the produce of his industry, he will only have

laboured to increase his consumption, not his wealth: and if the idle

person, by his frugality, keeps within the bounds of his yearly income,

he will thereby repair every disadvantage incurred by his sloth, the

balance then will stand even between them; the industry in one scale,

and the fund already provided in the other, will keep both parties on a

level as before.

In order, therefore, to make the balance of domestic wealth turn in

favour of a poor man, he must be both industrious and frugal.

Now let us apply these principles to a whole nation, considered as an

individual in the great society of mankind. A private person who

conducts his affairs with prudence, must either be in a way of growing

richer by his industry, or of spending his income with oeconomy and

discretion: so I must suppose a nation which is well governed, either to

be growing rich by foreign trade, or at least in a state of not becoming

poorer by it.

It is the duty of every statesman to watch over the conduct of those who

hold the foreign correspondence, as it is the duty of the master of a

family to watch over those he sends to market.

I find it is the opinion of the learned Mr. Hume, that there is no such

thing as a balance of trade, that money over all the world is like a

fluid, which must ever be upon a level, and that so soon as in any

nation that level is destroyed by any accident, while the nation

preserves the number of its inhabitants, and its industry, the wealth

must return to a level as before.

To prove this, he supposes four fifths of all the money in Great Britain

annihilated in one night, the consequence of which he imagines would be,

that all labour and commodities would sink in their price, and that

foreign markets would be thereby entirely supplied by that industrious

people, who would immediately begin to draw back such a proportion of

wealth, as would put them again upon a level with their neighbours.

This reasoning is consistent with the principles we have examined, and

humbly rejected in the preceding chapter; both stand upon the same

foundation, and lead to a chain of consequences totally different from

the whole plan of this inquiry.

My intention is not so much to refute the opinions of others, as briefly

to pass them in review. General propositions, such as those we have been

treating of, are only true or false, according as they are understood to

be accompanied with certain restrictions, applications, and limitations:

I shall therefore say nothing as to the proposition itself, but only

examine how far the example he has taken of the sudden annihilation of a

great proportion of a nation’s wealth, can naturally be followed by the

consequences he supposes.

For this purpose, let me suggest another consequence (different from

that of the author, and flowing from the doctrine we have established)

which possibly might happen, upon the annihilation of four fifths of all

the money in Great Britain. I shall take no notice of the effects which

so sudden a revolution might occasion; these have not been attended to

by the author, and therefore I shall consider them as out of the

question. I suppose the event to have happened, prices to have been

reduced, and every immediate inconvenience to have been prevented. My

only inquiry shall be directed towards the unavoidable consequences of

such a revolution, as to foreign trade, as to drawing back the money

annihilated, and as to the preserving the same number of inhabitants,

and the same degree of industry as before. If I can shew, that the event

alone of annihilating the specie, and reducing prices in proportion,

(which I shall allow to be the consequence of it) will have the effect

of annihilating both industry and the industrious, it cannot afterwards

be insisted on, that the revolution can have the effect of drawing back

a proportional part of the general wealth of Europe: because the

preservation of the industrious is considered as the requisite for this

purpose.

Here then is the consequence, which, in my humble opinion, would very

probably happen upon so extraordinary an emergency; and I flatter myself

that my reader has already anticipated my decision.

The inhabitants of Great Britain, who, upon such an occasion, would be

found in possession of all the exportable necessaries of life, and of

many other kinds of goods demanded in foreign markets, instead of

selling them to their poor countrymen, for a price proportioned to our

author’s tariff, and to the diminution of the specie, which he takes to

be the representation of them, would export them to France, to Holland,

or to any other country where they could get the best price, and the

inhabitants of Britain would starve.

If it be replied, that the exportation would not be allowed. I answer,

that such a prohibition would be highly seasonable; but quite contrary

to the principle of laying trade open, and impossible to be effectual,

as that author justly observes, when he says, “Can one imagine, that all

commodities could be sold in France, for a tenth of the price they would

yield on the other side of the Pyrenees, without finding their way

thither, and drawing from that immense treasure?” Suppose this phrase to

run thus. Can any one imagine, that provisions could be sold in Britain,

for a fourth part of the price they would yield on the other side of the

water, without finding their way thither, and drawing from that immense

treasure? This is entirely consistent with our principles, and ruins the

whole of Mr. Hume’s former supposition: because the exportation of them

would annihilate the inhabitants.

From this I conclude, that a nation, though industrious and populous,

may reduce itself to poverty in the midst of wealthy neighbours, as a

private person, though rich, may reduce himself to want, in the midst of

the amusements and luxury of London or of Paris. And that both the one

and the other, by following a different conduct, may amass great sums of

wealth, far above the proportion of it among their neighbours.

This is not a matter of long discussion. It is not by the importation of

foreign commodities, and by the exportation of gold and silver, that a

nation becomes poor; it is by consuming those commodities when imported.

The moment the consumption begins, the balance turns; consequently, it

is evidently against the principles which we now examine, either to sell

at home, or destroy confiscated goods. The only way of repairing the

damage done by such frauds, is to export the merchandize, and by selling

them cheap in other countries, to hurt the trade of the country which

first had furnished them. From this also we may conclude, that those

nations which trade to India, by sending out gold and silver, for a

return in superfluities of the most consumable nature, the consumption

of which they prohibit at home, do not in effect spend their own specie,

but that of their neighbours who purchase the returns of it for their

own consumption. Consequently, a nation may become immensely rich by the

constant exportation of her specie, and importation of all sorts of

consumable commodities. But she would do well to beware of this trade,

when her inhabitants have taken a luxurious turn, lest she should come

to resemble the drunkard who commenced wine merchant, in order to make

excellent chear in wine with all his friends who came to see him; or the

millener, who took it into her head to wear the fine laces she used to

make up for her customers.

If a rich nation, where luxury is carried to the highest pitch, where a

desire of gain serves as a spur to industry, where all the poor are at

work, in order to turn the balance of domestic wealth in their favour,

if such a nation, I say, is found to consume not only the whole work of

the inhabitants, but even that of other countries, it must have a

balance of trade against it, equivalent to the foreign consumption; and

this must be paid for in specie, or in an annual interest, to the

diminution of the former capital. Let this trade continue long, they

will not only come at the end of their metals, but they may even succeed

in exporting their lands. This last appears a paradox, and yet it is no

uncommon thing. The Corsicans have exported, that is sold, the best part

of their island to Genoa; and now, after having spent the price in

wearing damask and velvet, they want to bring it back, by confiscating

the property of the Genoese, who have both paid for the island, and

drawn back the price of it by the balance of their trade against these

islanders. It were to be wished that Corsica alone afforded an example

of this kind.

Is it not, therefore, the duty of a statesman to prevent the consumption

of foreign produce? If tapestry or other elegant furniture, such as is

seen in a certain great capital in Europe, were allowed to be imported

into a neighbouring nation, who doubts but this article would carry

money out of that nation?

It may be answered, that as much elegance of another kind may be sent in

return. True; and it would be very lucky if this could be the case; but

then you must suppose an equality of elegance in both countries, and

farther, you must suppose a reciprocal taste for the respective species

of elegance. Now the taste of one country may, indeed, be common to

both; but it may happen that the taste of the one may not be that of the

other, though nothing inferior, perhaps, in the opinion of a third

party. And the difference may proceed from this; that the young people

of one country travel into the other, where the inhabitants stay at

home: a circumstance which would prove very prejudicial to the country

of the travellers, if a wise statesman did not, by seasonable

prohibitions upon certain articles of foreign consumption, prevent the

bad consequences of adopting a taste for what his subjects cannot

produce.

This furnishes a hint, that it might not be a bad maxim in a great

monarchy, to have houses built in the capital for every foreign

minister, where the general distribution of the apartments of each might

be, as much as possible, analogous to the taste of the country for whose

minister it is calculated: but as to the furniture, to have it made of

the most elegant domestic manufactures easily exportable, nicely adapted

also to the uses and fashions of every foreign country. Such a

regulation could never fail of being highly acceptable, as it would

prove a great saving to foreign ministers, and would insensibly give

them a taste for the manufactures and luxury of the country they reside

in. On the other hand, I would be so far from expecting a return of this

civility, that I would recommend a set of furniture, as a gratification,

to every minister sent abroad, who should regularly sell it off upon the

expiration of his commission. Such an expence would not cost one penny

to the nation, and would be a means of captivating unwary strangers, who

might be thereby made to pay dearly for such marks of politeness and

civility. I return.

Without being expert in the computation of exports and imports, or very

accurate in combining the different courses of exchange between the

different cities of Europe, a statesman may lay it down as a maxim, that

whatever foreign commodity, of whatsoever kind it be, is found to be

consumed within the nation he governs, so far the balance of trade is

against her; and that so far as any commodity produced either by the

soil, or labour of the inhabitants, is consumed by foreigners, so far

the balance is for her.

