Sir James Steuart (1767)

An Inquiry into the Principles of Political Economy

Book II
Of Trade and Industry

Chap. XXVIII: Circulation considered with regard to the Rise and Fall of the Price of Subsistence and Manufactures

The intention of this chapter is to apply the principles we have been in search of, to the solution of some questions, which have been treated by those great masters of political reasoning, Messrs de Montesquieu and Hume. The ideas they have broached are so pretty, and the theory they have laid down for determining the rise and fall of prices so simple, and so extensive, that it is no wonder to see it adopted by almost every one who has written after them.

I have not forgot how much I was pleased when I first perused these authors, from the easy distribution which a general theory enabled me to make of certain classes of my ideas then lying without order, in that great repository of human crudities, the memory; which frequently retains more materials, than people, commonly, have either time, or perhaps capacity rightly to digest.

I am very far from pretending to any superiority of understanding over those gentlemen whose opinions I intend to review. accident alone has led me to a more minute examination of the particular circumstances, upon which they have founded their general maxims; and, in consequence of my inquiries, I think I have discovered, that in this, as in every other part of the science of political oeconomy, there is hardly such a thing as a general rule to be laid down.

There is no real or adequate proportion between the value of money and of goods; and yet in every country we find one established. How is this to be accounted for?

We have, in the fourth chapter of this book, already inquired into the principles which point out the influence of trade upon the variation of the price of goods; but the question now comes to be, how to fix and determine the fundamental price, which is the object of variation. It has been said, that the price of a manufacture is to be known by the expence of living of the workman, the sum it costs him to bring his work to perfection, and his reasonable profit. We are now to examine what it is, which in all countries must determine the standard prices of these articles of the first necessity; since the value of them does necessarily influence that of all others.

The best way to come at truth, in all questions of this nature, is to simplify them as much as possible, that they may be first clearly understood.

Whenever a question arises about price, an alienation is necessarily implied; and when we suppose a common standard in the price of any thing, we must suppose the alienation of it to be frequent and familiar. Now I must here observe, that in countries where simplicity reigns (which are those where the decision of this question ought regularly to be sought for, since it is there only where a complication of circumstances do not concur to raise the prices of subsistence) it is hardly possible to determine any standard for the price of articles of the first necessity.

Let us examine the state of those hunting Indians who live by their bow, and of other nations where the inhabitants exercise, I may say universally, that species of agriculture which I have called a direct method of subsistence, and we shall find that the articles of food and necessaries are hardly found in commerce: no person purchases them; because the principal occupation of every body is to procure them for himself. What answer would a Scotch highlander have given any one, fifty years ago, who should have asked him, for how much he sold a quart of his milk, a dozen of his eggs, or a load of his turf? In many provinces, unacquainted with trade and industry, there are many things which bear no determinate price; because they are seldom or never sold.

Sale alone can determine prices, and frequent sale only can fix a standard. Now the frequent sale of articles of the first necessity marks a distribution of inhabitants into labourers, and what we have called free hands. The first are those who produce the necessaries of life; the last are those who must buy them: and as the fund with which they purchase is produced from their industry, it follows, that without industry there can be no sale of articles of subsistence; consequently, no standard price determined.

Another consequence of this reasoning, is, that the sale of subsistence implies a superfluity of it in the hands of the seller, and a proper equivalent for it in the hands of the buyer; and when the equivalent is not money, it also implies a superfluity of the produce of some sort of industry; consequently, by the exchange of superfluities upon certain articles, a man procures to himself a sufficiency upon every one. This represents that gentle dependence which unites the members of a free society.

Does it not follow from this analysis of the question, that the prices of articles of the first necessity depend rather upon the occupation and distribution of the classes of inhabitants, than either upon the abundance of these necessaries, or of the money to purchase them; since many examples may be found, where these articles have borne little or no price, even in countries where money was not wanting. The reason therefore of low prices, is not the vast abundance of the things to be sold, but the little occasion any body has to buy them; every one being provided with them in one way or other, without being obliged to go to market.

How many familiar examples occur every where of this oeconomy! do we not find in every country, even where the numbers of the industrious free are multiplied exceedingly, more than one half of the inhabitants fed directly from the earth? Few of the class of farmers ever go to market for subsistence. Ask a country gentleman the expence of his living, he will tell you the sum of money he yearly spends, perhaps the quantity of his rents in kind, which he consumes in his house, and the rent of the lands he holds himself in farm; but it will never come into his head to reckon the value of every chicken, sheep, or bullock, with which his farm provides him, which he consumes without estimation, and which in many countries he could not dispose of for any determinate value.

From this I still conclude, that it is in countries of industry only where the standard prices of articles of the first necessity can be determined; and since in these, many circumstances concur to render them either higher or lower than in other places, it follows, that in themselves they bear no determinate proportion whatsoever, to the quantity of gold and silver in the country, as I hope presently to make still more evident.

What is it then which determines the standard value of these articles, in countries of industry? Here follows the best answer I can give to this question.

The standard price of subsistence is determined from two considerations. The first from the number of those who are obliged to buy, that is to say, of those who have them not of their own, and who are not provided with them, in lieu of service, by those who have. The second is, from the degree of employment found for those who are obliged to purchase them.

The number of the buyers of subsistence, nearly determines the quantity to be sold: because it is a necessary article, and must be provided in a determinate proportion for every one: and the more the sale is frequent, the more the price is determinate. Next as to the standard: this, I apprehend, must depend upon the faculties of the buyers; and these again must be determined by the extent of those of the greatest numbers of them; that is to say, by the extent of the faculties of the lower classes of the people. This is the reason why bread, in the greatest famine, never can rise above a certain price; for did it exceed the faculties of the great classes of a people, their demand would be withdrawn, which would leave the market overstocked for the consumption of the rich; consequently, such persons, who in times of scarcity are forced to starve, can be such only whose faculties fall, unfortunately, below the standard of those of the great class; consequently, in countries of industry, the price of subsistence never can rise beyond the powers to purchase of that numerous class who enjoy nothing beyond their physical necessary; consequently, never to such an immoderate height as to starve considerable numbers of the people; a thing which very commonly happens in countries where industry is little known, where multitudes depend merely upon the charity of others, and who have no resource left, so soon as this comes to fail them.

The faculties, therefore, of those who labour for a physical-necessary, must, in industrious nations, determine the standard value of subsistence, and the value in money which they receive for their work will determine the standard of their faculties, which must rise or fall according to the proportion of the demand for their labour.

By this exposition of the matter, I do not pretend to have dissipated every obscurity. The question still remains complex, as the nature of it requires it should do; and the solution of it depends upon farther considerations, which now lead me to the examination of the doctrine of Messrs de Montesquieu and Hume, concerning the influence of riches upon the increase of prices. I shall begin by shortly laying this doctrine before my readers, in three propositions.

First, The prices (say they) of commodities are always proportioned to the plenty of money in the country. So that the augmentation of wealth even fictitious, such as paper, affects the state of prices, in proportion to its quantity.

Secondly, The coin and current money in a country is the representation of all the labour and commodities of it. So that in proportion as there is more or less of this representation (money), there goes a greater or less quantity of the thing represented (commodities, &c.) to the same quantity of it. From this it follows that

Thirdly, Increase commodities, they become cheaper; increase money, they rise in their value.

Nothing can be more beautiful than these ideas. They appear, at first sight, sufficiently extensive to comprehend every variation of circumstances which can happen. Who was the first author of this doctrine, I cannot say. I find it in Mr Locke, and in the Spectator for the 19th of October 1711; but they have been beautifully illustrated by Monsr de Montesquieu; and Mr Hume has extended the theory, and diversified it prettily in his political discourses; which have done much honour to that gentleman, and drawn the approbation of the learned world so much, that there is hardly a nation in Europe which has not the pleasure of reading them in their own language.

Upon examining this theory, when I came to treat of the matters it is calculated to influence, I found I could not make it answer to the principles I had pursued, in the most natural order in which I had been able to deduce them: and this consideration obliged me, with regret, to lay it aside, and to follow another, much more complex. I have already expressed the mortification I have always had upon finding myself forced to strike out a general rule, and this, of all others, had at first hit my fancy the most; but I am obliged to say, that upon a close examination of the three propositions, I am forced to range this ingenious exposition of a most interesting subject, among those general and superficial maxims which never fail to lead to error.

