several companies of merchants at Glasgow carried the matter farther.
They associated themselves into different banks and issued notes so
low as ten shillings, which they used in all payments for goods,
manufactures, tradesmen, labour of all kinds; and these notes, from
the established credit of the companies, passed as money in all
payments throughout the country. By this means a stock of five thousand
pounds was able to perform the same operations as if it were ten,
and merchants were thereby enabled to trade to a greater extent, and
to require less profit in all their transactions. In Newcastle and
Bristol, as well as other trading places, the merchants have since
instituted banks of a like nature, in imitation of those in Glasgow.
But whatever other advantages result from these inventions, it must
still be allowed that they banish the precious metals; and nothing
can be a more evident proof of it than a comparison of the past and
present condition of Scotland in that particular. It was found, upon
the recoinage made after the Union, that there was near a million of
specie in that country; but notwithstanding the great increase of
riches, commerce and manufactures of all kinds, it is thought that,
even where there is no extraordinary drain made by England, the current
specie will not now amount to a fifth of that sum.
But as our projects of paper-credit are almost the only expedient by
which we can sink money below its level, so, in my opinion, the only
expedient by which we can raise money above its level is a practice
which we should all exclaim against as destructive—viz., the gathering
large sums into a public treasure, locking them up, and absolutely
preventing their circulation. The fluid not communicating with the
neighbouring element may, by such an artifice, be raised to what height
we please. To prove this we need only return to our first supposition
of the annihilating the half or any part of our cash, where we found
that the immediate consequence of such an event would be the attraction
of an equal sum from all the neighbouring kingdoms. Nor does there seem
to be any necessary bounds set by the nature of things to this practice
of hoarding. A small city like Geneva, continuing this policy for ages,
might engross nine-tenths of the money of Europe. There seems, indeed,
in the nature of man an invincible obstacle to that immense growth
of riches. A weak state with an enormous treasure will soon become a
prey to some of its poorer but more powerful neighbours; a great state
would dissipate its wealth in dangerous and ill-concerted projects,
and probably destroy with it what is much more valuable—the industry,
morals, and number of its people. The fluid in this case, raised to too
great a height, bursts and destroys the vessel that contains it, and
mixing itself with the surrounding element, soon falls to its proper
level.
So little are we commonly acquainted with this principle that, though
all historians agree in relating uniformly so recent an event as the
immense treasure amassed by Harry VII. (which they make amount to
£1,700,000), we rather reject their concurring testimony than admit
of a fact which agrees so ill with our inveterate prejudices. It is
indeed probable that that sum might be three-fourths of all
the money in England; but where is the difficulty that such a sum
might be amassed in twenty years by a cunning, rapacious, frugal, and
almost absolute monarch? Nor is it probable that the diminution of
circulating money was ever sensibly felt by the people, or ever did
them any prejudice. The sinking of the prices of all commodities would
immediately replace it, by giving England the advantage in its commerce
with all the neighbouring kingdoms.
Have we not an instance in the small republic of Athens with its
allies, who in about fifty years between the Median and Peloponnesian
Wars amassed a sum greater than that of Harry VII.?[20] for all the
Greek historians and orators agree that the Athenians collected in the
citadel more than 10,000 talents, which they afterwards dissipated,
to their own ruin, in rash and imprudent enterprises. But when this
money was set a-running, and began to communicate with the surrounding
fluid, what was the consequence? Did it remain in the state? No; for
we find by the memorable census mentioned by Demosthenes and Polybius
that, in about fifty years afterwards, the whole value of the republic,
comprehending lands, houses, commodities, slaves, and money was less
than 6000 talents.
What an ambitious, high-spirited people was this, to collect and keep
in their treasury, with a view to conquests, a sum which it was every
day in the power of the citizens, by a single vote, to distribute among
themselves, and which would go near to triple the riches of every
individual; for we must observe that the numbers and private riches of
the Athenians are said by ancient writers to have been no greater at
the beginning of the Peloponnesian War than at the beginning of the
Macedonian.
Money was little more plentiful in Greece during the age of Philip
and Perseus than in England during that of Harry VII., yet these two
monarchs in thirty years collected from the small kingdom of
Macedon a much larger treasure than that of the English monarch.
Paulus Æmilius brought to Rome about £1,700,000 sterling—Pliny says
£2,400,000—and that was but a part of the Macedonian treasure; the rest
was dissipated by the resistance and flight of Perseus.