A nation may in some measure be compared to a country gentleman, who

lives upon his land. This I suppose to be his all. From it he draws

directly his nourishment, perhaps his clothes are worked up in his

family. If he be so very frugal as never to go to market for any thing,

any spare produce which he can sell, is clear money in his purse. If he

indulges now and then in a bottle of wine, which his farm does not

produce, he must go to market with his purse in his hand; and so soon as

his bottle is out, I think he is effectually so much poorer than he was

before. If he goes on, and increases his consumption of such things as

he is obliged to buy, he will run out the money he had in his purse, and

be reduced to the simple production of his farm. If then this country

gentleman be poorer, certainly some body is richer; and as it is no body

in his family, it must be some of his neighbours.

Just so a nation which has no occasion to have recourse to foreign

markets, in order to supply her own consumption, must certainly grow

rich in proportion to her exportation.

These riches again will not circulate at home, in proportion to the

domestic consumption of natural produce and manufactures, but in

proportion to the alienation of them for money: the surpluswealth will

stagnate in one way or other, in the hands of the money gatherers, who

are the small consumers.

While there is found a sufficient quantity of money for carrying on

reciprocal alienations; those money gatherers will not be able to employ

their stagnated wealth within the nation; but so soon as this gathering

has the effect of diminishing the specie, below the proportion found

necessary to carry on the circulation, it will begin to be lent out, and

so return to circulate for a time, until by the operation of the same

causes it will fall back into its former repositories.

Should it be here objected, that upon the augmentation of a nation’s

riches, no money can stagnate; because _prices rising in proportion to

the augmentation of them_, all the additional wealth must be thrown into

circulation: surely both reason and experience must point out the

weakness of such an objection.

While a favourable balance, therefore, is preserved upon foreign trade,

a nation grows richer daily; and still prices remain regulated as

before, by the complicated operations of demand and competition; and

when one nation is grown richer, others must be growing poorer: this is

an example of a favourable balance of trade.

When this superfluity of riches is only profited of by the luxurious

individuals, instead of being turned to profit by the state itself, with

a view to secure the advantages thereby acquired, then the balance takes

a contrary turn: this is the case whenever foreign importations for

consumption, are either permitted as a gratification to the luxurious

desires of the wealthy, or because of the rise in the price of goods at

home, in consequence of domestic competition. If it be permitted purely

in favour of the first, it marks a levity and want of attention unworthy

of a statesman: if on account of the second, it shews either an

ignorance of the real consequences of so temporary an expedient, or a

disregard for the welfare of the lower classes of the people.

Every augmentation of prices at home, must be a necessary consequence of

many domestic circumstances, and must be removed by correcting them, as

has been, I think, made clear. But let it be supposed, that from the

augmentation of wealth _alone_, manufactures can no more produce work so

cheap as other nations; I think that both in humanity and prudence, a

people should submit to the inconvenience of paying dearer. In humanity,

because by the introduction of foreign manufactures, you starve those

very people, who by their labour have enriched you: in prudence, because

by opening your ports to such importation you deliberately throw away

that superiority of riches you have been at so much pains to acquire.

I freely grant, that particular people do not regulate either their

expence or their schemes of getting money, with a view to promote the

public good. One who has a coat to buy, will be very glad to find a

piece of foreign manufacture at a cheap rate; another will wish to

smuggle a piece of goods on which there is a high duty. But the question

is, whether a statesman is to allow this foreign consumption? I think it

is much the same question, as if it were asked, whether the master of a

family should, in good oeconomy, allow his servants to invite their

friends to drink in his cellar, instead of carrying them to a public

house.

But suppose it said, that “by laying trade open, you are sure that

wealth will naturally come to a balance, in all countries, and that all

fears of a wrong balance of trade are only the effect of a gloomy

imagination.” See Mr. Hume’s _Political Discourses_, Sect. v.

Several answers may be made to this objection. The first, that it is in

order to prevent this kind of balance, that every nation gives

themselves disquiet: for by balance here, is understood an equality of

wealth; and it is rich nations only who are anxious, lest they should be

brought to such an equality. In the question here before us, it is the

loss of the superiority which is understood by a balance turning against

a nation. If, therefore, it be the interest of a nation, poor in respect

of its neighbours, to have trade laid open, that wealth may, like a

fluid, come to an equilibrium; I am sure it is the interest of a rich

nation, to cut off the communication of hurtful trade, by such

impediments as restrictions, duties, and prohibitions, upon importation;

that thereby, as by dykes, its wealth may be kept _above_ the level of

the surrounding element.

Another answer is, that laying trade open would not have the effect

proposed; because it would destroy industry in some countries, at least,

if not every where. A manufacture must be very solidly established

indeed, not to suffer any prejudice by a permission to import the like

commodities from other countries. The very nature of luxury is such,

that it prompts people often to consume, from caprice and novelty, what

is really inferior to home-production. It may be answered, that this

argument cuts two ways: for if a nation from caprice consumes foreign

commodities, why may not other nations from caprice likewise, take off

those which are left on hand? This reasoning may appear good, in a

theory which does not take in every political consideration. But a poor

manufacturer who cannot find work, because the branch he works in is

supplied from abroad, cannot live till the caprice of foreigners makes

them demand his labour. If a certain number of inhabitants be employed

in a necessary branch of consumption, there must be a _certain_ demand

preserved for it; and whatever can render this precarious, will ruin the

undertaking, and those employed in it.

A third answer is, that any nation who would open its ports to all

manner of foreign importation, without being assured of a reciprocal

permission from all its neighbours, would, I think, very soon be ruined;

and if this be true, it is a proof that a balance of trade is a possible

supposition, and that proper restrictions upon importation may turn to

the advantage of a state.

In order to promote industry, a statesman must act, as well as permit

and protect. Could ever the woollen manufacture have been introduced

into France, from the consideration of the great advantage England had

drawn from it, if the King had not undertaken the support of it, by

granting many privileges to the undertakers, and by laying strict

prohibitions on all foreign cloths? Is there any other way of

establishing a new manufacture any where?

Laying, therefore, trade quite open would have this effect, it would

destroy at first, at least, all the luxurious arts; consequently, it

would diminish consumption; consequently, diminish the quantity of

circulating cash; consequently, it would promote hoarding; and

consequently, would bring on poverty in all the _states_ of Europe.

Nothing, I imagine, but an universal monarchy, governed by the same

laws, and administred according to one plan well concerted, can be

compatible with an universally open trade. While there are different

states, there must be different interests; and when no one statesman is

found at the head of these interests, there can be no such thing as a

common good; and when there is no common good, every interest must be

considered separately. But as this scheme of laying trade quite open, is

not a thing likely to happen, we may save ourselves the trouble of

inquiring more particularly into what might be its consequences; it is

enough to observe, that they must, in their nature, be exceedingly

complex, and if we have mentioned some of them, it has only been to

apply principles, and shew how consequences _may_ follow one another: to

foretel what _must_ follow is exceedingly difficult, if not impossible.

In discoursing of the balance of trade, I have hitherto considered it

only so far as the specie of a country is augmented by it. In the

subsequent book, when we shall have occasion to bring this subject once

more upon the carpet, I shall shew how a balance may be extremely

favourable without augmenting the mass of the precious metals; to wit,

by providing subsistence for an additional number of inhabitants; by

increasing the quantity of shipping, which is an article of wealth; by

constituting all other nations debtors to it; by the importation of many

durable commodities, which may be considered also as articles of wealth;

as a well furnished house, a well stored cellar, an ample wardrobe, and

a fine stable of horses, are articles which enhance the value of the

inheritance of a landed man.

Then we shall have occasion to shew how industry heightens the permanent

value of a nation, as agriculture increases its annual produce.

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

CHAP. XXX.

_Miscellaneous Questions and Observations relative to Trade and

Industry._

It is now time to draw to a conclusion of this book. The subject of

trade and industry is inexhaustible, if considered in all its branches,

and traced through every consequence. My intention has been to inquire

into the original principles which influence general operations, and

which, less or more, enter into every combination. I have represented

trade in its infancy, manhood, and old age; and have endeavoured to

prescribe a general regimen of health for every period. It is sufficient

to be thoroughly master of the principles, to be able to apply them to

particular cases, providing every circumstance be exactly known.

The intention of this chapter, is, to review some parts of our subject,

which I think have not received all the light necessary to be thrown

upon them, to suggest some remarkable differences between antient and

modern oeconomy, with regard to circulation and industry; and, in

general, to lay certain circumstances together, which may point out the

spirit of modern times, from which we are endeavouring to extract a set

of consistent principles. Every thing which points out relations is

useful; because we know nothing, but through this channel. Now certain

relations are too frequently taken for granted, and nothing is more

essential in political reasonings, than to point them out clearly, to

proceed by the shortest steps, and still to keep experience and matter

of fact before our eyes, when we draw a conclusion from a general

proposition. Let the conclusion appear ever so just, if, when compared

with experience, a disagreement appears, it is ten to one we have

overlooked some circumstance, which ought to have entred into the

combination.