In order to set the matter in as clear a light as possible, I shall make a short application of my own principles, relating to the decision of the main question, namely the causes of the rise and fall of prices, and conclude my chapter with some remarks upon the three propositions above laid down, submitting the whole to the better judgment of my reader. I have laid it down as a principle, that it is the complicated operations of demand and competition, which determines the standard price of everything. If there be many labourers, and little demand, work will be cheap. If the increase of riches, therefore, have the effect of raising demand, work will increase in its value, because there competition is implied; but if it has only the effect of augmenting demand, prices will stand as formerly. What then will become of the additional quantity of coin, or paper-money? I answer, that in both cases it will enter into circulation, in proportion to the rise or augmentation of demand; with this difference, that in the first case, it will have the effect of raising prices; because the supply is not supposed to augment in proportion: in the second, prices will stand as they were; because the supply is supposed to augment in proportion. These are the consequences of the augmentation of wealth, when it has the effect of either raising or augmenting demand. But if upon the increase of riches it be found that the state of demand remains without any variation, then the additional coin will probably be locked up, or converted into plate; because they who have it, not being inspired with a desire of increasing their consumption, and far less with the generous sentiment of giving their money away, their riches will remain without producing more effect than if they had remained in the mine. As for paper-money, so soon as it has served the first purpose of supplying the demand of him who borrowed it, because he had at that time no coin) it will return upon the debtor in it, and become realized; because of the little use found for it in carrying on circulation.

Let the specie of a country, therefore, be augmented or diminished, in ever so great a proportion, commodities will still rise and fall according to the principles of demand and competition; and these will constantly depend upon the inclinations of those who have property or any kind of equivalent whatsoever to give; but never upon the quantity of coin they are possessed of.

Let the quantity of the coin be ever so much increased, it is the desire of spending it alone, which will raise prices. Let it be diminished ever so low, while there is real property of any denomination in the country, and a competition to consume in those who possess it, prices will be high, by the means of barter, symbolical money, mutual prestations, and a thousand other inventions. Let me give an example.

Suppose a country where prices are determined, and where the specie is sufficient for the circulation: is it not plain, that if this country have a communication with other nations, there must, in carrying on trade, be a proportion between the prices of many kinds of merchandize, and that the sudden augmentation or diminution of the specie at home, supposing it could of itself operate the effects of raising or sinking prices, would be restrained in its operation by foreign competition? But let us suppose it cut off from every communication whatsoever, which seems the only case where this theory can operate with any appearance of justness, will any body pretend, that the frugal or extravagant turn of the inhabitants will have no influence upon prices; and will it be asserted, that no variation in the spirit of a people, as to frugality and dissipation, can take place, except upon a variation in the quantity of their gold and silver?

It may be answered, that as to articles of superfluity, no doubt the genius of a people, together with the quantity of the specie, may influence prices; but that in articles of indispensible necessity, they must constantly remain in proportion to the mass of riches. This I cannot admit to be just. Let me take the example of grain, which is the most familiar. Is it not plain, from what we have said above, that the proportion of wealth, found in the hands of the lowest class of the people, constantly regulates the price of it; consequently, let the rich be ever so wealthy, the price of subsistence can never rise above the faculties of the poor industrious. And is it not also plain, that those of the lowest class of the people, who purchase subsistence must buy it with the returns they receive from the rich for their industry? Now if the quantity of the wealth of the rich does not regulate their demand for the service of the poor, must it not follow, that the price of grain, as well as of every other thing offered to sale, must depend upon the degree of competition among the rich for the labour of the poor, that is, upon the demand for industry and not on the quantity of wealth in the country?

Nobody ever denied, that the extraordinary demand for a commodity had the effect of raising the price of it: and certainly nobody will deny, that the demand for a particular commodity may be greater at one time than at another, though the same quantity of this commodity be found at both times in the country; and the same quantity of specie likewise not only in the country, but also in circulation.

I acknowledge that in a country where there is much coin, and where credit is little known, a high and extraordinary demand for an article of superfluity may raise the price more than in another where the coin is more scarce; because, on certain occasions, the price of a thing may have no other bounds than the extent of the faculties of the buyer. In like manner, in other countries, where there is scarcely coin, or credit, it may be impossible for the highest demand to raise the price of such things even to the common standard established in those where there is great wealth. But these instances appear to be too particular to serve for the foundation of a general rule, with respect to the state of prices in the present situation of the nations of Europe, which, less or more, are all in communication with one another.

I cannot here omit taking notice of two very remarkable circumstances which we learn from undoubted historical authority, which seem to contradict one another, and which throw a great obscurity upon the principles I have been endeavouring to explain. I shall therefore introduce them by way of illustration, and when they are examined, I hope they will confirm my doctrine.

The first is, that in Scotland, formerly, when coin and credit were certainly very rare, the price of eight pounds weight of oatmeal, which is now commonly sold at eight pence sterling, was then valued at no more than two-thirds of one penny: and that a labouring man used to receive one penny and one third of a penny sterling for his week's subsistence; that is to say, the value of sixteen pounds of oatmeal, which to this day is the regulated quantity given for this purpose.

There is a very curious confirmation of the authenticity of this computation, in an hospital at old Aberdeen; where in former times, some proprietors of lands had settled a certain quantity of oatmeal in favour of the poor of the hospital, with a liberty to the hospital to accept the meal in kind, or the conversion at two-thirds of a penny for every eight pounds weight. They imprudently chose the last, and to this very day they are paid according to this standard. Now it is certainly impossible that any degree of plenty whatsoever, or any failing of demand, could at present reduce the price of this commodity so very low consequently, it may be said that it is the augmentation of wealth, not that of demand, which raises prices.

The second fact we learn from antiquity, that at the time when Greece and Rome abounded in wealth, when every rarity, and the work of the choicest artists was carried to an excessive price, an ox was bought for a mere trifle, and grain was cheaper perhaps than ever it was in Scotland.

If the application of our principles to the circumstances of those times, produce a solution of these apparent inconsistencies; and if we thereby can discover that the low prices of grain, both in Scotland, where there was little money, and at Rome where there was a great deal, was entirely owing to the little demand for articles of subsistence; will it not follow, that our principle is just, and that the other, notwithstanding the ingenuity of the thought, must fail in exactness; since it will appear, that low prices may be equally compatible with wealth, and with poverty.

Now as to Scotland in former times, as in all countries where there is little industry; where the inhabitants are mostly fed directly from the earth, without any alienation of her fruits taking place; where agriculture is exercised purely as a method of subsisting; where rents are low, and where, consequently, the free hands, who live upon them for the price of their industry, must be few; the demand for grain in the public markets must be very small; consequently, prices will be very low, whether there be little, or whether there be much money in the country. The reason is plain. The demand is proportioned here, not to the number of those who consume, but of those who. buy now those who consume, are all the inhabitants, but those who buy, are the few industrious only who are free, and who gain an independent livelihood by their own labour and ingenuity: now the price of their week's subsistence in Scotland was formerly one penny one third, consequently the subsistence they bought could not rise above this standard.

Next as to the state of Greece and Rome, where slavery was established. Those who were fed by the labour of their own slaves, by those of the state, or by the grain gratuitously distributed to the people, had no occasion to go to market; consequently, they did not enter into competition with the buyers. Farther, the simplicity of manners, and the few manufactures then known, made wants in general less extensive; consequently, the number of the industrious free was small, and they were the only persons who could have occasion to purchase food and necessaries; consequently, the competition of the buyers must have been small in proportion, and prices low.

Add to this the reflections which naturally present themselves upon examining the nature of supplying the markets. These were supplied partly from the surplus produced upon the lands of the great men, laboured by slaves; who being fed from the lands, the surplus cost in a manner nothing to the proprietors; and as the number of those who had occasion to buy, were very few, this surplus was sold cheap. Besides, the grain distributed to the people gratis, must necessarily have kept down the market, as a part of it would naturally, sometimes, be found superfluous to those who received it; and consequently, come to be sold in competition with that raised at private expence.

But when a fine mullet was brought to market, or when an artist appeared with a curious piece of work, the case was very different. The rich had plenty of money, who all appeared in competition for the preference; consequently, prices rose to an extravagant height. The luxury of those times, though excessive, was confined to a few, and as money, in general, circulated but slowly through the hands of the multitude, it was constantly accumulating in those of the rich, who found no measure, but their own caprice, in regulating the prices of what they wished to possess, and had money to purchase.

