en differents endroits, e't que W. of N. bk. iv. ch. i. vol. ii. p. 15.
200 PART II: POLICE riches of a country consists in money, that when a person retires from trade he turns his stock immediately into cash. It is plain, however, that the reason of this is that as money is the instrument of commerce, a man can change it for the necessaries and elegancies of life more easily than anything else. Even the miser who locks up his gold in his chest has this end in view. No man in his senses hoards up money for its own sake, but he considers that by keeping money always by him, he has it in his power to supply at once all the necessities of himself and his family.
This opinion that riches consist in money, as it is absurd in speculation, so it has given occasion to many prejudi cial errors in practice, some of which are the following.
[jj 10. Of Prohibiting the Exportation of Coin] It was owing to these tenets that the government prohibited the exportation of coin \ which prohibition has been extremely hurtful to the commerce of the country, because whatever quantity of money there is in any country above what is sufficient for the circulation is merely a dead stock.
In King William's time there were two species of coin, milled and unmilled. The unmilled was frequently clipped by different persons in its circulation. This occasioned frequent disorders among the people, and therefore the parliament ordered all the clipped money to be brought into the mint, and the government was at the expense of recoining it, which operation cost them about two millions. As they had been at this expense, they thought it just and proper to prohibit the exportation of money for the future2. The merchants, however, 1 MS. reads 'corn.' be supplied by the words, 'Till 2 There is evidently an omission the Restoration, indeed, it had at this point which may perhaps been unlawful to export any gold CHEAPNESS OR PLENTY 2OI complained of this hardship, and were then allowed to export money to a small extent1. The great complaint, however, was always scarcity of money. In order to remedy this, the government established a common office for coining money where every one might get their gold and silver turned into coin without any expense 2. The consequence of this was that as coin was of no more value than bullion, a great deal of coin was melted down and exported. To prevent this it was rendered felony to melt coin:!; but it is so simple an operation, and so easily gone about, that the law was easily eluded. The im mediate effect of this regulation was that more coin was exported than ever. This might have been easily prevented by fixing a certain price upon the coinage of bullion, or by ordaining the master of the mint to be paid by the persons who brought their money to be coined; but such a regulation was never thought of.
Any regulation of the above kind is very absurd, for there is no fear if things be left to their free course that any nation will want money sufficient for the circulation of their commodities, and every prohibition of exportation is always ineffectual, and very often occasions the exportation of more than otherwise would be. Suppose, for instance, the Portuguese prohibited from exporting their money by a capital punishment. As they have few goods to give in exchange for ours, their foreign trade must cease; or if they attempt to smuggle, the British merchant or silver.' See 9 Ed. Ill, st. 2, cap. 5. Above, p. 59; W. of N.
cap. i, 2 Hen. VI, cap. 6, and the bk. iv. ch. vi. vol. ii. p. 131.
summary in Hale, History of the 3 To melt coin, though punish- Pleas of the Crown, 1736, vol. i. able, does not appear to have ever pp. 655, 656. been felony. The act referred to 1 This probably refers to 15 is probably 6& 7 Will. Ill, cap. 17, Car. II, cap. 7, which allowed the of which § 2 is directed against exportation of foreign coin and the practice of making ingots in bullion. imitation of the Spanish. For the 2 Free and gratuitous coinage explanation of the mistake see was established by i8& 19 Car. II, above, p. 59, note 5.
must lay such a price upon his goods as will be sufficient to reward him for the risk he runs of being detected, and the Portuguese merchant, being obliged to buy his goods too dear, must be a loser. In general, every prohibition of this kind hurts the commerce of a country. Every unnecessary accumulation of money is a dead stock which might be employed in enriching the nation by foreign commerce. It likewise raises the price of goods and makes the country undersold at foreign markets.
