If Europe has derived so many advantages from the Amer- ican trade, it seems natural to imagine that Spain must have derived much greater.^ She drew from the newly discovered world so prodigious a quantity of gold and silver, that all we had before could not be compared with it.
But (what one could never have expected) this great king- dom was everywhere baffled by its misfortunes. Philip II, who succeeded Charles V, was obliged to make the celebrated bank- ruptcy known to all the world. There never was a prince who suffered more from the murmurs, the insolence, and the revolt of troops constantly ill paid.
wTom. ii. p. 170. about twenty years ago; which has been ;fThis has been already shown in a almost entirely incorporated in the small treatise written by the author present work.
370 MONTESQUIEU From that time the monarchy of Spain has been incessantly declining. This has been owing to an interior and physical de- fect in the nature of those riches, which renders them vain — a defect which increases every day.
Gold and silver are either a fictitious or a representative wealth. The representative signs of wealth are extremely dur- able, and, in their own nature, but little subject to decay. But the more they are multipHed, the more they lose their value, because the fewer are the things which they represent.
The Spaniards, after the conquest of Mexico and Peru, aban- doned their natural riches, in pursuit of a representative wealth which daily degraded itself. Gold and silver were extremely scarce in Europe, and Spain becoming all of a sudden mistress of a prodigious quantity of these metals, conceived hopes to which she had never before aspired. The wealth she found in the conquered countries, great as it was, did not, however, equal that of her mines. The Indians concealed part of them; and besides, these people, who made no other use of gold and silver than to give magnificence to the temples of their gods and to the palaces of their kings, sought not for it with an avarice like ours. In short, they had not the secret of drawing these metals from every mine; but only from those in which the separation might be made with fire: they were strangers to the manner of making use of mercury, and perhaps to mercury itself.
However, it was not long before the specie of Europe was doubled; this appeared from the price of commodities, which everywhere was doubled.
The Spaniards raked into the mines, scooped out mountains, invented machines to draw out water, to break the ore, and separate it; and as they sported with the lives of the Indians, they forced them to labor without mercy. The specie of Eu- rope soon doubled, and the profit of Spain diminished in the same proportion; they had every year the same quantity of metal, which had become by one-half less precious.
In double the time the specie still doubled, and the profit still diminished another half.
It diminished even more than half: let us see in what man- ner.
To extract the ^old frpm the mines, to give it the requisite THE SPIRIT OF LAWS preparations, and to import it into Europe, must be attended with some certain expense. I will suppose this to be as i to 64. When the specie was once doubled, and consequently became by one-half less precious, the expense was as 2 to 64. Thus the galoons which brought to Spain the same quantity of gold, brought a thing which really was of less value by one-half, though the expenses attending it had been twice as high.
If we proceed doubHng and doubling, we shall find in this progression the cause of the impotency of the wealth of Spain.
It is about two hundred years since they have worked their Indian mines. I suppose the quantity of specie at present in the trading world is to that before the discovery of the Indies as 32 is to I; that is, it has been doubled five times: in two hundred years more the same quantity will be to that before the dis- covery as 64 is to I; that is, it will be doubled once more. Now, at present, fifty quintals of ore yield four, five, and six ounces of gold; y and when it yields only two, the miner receives no more from it than his expenses. In two hundred years, when the miner will extract only four, this too will only defray his charges. There will then be but little profit to be drawn from the gold mines. The same reasoning will hold good of silver, except that the working of the silver mines is a little more ad- vantageous than those of gold.
But, if mines should be discovered so fruitful as to give a much greater profit, the more fruitful they may be, the sooner the profit will cease.
The Portuguese in Brazil have found mines of gold so rich,5 that they must necessarily very soon make a considerable diminution in the profits of those of Spain, as well as in their own.