To illustrate this, let me cite a mistake of my own, which I purposely

left uncorrected, in the second chapter of the first book, where I very

confidently declare, that a statesman, who, upon certain occasions,

which seem favourable for raising great sums upon a people, increases

taxes only in proportion to the interest of the money borrowed, must be

shortsighted and regardless of futurity. This, I remember, appeared to

me at the time I wrote, so clear and evident, that I thought I ran no

risk in making it enter into a preliminary chapter. But when I came to

look a little more particularly into the matter, I found I had been

grosly mistaken; as I hope to shew evidently in its proper place. Had

every such mistake been treated with the same indulgence, I should have

been more employed in the correction of my own blunders, than in the

prosecution of my subject. People who reason with tolerable exactness on

such subjects, generally fall into mistakes, from the generality of

their propositions. These may commonly be true enough, within the

compass of the author’s combinations at the time, and yet may not be

true in every other case. From which I infer, that every one of my

readers, who can form combinations more extensive than mine, will find

sufficient matter for criticism in every page of this inquiry. So much

the better: it is by such criticisms and discussions, that particular

branches of knowledge are brought to the certainty of science.

The more simple any plan of political oeconomy is, the more it is easy

to govern by general rules; the more complex it becomes, the more it is

necessary for a statesman to enter into combinations. But when general

rules have been long established, they gain such an authority over the

minds of a people, that any deviation from them appears like heresy in

religion: and how seldom does it happen, that a people is blessed with a

governor, who has both penetration to discover, art to persuade, and

power to execute a plan adapted to every combination of circumstances.

No change can happen in a state, but what is advantageous to some class

or other, and when the public good requires that a stop should be put to

such advantages, numbers of discontented people will always be found.

Circumstances, therefore, ought to be well weighed before new plans of

administration are entred upon; and when once adopted, those who pretend

to criticise, must suppose themselves provided with superior talents and

better informations as to every circumstance, than the author of the

innovation. For this reason, there is little danger in censuring a

statesman’s opinion, when he delivers it; but a great deal in finding

fault with his conduct, when his motives are not known.

In the former chapters, we have been treating of the nature and

consequences of circulation, the effects of augmentations and

diminutions of specie, and the doctrine of Mr. Hume concerning the

balance of trade. The perspicuity with which this author writes, renders

his ideas easy to conceive; and when people understand one another, most

disputes are soon at an end.

In order, therefore, to throw a little more light upon the nature of the

balance of trade between nations, let me examine the following questions

while we have the subject of the last chapter fresh in our memory.

QUEST. 1. Can any judgment be formed concerning the state of the balance

of trade of a nation, barely from the quantity of specie that is found

in it?

I answer in the negative. A great proportion of all the specie of

Europe, may be found in a country against which the balance of trade has

stood regularly for many years. An inconsiderable proportion of it may

be found in another, which has had it as regularly in its favour for the

same time.

The balance upon every article of trade, may be favourable to a nation

which squanders away more than the returns of it, upon foreign wars.

The balance of every article of trade, may be against a country which

receives more than all the loss incurred, either from her mines, from

countries tributary to her, or who willingly furnish subsidies upon many

political considerations.

Besides these varieties, there are still other combinations, relative to

the specie itself. The money found in a country, may either be said to

belong _absolutely_ to the country, when neither the state itself, or

the particular people of it, are in debt to foreigners; or only so _by

virtue of a loan_. Now, whether it is borrowed or not, the property of

it belongs to the country; but the difference consists in this, that

when it is borrowed, the acquisition of the metals adds nothing to the

national patrimony, that is to say, there is no acquisition of wealth

thereby made; but when it is gained by industry, the money adds to the

real value of the country, in consequence of the principles laid down in

the 26th chapter.

May not a nation then, having very little gold and silver, open a

subscription for millions, at so much _per cent_? Will not strangers

lend to her; when her own subjects cannot? May she not yearly, by paying

away the interest of the money borrowed, and by a heavy balance of trade

against her, be constantly diminishing her specie, and yet by new

contracts, keep up, and even increase the mass of the circulating value,

to such a degree, as to be possessed of a greater proportion of specie

than any of her neighbours? Farther,

Is it not certain, that all nations will endeavour to throw their ready

money, not necessary for their own circulation, into that country where

the interest of money is high with respect to their own, and where

consequently the value of property in land is low; since they may either

draw a high interest from it, or make the acquisition of solid property?

Forbidding therefore the acquisition of solid property to strangers, is,

in effect, a prohibition upon the gratuitous importation of specie. I

allow there may be examples of people who make such purchases, with a

view to draw the rents of the lands bought, out of the country; but

whatever be the intention at the time of purchase, such however is the

effect of an established fortune in a country, that, sooner or later, it

draws the proprietor to it; and when this does not happen, a subsequent

alienation commonly takes place.

Were the purchase, therefore, of lands permitted universally, and were

it established, that property in land, to a certain value, should give a

right to naturalization, no doubt large sums would be brought into those

countries, where lands are found cheapest; and as no exportable

commodity is given in return, the specie of such countries might mark

the quantity of lands sold, as well as that of merchandize exported. For

want of a sufficient extension of these and many other combinations,

which it would be easy to contrive, Mr. Belloni, in his _Dissertation

upon Commerce_, Chap. I. Sect. 5. falls into several mistakes, when he

judges of the exportation of commodities of a particular country, by the

quantities of money found in it.

_Essendo adunque da ciò venuto_ (says he) _che l’abondanza del danaro,

ovunque si ritrovi, significa l’abodanza stessa delle cose, delle quali

egli é misura: perciò diviziosi meritamente sono stati detti quegli

uomini, e ricco altersi quel regno, dove si ritrova gran copia di

danaro. Dal altro canto poi, se si considera lo stato di un regno, ed il

danaro, che è dentro di esso, tenendo sempre salda l’essenza della

moneta (che altro non sia, che misura di cose, e prezzo, che viene in

compenso di mercanzie) ovunque di essa vedrasi affluenza, ognuno ben

vede, doversi subito necessariamente arguire, un gran traffico di quel

dominio, con esito di merci, in uso degli esteri, e all’incontro ovunque

questa venga a mancare, doversene dedurre grande introito di merci, che

sieno subentrate nel luogo della moneta, e che l’abbiano fatta uscire._

These consequences are only just so far as money comes into, or goes out

of a country, as the price of merchandize exported or imported. But how

much money has not this author himself drawn into Rome from England, for

the exportation of nothing but the bills of travellers?

On the other hand, may not a country, which is actually in possession of

great quantities of gold and silver, call in these metals, and

circulate, in their place, a symbolical money? May not a nation then, as

well as a private person, employ this specie in a profitable foreign

trade, and gain daily by it? May she not, after some time, withdraw her

stock, by calling in her debts? And may she not also call in her paper,

and remain with an additional acquisition of specie in her pocket?

Consequently, during the circulation of the paper, no judgment can be

formed as to the balance of her trade, by examining the state of her

specie; because I can suppose that at this time every shilling of it may

be in the hands of strangers. Consequently, the richest nation in Europe

may be the poorest in circulating specie.

“The writings of Mr. Gee (says Mr. Hume, in his _Political Discourse

upon the Balance of Trade_) struck all the nation with a pannic fear, by

shewing from a long enumeration of particulars, that the balance

inclined so much against us, and for so considerable sums, that in the

space of five or six years, there would not remain one shilling in

England. But happily twenty years are elapsed since, we have supported a

long and expensive foreign war, and nevertheless, it is commonly

believed, that money is at present as plentiful in the kingdom as ever.”

I quote from the French translation.

Mr. Gee was in the wrong to conclude, that the balance of trade would

have the effect of carrying off the coin: and Mr. Hume has been misled

by this mistake, to conclude, that Mr. Gee’s calculations were false. I

know nothing as to the matter of fact; nor whether Mr. Gee was a good or

a bad judge of the question he treated; but from what has been said, I

hope it appears, that the state of the coin in England, at the time Mr.

Hume wrote, was no proof on either side.

To judge of the balance of trade is one thing; to judge of the wealth of

a nation as to specie is another. England may greatly increase her

specie by her trade, and greatly diminish it by her wars: perhaps this

may be the fact. She may also, at certain times, have a balance of trade

against her; and great sums laid out in foreign wars, may be the means

of making it return in her favour. Should that nation begin to pay off

her debts to strangers, in ready coin, might she not soon diminish,

perhaps exhaust, the specie she is now possessed of; yet surely none

ever became poorer by paying off their debts. Nothing is so easy as to

have specie, when one has solid property to pledge for it; and nothing

can be worse judged, than to purchase specie from strangers, at the

expence of paying an interest for it, when they can contrive a

circulating value in paper money, representing the solid value which

must have been pledged to strangers for the loan of their metals.