It is to be observed that prohibiting the exportation of money is really one great cause of the poverty of Spain and Portugal. When they got possession of the mines of Mexico and Peru, they thought they could command all Europe by the continual supplies which they received from thence, if they could keep the money among them, and therefore they prohibited the exportation of it. But this had a quite contrary effect, for when money is, as it were, dammed up to an unnatural height, and there is more than the circulation requires, the consequences are very unfavourable to the country. For it is impossible that the exportation of gold and silver can be wholly stopped, as the balance of trade must be against them, that is, they must buy more than they sell, and it is in dispensably necessary that this balance be paid in money. Every commodity rises to an extravagant height. The Portuguese pay for English cloth, additional to the natural price of it, the expense and risk of carrying it there, for nobody ever saw a Spanish or Portuguese ship in a British harbour. All the goods sent to those countries are carried by ourselves and consigned to the British factors, to be disposed of by them. But besides the carriage and insurance, the British merchant must be paid for the risk of having his money seized in Portugal, in consequence of the prohibition. All risk of forfeiture or penalty must lie upon the goods l. This has a miserable 1 Law, Money and Trade Considered, ch. ii. 2nd ed. pp. 21, 22.
CHEAPNESS OR PLENTY 203 effect upon the domestic industry of those countries, and has put a stop to their manufactures. Nobody ever saw a piece of Spanish cloth in any other country, yet they have the best materials in the world, and with the same art that we have, might monopolise the trade of Europe. It drew the attention of the nations who trade with them in these commodities, when a general, on a certain occasion, presented to his majesty the regiment of which he had the command clothed in the manufactures of Spain. In general they export no manufactured com modities, swords and armour excepted, as they have confessedly the best steel in the world, but only the spontaneous productions of the country, such as fruits and wines.
Regulations of a similar nature were made in Britain in King William's time1. Money was thought to constitute opulence, and therefore the accumulation of it commanded the whole of the public attention. They coined all money brought in for nothing, and the expenses of coinage, which amounted to about £140,000 2, were entirely thrown away; and, besides, great encouragement was given to exportation, because, as gold and silver were coined for nothing, coined money could never be dearer than bullion. As the exportation of bullion was free, they melted down the coin and sent it abroad. At present there is a great temptation to such practices, for an oz. of pure silver at mint price is exactly valued at 55. 2<^., but bullion is often bought at 55. 6d. As nothing is lost in melting, here is a profit of 4^. per oz. It is on this account that we seldom or never see a new shilling, and it is one of the causes that silver is so scarce in proportion to gold:t.
1 The lecturer now returns from too little. In Lord Liverpool's the digression contained in the Treatise on the Coins of the Realm, last two paragraphs. 1805, p. 75, the Mint charges are 2 MS. reads 'fourteen thousand stated to have been,£179,431 6s. pounds,' which is obviously much 3 See above, p. 190 and notes.
204 PART II I POLICE [$ ii. Of the Balance of Trade I\ The idea of public opulence consisting in money has been productive of other bad effects. Upon this principle most pernicious regulations have been established. Those species of commerce which drain us of our money are thought disadvantageous, and those which increase it beneficial, therefore the former are prohibited and the latter encouraged. As France is thought to produce more of the elegancies of life than this country, and as we take much from them, and they need little from us, the balance of trade is against us, and therefore almost all our trade with France is prohibited by great taxes and duties on importation. On the other hand, as Spain and Portugal take more of our commodities than we of theirs, the balance is in our favours, and this trade is not only allowed, but encouraged. The absurdity of these regulations will appear on the least reflection. All commerce that is carried on betwixt any two countries must necessarily be advantageous to both. The very intention of commerce is to exchange your own commodities for others which you think will be more convenient for you. When two men trade between themselves it is undoubtedly for the advantage of both. The one has perhaps more of one species of commodities than he has occasion for, he there fore exchanges a certain quantity of it with the other, for another commodity that will be more useful to him. The other agrees to the bargain on the same account, and in this manner the mutual commerce is advantageous to both. The case is exactly the same betwixt any two nations *. The goods which the English merchants want to import from France are certainly more valuable to them than what they give for them. Our very desire to purchase them shows that we have more use for them than either 1 W. of N. bk. iv. ch. ii. vol. i. p. 29.