I have frequently heard people deplore the blindness of the Court of France, who repulsed Christopher Columbus, when he made the proposal of discovering the Indies.^ Indeed they did, though perhaps without design, an act of the greatest wis- dom. Spain has behaved like the foolish king who desired that y See Frezier's " Voyages." were far from being so considerable an s According to Lord Anson, Europe item as they are at present, receives every year from Brazil two a Voltaire deplores the insufficiency of millions sterling in gold, which is found Montesquieu's knowledge upon finance jn sand at the foot of the mountains, or and commerce, saying that these prinin the beds of rivers. When I wrote the ciples were not then discovered, or, at little treatise mentioned in the first note least, had not been developed in his of this chapter the returns from Brazil time.— Ed.
372 MONTESQUIEU everything he touched might be converted into gold, and who was obHged to beg of the gods to put an end to his misery.
The companies and banks estabHshed in many nations have put a finishing stroke to the lowering of gold and silver as a sign of representation of riches; for by new fictions they have multiplied in such a manner the signs of wealth, that gold and' silver having this office only in part have become less precious.
Thus public credit serves instead of mines, and diminishes the profit which the Spaniards drew from theirs.
True it is that the Dutch trade to the East Indies has in- creased, in some measure, the value of the Spanish merchan- dise: b for as they carry bullion, and give it in exchange for the merchandise of the East, they ease the Spaniards of part of a commodity which in Europe abounds too much.
And this trade, in which Spain seems to be only indirectly concerned, is as advantageous to that nation as to those who are directly employed in carrying it on.
From what has been said we may form a judgment of the last order of the Council of Spain, which prohibits the making use of gold and silver in gildings, and other superfluities; a decree as ridiculous as it would be for the states of Holland to prohibit the consumption of spices.
My reasoning does not hold good against all mines; those of Germany and Hungary, which produce little more than the expense of working them, are extremely useful. They are found in the principal state; they employ many thousand men, who there consume their superfluous commodities, and they are properly a manufacture of the country.
The mines of Germany and Hungary promote the culture of land; the working of those of Mexico and Peru destroys it.
The Indies and Spain are two powers under the same master; but the Indies are the principal, while Spain is only an acces- sory. It is in vain for politics to attempt to bring back the principal to the accessory; the Indies will always draw Spain to themselves.
Of the merchandise, to the value of about fifty millions of livres, annually sent to the Indies, Spain furnishes only two millions and a half: the Indies trade for fifty millions, the Spaniards for two and a half.
h Voltaire holds that the Spaniards that they were obliged to draw such had no manufactures of their own, and supplies from abroad. — Ed.
THE SPIRIT OF LAWS 373 That must be a bad kind of riches which depends on accident, and not on the industry of a nation, on the number of its inhab- itants, and on the cultivation of its lands. The King of Spain, who receives great sums from his custom-house at Cadiz, is in this respect only a rich individual in a state extremely poor. Everything passes between strangers and himself, while his subjects have scarcely any share in it; this commerce is inde- pendent both of the good and bad fortune of his kingdom.
Were some provinces of Castile able to give him a sum equal to that of the custom-house of Cadiz, his power would be much greater; his riches would be the effect of the wealth of the country; these provinces would animate all the others, and they would be altogether more capable of supporting their re- spective charges; instead of a great treasury he would have a great people.
23. — A Problem 23. — A Problem It is not for me to decide the question whether if Spain be not herself able to carry on the trade of the Indies, it would not be better to leave it open to strangers. I will only say that it is for their advantage to load this commerce with as few obstacles as politics will permit. When the merchandise which several nations send to the Indies is very dear, the inhabitants of that country give a great deal of their commodities, which are gold and silver, for very little of those of foreigners; the contrary to this happens when they are at a low price. It would perhaps be of use that these nations should undersell each other, to the end that the merchandise carried to the Indies might be always cheap. These are principles which deserve to be ex- amined, without separating them, however, from other con- siderations: the safety of the Indies, the advantages of only one custom-house, the danger of making great alterations, and the foreseen inconveniences, which are often less dangerous than those which cannot be foreseen.