From what has been said, it appears, that the riches of a country have no determinate influence upon prices; although, I allow, they may accidentally affect them: (what I mean is, that they may influence them; but they cannot regulate them:) and if we depart from the principles above laid down, to wit, that prices are regulated by the complicated operation of demand and competition, in order to follow the other, we must add a restriction (which I observe Mr Hume has attended to on one occasion, although he has lost sight of it on several others), to wit, that the price of every commodity is in proportion to the sum of money circulating in the market for that commodity; which is almost my proposition in other words: for the money to be employed in the purchase of any commodity, is just the measure of the demand. But even here, the money in the market destined only for the purchase of a particular commodity, does not regulate the price of it. Nothing but the finishing of the transaction, that is, the convention between the buyer and seller, can determine the price, and this must depend upon inclination, not weight of money, as an example will make plain.

I shall suppose grain to have been at forty shillings per quarter, in a country market, for several months together, where the ordinary demand for the current consumption is twenty quarters every market day. If at any time an extraordinary demand should happen, which may exceed all that is to be found in the market, there will be a competition among the buyers, which will have the effect of raising the market. Now, according to the doctrine of our learned author, it may be said, that the corn rises in proportion to the quantity of the specie which is in the market, and that it is because of this increase of specie, that the grain rises in its price. I answer, first, allowing this to be true, can it be said, that a particular temporary, or perhaps accidental demand for a few quarters of corn, more than usual, implies any augmentation of the quantity of money, or the smallest diminution either upon the total consumption, or total quantity of grain contained in the country? For if the demand have risen in one market, it must probably have diminished in another, since the Same inhabitants cannot consume in two places. This I think every person must agree to, without farther illustration. But I say farther, that prices will not rise in proportion to the money in the market; but in proportion to the desire of acquiring grain in those who have this money.

Suppose the whole quantity of grain in the market to be thirty quarters; if there be no demand for more, these will be sold at forty shillings as the twenty quarters would have been. But suppose the demand to be for sixty quarters, and that there is a hundred and twenty pounds sterling ready to be employed for corn, does it follow, that grain will rise to four pounds a quarter, because the money in the market bears this proportion to the quantity of grain? Certainly not.

We must therefore, I think, adopt the other principle, and follow the proportions of demand and competition; and then we shall find, that if the sellers want to raise their price up to the proportion of the money in the market, all demand will cease, as effectually as if it had never been made; and the sellers will afterwards be obliged to accept of such a moderate augmentation as shall be in proportion to the urgency of the demand, but never in proportion to the money ready to be employed.

The circulation of every country, as we have shewn above, must ever be in proportion to the industry of the inhabitants, producing the commodities which come to market: whatever part of these commodities is consumed by the very persons who produce them, enters not into the it. If the coin circulation of grain, nor does it in anywise affect prices of of a country, therefore, fall below the proportion of the produce of industry offered to sale, industry itself will come to a stop; or inventions, such as symbolical money, will be fallen upon to provide an equivalent for it. But if the specie be found above the proportion of the industry, it will have no effect in raising prices, nor will it enter into circulation: it will be hoarded up in treasures, where it must wait not only the call of a desire in the proprietors to consume, but of the industrious to satisfy this call.

We may therefore conclude, in consequence of the principles we have laid down, that, whatever be the quantity of money in any nation, in correspondence with the rest of the world, there never can remain in circulation, but a quantity nearly proportional to the consumption of the rich, and to the labour and industry of the poor inhabitants. The value of each particular species of which consumption is determined by a complication of circumstances at home and abroad; consequently, the proportion is not determined by the quantity of money actually in the country.

If the contrary is maintained, and if it be still affirmed that the proportion between specie and manufactures must be reciprocal and determinate, then I am authorised to draw this conclusion, to wit: That if the greatest produce of industry must be sold for what specie is found in the country, let the sum be ever so small; so in like manner, the smallest produce of industry must be sold for all the specie found in the country, let the sum be ever so great. Consequently, in the first case, we must suppose, that the industrious will never seek for a better price from abroad; and in the second, that the moneyed people must spend all they have in supplying their most moderate wants, and never seek for cheaper merchandize than what they can find at home. Consequently there can be no foreign trade, nor can there ever be any hoarding.

I shall now conclude my chapter, with a few observations upon the three propositions as they stand in their order.

Prop. 1. Prices are in proportion to the plenty of money. And thus the augmenting even of fictitious wealth, such as paper, affects the state of prices, according to its quantity.

From this, Mr Hume disapproves of the introduction of paper money, when specie is wanting, and says, that if nothing were allowed to circulate but gold and silver, the quantity being less, prices would be lower.

This is neither more or less than a project to destroy credit, with a view to support trade and industry. Because it would effectually prevent any person from making a consumption, except at the time he happened to be provided with ready money. Does the paper-money in England keep up the prices of grain at present, January 1759? And will not every article of necessaries fall, in a short time, as low in this country as in any other in Europe; if the same measures continue to be followed?

Were all paper-money in this kingdom proscribed at once, no doubt the prices of many things would fall very considerably; but such a fall would neither be universal or equable. The reason of this fall would not be, because the specie would become proportionally divided among all the inhabitants, according to the value of their property; nor because of the small quantity of it, since prices abroad would still regulate many at home: but because of the sudden revolution, and the violent overturn thereby produced on the balance of work and demand. The scale of the first would preponderate to such a degree, that those classes of the industrious, who work for daily subsistence in furnishing superfluities, would enter into so strong a competition with one another, that the price of their work would fall to nothing, while subsistence would remain at the price of exportation. If it be asked what could occasion this difference, I answer, because the workmen who supply superfluities, adapted to the taste of their own nation, would find no more demand for them, from the want of credit, or of a circulating fund at home to buy with; and strangers would not profit of the fall in the price of a superfluity not adapted to their own taste; but they would very willingly become purchasers of every bushel of grain become superfluous, and thereby starve so many of the inhabitants; and this last circumstance would keep the price of subsistence upon a pretty even level with that of other countries.

But if we suppose all communication cut off with strangers, would this proportion between money and prices then hold true? By no means. Here is the reason: there are many ways of alienating goods or natural produce, without the assistance of specie. Immense quantities of both may be consumed by barter, or in lieu of service, where money is never heard of; now all this portion alienated, enters into the mass of what is called produce and manufactures which come to market; but can have no influence upon the specie, nor can specie have any upon it, since the money remains inactive during these operations.

Another reason is, that there is no such thing as preserving specie of a country in an equal repartition, so as to serve the occasions of every body in proportion to their worth. The reason is manifest: money, like every other thing, will come into the hands of those who give the greatest value for it, and when the quantity of it is small in any country, where nothing can be procured without it, such proprietors of lands as have the greatest desire to consume, will purchase the specie by giving a higher interest, or by selling their lands cheaper than other people.

This alone is sufficient to prove that the repartition of specie can never be in proportion to property; and this also destroys the supposition of prices rising and falling according to the proportion of it, even in a country cut off from every foreign communication. But here is still another proof: any individual who has, by mortgaging his lands, got together a large proportion of the specie of his country, will raise prices in his own neighbourhood, by making an extraordinary demand for work; and the rest of the same country, drained of their circulating value, must diminish their demand; consequently, prices will fall elsewhere. I now come to the second proposition.

The coin and current money of a country, is the representation of all its labour and commodities; so that in proportion as there is more or less of this representation, a greater or less quantity of it will go for the same quantity of the thing represented.

To this representation I cannot agree, and I apprehend this to be the source of the error. A proper equivalent for labour and manufactures may, in one sense, be called a representation; but there is no necessity for this equivalent to consist in coin. Are not meat and clothes an equivalent for personal service? Is not a free house and a bit of land, a very good equivalent for all the manufactures a country weaver can work up for me who am his landlord? Were there not one penny of coin in the country, would it follow, that there could be no alienation, or that every thing might there be got for nothing?

Coin has an intrinsic value; and when it comes into a country, it adds to the value of the country, as if a portion of territory were added to it: but it has no title to represent any thing vendible, by preference, or to be considered as the only equivalent for all things alienable. It is made a common price, on no other account than because of its rarity, its solidity, its being of a nature to circulate; and suffers a correct division without end, and because it carries its value along with it, which is a proper equivalent for every thing; and at the same time is by its nature little liable to vary.

Were, indeed, a statesman to perform the operation of circulation and commerce, by calling in, from time to time, all the proprietors of specie in one body, and all those of alienable commodities, workmen, &c. in another'. and were he, after informing himself of the respective quantities of each, to establish a general tariff of prices, according to our author's rule; this idea of representation might easily be admitted; because the parcels of manufactures would then seem to be adapted to the pieces of the specie, as the rations of forage for the horses of an army are made larger or smaller, according as the magazines are well or ill provided at the time: but has this any resemblance to the operations of commerce?