CHEAPNESS OR PLENTY 205 the money or the commodities which we give for them. It may be said indeed that money lasts for ever, but that claret and cambrics are soon consumed. This is true: but what is the intention of industry if it be not to produce those things which are capable of being used, and are conducive to the convenience and comfort of human life? Unless we use the produce of our industry, unless we can subsist more people in a better way, what avails it? Besides, if we have money to spend upon foreign com modities, what purpose serves it to keep it in the country? If the circulation of commodities require it, there will be none to spare; and if the channel of circulation be full, no more is necessary. And if only a certain sum be necessary for that purpose, why throw more into it?
Again, by prohibiting the exportation of goods to foreign markets, the industry of the country is greatly discouraged. It is a very great motive to industry, that people have it in their power to exchange the produce of their labour for what they please, and wherever there is any restraint on people in this respect, they will not be so vigorous in improving manufactures. If we be prohibited to send corn and cloth to France, that industry is stopped which raises corn and prepares cloth for the French market. It may be said indeed that if we were allowed to trade with France we would not exchange our commodities with theirs, but our money, and thus human industry is by no means discouraged; but if we attend to it, we shall find that it comes to the same thing at last. By hindering people to dispose of their money as they think proper, you discourage those manufactures by which this money is gained. All jealousies therefore between different nations, and prejudices of this kind, are extremely [hurtful] to commerce, and limit public opulence '. This is always the case betwixt France and us in the time of war.
1 Hume, ' Of the Jealousy of Trade,' in Essays and Treatises, 1758, passim.
205 PART II: POLICE In general we may observe that these jealousies and prohibitions are most hurtful to the richest nations, and that in proportion as a free commerce would be advan tageous. When a rich man and a poor man deal with one another, both of them will increase their riches, if they deal prudently, but the rich man's stock will increase in a greater proportion than the poor man's. In like manner when a rich and a poor nation engage in trade, the rich nation will have the greatest advantage, and therefore the prohibition of this commerce is most hurtful to it of the two. All our trade with France is prohibited by the high duties imposed on every French commodity imported. It would, however, have been better police to encourage our trade with France. If any foreign commerce is to be pro hibited, it ought to be that with Spain and Portugal. This would have been most advantageous to England. France is much more populous, a more extensive country, farther advanced in arts and manufactures of every kind, and the industry which a commerce with that country would have excited1 at home would have been much greater. Twenty millions of people perhaps in a great society, working as it were to one another's hands, from the nature of the division of labour before explained, would produce a thousand times more goods than another society con sisting only of two or three millions. It were happy therefore, both for this country and for France, that all national prejudices were rooted out, and a free and uninterrupted commerce established.
It may be observed in general that we never heard of any nation ruined by this balance of trade. When Gee published his book, the balance with all nations was against us, except Spain and Portugal2. It was then 1 MS. reads 'exerted.' convenient to reject as untrust- 2 And Holland, according to worthy in this case. Trade and the Custom House accounts, Navigation, chs. xii, xxxiv. which, however, Gee finds it CHEAPNESS OR PLENTY 207 thought that in a few years we would be reduced to an absolute state of poverty. This indeed has been the cry of all political writers since the time of Charles II; notwithstanding all this, we find ourselves far richer than before, and, when there is occasion for it, we can raise much more money than ever has been done. A late minister of state levied in one year twenty-three millions ' with greater ease than Lord Godolphin could levy six in Queen Anne's time. The French and Dutch writers, embracing the same principle, frequently alarmed their country with the same groundless terror, but they still continue to flourish. It is to be observed that the poverty of a nation can never proceed from foreign trade if carried on with wisdom and prudence. The poverty of a nation proceeds from much the same causes with those which render an individual poor. When a man consumes more than he gains by his industry, he must impoverish himself unless he has some other way of subsistence. In the same manner, if a nation consume more than it produces, poverty is inevitable; if its annual produce be ninety millions and its annual consumption an hundred, then it spends, eats, and drinks, tears, wears, ten millions more than it produces, and its stock of opulence must gradually [go] to nothing.