BOOK XXII OF LAWS IN RELATION TO THE USE OF MONEY I. — The Reason of the Use of Money PEOPLE who have Httle merchandise, as savages, and among civilized nations those who have only two or three species, trade by exchange. Thus the caravans of Moors that go to Timbuctoo, in the heart of Africa, have no need of money, for they exchange their salt for gold. The Moor puts his salt in a heap, and the Negro his dust in an- other; if there is not gold enough, the Moor takes away some of his salt, or the Negro adds more gold, till both parties are agreed.
But when a nation traffics with a great variety of merchan- dise, money becomes necessary; because a metal easily carried from place to place saves the great expenses which people would be obliged to be at if they always proceeded by exchange.
As all nations have reciprocal wants, it frequently happens that one is desirous of a large quantity of the other's merchan- dise, when the latter will have very little of theirs, though with respect to another nation the case is directly opposite. But when nations have money, and proceed by buying and selling, those who take most merchandise pay the balance in specie. And there is this difference, that in the case of buying, the trade carried on is in proportion to the wants of the nation that has the greatest demands; whilst in bartering, the trade is only according to the wants of the nation whose demands are the fewest; without which the latter would be under an impossi- bility of balancing its accounts.
2. — Of the Nature of Money Money is a sign which represents the value of all merchan- dise. Metal is taken for this sign, as being durable,^ because a The salt made use of for this purpose in Abyssinia has this defect, that it is continually wasting away.
THE SPIRIT OF LAWS 375 it consumes but little by use; and because, without being de- stroyed, it is capable of many divisions. A precious metal has been chosen as a sign, as being most portable. A metal is most proper for a common measure, because it can be easily reduced to the same standard. Every state fixes upon it a particular impression, to the end that the form may correspond with the standard and the weight, and that both may be known by in- spection only.
The Athenians, not having the use of metals, made use of oxen,& and the Romans of sheep; but one ox is not the same as another ox in the manner that one piece of metal may be the same as another.
As specie is the sign of the value of merchandise, paper is the sign of the value of specie; and when it is of the right sort, it represents this value in such a manner that as to the effects produced by it there is not the least difference.
In the same manner, as money is the sign and representative of a thing, everything is a sign and representative of money; and the state is in a prosperous condition when on the one hand money perfectly represents all things, and on the other all things perfectly represent money, and are reciprocally the sign of each other; that is, when they have such a relative value that we may have the one as soon as we have the other. This never happens in any other than a moderate government, nor does it always happen there; for example, if the laws favor the dishonest debtor, his effects are no longer a representative or sign of money. With regard to a despotic government, it would be a prodigy did things there represent their sign. Tyranny and distrust make everyone bury their specie; c things therefore are not there the representative of money.
Legislators have sometimes had the art not only to make things in their own nature the representative of specie, but to convert them even into specie, like the current coin. Caesar, when he was dictator, permitted debtors to give their lands in payment to their creditors, at the price they were worth before the civil war.<^ Tiberius ordered that those who desired specie b Herodotus, in " Clio," tells us that c It is an ancient custom in Algiers the Lydians found out the art of coin- for the father of a family to have a ing money; the Greeks learned it from treasure concealed in the earth. — " Histhem: the Athenian coin had the im- tory of the Kingdom of Algiers," by pression of their ancient ox. T have Laugier de Tassis.
seen one of those pieces in the Earl of d Caesar on the " Civil War," book Pembroke's cabinet. III.
376 MONTESQUIEU should have it from the public treasury on binding over their land to double the value.^ Under Caesar the lands were the money which paid all debts; under Tiberius ten thousand ses- terces in land became as current money equal to five thousand sesterces in silver.
The Magna Charta of England provides against the seizing of the lands or revenues of a debtor, when his movable or per- sonal goods are sufficient to pay, and he is willing to give them up to his creditors; thus all the goods of an Englishman rep- resented money.