We may learn from Stanyan that the Canton of Berne had £300,000 lent
at interest, and had above six times as much in their treasury. Here,
then, is a sum hoarded of £1,800,000 sterling, which is at least
quadruple of what should naturally circulate in such a petty state;
and yet no one who travels into the Pais de Vaux, or any part of that
canton, observes any want of money more than could be supposed in a
country of that extent, soil, and situation. On the contrary, there are
scarce any inland provinces in the countries of France or Germany where
the inhabitants are at this time so opulent, though that canton has
vastly increased its treasure since 1714, the time when Stanyan wrote
his judicious account of Switzerland.[21]
The account given by Appian of the treasure of the Ptolemies is so
prodigious that one cannot admit of it, and so much the less because
the historian says the other successors of Alexander were all so
frugal, and had many of them treasures not much inferior; for this
saving humour of the neighbouring princes must necessarily have checked
the frugality of the Egyptian monarchs, according to the foregoing
theory. The sum he mentions is 740,000 talents, or £191,166,666 13s.
4d., according to Dr. Arbuthnot’s computation; and yet Appian says that
he extracted his account from the public records, and he was himself a
native of Alexandria.
From these principles we may learn what judgment we ought to form of
those numberless bars, obstructions, and imposts which all nations of
Europe, and none more than England, have put upon trade, from an
exorbitant desire of amassing money, which never will heap up beyond
its level while it circulates; or from an ill-grounded apprehension of
losing their specie, which never will sink below it. Could anything
scatter our riches, it would be such impolitic contrivances. But this
general ill effect, however, results from them, that they deprive
neighbouring nations of that free communication and exchange which the
Author of the world has intended, by giving them soils, climates, and
geniuses so different from each other.
Our modern politics embrace the only method of banishing money—the
using paper-credit; they reject the only method of amassing it, the
practice of hoarding; and they adopt a hundred contrivances which
serve to no purpose but to check industry, and rob ourselves and our
neighbours of the common benefits of art and nature.
All taxes, however, upon foreign commodities are not to be regarded
as prejudicial or useless, but those only which are founded on the
jealousy above mentioned. A tax on German linen encourages home
manufactures, and thereby multiplies our people and industry; a tax on
brandy increases the sale of rum, and supports our southern colonies.
And as it is necessary imposts should be levied for the support of
government, it may be thought more convenient to lay them on foreign
commodities, which can easily be intercepted at the port and subjected
to the impost. We ought, however, always to remember the maxim of Dr.
Swift, that, in the arithmetic of the customs, two and two make not
four, but often make only one. It can scarcely be doubted but if the
duties on wine were lowered to a third, they would yield much more to
the Government than at present; our people might thereby afford to
drink commonly a better and more wholesome liquor, and no prejudice
would ensue to the balance of trade, of which we are so jealous. The
manufacture of ale beyond the agriculture is but inconsiderable, and
gives employment to few hands. The transport of wine and corn would not
be much inferior.
But are there not frequent instances, you will say, of states and
kingdoms which were formerly rich and opulent, and are now poor
and beggarly? Has not the money left them with which they formerly
abounded? I answer, if they lose their trade, industry, and people,
they cannot expect to keep their gold and silver, for these precious
metals will hold proportion to the former advantages. When Lisbon
and Amsterdam got the East India trade from Venice and Genoa, they
also got the profits and money which arose from it. Where the seat
of government is transferred, where expensive armies are maintained
at a distance, where great funds are possessed by foreigners, there
naturally follows from these causes a diminution of the specie. But
these, we may observe, are violent and forcible methods of carrying
away money, and are in time commonly attended with the transport of
people and industry; but where these remain, and the drain is not
continued, the money always finds its way back again, by a hundred
canals of which we have no notion or suspicion. What immense treasures
have been spent, by so many nations, in Flanders since the revolution,
in the course of three long wars! More money perhaps than the half of
what is at present in all Europe. But what has now become of it? Is it
in the narrow compass of the Austrian provinces? No, surely; it has
most of it returned to the several countries whence it came, and has
followed that art and industry by which at first it was acquired. For
above a thousand years the money of Europe has been flowing to Rome by
an open and sensible current; but it has been emptied by many secret
and insensible canals, and the want of industry and commerce renders at
present the papal dominions the poorest territories in all Italy.
In short, a government has great reason to preserve with care its
people and its manufactures. Its money it may safely trust to the
course of human affairs, without fear or jealousy; or if it ever give
attention to this latter circumstance, it ought only to be so far as it
affects the former.
NOTES, OF THE BALANCE OF TRADE.
[17] There is another cause, though more limited in its operation,
which checks the wrong balance of trade, to every particular nation to
which the kingdom trades. When we import more goods than we export,
the exchange turns against us, and this becomes a new encouragement to
export, as much as the charge of carriage and insurance of the money
which becomes due would amount to. For the exchange can never rise
higher than that sum.