[§12. Of the Opinion that no Expense at Home can be hurtful^ There is still another bad effect proceeding from that absurd notion, that national opulence consists in money. It is commonly imagined that whatever people 1 For the service of the year before Adam Smith left Glasgow 1760,£19,616,119, and for that of (Sinclair, History of the Public 1761,£18,299,153, were voted, and Revenue, pt. iii. 1790, p. 69). Pitt these amounts were far in excess resigned Oct. 5, 1761, but New- of the votes for any other year castle continued in office till May, 208 PART II: POLICE spend in their own country cannot diminish public opulence, if you take care of exports and imports. This is the foundation of Dr. Mandeville's system that private vices are public benefits: what is spent -at home is all spent among ourselves, none of it goes out of the country l. But it is evident that when any man tears, and wears, and spends his stock, without employing himself in any species of industry, the nation is at the end of the year so much the poorer by it. If he spend only the interest of the money he does no harm, as the capital still remains, and is employed in promoting industry, but if he spend the capital, the whole is gone. To illustrate this let us make a supposition, that my father at his death, instead of a thousand pounds in cash, leaves me the necessaries and conveniences of life to the same value, which is precisely the same as if he left it in money, because I afterwards purchase them in money. I get a number of idle folks about me. and eat, drink, tear, and wear, till the whole is consumed. By this, I not only reduce myself to want, but certainly rob the public stock of a thousand pounds, as it is spent and nothing produced for it. As a farther illustration of the hurt which the public receives from such practices, let us suppose that this island was invaded by a numerous band of Tartars, a people who are still in the state of shepherds, a people who lead a roving life, and have little or no idea of industry. Here they would find all commodities for the taking, they would put on fine clothes, eat, drink, tear, and wear everything they laid their hands upon. The consequence would be that from the highest degree of opulence the whole country would be reduced to the 1762,50 that either 1760 or 1761 'Levied1 should be 'raised,' as may be referred to. In IV. of N. more than half the amounts bk. iv. ch. i. vol. ii. p. 17, it is were borrowed, remarked that 'the expense of J In Fable of the Bees, pt. i. Re- 1761, for example, amounted to mark (L), Mandeville rather more than nineteen millions.' argues against the doctrine.
CHEAPNESS OR PLENTY 209 lowest pitch of misery, and brought back to its ancient state. The thirty millions of money would probably re main for some time, but all the necessaries of life would be consumed. This shows the absurdity of that opinion that no home consumption can hurt the opulence of a country.
Upon this principle that no public expense employed at home can be hurtful, a war in Germany is thought a dreadful calamity, as it drains the country of money, and a land war is always thought more prejudicial than a sea one for the same reason; but upon reflection, we will find that it is the same thing to the nation, how or where its stock be spent. If I purchase a thousand pounds' worth of French wines, and drink them all when they come home, the country is two thousand pounds poorer, because both the goods and money are gone; if I spend a thousand pounds worth of goods at home upon myself the country is only deprived of one thousand pounds, as the money still remains; but in maintaining an army in a distant war it is the same thing whether we pay them in goods or money, because the consumption is the same at an}' rate. Perhaps it is the better police to pay them in money, as goods are better fitted for the purposes of life at home1. For the same reason there is no dif ference between land and sea wars, as is commonly imagined.
From the above considerations it appears that Britain * should by all means be made a free port, that there should be no interruptions of any kind made to foreign trade, that if it were possible to defray the expenses of govern ment by any other method, all duties, customs, and excise should be abolished, and that free commerce and liberty of exchange should be allowed with all nations, and for all things.
1 In IV. of N. bk. iv. ch. i. vol. ii. to be the best medium for de- pp. 18, 19, ' the finer and more fraying the expense of distant improved manufactures ' are said wars.