The laws of the Germans constituted money a satisfaction for the injuries that were committed, and for the sufferings due to guilt. But as there was but very little specie in the country, they again constituted this money to be paid in goods or chat- tels. This we find appointed in a Saxon law, with certain regu- lations suitable to the ease and convenience of the several ranks of people. At first the law declared the value of a sou in cat- tle; f the sou of two tremises answered to an ox of twelve months, or to a ewe with her lamb; that of three tremises was worth an ox of sixteen months. With these people money be- came cattle, goods, and merchandise, and these again became money.
Money is not only a sign of things; it is also a sign and rep- resentative of money, as we shall see in the chapter on ex- change.
3. — Of ideal Money There is both real and ideal money. Civilized nations gen- erally make use of ideal money only, because they have con- verted their real money into ideal. At first their real money was some metal of a certain weight and standard, but soon dis- honesty or want made them retrench a part of the metal from every piece of money, to which they left the same name; for example, from a livre at a pound weight they took half the silver, and still continued to call it a livre; the piece which was the twentieth part of a pound of silver they continued to call a sou, though it is no more the twentieth part of this pound of silver. By this method the livre is an ideal livre, and the sou an ideal sou. Thus of the other subdivisions; and so far may e Tacitus, lib. VI. / " The Laws of the Saxons," chap, xviii.
THE SPIRIT OF LAWS 377 this bd carried that what we call a livre shall be only a small part of the original livre or pound, which renders it still more ideal. It may even happen that we have no piece of money of the precise value of a livre, nor any piece exactly with a sou, then the livre and the sou will be purely ideal. They may give to any piece of money the demonmination of as many livres and as many sous as they please, the variation may be continual, because it is as easy to give another name to a thing as it is difficult to change the thing itself.
To take away the source of this abuse, it would be an ex- cellent law for all countries who are desirous of making com- merce flourish, to ordain that none but real money should be current, and to prevent any methods from being taken to ren- der it ideal.
Nothing ought to be so exempt from variation as that which is the common measure of all.
Trade is in its own nature extremely uncertain; and it is a great evil to add a new uncertainty to that which is founded on the nature of the thing.
4. — Of the Quantity of Gold and Silver While civilized nations are the mistresses of the world, gold and silver, whether they draw it from among themselves, or fetch it from the mines, must increase every day. On the con- trary, it diminishes when barbarous nations prevail. We know how great was the scarcity of these metals when the Goths and Vandals on the one side, and on the other the Saracens and Tartars, broke in like a torrent on the civilized world.
5. — The same Subject continued The bullion drawn from the American mines, imported into Europe, and thence sent to the East, has greatly promoted the navigation of the European nations; for it is merchandise which Europe receives in exchange from America, and which she sends in exchange to the Indies. A prodigious quantity of gold and silver is therefore an advantage, when we consider these metals as merchandise; but it is otherwise when we con- sider them as a sign, because their abundance gives an alloy to their quality as a sign, which is chiefly founded on their scar- city.
378 MONTESQUIEU 378 MONTESQUIEU Before the first Punic war g copper was to silver as 960 to i; ^ it is at present nearly as 73^ to i. When the proportion shall be as it was formerly, silver will better perform its office as a sign.
6. — The Reason why Interest was lowered one-half after the Conquest of the Indies Garcilaso informs us i that in Spain after the conquest of the Indies the interest, which was at ten per cent., fell to five. This was a necessary consequence. A great quantity of specie being all of a sudden brought into Europe, much fewer persons had need of money. The price of all things increased, while the value of money diminished; the proportion was then broken, and all the old debts were discharged. We may recollect the time of the System,/ when everything was at a high price ex- cept specie. Those who had money after the conquest of the Indies were obliged to lower the price or hire of their mer- chandise, that is, in other words, their interest.
From this time they were unable to bring interest to its ancient standard, because the quantity of specie brought to Europe has been annually increasing. Besides, as the public funds of some states, founded on riches procured by com- merce, gave but a very small interest, it became necessary for the contracts of individuals to be regulated by these. In short, the course of exchange having rendered the conveying of specie from one country to another remarkably easy; money cannot be scarce in a place where they may be so readily sup- plied with it by those who have it in plenty.