The idea of coin being the representation of all the industry and manufactures of a country, is pretty; and has been invented for the sake of making a general rule for operating an easy distribution of things extremely complex in their nature. From this comes error. We substitute a complex term, sometimes in one sense, and sometimes in another, and we draw conclusions as if it expressed a fixed and determinate idea.

If in algebra, x, y, z, &c. ever stood for more than a single idea, the science would become useless; but as they never represent but the very same notion, they never change their nature through all manner of transpositions.

It is not the same of terms in any other science, as abundantly appears from the question now before us: coin is called a representation because it is an equivalent; and because it is a representation, it must bear an exact proportion to the thing represented. And since in some particular examples, this representation appears to hold; therefore the rule is made general, although circumstances may be different. If, for example, a merchant, or a private person, has in hand a thousand pounds worth of grain, no doubt that the thousandth part of the merchandize is worth the thousandth part of the sum; because both are determinate in their quantity and quality. but the parcels of this corn, though exactly proportioned to the price of the whole, do not draw their value from this proportion, but from the total value of the whole mass; which is determined from the complicated operations of demand and competition, as has been said, and not from the specie of the country which can bear no proportion either to the quantity or quality of the grain.

There may be vast quantities of coin in a country of little industry; and, vice versa, coin is constantly an equivalent, but never a representation more than any other equivalent which may be contrived. Were the doctrine of this second proposition true, every commodity in a country should be sold like a parcel of the grain in the foregoing example, by the rule of three; as the property of all the labour and manufactures of the country is to the part I intend to alienate, so is all the gold and silver in the country to the part I am entitled to receive. This ideal of regulating prices may be very philosophical, but it is not very mercantile. I now proceed to the third and last proposition. Increase the commodities, they become cheaper: increase the money, they rise in their value.

This proposition is much too general; the first part of it is commonly true, the last part is more commonly false.

What can increase commodities, but a demand for them? If the demand be equal to the augmentation, there will be no alteration in the price.

Let extraordinary plenty increase subsistence, it will naturally fall in the price; but it may be hoarded up, and made to rise in spite of the plenty; it may be demanded from abroad; this also will make it rise.

Let the production of superfluities, not exportable, be produced by workmen whose branch is overstocked, prices will undoubtedly fall. The same observations are true of a diminution in the quantity of commodities. If this diminish by degrees, from a diminution of demand, the price of them will not rise.

If the quantity of subsistence fall below the necessary consumption of the inhabitants, the price of it will undoubtedly rise.

If the articles of superfluity be diminished, prices will rise in proportion only to the eagerness to buy, that is, to the competition, not to the deficiency. On the other hand, as to coin or money.

Increase the money, nothing can be concluded as to prices, because it is not certain that people will increase their expences in proportion to their wealth; and although they should, the moment their additional demand has the effect of producing a sufficient supply, prices will return to the old standard.

But diminish the quantity of specie usually employed in circulation, you both retard this, and hurt the industrious; because we suppose the former quantity exactly sufficient to preserve both in the just proportion to the desires and wants of the inhabitants.

These are but a few of the numberless modifications necessary to be applied to this general rule; and I hope what I have said will justify the observation I have made on the whole doctrine; to wit, that it is much more specious than solid, in every one of its three branches.

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

Suppose the specie of Europe to continue increasing in quantity every year, until it amounts to ten times the present quantity, will prices rise in proportion?

I answer, that such an augmentation might happen, without the smallest alteration upon prices, or that it might occasion a very great one, according to circumstances. Were industry to increase to ten times what it is at present, that is to say, were the produce of it to increase to ten times its present value, according to the actual standard of prices, the value of every manufacture and produce might remain without alteration. This supposition is possible: because no man can tell to what extent demand may carry industry. If, on the other hand the scale of demand could be supposed to preponderate, so as to draw all the wealth into circulation, without having the effect of augmenting the supply (which I take to be impossible) then prices would rise to ten times the present standard, at least in many articles.

This solution is entirely consistent both with Mr Hume's principle and mine; because nothing is so easy in an hypothesis, as to establish proportions between things, which in themselves are beyond all the powers of computation.

Chap. XXIX: Circulation with foreign Nations, the same thing as the Balance of Trade

We have endeavoured to shew in a former chapter, how the circulation of money, given in exchange for consumable commodities, produces a vibration in the balance of domestic wealth: we are now to apply the same principles to the circulation of foreign trade; in order to find out, if there can really be such a thing as a balance upon it, which may enrich one country, and impoverish another.

It has been said, that when money is given for a consumable commodity, the person who gets it acquires a balance in his favour, so soon as he with whom he has exchanged, has begun to consume.

That if two consumable commodities are exchanged, the balance comes to a level, when both are consumed. That it is the wealth only which is found in circulation, which can change its balance; the remainder must be found locked up, made into plate, or employed in foreign trade. And it has been observed, that the quantity of money found in circulation, is ever in proportion to the sale of the produce of industry and manufactures; and that when the precious metals are not sufficient to carry on a circulation, proportionable to the demands of those who have any real equivalent to give, symbolical money may be made to fill up the void, when the interest of the state comes to require it.

We have also laid it down as a kind of general rule, that while luxury tends only to keep up demand to the reasonable proportion of the power and inclination in the industrious part of a people to supply it, then it is advantageous to a nation; and that so soon as it begins to make the scale of home-demand preponderate, by forming a competition among the natives, to consume what strangers seek for, then it is hurtful, and has an evident tendency to root out foreign trade. These principles are all analogous to one another, and should be retained while we examine the question before us.

I must still add, that the fluctuation of the balance of wealth is constantly inclining in favour of the industrious, and against the idle consumer. This however admits of a restriction, viz. the industrious must be supposed to be frugal; and the idle, extravagant. For if the industrious man consume the full produce of his own industry, he will have laboured to increase his consumption only, not his wealth: and if the idle person, by his frugality, keeps within the bounds of his yearly income, he will thereby repair every disadvantage incurred by his sloth, the balance then will stand even between them; the industry in one scale, and the fund already provided in the other, will keep both parties on a level as before.

In order, therefore, to make the balance of domestic wealth turn in favour of a poor man, he must be both industrious and frugal.

Now let us apply these principles to a whole nation, considered as an individual in the great society of mankind. An industrious person who conducts his affairs with prudence, must either be in a way of growing richer by his industry, or of spending his income with oeconomy and discretion: so I must suppose a nation which is well governed, either to be growing richer by foreign trade, or at least in a state of not becoming poorer by it.

It is as much the duty of every statesman to watch over the conduct of those who hold the foreign correspondence of his people, as it is the duty of the master of a family to watch over those he sends to market.

I find it is the opinion of the learned Mr Hume, that there is no such thing as a balance of trade, that money over all the world is like a fluid, which must ever be upon a level, and that so soon as in any nation this level is destroyed by any accident, while the nation preserves the number of its inhabitants, and its industry, the wealth must return to a level as before.

To prove this, he supposes four fifths of all the money in Great Britain to be annihilated in one night, the consequence of which he imagines would be, that all labour and commodities would sink in their price, and that foreign markets would therefore be entirely supplied by this industrious people, who would immediately begin to draw back such a proportion of wealth, as would soon put them again upon a level with their neighbours.

This reasoning is consistent with the principles we have examined, and humbly rejected in the preceding chapter. both stand upon the same foundation, and lead to a chain of consequences totally different from the principles laid down in this inquiry.

My intention is not so much to refute the opinions of others, as briefly to pass them in review. General propositions, such as those we have been treating of, are only true or false, according as they are understood to be accompanied with certain restrictions, applications, and limitations: I shall therefore say nothing as to the proposition itself, but examine only how far the sudden annihilation of a great proportion of a nation's wealth, can naturally be followed by the consequence which has been supposed.

For this purpose, let me suggest another consequence (different from that of the author, and flowing from the doctrine we have established) which possibly might happen, upon the annihilation of four fifths of all the money in Great Britain. I shall take no notice of the effects which so sudden a revolution might occasion; these have not been attended to by the author, and therefore I shall consider them as out of the question. I shall suppose the event to have happened, prices to have been reduced, and every immediate inconvenience to have been prevented. My only inquiry shall be concerning the unavoidable consequences of such a revolution, as to foreign trade, as to drawing back the money annihilated, and as to the preserving the same number of inhabitants, and the same degree of industry as before. If I can shew, that the event alone of annihilating the specie, and reducing prices in proportion (which I shall allow to be the consequence of it) will have the effect of annihilating both industry and the industrious, it cannot afterwards be insisted on, that the revolution can have the effect of drawing back a proportional part of the general wealth of Europe: because the preservation of the industrious is considered as the requisite for this purpose.