[18] It must carefully be remarked that throughout this discourse,
wherever I speak of the level of money I mean always its proportional
level to the commodities, labour, industry, and skill which is in the
several states; and I assert that where these advantages are double,
treble, quadruple to what they are in the neighbouring states, the
money infallibly will also be double, treble, quadruple. The only
circumstance that can obstruct the exactness of these proportions is
the expense of transporting the commodities from one place to another,
and this expense is sometimes unequal. Thus the corn, cattle, cheese,
butter of Derbyshire cannot draw the money of London so much as the
manufactures of London draw the money of Derbyshire. But this objection
is only a seeming one, for so far as the transport of commodities is
expensive, so far is the communication between the places obstructed
and imperfect.
[19] We observed in essay _Of Money_, that money, when increasing,
gives encouragement to industry during the interval between the
increase of money and the rise of the prices. A good effect of this
nature may follow too from paper-credit; but it is dangerous to
precipitate matters at the risk of losing all by the failing of that
credit, as must happen upon any violent shock in public affairs.
[20] There were about eight ounces of silver in a pound sterling in
Harry VII.’s time.
[21] The poverty which Stanyan speaks of is only to be seen in the most
mountainous cantons, where there is no commodity to bring money; and
even there the people are not poorer than in the diocese of Saltsburg
on the one hand, or Savoy on the other.
OF THE JEALOUSY OF TRADE.
Having endeavoured to remove one species of ill-founded jealousy which
is so prevalent among commercial nations, it may not be amiss to
mention another which seems equally groundless. Nothing is more usual,
among states which have made some advances in commerce, than to look on
the progress of their neighbours with a suspicious eye, to consider all
trading states as their rivals, and to suppose that it is impossible
for any of them to flourish but at their expense. In opposition to
this narrow and malignant opinion, I will venture to assert that the
increase of riches and commerce in any one nation, instead of hurting,
commonly promotes the riches and commerce of all its neighbours;
and that a state can scarcely carry its trade and industry very far
where all the surrounding states are buried in ignorance, sloth, and
barbarism.
It is obvious that the domestic industry of a people cannot be hurt
by the greatest prosperity of their neighbours; and as this branch of
commerce is undoubtedly the most important in any extensive kingdom,
we are so far removed from all reason of jealousy. But I go farther,
and observe that where an open communication is preserved among
nations, it is impossible but the domestic industry of every one must
receive an increase from the improvements of the others. Compare the
situation of Great Britain at present with what it was two centuries
ago. All the arts, both of agriculture and manufactures, were then
extremely rude and imperfect. Every improvement which we have since
made has arisen from our imitation of foreigners, and we ought so far
to esteem it happy that they had previously made advances in arts and
ingenuity. But this intercourse is still upheld to our great advantage.
Notwithstanding the advanced state of our manufactures, we daily
adopt in every art the inventions and improvements of our neighbours.
The commodity is first imported from abroad, to our great
discontent, while we imagine that it drains us of our money; afterwards
the art itself is gradually imported, to our visible advantage. Yet we
continue still to repine that our neighbours should possess any art,
industry, and invention, forgetting that had they not first instructed
us we should have been at present barbarians, and did they not still
continue their instructions, the arts must fall into a state of
languor, and lose that emulation and novelty which contribute so much
to their advancement.
The increase of domestic industry lays the foundation of foreign
commerce. Where a great number of commodities are raised and perfected
for the home-market there will always be found some which can be
exported with advantage. But if our neighbours have no art nor
cultivation, they cannot take them, because they will have nothing to
give in exchange. In this respect, states are in the same condition
as individuals. A single man can scarce be industrious where all his
fellow-citizens are idle. The riches of the several members of a
community contribute to increase my riches, whatever profession I may
follow. They consume the produce of my industry, and afford me the
produce of theirs in return.
Nor need any state entertain apprehensions that their neighbours will
improve to such a degree in every art and manufacture as to have no
demand from them. Nature, by giving a diversity of geniuses, climates,
and soils to different nations, has secured their mutual intercourse
and commerce, as long as they all remain industrious and civilized.
Nay, the more the arts increase in any state, the more will be its
demands from its industrious neighbours. The inhabitants, having become
opulent and skilful, desire to have every commodity in the utmost
perfection; and as they have plenty of commodities to give in exchange,
they make large importations from every foreign country. The industry
of the nations from whom they import receives encouragement; their own
is also increased by the sale of the commodities which they give in
exchange.
But what if a nation has any staple commodity, such as the woollen
manufacture is to England? Must not the interfering of their neighbours
in that manufacture be a loss to them? I answer that when any commodity
is denominated the staple of a kingdom, it is supposed that that
kingdom has some peculiar and natural advantages for raising the
commodity; and if, notwithstanding these advantages, they lose such a
manufactory, they ought to blame their own idleness or bad government,
not the industry of their neighbours. It ought also to be considered
that by the increase of industry among the neighbouring nations the
consumption of every particular species of commodity is also increased;
and though foreign manufactures interfere with us in the market, the
demand for our product may still continue, or even increase. And even
should it diminish, ought the consequence to be esteemed so fatal? If
the spirit of industry be preserved, it may easily be diverted from
one branch to another, and the manufactures of wool, for instance, be
employed in linen, silk, iron, or other commodities for which there
appears to be a demand. We need not apprehend that all the objects
of industry will be exhausted, or that our manufacturers, while they
remain on an equal footing with those of our neighbours, will be in
danger of wanting employment; the emulation among rival nations serves
rather to keep industry alive in all of them. And any people is happier
who possess a variety of manufactures, than if they enjoyed one single
great manufacture, in which they are all employed. Their situation is
less precarious, and they will feel less sensibly those revolutions and
uncertainties to which every particular branch of commerce will always
be exposed.