7. — How the Price of Things is -fixed in the Variation of the Sign of Riches Money is the price of merchandise or manufactures. But how shall we fix this price? Or, in other words, by what piece of money is everything to be represented?
If we compare the mass of gold and silver in the whole world with the quantity of merchandise therein contained, it is cer- tain that every commodity or merchandise in particular may ^ See chap. 12 of this book. t " History of the Civil Wars of the h Supposing a mark of eight ounces Spaniards in the West Indies."
of silver to be worth forty-nine livres, j In France, Law's project was called and copper twenty sols per pound. by this name.
THE SPIRIT OF LAWS 379 be compared to a certain portion of the entire mass of gold and silver. As the total of the one is to the total of the other, so part of the one will be to part of the other. Let us suppose that there is only one commodity or merchandise in the world, or only one to be purchased, and that this is divisible like money; a part of this merchandise will answer to a part of the mass of gold and silver; the half of the total of the one to the half of the total of the other; the tenth, the hundredth, the thou- sandth part of the one, to the tenth, the hundredth, the thou- sandth part of the other. But as that which constitutes property among mankind is not all at once in trade, and as the metals or money which are the sign of property are not all in trade at the same time, the price is fixed in the compound ratio of the total of things with the total of signs, and that of the total of things in trade with the total of signs in trade also; and as the things which are not in trade to-day may be in trade to-mor- row, and the signs not now in trade may enter into trade at the same time, the establishment of the price of things fundamen- tally depends on the proportion of the total of things to the total of signs.
Thus the prince or the magistrate can no more ascertain the value of merchandise than he can establish by a decree that the relation i has to 10 is equal to that of i to 20. Julian's lowering the price of provisions at Antioch was the cause of a most terrible famine.^ 8. — The same Subject continued The negroes on the coast of Africa have a sign of value with- out money. It is a sign merely ideal, founded on the degree of esteem which they fix in their minds for all merchandise, in proportion to the need they have of it. A certain commodity or merchandise is worth three macoutes; another, six ma- coutes; another, ten macoutes; that is, as if they said simply three, six, and ten. The price is formed by a comparison of all merchandise with each other. They have therefore no particu- lar money; but each kind of merchandise is money to the other. Let us for a moment transfer to ourselves this manner of valuing things, and join it with ours: all the merchandise and goods in the world, or else all the merchandise or manufactures k " History of the Church," by Socrates, lib. II.
380 MONTESQUIEU of a state, particularly considered as separate from all others, would be worth a certain number of macoutes; and, dividing the money of this state into as many parts as there are ma- coutes, one part of this division of money will be the sign of a macoute.
If we suppose the quantity of specie in a state doubled, it will be necessary to double the specie in the macoute; but if in doubling the specie you double also the macoute, the pro- portion will remain the same as before the doubling of either.
If, since the discovery of the Indies, gold and silver have in- creased in Europe in the proportion of i to 20, the price of provisions and merchandise must have been enhanced in the proportion of i to 20. But if, on the other hand, the quantity of merchandise has increased as i to 2 — it necessarily follows that the price of this merchandise and provisions, having been raised in proportion of i to 20, and fallen in proportion of i to 2 — it necessarily follows, I say, that the proportion is only as The quantity of goods and merchandise increases by an aug- mentation of commerce, the augmentation of commerce by an augmentation of the specie which successively arrives, and by new communications with freshly discovered countries and seas, which furnish us with new commodities and new mer- chandise.
9. — Of the relative Scarcity of Gold and Silver Besides the positive plenty and scarcity of gold and silver, there is still a relative abundance and a relative scarcity of one of these metals compared with the other.