Here then is the consequence, which, in my humble opinion, would very probably happen upon so extraordinary an emergency; and I flatter myself that my reader has already anticipated my decision.

The inhabitants of Great Britain, who, upon such an occasion, would be found in possession of all the exportable necessaries of life, and of many other kinds of goods demanded in foreign markets, instead of selling them to their poor countrymen, for a price proportioned to our author's tariff, namely to the diminution of the specie, which he takes to be the representation of them, would export them to France, to Holland, or to any other country where they could get the best price, and the inhabitants of Britain would starve.

If it be replied, that the exportation would not be allowed. I answer, that such a prohibition would be highly seasonable; but quite contrary to the principle of laying trade open, and impossible to be effectual, as this author justly observes, when he says, 'Can one imagine, 'that all commodities could be sold in France, for a tenth of the price 'they would yield on the other side of the Pyrenées, without finding 'their way thither, and drawing from that immense treasure?' Suppose this phrase to run thus: Can any one imagine, that provisions could be sold in Britain, for a fourth part of the price they would yield on the other side of the water, without finding their way thither, and drawing from that immense treasure? This is entirely inconsistent with our principles, and ruins the whole of Mr Hume's former supposition: because the exportation of them would annihilate the inhabitants.

From this I conclude, that a nation, though industrious and populous, may reduce itself to poverty in the midst of wealthy neighbours, as a private person, though rich, may reduce himself to want, in the midst of the amusements and luxury of London or of Paris. And that both the one and the other, by following a different conduct, may amass great sums of wealth, far above the proportion of it among their neighbours.

This is not a matter of long discussion. It is not by the importation of foreign commodities, and by the exportation of gold and silver, that a nation becomes poor; it is by consuming these commodities when imported. The moment the consumption begins, the balance turns; consequently, it is evidently against the principles which we now examine, either to sell at home, or destroy, confiscated goods. The only way of repairing the damage done by such frauds, is to export the merchandize, and, by selling it cheap in other countries, to hurt the trade of the country which first had furnished it. From this also we may conclude, that those nations which trade to India, by sending out gold and silver, for a return in superfluities of the most consumable nature, the consumption of which they prohibit at home, do not in effect spend their own specie, but that of their neighbours who purchase the returns of it for their own consumption. Consequently, a nation may become immensely rich by the constant exportation of her specie, and importation of all sorts of consumable commodities. But she would do well to beware of this trade, when her inhabitants have taken a luxurious turn, lest she should come to resemble the drunkard, who commenced wine-merchant, in order to make excellent cheer in wine with all his friends who came to see him; or the milliner, who took it into her head to wear the fine laces she used to make up for her customers.

If a rich nation, where luxury is carried to the highest pitch, where a desire of gain serves as a spur to industry, where all the poor are at work, in order to turn the balance of domestic wealth in their favour; if such a nation, I say, be found to consume not only the whole work of the inhabitants, but part of that of other countries, it must have a balance of trade against it, equivalent to the amount of foreign consumption; and this must be paid for in specie, or in an annual interest, to the diminution of the former capital. Let this trade continue long enough, they will not only come at the end of their metals, but they may render themselves virtually tributary to other nations, by paying to them annually a part of the income of their lands, as the interest due upon the accumulated balances of many years' unfavourable trade.

Is it not, therefore, the duty of a statesman to prevent the consumption of foreign produce? If tapestry or other elegant furniture, such as is seen in a certain great capital in Europe, were allowed to be imported into a neighbouring nation; who doubts but this article would carry money out of that nation?

It may be answered, that as much elegance of another kind may be sent in return. True; and it would be very lucky if this could be the case; but then you must suppose an equality of elegance in both countries; and farther, you must suppose a reciprocal taste for the respective species of elegance. Now the taste of one of the countries may be common to both; but not that of the other, though nothing inferior, perhaps, in the opinion of a third party. And the difference may proceed from this; that the young people of one country travel into the other, where the inhabitants stay at home: a circumstance which would prove very prejudicial to the country of the travellers, if a wise statesman did not, by seasonable prohibitions upon certain articles of foreign consumption, prevent the bad consequences of adopting a taste for what his subjects cannot produce.

This furnishes a hint, that it might not be a bad maxim in a great monarchy, to have houses built and furnished in the capital for every foreign minister, where the general distribution of the apartments of each might be, as much as possible, analogous to the taste of the country for whose minister it is calculated: but as to the furniture, to have it made of the most elegant domestic manufactures easily transportable, nicely adapted also to the uses and fashions of each foreign country. Such a regulation could never fail of being highly acceptable, as it would prove a great saving to foreign ministers, and would insensibly give them a taste for the manufactures and luxury of the country they reside in. On the other hand, I should be so far from expecting a return of this civility, that I would recommend the bestowing of a set of furniture, as a gratification to every minister sent abroad by the state, who should regularly sell it off in the place of his residence, upon the expiration of his commission. Such an expence would not cost one penny to the nation, and would be a means of captivating unwary strangers, who might be thereby made to pay dearly for such marks of politeness and civility. I return.

Without being expert in the computation of exports and imports, or very accurate in examining the different courses of exchange between the different cities of Europe, a statesman may lay it down as a maxim, that whatever foreign commodity, of whatsoever kind it be, is found to be consumed within the nation he governs, so far the balance of trade is against her; and that so far as any commodity produced either by the soil, or labour of the inhabitants, is consumed by foreigners, so far the balance is for her.

A nation may in some measure be compared to a country gentleman, who lives upon his land. This I suppose to be his all. From it he draws directly his nourishment, perhaps his clothes are wrought up in his family. If he be so very frugal as never to go to market for any thing, all the spare produce which he can sell will be clear money in his purse. If he indulge now and then in a bottle of wine, which his farm does not produce, he must go to market with his purse in his hand; and so soon as his bottle is out, I think he is effectually so much poorer than he was before. If he go on, and increase his consumption of such things as he is obliged to buy, he will run out the money he had in his purse, and be reduced to the simple production of his farm. If then this country gentleman be poorer, certainly somebody must be richer; and as it is nobody in his family it must be some of his neighbours.

Just so a nation which has no occasion to have recourse to foreign markets, in order to supply her own consumption, must certainly grow rich in proportion to her exportation.

These riches again will not circulate at home, in proportion to the domestic consumption of natural produce and manufactures, but in proportion to the alienation of them for money: the surplus wealth will stagnate in one way or other, in the hands of the money gatherers, who are the small consumers.

While there is found a sufficient quantity of money for carrying on reciprocal alienations; those money gatherers will not be able to employ their stagnated wealth within the nation; but so soon as this gathering has had the effect of diminishing the specie, below the proportion found necessary to carry on the circulation, it will begin to be lent out, and so it will return to circulate for a time, until by the operation of the same causes it will fall back again into its former repositories.

Should it be here objected, that upon the augmentation of a nation's riches, no money can stagnate; because prices rising in proportion to the augmentation of riches, all the additional wealth must be thrown into circulation; surely both reason and experience must point out the weakness of such an objection.

While a favourable balance, therefore, is preserved upon foreign trade, a nation grows richer daily; and still prices remain regulated as before, by the complicated operations of demand and competition; and when one nation is growing richer, others must be growing poorer: this is an example of a favourable balance of trade.

When this superfluity of riches is profited of by the luxurious individuals only, instead of being turned to profit by the state itself, with a view to secure the advantages thereby acquired, then the balance takes a contrary turn: this is the case whenever foreign importations for consumption are either permitted as a gratification to the luxurious desires of the wealthy., or because of the rise in the price of goods at home, in consequence of domestic competition. If it be permitted purely in favour of the first, it marks a levity and want of attention unworthy of a statesman; if on account of the second, it shows either an ignorance of the real consequences of so temporary an expedient, or a disregard for the welfare of the lower classes of the people.

Every augmentation of prices at home, must be a necessary consequence of many domestic circumstances, and must be removed by correcting them, as has been, I think, made clear. But let it be supposed, that from the augmentation of wealth alone, manufacturers can no more produce work so cheap as other nations; I think that both in humanity and prudence, a people should submit to the inconvenience of paying dearer. In humanity, because by the introduction of foreign manufactures, you starve those very people, who by their labour have enriched you: in prudence, because by opening your ports to such importation you deliberately throw away that superiority of riches you have been at so much pains to acquire.