But still it may be asked, how it happens, that notwithstanding of the

most unfavourable balance of trade, no nation is ever found to be

entirely drained of her specie; and since we have proved, that the

specie of a country may be diminished by a disadvantageous trade, what

are the principles which prevent the total dissipation of it?

This is a very curious question, and opens a door to a multitude of new

ideas, which will furnish abundant matter of speculation, when we come

to treat more directly of credit. I shall here examine it in general,

only for the sake of applying the principles we have laid down.

I. It may be said, that as common prudence prevents a private person

from spending to his last shilling; so the like prudence commonly

engages a people to put a stop to trade, before it has had time totally

to drain them. Although most people drink wine, there is no reason why

every body should be drunk.

II. Nothing is so complicated as the balance of trade, considered among

many nations. The general wealth circulates from one to another, as the

money which the farmer gives the landlord circulates back to the farmer.

In the number of hands through which the money passes, some are of the

class of the luxurious, some of the frugal; the first represents those

nations who lose by the balance, the latter those who gain. But the most

industrious nations of all, and those who, considered abstractedly from

extraordinary accidents, appear in the way to swallow up the wealth of

the rest, are, by the means of such accidents, made liable to terrible

restitutions. How many millions, for example, has England restored to

the continent, in consequence of her wars and subsidies? She then lays a

foundation for many more years of favourable balance, and accordingly we

see it return to her, as the money which the state spends within the

nation, returns into the exchequer at the end of the year.

III. It may be asked, how it happens that no nation has ever spent to

its last farthing, as many an individual has done? I answer, that I am

far from believing that this has never happened; nay, I believe there is

nothing more frequent or familiar than this very case, providing the

riches of a country be here supposed to mean no more than the specie

_absolutely_ belonging to herself, not borrowed from other nations.

I have said above, that the acquisition of money by industry, increased

the real value of a country, as much as the addition of a portion of

territory: now what should hinder a people from spending their ready

money, and, at the same time, preserving their land? Because a young

gentleman, whose father has left him a fine estate in land, and ten

thousand pounds in ready money, has spent the ten thousand pounds, does

it follow, that he is without a shilling? Upon this view of the

question, it will, I believe, be granted, that Dr. Swift’s idea that all

the specie of Ireland would in a short time be exported, in consequence

of an unfavourable balance of trade, is very far from being chimerical,

and might be exactly true; although at this time there be six times more

in circulation than ever; just as a person who is running through his

fortune, has commonly more money in his hands than his father used to

have, when he was acquiring it. Let Ireland pay her debts to England,

and then count her specie. Let England pay her’s to all the world, and

then weigh her gold and silver. Suppose that on summing up the accounts,

there is not found one shilling in either country, is this any proof of

their being undone? By no means: _coin is one article of our wealth, but

never can be the measure of it_.

I know little of the state of Ireland; but if it be true, that paper

money is increasing daily in that country, it is, I suppose, because the

specie is daily exported to England, as the returns of estates belonging

to people who reside there, and that the Irish, instead of buying it

back again for their own use in circulation, augment their paper, in

proportion to the progress of their industry; and only buy such

quantities of specie as are necessary for paying the balance of their

trade. Now by buying specie, I do not suppose, that they bring any over

to Ireland, in order to send it back to England; but that they send over

goods to the value, which the English merchants pay in specie, or in

English paper, to those who are creditors upon Ireland, for the value of

their rents, &c.

Suppose then, for a farther illustration of some principles, that all

the lands of Ireland belonged to Englishmen residing in their own

country, and annually drawing from Ireland the income belonging to them,

what would the consequence be? As long as this portion of the produce of

lands, which goes for rent, (and which, as we have said, is the fund

provided for the subsistence of the free hands who purchase their own

necessaries) could be bought and consumed by the Irish themselves, that

is, in other words, while in Ireland there was a demand for this portion

of the fruits, it would be paid for, either in coin, to the diminution

of their specie, or in something which might be converted into money;

that is, by the produce of their industry, and thus, by the means of

trade, would come into the hands of the English proprietors, either in

specie, or in any other form they judged proper.

That so soon as the demand for this portion of fruits came to fail, for

want of money, or industry, in Ireland to purchase it, what remained on

hand would be sent over to England in kind; or by the way of trade, be

made to circulate with other nations (in beef, butter, tallow, &c.) who

would give silver and gold for it, to the proprietors of the Irish

lands. By such a diminution of demand in the country, for the fruits of

the earth, the depopulation of Ireland would be implied; because they

who consumed them formerly, consume them no more; that is to say, they

either died, or left the country.

To conclude, a great part of the value of a country is its produce and

manufactures; but it does not follow, as Mr. Belloni asserts, that these

should as necessarily draw a proportional sum of the gold and silver of

Europe into that country, as a shoal of small fishes draws water fowl,

or as charity draws the poor, or as beauty draws admiration.

QUEST. 2. Can no rule be found to judge of the balance of trade from the

state of specie, or at least to perceive the effects of that balance in

augmenting or diminishing the mass of riches?

Could it be supposed that specie never circulated between nations, but

in the way of trade, and in exchange for exportable commodities, this

would be a rule.

In nations where the earth produces neither gold or silver, and where

these metals are imported as the returns of industry only, the balance

in their favour, from the introduction of specie, to this day, would be

measured by the quantity of it which they possess. Here Mr. Belloni’s

opinion is just.

Farther, the consumption made by any nation for the same term of years,

is equal to the whole natural produce and labour of the inhabitants for

that time, _minus_ the quantity of such produce and labour, as is, or

has been equal in value to the actual national specie.

On the other hand, in nations where gold and silver are produced by the

earth, the balance of trade against them, from the time these metals

became the object of trade, to this day, may be estimated by the

quantity of them which has been exported.

And farther, the consumption made by such nations, for the same term of

years, is equal to the whole natural produce and labour of the

inhabitants for that time, _plus_ the quantity of such produce and

labour, as is, or has been equal to the quantity of these metals

exported.

These positions are by much too general to be laid down as principles,

because trade is not concerned in every acquisition or alienation of

specie; but they may serve, in the mean time, to illustrate the doctrine

we have been considering, and even in many cases may be found pretty

exact. For example,

If it be true, that in any nation of Europe, there be now just as much

silver and gold as there was ten years ago, and if that nation during

this period, has supported, without borrowing from strangers, an

expensive war which may have cost it, I suppose, five millions, it is

certain, that during this period, the home consumption must have been

the value of five millions less than the natural produce, labour, and

industry of the inhabitants; which sum of five millions must have come

from abroad, in return for a like value of the production, labour, &c.

remaining over and above their own consumption.

In this supposition, the national wealth (the metals) remains as before,

the balance of it only is changed. How this change is performed, and

what are its consequences, may be discovered by an application of the

principles already laid down.

QUEST. 3. What were the effects of riches before the introduction of

trade and industry?

I never can sufficiently recommend to my readers to compare

circumstances, in the oeconomy of the antients, with that of modern

times; because I see a multitude of new doctrines laid down, which, I

think, never would have been broached, had such circumstances been

properly attended to. I have endeavoured to shew, that the price of

goods, but especially of articles of the first necessity, have little or

no connection with the quantities of specie in a country. The slightest

inspection into the state of circulation, in different ages, will

fortify our reasoning: but the general taste of dissipation which is

daily gaining ground, makes people now begin to imagine, that wealth and

circulation are synonimous terms; whereas nothing is more contrary both

to reason and matter of fact. A slight review of this matter, in

different ages, will set it in a clearer light than a more abstract

reasoning can.

It is a question with me, whether the mines of Potosi and Brasil, have

produced more riches to Spain and Portugal, within these two hundred

years, than the treasures heaped up in Asia, Greece, and Egypt, after

the death of Alexander, furnished to the Romans, during the two hundred

years which followed the defeat of Perseus, and the conquest of

Macedonia.

From the treasures mentioned by all the historians who have writ of the

conquest of those kingdoms by the Romans, I do not think I am far from

truth, when I compare the treasures of the frugal Greeks to the mines of

the new world.

What effect, as to circulation, had the accumulation of these vast

treasures? Not any to accelerate it, surely: and no person, the least

conversant in antiquity, will pretend that the circulating specie in

those times, bore as great a proportion to their treasures, as what is

at present circulating among us, bears to the wealth of the most

oeconomising Prince in Europe. If any one doubt of this particular, let

him listen to Appian, who says, that the successors of Alexander, the

possessors of those immense riches, lived with the greatest frugality.

Those treasures were then, as I have said, a real addition to the value

of their kingdoms; but had not the smallest influence upon prices. In

those days of small circulation, the prices of every thing must have

been vastly low, not from the great abundance of them, but because of

the little demand; and as a proof of this, I cite the example of a

country, which, within the space of fifty years, possessed in _specie_

at one time, considerably beyond the worth of the land, houses, slaves,

merchandize, natural produce, moveables, and ready money, at another.

