markitect-main/examples/infospace-with-history/artifacts/sources/book-4-chapter-01.md

id, title, book, chapter, artifact_type

id	title	book	chapter	artifact_type
book-4-chapter-01	OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM.	4	1	content

CHAPTER I. OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE SYSTEM.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  The restraints upon importation were of two kinds.

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

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

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

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

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

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

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

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

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