I freely grant, that particular people do not regulate either their expence or their schemes of getting money, with a view to promote the public good. One who has a coat to buy, will be very glad to find a piece of foreign manufacture at a cheap rate; a merchant will wish to smuggle goods on which there is a high duty. But the question is, Whether a statesman is to wink at such abuses? I think it is much the same question, as if it were asked, whether the master of a family should, in good oeconomy, allow his servants to invite their friends to drink in his cellar, instead of carrying them to a public house.

But suppose it be said, that 'by laying trade open, you are sure that wealth will naturally come to a balance, in all countries, and that all fears of a wrong balance of trade are only the effect of a gloomy imagination'. See Hume's Political Discourses, Sect. v.

Several answers may be made to this objection. The first, that it is in order to prevent this kind of balance, that a nation ever gives itself disquiet: for by balance here, is understood an equality of wealth; and rich nations are they only who are anxious, lest they should be brought to such an equality. In the question here before us, it is the loss of this superiority of wealth which is understood by a balance turning against a trading nation. If, therefore, it be the interest of a nation, poor in respect of its neighbours, to have trade laid open, that wealth may, like a fluid, come to an equilibrium; I am sure it is the interest of a rich nation, to cut off the communications of hurtful trade, by such impediments as restrictions, duties, and prohibitions, upon importation; in order that, as by dykes, its wealth may be kept above the level of the surrounding element.

Another answer is, that laying trade open would not have the effect proposed; because it would destroy industry in some countries, at least, if not every where. A manufacture must be very solidly established indeed, not to suffer any prejudice, by a permission to import the like commodities from other countries. The very nature of luxury is such, that it frequently prompts people to consume, from caprice and novelty, what is really inferior to home-production. It may be answered, that this argument cuts two ways: for if a nation from caprice consume foreign commodities, why may not other nations from caprice likewise, take off those which are left on hand? This reasoning may appear good, in a theory which does not take in every political consideration. But a poor manufacturer who cannot find work, because the branch he works in is supplied from abroad, cannot live till the caprice of foreigners shall make them demand his labour. If a certain number of inhabitants be employed in a necessary branch of Consumption, there must be a certain demand preserved for it; and whatever can render this precarious, will ruin the undertaking, and those employed in it.

A third answer is, that any nation who would open its ports to all manner of foreign importation, without being assured of a reciprocal permission from all its neighbours, would, I think, very soon be ruined; and if this be true, it is a proof that a balance of trade is a possible supposition, and that proper restrictions upon importation may turn to the advantage of a state.

In order to promote industry, a statesman must act, as well as permit and protect. Could ever the woollen manufacture have been introduced into France, from the consideration of the great advantage England had drawn from it, had not the king undertaken the support of it, by granting many privileges to the undertakers, and by laying strict prohibitions on all foreign cloths? Is there any other way of establishing a new manufacture any where?

Laying, therefore, trade quite open would have this effect; it would destroy, at first at least, all the luxurious arts; consequently, it would diminish consumption; consequently, diminish the quantity of circulating cash; consequently, it would promote hoarding; and consequently, would bring on poverty in all the states of Europe. Nothing, I imagine, but an universal monarchy, governed by the same laws, and administered according to one plan well concerted, can be compatible with an universally open trade. While there are different states, there must be separate interests; and when no one statesman is found at the head of these interests, there can be no such thing as a common good; and when there is no common good, every interest must be considered separately. But as this scheme of laying trade quite open, is not a thing likely to happen, we may save ourselves the trouble of inquiring more particularly into what might be its consequences; it is enough to observe, that they must, in their nature, be exceedingly complex, and if we have mentioned some of them, it has been to apply principles only, and shew how consequences may follow one another: to foretel what must follow is exceedingly difficult, if not impossible.

In discoursing of the balance of trade, I have hitherto considered it so far only as the specie of a country is augmented by it. In the subsequent books, where we shall have occasion to bring this subject once more upon the carpet, I shall shew how a balance may be extremely favourable without augmenting the mass of the precious metals; to wit, by providing subsistence for an additional number of inhabitants; by increasing the quantity of shipping, which is an article of wealth; by constituting all other nations debtors to it; by the importation of many durable commodities, which may be considered also as articles of wealth; as a well furnished house, a well stored cellar, an ample wardrobe, and a fine stable of horses, are articles which enhance the value of the inheritance of a landed man.

Then we shall have occasion to shew how industry heightens the permanent value of a nation, as agriculture increases its annual produce.

Chap. XXX: Miscellaneous Questions and Observations relative to Trade and Industry

In the former chapters, we have been treating of the nature and consequences of circulation, the effects of augmentations and diminutions of specie, and the doctrine of Mr Hume concerning the balance of trade. The perspicuity with which this author writes, renders his ideas easy to be conceived; and when people understand one another, most disputes are soon at an end.

In order, therefore, to throw a little more light upon the nature of the balance of trade between nations, let me examine the following questions while we have the subject of the last chapter fresh in our memory.

Quest. 1. Can any judgment be formed concerning the state of the balance of trade of a nation, barely from the quantity of specie that is found in it?

I answer in the negative. A great proportion of all the specie of Europe, may be found in a country against which the balance of trade has stood regularly for many years. An inconsiderable proportion of it may be found in another, which has had it as regularly in its favour for the same time. Here follows the proof of this proposition.

The balance upon every article of trade may be favourable to a nation, which squanders away more than the returns of it, upon foreign wars. The balance of every article of trade may be against a country, which receives more than all the loss incurred, either from her mines, or from countries tributary to her, or who willingly furnish subsidies upon many political considerations.

Besides these varieties, there are still other circumstances to be combined, relative to the specie itself. The money found in a country, may either be said to belong absolutely to the country, when neither the state itself, or the particular people of it, are in debt to foreigners; or only so by virtue of a loan. Now, whether it is borrowed or not, the property of it belongs to the country; but the difference consists in this, that when it is borrowed, the acquisition of the metals adds nothing to the national patrimony, that is to say, there is no acquisition of wealth thereby made; but when it is gained by industry, the money adds to the real value of the country, in consequence of the principles laid down in the 26th chapter.

May not a nation, then, having very little gold and silver, open a subscription for millions, at so much per cent? Will not strangers lend to her, when her own subjects cannot? May she not yearly, by paying away the interest of the money borrowed, and by a heavy balance of trade against her, be constantly diminishing her specie, and yet by new contracts, keep up, and even increase the mass of the circulating value, to such a degree, as to be possessed of a greater proportion of specie than any of her neighbours? Farther.

Is it not certain, that all nations will endeavour to throw their ready money, not necessary for their own circulation, into that country where the interest of money is high with respect to their own, and where consequently the value of property in land is low; since they may either draw a high interest from it, or make the acquisition of solid property? Forbidding therefore the acquisition of solid property to strangers, is, in effect, a prohibition upon the gratuitous importation of specie. I allow there may be examples of people who make such purchases, with a view to draw the rents of the lands bought, out of the country; but whatever be the intention at the time of purchase, such however is the effect of an established fortune in a country, that, sooner or later, it draws the proprietor to it; and when this does not happen, a subsequent alienation commonly takes place.

Were the purchase, therefore, of lands permitted universally, and were it established, that property in land, to a certain value, should give a right to naturalization, I have little doubt but large sums would be brought into those countries, where lands are found to be the cheapest; and as no exportable commodity is given in return, the specie of such counties will mark the quantity of lands sold, as well as that of merchandize exported. For want of a sufficient extension of these and many other combinations, which it would be easy to contrive, Mr Belloni, in his Dissertation upon Commerce, Chap. 1. Sect. 5. falls into several mistakes, when he judges of the exportation of commodities of a particular country, by the quantities of money found in it.

'It being the case (says he) that the plenty of coin, wherever it be found, points out the plenty of those goods of which it is the measure: Such persons, therefore, have justly been called rich, and such kingdoms wealthy, where there is found a great quantity of coin. On the other hand again, if we consider the state of a kingdom, and of the coin which is in it, supposing always the intrinsic value of the coin to be preserved (which is nothing else but the measure of the goods and of the price which is given for them), we must necessarily conclude, as every one must acknowledge, that in such countries where we find plenty of coin there must be a considerable trade in exporting goods for the use of strangers; and on the contrary, wherever coin is found to be scarce we may conclude that a great importation of foreign goods has taken place of the coin, which must have gone abroad for the payment of them.'

These consequences are just, only so far as money comes into a country or goes out of it, as the price of merchandize exported or imported. But how much money has not this author himself drawn into Rome from England, for the exportation of nothing but the bills of travellers?