P 210 PART II: POLICE But still further, and on the same principles as above, an apology is made for the public debt. Say they, though we [owe] at present above a hundred millions1, we owe it to ourselves, or at least very little of it to foreigners. It is just the right hand owing the left, and on the whole can be little or no disadvantage. But [it] is to be considered that the interest of this hundred millions is paid by industrious people, and given to support idle people who are employed in gathering it. Thus industry is taxed to support idleness. If the debt had not been contracted, by prudence and economy the nation would have been much richer than at present. Their industry would not be hurt by the oppression of those idle people who live upon it. Instead of the brew7er paying taxes which are often improper, the stock might have been lent out to such industrious people as would have made six or seven per cent, by it, and have given better interest than the government does: this stock would then have been employed for the country['s] welfare. When there are such heavy taxes to pay, every merchant must carry on less trade than he would otherwise do; he has his taxes to pay before he sell any of his commodities. This narrows, as it were, his stock, and hinders his trade from being so extensive as it otherwise would be'-. To stop this clamour, Sir Robert Walpole endeavoured to show that the public debt was no inconvenience:!, though it is to 1 According to W. of N. bk. v. occasion (see Historical Register, ch. iii. vol. ii. p. 523, the debt in 1733, pp. 218, 219, 222, 223) or in 1764 amounted to ^139,516,807. his pamphlet, Some Considerations '2 W. of N. bk. v. ch. iii. vol. ii. concerning the Public Funds, the pp. 526-529. Public Revenues, and the Annual 3 Walpole took half a million Supplies, 1735. Hume, however, in from the Sinking Fund in 1733, the earlier editions of his Political but he does not appear to have Discourses, said that arguments in contended that the debt was no favour of ' the new paradox, that inconvenience either in debate in public encumbrances are of themthe House of Commons on that selves advantageous, independent CHEAPNESS OR PLENTY 211 be supposed that a man of his abilities saw the contrary himself.
[§ 13. Of tJie Scheme of Mr. Law."]
The last bad effect that shall be taken notice of is the notion of Mr. Law, a Scotch merchant. He thought that national opulence consists in money, and that the value of gold and silver is arbitrary, and depends on constitution and agreement. He imagined that the idea of value might be brought to paper, and it preferred to money. If this could be done, he thought it would be a great convenience, as the government then might do what it pleased, raise armies, pay soldiers, and be at any expense whatever. Mr. Law proposed his scheme to the Scotch parliament in 1701 J. It was rejected, and he went over to France, where his project was relished by the Duke of Orleans. In this book2 he agrees with the fore-mentioned writers that, the balance of trade being against a nation, it must soon be drained of its money. In order to turn the balance of trade in our favours, he proposed to the Scotch Parliament the following scheme: of the necessity of contracting Green and T. H. Grose, 1875, vol. them,' might naturally have passed i. pp. 362, 363). for trials of wit among rhetori- J A mistake for' 1705.' In the cians, ' had we not seen such ab- 2nd edition of Monty and Trade, surd maxims patronized by great 1720, the bookseller requests the ministers...And these puzzling reader to receive favourably ' the arguments (for they deserve not following pages, which consist of the name of specious), though some heads of a scheme which they could not be the foundation Mr. Law proposed to the Parlia- of Lord Orford's conduct— for lie ment of Scotland in the year 1705.' had more sense— served at least The year given in the text above to keep his partisans in counten- was the date of Law's Proposals ance and perplex the understand- and Reasons for Constituting a ing of the nation.' ' Of Public Council of Trade in Scotland. Credit,' Political Discourses, 1752, 2 I.e. Money and Trade Con- p. 126. After 1768 this reference sidered: with a Proposal for sup- to Lord Orford was omitted (see plying the Nation with Money, Hume's Essays, edited by T. H. 1705.
212 PART II I POLICE As there was little gold or silver in this country he thought they might fall upon some other method of creating money, independent of it, to wit, by paper. On this account he proposed the erecting of a land bank at Edinburgh, in which it is to be observed, he falls into many blunders concerning tenures and the nature of property. At this bank they were to keep by them only twenty or thirty thousand pounds to answer small demands, and to give out notes for land. For two acres of arable land they were to issue out a note of equal value, and if any extraordinary demand was made upon them, they would pay so much of it in money, and so much in land. By this means in a very short time the whole land of Scotland would go from hand to hand, as a twenty-shilling note does1.