The example is mentioned by Mr. Hume, and I am surprized the consequence

of it did not strike him. For if the money they possessed was greatly

above the worth of all their property, moveable and immoveable, surely

it never could be considered as a representation of their industry,

which made so small a part of the whole. Athens possessed, before the

Peloponesian war, a treasure of ten thousand talents; and fifty years

afterwards, all Athens, in the several articles above specified, did not

amount to the value of six thousand. Hume’s _Political Discourses upon

the Balance of Trade_.

These treasures were spent in the war, and they had been laid up for no

other purpose. Therefore I was in the right, when I observed above,

Chap. 22. that war in antient times, had the effect that industry has

now: it was the only means of making wealth circulate. But peace

producing a general stagnation of circulation, people returned to the

antient simplicity of their manners, and the prices of subsistence

remained on the former footing; because there was no increase of

appetite, or rising of demand upon any necessary article. So much for

the state of wealth during the days of frugality.

The Romans subdued all those kingdoms of the Greeks, and drew their

treasures to Rome. The republic went to destruction, and a succession of

the most prodigal Princes ever known in history succeeded one another

for about two hundred years. Those monstrous treasures were then thrown

into circulation, and I must now give an idea of the effects produced by

such a revolution.

I have already observed (Chap. 28.) that in consequence of the great

prodigality of those times, the prices of superfluities rose to a

monstrous height; while those of necessaries kept excessively low. The

fact is indisputable, and any one who inclines to satisfy himself

farther, may look into that valuable collection of examples of antient

luxury, wealth, and at the same time of simplicity, found in Mr.

Wallace’s _Dissertation upon the Numbers of Mankind in antient and

modern Times_, p. 132. et seq.

But how is it to be accounted for, that the prices of superfluities

should stand so high, while necessaries were so low? The reason is

plain, from the principles we have laid down. The circulation of money

had no resemblance to that of modern times: fortunes were made by

corruption, fraud, concussion, rapine, and penury; not by trade and

industry. Seneca amassed in four years 2,400,000 pounds sterling. An

augur was worth 3 millions sterling. M. Antony owed on the Ides of

March, 322,916 pounds sterling, and paid it before the calends of April.

We know of no such circulation. Every revolution was violent: the

powerful were rapacious and prodigal, the weak were poor and lived in

the greatest simplicity: consequently, the objects of the desires of the

rich were immensely dear; and the necessaries for the poor were

excessively cheap. This is a confirmation of the principles we have laid

down in Chap. 28. that the price of subsistence must ever be in

proportion to the faculties of the numerous classes of those who buy:

that the price of every thing must be in proportion to the demand made

for it; and that in every case, where the supply can naturally increase

in proportion to the demand, there must be a determined proportion

between the price of such articles and that of subsistence. Now in the

examples given by Mr. Wallace, of such articles as were found at

monstrous prices, we only find such as could not be increased according

to demand: here is the enumeration of them. Large asses brought from

Spain, peacocks, fine doves, mullets, lampreys, peaches, large

asparagus, purple, wool, jewels, carpets, _vestes Byssinæ_, slaves

skilled in the finer arts, pictures, statues, books, and rewards to

those who taught the sciences. By casting a glance upon the catalogue,

we may easily perceive that the extraordinary price must have proceeded

from the impossibility of augmenting the supply in proportion to the

demand; not from the abundance of the money, which had no effect in

raising the price of necessaries. The cheapness again of these, did not

proceed from vast plenty; but because the price must have remained in

proportion to the faculties of the numerous poor; and because the

augmentation of the wealth of the rich never could increase their

consumption of any necessary article. Had the Roman empire been governed

with order and tranquility, this taste of luxury, by precipitating money

into the hands of the numerous classes, would, in time, have wrought the

effects of multiplying the number of the industrious, by purging the

lands; consequently, of increasing the demand for vendible subsistence;

consequently, of raising the price of it. And on the other hand, the

adequate proportion between services and rewards given by the public,

would have checked the other branch of circulation which produced those

monstrous fortunes, to wit, rapine and corruption: and industry

receiving a regular encouragement, every article of extraordinary demand

for delicate aliments, birds, fishes, fruits, &c. would have been

supplied with sufficient abundance; and consequently, would have fallen

in its price. But when either despotism or slavery were the patrimonial

inheritance of every one on coming into the world, we are not to expect

to see the same principles operate, as in ages where the monarch and the

peasant are born equally free to enjoy the provision made for them by

their forefathers.

I shall now come nearer home, and examine a very remarkable difference

between the oeconomy in practice some hundred years ago, and that of the

present time, with regard to the method of levying men and money.

This change is a consequence of trade and industry, and as I have been

preparing the way for the introduction of other matters which equally

owe their existence to them, it may not be improper, in this last

chapter, to point out the natural causes of this change in modern

politics. When people consider effects only, without examining the

causes which produce them, they commonly blame rashly, or fall into an

idle admiration of fortune. It is only by tracing natural causes, that

we come at the means of forming a solid judgment of the nature of every

abuse, and of every advantage.

The general taste for the extension of industry, is what has brought

such loads of money into circulation; not the discovery of America. We

read of treasures in antient times which appear to rival the wealth of

modern Europe. Appian, as cited by Mr. Hume, mentions a treasure of the

Kings of Egypt, of near two hundred millions sterling; and says, that

all the successors of Alexander were nearly as rich, and fully as

frugal. Frugality then is compatible with the greatest wealth. Therefore

the wealth of America, has not been the cause of European refinement;

but the extension of civil liberty has obliged the possessors of

treasures, which in all ages have been coveted by man, to open their

repositories, in order to procure the service of those who formerly made

a branch of the property of the most wealthy. This is the foundation of

trade and industry.

Why, therefore, has trade and industry laid the foundation of taxes and

standing armies, which appear so contrary to the one and the other?

I answer shortly, that very little change has been made as to things

themselves by that revolution; but with respect to the order of things,

the difference is great. Trade and industry cannot flourish without

method and regularity; taxes and standing armies are only a systematical

execution of the old plan, for preserving the power, safety, and

independence of the nations of Europe.

Taxes are no more than the liquidation of those services which formerly

were performed in kind. Standing armies are become necessary, that the

call of the rich luxurious, who are insatiable in their demand for the

service of the poor, may not be able to engross also the hands necessary

for the defence of the state. Personal services were the taxes of former

times. Let no man imagine, that ever any state could subsist without the

contribution of its subjects. But a more authentic proof of this opinion

is, that in the year 1443, while Charles the VIIth was engaged in the

long war with the Kings of England, who disputed with him the monarchy

of France, the services of the vassals of that kingdom (by the edict of

Saumur of the 14th of September) were formally converted into the

perpetual _Taille_; and this may be considered, as the foundation of the

regular military force of the French nation. No body, in those days,

imagined such an imposition to be oppressive or unjust: and if those who

remain subject to it, appear under oppression at present, it is only

because they continue in their antient situation. Personal services are

the heaviest of all impositions.

QUEST. 4. Why, therefore, are taxes so generally cried out against, why

do they appear so new an invention, and why do people flatter

themselves, that there is a possibility of putting an end to so general

an oppression? I answer, because people commonly attend to words, and

not to things. In former times, the great bulk of the inhabitants lived

upon the lands, and were bound to personal service. This kind of

imposition was familiar, general, and equal; every class of the people

was bound to services analogous to their rank in the state. The

industrious who lived without any dependence upon the lands, and who did

not enjoy the privileges of cities and corporations, were so few, that

they were not an object of public attention. Farther, most privileges

then known, were in consequence of land-property; consequently, those

independent people were in a manner without protection, they were

vassals to no body; consequently, had no body to interest themselves for

them; consequently, were a prey to every one who had power, and no body

was sorry to see a rich fellow, who had got plenty of ready money, and

who seemed to do nothing for it, plundered by a lord who appeared in the

service of his country. We see in the time of the croisades how odious

all those money gatherers were; these were what we now call traders, it

was principally in hatred to them, that the borrowing of money at

interest was declared antichristian; because the Jews were principally

in those days the merchants or the money lenders.

In the beginning of the sixteenth century, when Princes began to take a

taste for magnificence, finding no body, almost, within their own

country capable to supply them, they used to send to Flanders and

Venice, the great trading states in those days, for many kinds of

manufactures. This is the fountain of foreign trade in Europe. These two

states perceiving the great benefit resulting to them from this new

taste of dissipation, gave great encouragement to the industrious. Had

they begun to impose high taxes upon them, they would have ruined all.

Industry, then, was encouraged at first, and little loaded with any

imposition. This is perfectly consistent with our doctrine. Some

Princes, perceiving the daily diminution of their wealth, made efforts

to restore this antient simplicity, by forbidding this hurtful trade;

others, such as Francis I. of France, and Henry VIII. of England,

endeavoured all they could to establish industry in their own states.