On the other hand, may not a country, which is actually in possession of great quantities of gold and silver, call in these metals and circulate, in their place, a symbolical money; may not a nation then, as well as a private person, employ this specie in a profitable foreign trade, and gain daily by it? May she not, after some time, withdraw her stock, by calling in her debts? And may she not also call in her paper, and remain with an additional acquisition of specie in her pocket? Consequently, during the circulation of the paper, no judgment can be formed as to the balance of her trade, by examining the state of her specie; because I can suppose that at this time every shilling of it may be in the hands of strangers. Consequently, the richest nation in Europe may be the poorest in circulating specie.

'The writings of Mr Gee (says Mr Hume in his Political Discourse upon the Balance of Trade) struck the nation with an universal panic, when they saw it plainly demonstrated, by a detail of particulars, that the balance was against them for so considerable a sum as must leave them without a single shilling in five or six years. But, luckily, twenty years have since elapsed, along with an expensive foreign war; and yet 'tis commonly supposed that money is still more plentiful among us than in any former period.' I quote from the French translation.

Mr Gee was in the wrong to conclude, that the balance of trade would have the effect of carrying off the coin: and Mr Hume has been misled by this mistake, to conclude, that Mr Gee's calculations were false. I know nothing as to the matter of fact; nor whether Mr Gee was a good or a bad judge of the question he treated; but, from what has been said, I hope it appears, that the state of the coin in England, at the time Mr Hume wrote, was no proof on either side.

To judge of the balance of trade is one thing; to judge of the wealth of a nation as to specie is another. England may greatly increase her specie by her trade, and greatly diminish it by her wars: perhaps this may be the fact. She may also, at certain times, have a balance of trade against her; and great sums laid out in foreign wars may be the means of making it return in her favour. Should this nation begin to pay off her debts to strangers, in ready coin, might she not soon diminish, perhaps exhaust, the specie she is now possessed of; yet surely none ever became poorer by paying off their debts. Nothing is so easy as to have specie, when one has solid property to pledge for it; and nothing can be worse judged, than to purchase specie from strangers, at the expence of paying an interest for it, when one can contrive a circulating value in paper-money, representing the solid value which must be pledged to strangers for the loan of their metals.

But still it may be asked, how it happens, that notwithstanding the most unfavourable balance of trade, no nation ever found herself entirely drained of her specie; and since we have proved, that the specie of a country may be diminished by a disadvantageous trade, what are the principles which prevent the total dissipation of it?

This is a very curious question, and opens a door to a multitude of new ideas, which will furnish abundant matter of speculation, when we come to treat more directly of credit. I shall here examine it in general, for the sake only of applying the principles we have laid down.

First, It may be said, that as common prudence prevents a private person from spending to his last shilling; so the like prudence commonly engages a people to put a stop to trade, before it has time totally to drain them. Although most people drink wine, there is no reason why every body should be drunk.

Secondly, Nothing is so complicated as the balance of trade, considered among many nations. The general wealth circulates from one to another, as the money which the farmer gives the landlord circulates back to the farmer. In the number of hands through which the money passes, some are of the class of the luxurious, some of the frugal; the first represents those nations who lose by the balance, the latter those who gain. But the most industrious nations of all, and those who, considered abstractedly from extraordinary accidents, appear in the way to swallow up the wealth of all the rest, are, by the means of such accidents, made liable to terrible restitutions. How many millions, for example, has England restored to the continent, in consequence of her wars and subsidies? She then lays a foundation for many more years of favourable balance, and accordingly we see it return to her, as the money which the state spends within the nation returns into the Exchequer at the end of the year.

Thirdly, It may be asked, how it happens that no nation has ever spent to its last farthing, as many an individual has done? I answer, that I am far from believing that this has never happened; nay, I believe there is nothing more frequent or familiar than this very case, provided the riches of a country be here supposed to mean no more than the specie absolutely belonging to herself, not borrowed from other nations.

I have said above, that the acquisition of money by industry increased the real value of a country, as much as the addition of a portion of territory; now what should hinder a people from spending their ready money, and preserving their land at the same time? Because a young gentleman, whose father has left him a fine estate in land, and ten thousand pounds in ready money, has spent the ten thousand pounds, does it follow, that he is not worth a shilling? Upon this view of the question, it will, I believe, be granted, that Dr Swift's idea that all the specie of Ireland would in a short time be exported, in consequence of an unfavourable balance of trade, is very far from being chimerical, and may be exactly true; although at this time there be six times more coin in circulation than ever; just as a person who is running through his fortune, has commonly more money in his hands than his father used to have, when he was acquiring it. Let Ireland pay her debts to England, and then reckon her specie. Let England pay hers to all the world, and then weigh her gold and silver. Suppose that on summing up the accounts, there is not found one shilling in either country, is this any proof of their being undone? By no means: coin is one article of our wealth, but never can be the measure of it.

I know little of the state of Ireland; but if it be true, that paper money is increasing daily in that country, it is, I suppose, because the specie is daily exported to England, as the returns of estates belonging to people who reside there, and that the Irish, instead of buying it back again for their own use in circulation, augment their paper, in proportion to the progress of their industry; and buy such quantities only of specie as are necessary for paying the balance of their trade. Now by buying specie, I do not suppose, that they bring any over to Ireland, in order to send it back to England; but that they send over goods to the value, which the English merchants pay in specie, or in English paper, to those who are creditors upon Ireland, for the value of their rents, &c.

Suppose then, for a farther illustration of some principles, that all the lands of Ireland belonged to Englishmen residing in their own country, and annually drawing from Ireland the income belonging to them, what would the consequence be? I answer, that as long as this portion of the produce of lands, which goes for rent, (and which we have said to be the fund provided for the subsistence of the free hands who purchase their own necessaries,) can be bought and consumed by the Irish themselves, that is, in other words, while in Ireland there is a demand for this portion of the fruits, it will be paid for, either in coin, to the diminution of their specie, or in something which may be converted into money; that is, by the produce of their industry, and thus, by the means of trade, will come into the hands of the English proprietors, either in specie, or in any other form they judge proper.

That so soon as the demand for this portion of fruits comes to fail, for want of money, or industry, in Ireland, to purchase it, what remains on hand will be sent over to England in kind; or, by the way of trade, be made to circulate with other nations (in beef, butter, tallow, &c.) who will give silver and gold for it, to the proprietors of the Irish lands. By such a diminution of demand in the country, for the fruits of the earth, the depopulation of Ireland is implied; because they who consumed them formerly, consume them no more; that is to say, they are dead, or have left the country.

To conclude; a great part of the value of a country is its produce and manufactures; but it does not follow that these should as necessarily draw into a country a proportional sum of the gold and silver of Europe, as a shoal of small fishes draws water-fowl, or as charity draws the poor, or as beauty draws admiration.

Quest. 2. Can no rule be found to judge of the balance of trade from the state of specie, or at least to perceive the effects of this balance in augmenting or diminishing the mass of riches?

Could it be supposed that specie never circulated between nations, but in the way of trade, and in exchange for exportable commodities, the following rules might be laid down.

First, In nations where the earth produces neither gold or silver, and where these metals are imported as the returns of industry only, the balance in their favour, from the introduction of specie, to this day, would be measured by the quantity of it which they possess. Here Mr Belloni's opinion is just.

Secondly, The consumption made by any nation for the same term of years, is equal to the whole natural produce and labour of the inhabitants for that time, minus the quantity of such produce and labour, as is, or has been, equal in value to the actual national specie.

Thirdly, On the other hand, in nations where gold and silver are produced by the earth, the balance of trade against them, from the time these metals became the object of trade to this day, may be estimated by the quantity of them which has been exported.

Fourthly, and farther; the consumption made by such nations, for the same term of years, is equal to the whole natural produce and labour of the inhabitants for that time, plus the quantity of such produce and labour, as is, or has been, equal to the quantity of these metals exported.

These rules are by much too general to be laid down as principles; because trade is not concerned in every acquisition or alienation of specie; but they may serve, in the mean time, to illustrate the doctrine we have been considering, and even in many cases may be found pretty exact. For example:

If it be true, that in any nation of Europe, there be now just as much silver and gold as there was ten years ago, and if that nation, during this period, has supported, without borrowing from strangers, an expensive war which may have cost it, I suppose, five millions fairly exported in coin, it is certain that, during this period, the home-consumption must have been the value of five millions less than the natural produce, labour, and industry of the inhabitants; which sum of five millions must have come from abroad in coin, and in return for a like value of the production, labour, &c. remaining over and above their own consumption, and exported for this return in ready specie.

In this supposition, the national wealth (the metals) stands as before; the balance of it only is changed. How this change is performed, and what are its consequences, may be discovered by an application of the principles already laid down.