The avaricious hoard up their gold and silver, for as they do not care to spend, they are fond of signs that are not subject to decay. They prefer gold to silver, because as they are always afraid of losing, they can best conceal that which takes up the least room. Gold, therefore, disappears when there is plenty of silver, by reason that every one has some to conceal; it ap- pears again when silver is scarce, because they are obliged to draw it from its confinement.
It is then a rule, that gold is common when silver is scarce, and gold is scarce when silver is common. This lets us see the THE SPIRIT OF LAWS 381 difference between their relative and their real abundance and scarcity, of which I shall presently speak more at large.
10. — Of Exchange The relative abundance and scarcity of specie in different countries forms what is called the course of exchange.
Exchange is a fixing of the actual and momentary value of money.
Silver as a metal has value like all other merchandise, and an additional value as it is capable of becoming the sign of other merchandise. If it were no more than mere merchandise, it would lose much of its value.
Silver, as money, has a value, which the prince in some re- spects can fix, and in others cannot.
I. The prince establishes a proportion between a quantity of silver as metal, and the same quantity as money. 2. He fixes the proportion between the several metals made use of as money. 3. He establishes the weight and standard of every piece of money. In fine, 4. He gives to every piece that ideal value of which I have spoken. I shall call the value of money in these four respects its positive value, because it may be fixed by law.
The coin of every state has, besides this, a relative value, as it is compared with the money of other countries. This relative value is established by the exchange, and greatly depends on its positive value. It is fixed by the general opinion of the mer- chants, never by the decrees of the prince; because it is subject to incessant variations, and depends on a thousand accidents.
The several nations, in fixing this relative value, are chiefly guided by that which has the greatest quantity of specie. If she has as much specie as all the others together, it is then most proper for the others to regulate theirs by her standard: and the regulation between all the others will pretty nearly agree with the regulation made with this principal nation.
In the actual state of the globe, Holland / is the nation we are / The Dutch regulate the exchange for for all Europe, it would be done in a almost all Europe, by a kind of deter- manner most advantageous to themmination among themselves, in a man- selves, which would not be permitted; ner most agreeable to their own Inter- and experience further contradicts Monests. In point of fact, however, if the tesquieu's statement.— Ed. Dutch undertook to regulate exchange 382 MONTESQUIEU speaking of. Let us examine the course of exchange with re- lation to her.
They have in Holland a piece of money called a florin, worth twenty sous, or forty half-sous or gros. But, to render our ideas as simple as possible, let us imagine that they have not any such piece of money in Holland as a florin, and that they have no other but the gros: a man who should have a thousand florins should have forty thousand gros; and so of the rest. Now the exchange with Holland is determined by our know- ing how many gros every piece of money in other countries is worth; and as the French commonly reckon by a crown of three livres, the exchange makes it necessary for them to know how many gros are contained in a crown of three livres. If the course of exchange is at fifty-four, a crown of three livres will be worth fifty-four gros; if it is at sixty, it will be worth sixty gros. If silver is scarce in France, a crown of three livres will be worth more gros; if plentiful, it will be worth less.
This scarcity or plenty, whence results the mutability of the course of exchange, is not the real, but a relative, scarcity or plenty. For example, when France has greater occasion for funds in Holland than the Dutch of having funds in France, specie is said to be common in France and scarce in Holland: and vice versa.
Let us suppose that the course of exchange with Holland is at fifty-four. If France and Holland composed only one city, they would act as we do when we give change for a crown: the Frenchman would take three livres out of his pocket, and the Dutchman fifty-four gros from his. But as there is some distance between Paris and Amsterdam, it is necessary that he who for a crown of three livres gives me fifty-four gros, which he has in Holland, should give me a bill of exchange for fifty- four gros payable in Holland. The fifty-four gros is not the thing in question, but a bill for that sum. Thus, in order to judge of the scarcity or plenty of specie,^ we must know if there are in France more bills of fifty-four gros drawn upon Holland than there are crowns drawn upon France. If there are more bills from Holland than there are from France, specie is scarce in France, and common in Holland; it then becomes necessary