For this purpose, great privileges were granted to the industrious, who

thereby increased daily. But this revolution naturally purged the lands,

and by that operation diminished the number of personal service-men; or,

as in France, where personal service was at an end, the number of those

subject to the _taille_. I shall not trace this progress very minutely,

but come directly to the period of extensive taxation. When industry was

fairly established, and when nations began to be well clothed with the

produce of their own soil, wrought up in a thousand different forms, by

their own industrious subjects, Princes soon perceived their treasures

to melt away, and saw plainly, that without a method of drawing back the

money from this new class of inhabitants, the whole wealth of the state

would come to center in their hands; but the means of coming at money

was extremely difficult. The proprietors of the riches had no solid

property in proportion; and their money was inaccessible. Some betook

themselves to violence, and others to fraud: the one and the other

produced the worst effects. The violence destroyed industry, and rendred

the industrious miserable: for we have observed, that when inhabitants

are once purged from off the lands, they have no resource left them but

their industry; whereas let a peasant be robbed ever so often of his

money, he still has the earth to maintain him. The fraudulent corrupted

the great; the ministers of Princes became the terror of every man who

had money; they enriched themselves by accepting of compositions, and

the state remained constantly in want. At last, the scheme of

proportional taxes took place: but for this purpose it was necessary to

obtain the consent of the whole state; for no Prince’s power extended so

far, and they were not come to the time of being able to enlarge their

prerogative. Such impositions, therefore, were first introduced in

republics, and mixed governments. In monarchies they were established

with more difficulty; because the great were equally affected by them

with the small. But when long and expensive wars rendred supplies of

money absolutely necessary, then were taxes consented to; and the Prince

who had not power enough to _establish_ them, easily found means to

_keep them up_, when once introduced.

From this progress we may easily discover the reason why taxes are cried

out against. The system appears new, because we remember, in a manner,

the doubling of the impositions, and we see them daily gaining ground;

but we never reflect on the change of circumstances, and seldom attend

to the consequences of that new species of circulation, which is carried

on between the public and those employed by it. The state now pays for

every service, because the people furnish it with money for this

purpose.

If the blood therefore be let out, in modern times, at a thousand

orifices of the body politic, there are just as many absorbitories (if I

may be allowed such an expression) opened to receive it back. From this

last circumstance I imply the perpetuity of taxes, while this system of

political oeconomy prevails. We have not as yet seen an example of any

state abolishing them, though many indeed have had such a scheme in

view. But to resume my former comparison, I may suggest, that if all the

orifices through which the blood issues, should be bound up, all the

absorbitories which are fed with the returning blood, must be starved.

But more of this in its proper place.

QUEST. 5. Why are standing armies a consequence of trade and industry?

In the first place, armies in all ages, past, present, and to come, have

been, are, and will be calculated for offensive and defensive war; while

therefore war subsists among men, armies in one way or other, will be

necessary.

The advantage of regular armies has been known in all ages; and yet we

find, that for many centuries they appeared in a manner discontinued;

that is to say, we read neither of legions, nor of regiments, nor of any

denomination of bodies of warlike men, kept up and exercised in time of

peace, as was the custom while the Roman empire subsisted: and now,

since trade has been established, we see the antient Roman military

oeconomy again revived. Let us therefore apply our principles, in order

to account for this revolution also.

During the Roman empire, there was a very great flux of money into the

coffers of the state, which proceeded more from rapine than from taxes.

Consequently, it was an easy matter to keep up large bodies of regular

forces.

With these they subdued the world, as I may call it, that is, all the

polite nations then known; the Carthaginians, Greeks, and Asiatics. Had

they remained satisfied, their empire might possibly have subsisted;

because people who are rich, luxurious, and polite, are commonly

peaceable. But nothing could satisfy their ambition: they conquered

Gaul, and stretched the boundary of their empire from the streights of

Gibraltar to the mouth of the Rhine. All was peaceable on that side, and

in two or three centuries, both Spain and Gaul had adopted the spirit,

language, and manners of the Roman people. But when they passed the

Rhine, the Danube, and the Euphrates, they found mankind still less

cultivated, and very little known. Their enemies fled before them, and

left a territory which was not worth possessing. This of all barriers is

the strongest. By carrying on war against such people, the match was

very unequal; those nations had every thing to gain, and nothing to

lose; the Romans had all to lose, and nothing to win. Those wars

continued until the Barbarians learned the Roman discipline, and became

warriors. It was the most profitable trade for them, as well as the only

means of safety. That this was the plan of their oeconomy appears

plainly from the form of government every where established by them.

Where every free man was a soldier, there was no occasion for a regular

militia.

Men are governed by prejudice more than by reason: to this I attribute

the sudden change in the government of Europe. In place of one man

governing the world, as was the case of the Emperors, the new spirit

was, that all soldiers were equal, and a King was but _primus inter

pares_. The sudden revolution had the effect of ruining every thing:

learning, industry, politics, all went to wreck. _One hundred years of

barbarity must ruin the effects of a thousand centuries of politeness._

This is the date of the annihilation of standing armies. A powerful

Prince, such as Charles the Great, who acted in a high sphere, and who

made the world his own, might, during his lifetime, establish the old

oeconomy. But the general establishment of the feudal form of

government, which, no doubt, was the best for preserving a great empire,

filled with barbarity every where, joined with the weakness of that

Prince’s successors, introduced a new form less barbarous than the

former, but equally compatible with a numerous standing militia. Every

Baron became a sovereign, and his vassals were bred to arms; but as they

were forced to attend the plough for subsistence, as well as the camp;

wars were carried on consistently with agriculture. Certain months of

the year were appropriated for war; others for peace. This was easily

accomplished: war was constantly at the door; a campaign was finished in

a week, because every man’s nearest neighbour was commonly his worst

enemy.

Europe remained in this general state of confusion for some centuries.

Princes had, during that period, a most precarious authority, and when

any nation chanced to be under the government of one who had talents to

unite his subjects, he became so formidable that there was no

possibility of resisting him. In those days, it was a hard matter to

form an idea of a balance of power; because there was no rule to

determine the force of nations. Under the Otho’s, Germany threatned

Italy with chains; under Edward and Henry, England seemed on the road of

adding all France to her monarchy; Ferdinand the catholic, laid the

foundation of the Spanish greatness, and his successors bid fair for the

universal monarchy of Europe. In our days, the acquisition of a small

province, nay of a considerable town, is not to be made by conquest,

without a general convention between all the powers of Europe, and those

who are conversant in foreign affairs, can estimate, in a minute, the

force of Princes, by the troops they are able to maintain; nothing is so

easy as to lay down, on a sheet of paper, a state of all the armed men

in Europe. A Prince can hardly add a soldier to a company, but all the

world is informed of it. Excepting the extent of their credit, and the

talents of their generals and counsellors, every thing relative to power

is become the object of computation. Hence the balance of power,

formerly unknown, is now become familiar. So much is sufficient for the

matter of fact; let us now examine why _trade_ and _industry_ have given

rise to so regular a system of war.

The reason is, because in a state where those are introduced, every

thing must be made regular, or all will go to wreck. The keeping up of

large armies, is the remains of that turbulent spirit which animated

royalty for so many centuries. All literature is filled with warlike

sentiments, from.the books of Moses to the news papers of this day. A

young person cannot learn to read without imbibing the fire of war. But

as nothing is so evident, from the consideration of the total revolution

in the spirit of the people of Europe, as that war is inconsistent with

the prosperity of a modern state, I sometimes allow my imagination to

carry me so far as to believe the time is at hand when war will come to

cease. But there is no such thing as predicting in political matters:

general peace is a contingent consequence which a thousand accidents may

prevent; and one among the rest is, that the whole plan of modern policy

may be broken to pieces, before Princes come to discover that it is

their interest to be quiet. The ambition of one, arms all the rest, and

when once they are at the head of their armies, want of money only

assembles a congress, not to make peace, but that the parties may have

some years to gather new force.

It is not therefore trade and industry which have given birth to

standing armies, they have only rendred war impossible without them. It

is the ambition of Princes to extend their dominion, and even sometimes

to extend their commerce, which gives occasion to war. And we see daily

how difficult it becomes to provide troops for this purpose, from no

other reason so much as from the progress of trade and industry. Those

who have the money cannot have the men, those who have the men cannot

have the money. Do we not see how the greatest monarchy in Europe, the

Prince who has the most millions of subjects, cannot preserve the rank

of power he has prescribed to himself (_his political-necessary for

war_) without a body of above thirty thousand strangers, in the time of

the most profound peace, and after the greatest reduction judged

consistent with the safety of the country? These cost vastly more than

national troops, and brave men of all countries are alike; so that the

only reason for keeping up so large a body of foreigners, is to

facilitate augmentations when occasion requires it; and not to spare the

subjects who are willing to serve, but to spare agriculture and

industry, after the superfluities of these have fallen in, to compleat

that body of troops which experience has determined to be proportioned

to such superfluities.