The only commercial state which ought to dread the improvements and
industry of their neighbours is such a one as Holland, which enjoying
no extent of land, nor possessing any native commodity, flourishes
only by being the brokers, and factors, and carriers of others. Such a
people may naturally apprehend that as soon as the neighbouring
states come to know and pursue their interest, they will take into
their own hands the management of their affairs, and deprive their
brokers of that profit which they formerly reaped from it. But though
this consequence may naturally be dreaded, it is very long before it
takes place; and by art and industry it may be warded off for many
generations, if not wholly eluded. The advantage of superior stocks
and correspondence is so great that it is not easily overcome; and
as all the transactions increase by the increase of industry in the
neighbouring states, even a people whose commerce stands on this
precarious basis may at first reap a considerable profit from the
flourishing condition of their neighbours. The Dutch, having mortgaged
all their revenues, make not such a figure in political transactions
as formerly; but their commerce is surely equal to what it was in the
middle of the last century, when they were reckoned among the great
powers of Europe.
Were our narrow and malignant politics to meet with success, we should
reduce all our neighbouring nations to the same state of sloth and
ignorance that prevails in Morocco and the coast of Barbary. But what
would be the consequence? They could send us no commodities, they could
take none from us. Our domestic commerce itself would languish for want
of emulation, example, and instruction; and we ourselves should soon
fall into the same abject condition to which we had reduced them. I
shall therefore venture to acknowledge that not only as a man, but as a
British subject, I pray for the flourishing commerce of Germany, Spain,
Italy, and even France itself. I am at least certain that Great Britain
and all these nations would flourish more did their sovereigns and
ministers adopt such enlarged and benevolent sentiments towards each
other.
OF THE BALANCE OF POWER.
It is a question whether the _idea_ of the balance of power be owing
entirely to modern policy, or whether the _phrase_ only has been
invented in these latter ages. It is certain that Xenophon, in his
institution of Cyrus, represents the combination of the Asiatic powers
to have arisen from a jealousy of the increasing force of the Medes
and Persians; and though that elegant composition should be supposed
altogether a romance, this sentiment, ascribed by the author to the
Eastern princes, is at least a proof of the prevailing notions of
ancient times.
In all the politics of Greece the anxiety with regard to the balance
of power is most apparent, and is expressly pointed out to us even by
the ancient historians. Thucydides represents the league which was
formed against Athens, and which produced the Peloponnesian war, as
entirely owing to this principle. And after the decline of Athens,
when the Thebans and Lacedemonians disputed for sovereignty, we find
that the Athenians (as well as many other republics) threw themselves
always into the lighter scale, and endeavoured to preserve the balance.
They supported Thebes against Sparta, till the great victory gained by
Epaminondas at Leuctra, after which they immediately went over to the
conquered, from generosity as they pretended, but in reality from their
jealousy of the conquerors.
Whoever will read Demosthenes’ oration for the Megalopolitans may see
the utmost refinements on this principle which ever entered into the
head of a Venetian or English speculatist; and upon the first rise of
the Macedonian power, this orator immediately discovered the danger,
sounded the alarm through all Greece, and at last assembled that
confederacy under the banners of Athens which fought the great and
decisive battle of Chæronea.
It is true the Grecian wars are regarded by historians as wars of
emulation rather than of politics, and each state seems to have had
more in view the honour of leading the rest than any well-grounded
hopes of authority and dominion. If we consider, indeed, the small
number of inhabitants in any one republic compared to the whole,
the great difficulty of forming sieges in those times, and the
extraordinary bravery and discipline of every freeman among that noble
people, we shall conclude that the balance of power was of itself
sufficiently secured in Greece, and needed not to be guarded with that
caution which may be requisite in other ages. But whether we ascribe
the shifting sides in all the Grecian republics to jealous emulation or
cautious politics, the effects were alike, and every prevailing power
was sure to meet with a confederacy against it, and that often composed
of its former friends and allies.
The same principle—call it envy or prudence—which produced the
ostracism of Athens and petalism of Syracuse, and expelled every
citizen whose fame or power overtopped the rest—the same principle, I
say, naturally discovered itself in foreign politics, and soon raised
enemies to the leading state, however moderate in the exercise of its
authority.