From this short exposition let me deduce a principle. That since every

state has occasion, according to the present system of Europe, for a

certain number of armed men for their defence, the first care of a

statesman, is, to discover to what number those of his subjects, who

willingly prefer the conditions offered for military service to the

occupations of industry, may amount. If he finds these exceed the number

wanted for recruiting the army, it is a good reason to diminish the pay;

until the encouragement comes upon a level with the supply demanded. If

on the contrary, the number of volunteers falls below the standard

required, he must examine the state of the balance of work and demand,

before he can give any farther encouragement. If this balance stands

even, he must take care that the pay given to soldiers be not carried so

high, as to engage those of the lowest class of profitable industry to

desert it.

What measures, therefore, can be fallen upon? There are two. Either to

hire foreign troops, as many states do; and I suppose for good reasons,

only because it is done. But I should prefer another method, which is to

create a new class of inhabitants, appropriated for supplying the army,

upon the principle above laid down, that he who feeds may have as many

mouths as he pleases.

I would therefore fix the military pay at a rate below the profits of

useful industry, and accept of such as should offer. For the

augmentation of this class, I would receive all male children who should

be given or exposed by their parents. These should be bred to every sort

of labour for which the state has occasion, and their numbers might be

carried to twenty _per cent._ above that which might be judged necessary

in time of the hottest war. Out of this class only, the standing forces

might be recruited: those who remained might be employed in every public

service; such as working in arsenals, docks, highways, public buildings,

&c. By taking care of the children of this whole class, their numbers

would rise to whatever height might be judged necessary. The same spirit

would be kept up; they might serve by turns, and all become disciplined.

This is a good scheme, in many cases, and is an improvement upon the

distribution of the inhabitants: the execution is gradual; therefore no

sudden revolution is implied. But it is fit only for a state which can

augment its numbers, without seeking for subsistence from without. It

would spare the land and manufactures, and be a ready outlet for all

supernumeraries in every class.

This subject shall be resumed in the fifth book, when we come to the

application of the amount of taxes. At present it has found a place,

only because the support of a national force has been ranked among the

objects of attention of those statesmen who are at the head of rich and

luxurious nations which have lost their foreign trade.

QUEST. 6. What are the principles upon which the relative force of

nations is to be estimated?

Without some limitations, no question can be more difficult to resolve

than this; it must therefore be examined only in so far as it comes

under the influence of certain principles. It is as impossible to

estimate the real force of a nation, as it is to estimate that of any

considerable quantity of gun-powder, and for the same reason. The nation

cannot exert all its force at once, no more than the powder can be all

inflamed at once, and the successive efforts of a small power, are never

equally effectual with the momentous shock of a great one. In

proportion, therefore, as the spirit of individuals is moved to concur

with the public measure, a people become powerful; and as I know of no

principle which can regulate such affections of the mind, we must throw

them quite out of the question, and measure the power of nations by the

quantity of men and money at a statesman’s command, in consequence of

the oeconomy he has established. Let me then suppose two nations, where

the number of inhabitants, and weight of gold and silver are absolutely

the same, military genius and discipline quite equal. From what has been

said, we must determine that nation to be the strongest, which, without

disturbing the oeconomy of their state, can raise the greatest

proportion of men, and draw the greatest proportion of money into the

public coffers.

When the number of inhabitants is given, the first thing to be known is

the nature of the produce of the country, whether mostly in corn, wine,

or pasture: the more the ground is laboured, and the more crops it

yearly produces, the fewer free hands it will maintain in proportion to

the whole, this computation must then proceed upon the principles laid

down above, Book I. Chap. 8.

When once you come at the number of free hands, you must examine the

state of luxury. Luxury is justly said to effeminate a nation, because

the great multitude of hands taken up in supplying the instruments of it

to the rich, diminishes greatly the number of such as can be employed in

war. If manufacturers and folks accustomed to a sedentary life, are at a

certain age taken from trades, to compose armies, they will make bad

soldiers; and the strength of a nation lies chiefly in the valour and

strength of the soldiery. Luxury therefore effeminates a nation in

general; but it does not follow from hence, that the most luxurious are

the most effeminate, and most improper for war; on the contrary, they

are found to be the bravest and most proper. The effeminacy and baseness

of mind, in point of courage, are found in the sedentary multitude. The

truth of this might be proved from many examples in antient history, if

the present situation of Europe left the smallest room to doubt of it.

The more therefore that luxury prevails in a country, the fewer good

troops can be raised in it, and _vice versa_. But it is not sufficient

to have men for war, the men must be enabled to subsist, and in the

modern way of making war, their subsistence and other expences require

large sums of money. We must then examine what proportion of the general

wealth may be applied to this purpose.

If in any country the riches be found in few hands, the state will be

poor; because the opulence of the public treasure depends greatly upon a

right and proportional distribution of wealth among the inhabitants.

Riches are only acquired three ways. First, Gratuitously, as by

succession, gift, or the like; secondly, by industry; and lastly, by

penury. Those who are poor are seldom enriched gratuitously, never by

penury, and always by industry; when a poor man grows rich in any state,

he changes in so far the balance of wealth, for what is added to him is

taken from another. When a spirit of industry prevails, the balance is

always turning in favour of the industrious, and as it is a pretty

general rule, that the rich are not the most laborious, so the balance

is generally turning against them. This being the case, the more that

industry prevails, the quicker will this revolution be brought on. By

such revolutions, wealth becomes _equably distributed_; for by being

_equably distributed_, I do not mean, that every individual comes to

have an _equal_ share, but an equal chance, I may say a certainty, of

becoming rich in proportion to his industry. Riches which are acquired

by succession, or any other gratuitous means, do not in the least

contribute to circulation, the owner, as has been said, only changes his

name. Those made by penury or hoarding, instead of adding to, evidently

diminish circulation. It is, therefore, by industry alone that wealth is

made to circulate, and it is by its circulation only, that money is

useful. When large sums are locked up, they produce nothing; they are

therefore locked up not to be useful while they remain secreted; but

that they may be useful when brought out in order to be alienated. In a

state, therefore, where there are a few very rich and many very poor,

there must be much money locked up; for without money none can be rich,

and if it were not locked up it must fall into the hands of the poor.

Why? Because the rich will not give it to the rich, gratuitously, nor

will they labour to acquire it; either then the common people must be

lazy and unwilling to work, or the rich must be so penurious and

addicted to hoarding as to keep it out of the hands of the poor. In both

which cases, if there be money in the country, it must be found in

coffers.

From these positions it may be concluded, that wealth which produces

nothing to its owner, cannot be supposed to produce any thing to the

state: consequently, that state in which there is the quickest

circulation of money, is, _cæteris paribus_, that in which the greatest

proportion of the general wealth may be raised for the public service.

This is all that is necessary to observe at present: when we have

examined the nature of credit and taxes, and the principles upon which

they may be levied in different countries, and under different forms of

government, we shall discover more rules for estimating the force of

different states.

The principles of industry have been so interwoven with those of trade,

through all the chapters of this second book, that it is now proper,

before we dismiss the subject, to examine a little into the nature of

the first, considered more abstractedly, and more detached from its

relation to the equivalent given for it, which is the proper

characteristic of trade, and from which proceeds the intimate connection

between them.

The object of our enquiry hitherto has been to discover the method of

engaging a free people in the advancement of the one and the other, as a

means of making their society live in ease, by reciprocally contributing

to the relief of each others wants. Let us next examine some farther

consequences. We are now to cast our eyes upon another view of this

extensive landscape, where the personal advantages, immediately felt

from this gentle band of mutual dependence, are not to fix our attention

so much as the effects produced by industry upon the face of things, and

manners of a people.

The better to transmit this idea, which I find a little dark, let me

say, that hitherto we have treated our subject, according to the

principles which should direct a statesman, to advance trade and

industry, by engaging the rich to give bread to the poor. Now we are to

examine the consequences resulting from the execution of this plan; and

compare the difference between a country which has been inhabited by a

people abundantly provided for without industry and labour, and one

occupied by another who have subsisted by these means: and farther, we

are to examine industry as producing effects more or less hurtful to the

simplicity of manners, and more or less permanent and beneficial,

according as it has been directed towards different objects.

I can easily suppose a nation living in the greatest simplicity, even

going naked, but abundantly fed, either with the spontaneous fruits of

the earth, or by an agriculture proportioned to the wants of every one,

and where very little alienation or exchange takes place. From this

primitive life, as I may call it, the degrees of industry, like

imperceptible shades, may be augmented; and the augmentation, as I

apprehend, is to be measured, not so much by the degree of occupation

which the inhabitants pursue, as by the quantity of permutation among

them; because I think permutation implies superfluity of something[N].

Footnote N:

Our first parents, placed in Paradise, were fed from the hand of God,

and freed by the constitution of their nature, from every uneasy

animal desire. Since the fall, the whole human species have been

employed in contriving and executing methods for relieving the wants

which are the consequences of such desires.

Hence I conclude, that had the fall never taken place, the pursuits of

man would have been totally different from what they are at present.

May I be allowed to suppose, that in such a happy state, he might have

been endowed with a faculty of transmitting his most complex ideas

with the same perspicuity with which we now transmit those relating to

geometry, numbers, colours, &c. From this I infer, there would have

been no difference of sentiment, no dispute, no competition between

man and man. The progress in acquiring useful knowledge, the pleasure

of communicating discoveries, would alone have provided a fund of

happiness, as inexhaustible as knowledge itself.

Mankind, therefore, set out upon a system of living without labour,

without industry, without wants, without dependence, without

subordination; consequently, had they remained in that state, the

lapse of time would have produced no change upon any thing, but the

state of knowledge. Banished from Paradise, man began to plow the

ground, consequently to change her surface: he built houses, made

bridges, traced roads, and by degrees has come, in different ages, to

please and gratify his inclinations, by numberless occupations and

pursuits, constantly dictated to him by his wants; that is, by his

imperfections, and by the desires which they inspire. When these are

satisfied, his physical happiness is carried as far as possible; but

as mankind seldom remain in a state of contentment, and that our

nature constantly prompts us to add something new to our former

enjoyments, so it naturally happens, that societies once established,

and living in peace, pass from one degree of refinement to another,

that is to say, man daily becomes more laborious.

A people then lives in the utmost simplicity, when the earth is so far

in common, as that none can acquire the property of it, but in virtue of

his possession as the means of subsistence; and when every one is

employed in providing necessaries for himself, and for those who belong

to him. The moment any one has occasion for the service of another,

independent of him, he must have an equivalent to give. This equivalent

must be something moveable, some fruit of the earth, pure or modified,

superfluous, not necessary, not the earth itself, because this is the

foundation of his subsistence; and he can never alienate what is

essential to his being, in order to procure a superfluity. From this we

may deduce a principle that the alienation of consumable commodities is

a consequence of superfluity alone, as this again is the bane of

simplicity. Consequently, he who would carry simplicity to the utmost

length, ought to proscribe all alienation; consequently, all dependence

among men; consequently, all subordination: every one ought to be

entirely dependent upon his own labour, and nothing else.

Were man either restored to his primitive state of innocence, or reduced

to a state of brutality; were his pursuits either purely spiritual, or

did they extend no farther than to the gratification of his animal

desires, and acquisition of his physical-necessary; such an oeconomy

might be compatible with society. But as we stand in a middle state

between the two, and have certain desires which participate of the one

and of the other, the gratification of which constitute what we have

called our _political-necessary_ (which we cannot procure to ourselves,

because the very nature of it implies superiority and subordination, as

well as a mutual dependence among men) a total obstruction to alienation

becomes compatible with government, consequently with human society; and

this being the case, all simplicity of manners is only relative. Our

fathers looked upon the manners of their ancestors as simple, these

again admired the simplicity of the patriarchs; and perhaps the time may

come, when the manners of the eighteenth century may be called the noble

simplicity of the antients.

As simplicity of manners is therefore relative, let us decide, that as

long as superfluity does more good in providing for the poor, than hurt

in corrupting the rich; so far it is to be approved of and no farther.

Here it is urged, that since superfluity is only good, so far as it

provides subsistence for the poor, why may not the pursuits of industry

be turned towards objects which cannot corrupt the mind? Why, in place

of fine clothes, elegant entertainments, magnificent furniture, carving,

gildings, and embroidery, with all the splendor to be seen in palaces,

gardens, operas, balls, and masquerades, processions, shews,

horse-races, and diversions of every kind, why might not, I say, the

multitudes which are employed in supplying these transitory

gratifications of human weakness (not to call them by a worse name) be

employed in making highways, bridges, canals, fountains, fortifications,

harbours, public buildings, and a thousand other works, both useful to

society, and of good example to succeeding generations? Such employments

are eternal monuments of grandeur, they are of lasting utility, and are

no more to be compared to the trifling industry of our days, than an

Egyptian pyramid is to be compared with the luxury of Cleopatra, or the

_via appia_ with the suppers of Heliogabalus. This was the taste in the

virtuous days of antient simplicity: the greatness of a people appeared

in the magnificence of useful works, and as virtue disappeared, a luxury

resembling that of modern times took place. The aqueducts, common

sewers, temples, highways, and burying places were the ornaments of

consular Rome. The imperial grandeur of that city shone out in

amphitheatres and baths; and the turpitude of manners (say the patrons

of simplicity) which brought on the decline, ought to terrify those who

make the apology of modern luxury and dissipation.

In order to set this question in a clear light, and to do justice both

to the antients and moderns, let us once more enter into an examination

of circumstances, and seek for effects in the causes which produce them.

These are uniform in all ages; and if manners are different, the

difference must be accounted for, without overturning the principles of

reason and common sense.

QUEST. 7. In what manner, therefore, may a statesman establish industry,

so as not to destroy simplicity, nor occasion a sudden revolution in the

manners of his people, the great classes of which are supposed to live

secure in ease and happiness; and, at the same time, so as to provide

every one with necessaries who may be in want?

The observations we are going to make will point out the answer to this

question: they will unfold still farther the political oeconomy of the

antients, and explain how manners remained so pure from vicious luxury,

notwithstanding the great and sumptuous works carried on, which strike

us with so lofty an idea of their useful magnificence and noble

simplicity. These observations will also confirm the justness of a

distinction made, in the first chapter of this book, between labour and

industry; by shewing that _labour_ may ever be procured, even by force,

at the expence of furnishing man with his physical-necessary, from which

no superfluity can proceed: whereas industry cannot be established, but

by an adequate equivalent, proportioned, not to the absolutely

necessary, but to the reasonable desire of the industrious; which

equivalent becomes afterwards the means of diffusing a luxurious

disposition among all the classes of a people.

If a statesman finds certain individuals in want, he must either feed

them, in which case he may employ them as he thinks fit; or he must give

them a piece of land, as the means of feeding themselves. If he gives

the land, he can require no equivalent for it, because a person who has

nothing can give nothing but his labour; and if he be obliged to labour

for his food, he cannot purchase with labour the earth itself, which is

the object of it. If it be asked, whether a statesman does better to

give the food, or to give the land? I think it will appear very evident,

that the first is the better course, because he can then exact an

equivalent; and since in either way the person is fed, the produce of

his labour is always clear gain. But in order to give the food, he must

have it to give; in which case, it must either be a surplus-produce of

public lands, or a contribution from the people. In both which cases, is

implied a labour carried on beyond the personal wants of those who

labour the ground. If this fund be applied in giving bread to those whom

he employs in improving the soil of the country in general, it will have

no immediate effect of destroying the simplicity of their manners; it

will only extend the fund of their subsistence. If he employs them in

making highways, aqueducts, common sewers, bridges, and the like; it

will extend the correspondence between the different places of the

country, and render living in cities more easy and agreeable: and these

changes have an evident tendency towards destroying simplicity. But here

let it be remarked, that the simplicity of individuals is not hurt by

the industry carried on at the expence of the public. The superfluous

food at the statesman’s disposal, is given to people in necessity, who

are employed in relieving _the wants of the public, not of private

persons_. But if, in consequence of the roads made, any inhabitant shall

incline to remove from place to place in a chariot, instead of riding on

horseback, or walking, he must engage some body to make the machine:

this is a farther extension to occupation, on the side of those who

labour; but the consequence of the employment is very different, when

considered with regard to the simplicity of manners. The reason is

plain: the ingenuity here must be paid for; and this superfluity in the

hands of the workman is a fund for his becoming luxurious.

Industry destroys simplicity of manners in him who gives an equivalent

for an article of superfluity; and the equivalent given frequently gives

rise to a subordinate species of luxury in the workman. When industry

therefore meets with encouragement from individuals, who give an

equivalent in order to satisfy growing desires, it is a proof that they

are quitting the simplicity of their manners. In this case, the wants

and desires of mankind prove the mother of industry, which was the

supposition in the first book; because, in fact, the industry of Europe

is owing to this cause alone.

But the industry of antient times was very different, where the

multitude of slaves ready to execute whatever was demanded, either by

the state or by their masters, for the equivalent of simple maintenance

only, prevented wealth from ever falling into the hands of industrious

free men; and he who has no circulating equivalent to give for

satisfying a desire of superfluity, must remain in his former

simplicity. The labour therefore of those days producing no circulation,

could not corrupt the manners of the people; because, remaining

constantly poor, they never could increase their consumption of

superfluity.

I must, in this place, insert the authority of an antient author, in

order both to illustrate and to prove the justness of this

representation of the political oeconomy of the antients.

There remains a discourse of Xenophon upon the improvement of the

revenue of the state of Athens. Concerning the authenticity of this

work, I have not the smallest doubt. It is a _chef d’oeuvre_ of its

kind, and from it more light is to be had, in relation to the subject we

are here upon, than from any thing I have ever seen, antient or modern.

An Inquiry into the Principles of Political Oeconomy (Vol. 1 of 2) Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes · 第 8 / 12 章

Upon examining this theory, when I came to treat of the matters it is