Quest. 3. What were the effects of riches before the introduction of trade and industry?

I never can sufficiently recommend to my readers to compare circumstances in the economy of the ancients, with these of modern politics; because I see a multitude of new doctrines laid down, which, I think, never would have been broached, had such circumstances been properly attended to. I have endeavoured to shew, that the price of goods, but especially of articles of the first necessity, have little or no connection with the quantities of specie in a country The slightest inspection into the state of circulation, in different ages, will fortify our reasoning: but the general taste of dissipation, which is daily gaining ground, makes people now imagine, that wealth and circulation are synonymous terms; whereas nothing is more contrary both to reason and matter of fact. A slight review of this matter, in different ages, will set it in a clearer light than a more abstract reasoning can do.

It is a question with me, whether the mines of Potosi and Brazil, have produced more riches to Spain and Portugal, within these two hundred years, than the treasures heaped up in Asia, Greece, and Egypt, after the death of Alexander, furnished to the Romans, during the two hundred years which followed the defeat of Perseus, and the conquest of Macedonia.

From the treasures mentioned by all the historians who have written of the conquest of these kingdoms by the Romans, I do not think I am far from truth, when I compare the treasures of the frugal Greeks to the mines of the new world.

What effect, as to circulation, had the accumulation of these vast treasures? Not any to accelerate it, surely: and no person, the least conversant in antiquity, will pretend that the circulating specie in those times bore as great a proportion to their treasures, as what is at present circulating among us bears to the wealth of the most oeconomising Prince in Europe. If any one doubt of this particular, let him listen to Appian, who will inform him, that the successors of Alexander, the possessors of these immense riches, lived with the greatest frugality. These treasures were then, as I have said, a real addition to the value of their kingdoms but had not the smallest influence upon prices. In those days of small circulation, the prices of every thing must have been vastly low, not from the great abundance of them, but because of the little demand; and as a proof of this, I cite the example of a country, which, within the space of fifty years, possessed in specie, at one time, considerably beyond the worth of the land, houses, slaves, merchandize, natural produce, moveables, and ready money, at another. The example is mentioned by Mr Hume; and I am surprized the consequence of it did not strike him. For if the money they possessed was greatly above the worth of all their property, moveable and immoveable, surely it never could be considered as a representation of their industry, which made so small a part of the whole. Athens possessed, before the Peloponnesian war, a treasure of ten thousand talents; and fifty years afterwards, all Athens, in the several articles above specified, did not amount to the value of six thousand. Hume's Political Discourses upon the Balance of Trade.

These treasures were spent in the war, and they had been laid up for no other purpose. Therefore I was in the right, when I observed above, Chap. 22., that war in ancient times had the effect that industry has now: it was the only means of making wealth circulate. But, peace producing a general stagnation of circulation, people returned to the ancient simplicity of their manners, and the prices of subsistence remained on the former footing; because there was no increase of appetite, or rising of demand upon any necessary article. So much for the state of wealth during the days of frugality.

The Romans subdued all those kingdom of the Greeks, and drew their treasures to Rome. The republic went to destruction, and a succession of the most prodigal princes ever known in history succeeded one another for about two hundred years. Those monstrous treasures were then thrown into circulation: and I must now give an idea of the effects produced by such a revolution.

I have already observed (Chap. 28.), that in consequence of the great prodigality of those times, the price of superfluities rose to a monstrous height; while the price of necessaries kept excessively low. The fact is indisputable; and any one who inclines to satisfy himself father, may look into that valuable collection of examples of ancient luxury, wealth, and, at the same time, of simplicity, found in Dr Wallace's Dissertation upon the Numbers of Mankind in ancient and modern Times, p. 132. et seq.

But how is it to be accounted for, that the price of superfluities should stand so high, while the price of necessaries was so low? The reason is plain, from the principles we have laid down. The circulation of money had no resemblance to that of modern times: fortunes were made by corruption, fraud, concussion, rapine, and penury; not by trade and industry. Seneca amassed in four years 2,400,000 pounds sterling. An augur was found to be worth 3 millions sterling. M. Antony owed on the ides of March, 322,916 pounds sterling, and paid it before the calends of April. We know of no such circulation. Every revolution was violent: the powerful were rapacious and prodigal, the weak were poor and lived in the greatest simplicity: consequently, the objects of the desires for the rich were immensely dear; and the necessaries for the poor were excessively cheap. This is a confirmation of the principles we have laid down in Chap. 28., that the price of subsistence must ever be in proportion to the faculties of the numerous classes of those who buy: that the price of every thing must be in proportion to the demand for it; and that in every case, where the supply can naturally be increased in proportion to the demand, there must be a determinate proportion between the price of such articles and that of subsistence. Now in the examples given by Dr Wallace, of things which sold at monstrous prices, we find such only as could not be increased according to demand: here is the enumeration of them. Large asses brought from Spain, peacocks, fine doves, mullets, lampreys, peaches, large asparagus, purple, wool, jewels, carpets, vestes Byssinae, slaves skilled in the finer arts, pictures, statues, books, and rewards to those who taught the sciences. By casting a glance upon the catalogue, we may easily perceive that the extraordinary price must have proceeded from the impossibility of augmenting the supply in proportion to the demand; not from the abundance of the money, which had no effect in raising the price of necessaries. The cheapness, again, of these did not proceed from the vast plenty of them; but because the price remained in proportion to the faculties of the numerous poor; and because the augmentation of the wealth of the rich never could increase their consumption of any necessary article. Had the Roman empire been governed with order and tranquillity, this taste of luxury, by precipitating money into the hands of the numerous classes, would, in time, have wrought the effects of multiplying the number of the industrious; consequently, of increasing the demand for vendible subsistence; consequently, of raising the price of it. And, on the other hand, the introduction of a more adequate proportion between services and rewards given by the public, would have checked the other branch of circulation which produced those monstrous fortunes, to wit, rapine and corruption: and, industry receiving a regular encouragement, every article of extraordinary demand for delicate aliments, birds, fishes, fruits, &c. would have been supplied with sufficient abundance; and consequently, would have fallen in its price. But while either despotism or slavery were the patrimonial inheritance of every one on coming into the world, we are not to expect to see the same principles operate, as in ages where the monarch and the peasant are born equally free to enjoy the provision made for them by their forefathers.

Quest. 7. In what manner, therefore, may a statesman establish industry, so as not to destroy simplicity, nor occasion a sudden revolution in the manners of his people, the great classes of which are supposed to live secure in ease and happiness; and, at the same time, so as to provide with necessaries every one who may be in want?

The observations we are going to make will point out the answer to this question: they will still farther unfold the political economy of the ancients, and explain how manners remained so pure from vicious luxury, notwithstanding the great and sumptuous works carried on, which strike us with so lofty an idea of their useful magnificence and noble simplicity. These observations will also confirm the justness of a distinction made, in the first chapter of this book, between labour and industry; by shewing that labour may ever be procured, even by force, at the expence of furnishing man with his physical-necessary, from which no superfluity can proceed: whereas industry cannot be established, but by means of an adequate equivalent, proportioned, not to the absolutely necessary, but to the reasonable desire of the industrious; which equivalent becomes afterwards the means of diffusing a luxurious disposition among all the classes of a people.

If a statesman find certain individuals in want, he must either feed them, in which case he may employ them as he thinks fit; or he must give them a piece of land, as the means of feeding themselves. If he give the land, he can require no equivalent for it, because a person who has nothing can give nothing but his labour; and if he be obliged to labour for his food, he cannot purchase with labour the earth itself, which produces it. If it be asked, whether a statesman does better to give the food, or to give the land? I think it will appear very evident, that the first is the better course, because he can then exact an equivalent; and since in either way the person is fed, the produce of his labour is always clear gain. But in order to give the food, he must have it to give; in which case it must either be a surplus-produce of public lands, or a contribution from the people. In both which cases, is implied an industry carried on beyond the personal wants of those who labour the ground. If this fund be applied in giving bread to those whom he employed in improving the soil of the country in general, it will have no immediate effect in destroying the simplicity of their manners; it will extend the fund only of their subsistence. If he employs them in making highways, aqueducts, common sewers, bridges, and the like; it will extend the correspondence between the different places of the country, and render living in cities more easy and agreeable: and these changes have an evident tendency towards destroying simplicity. But here let it be remarked, that the simplicity of individuals is not hurt by the industry carried on at the expence of the public. The superfluous food at the statesman's disposal, is given to people in necessity, who are employed in relieving the wants of the public, not of private persons. But if, for example, in consequence of the roads made, any inhabitant shall incline to remove from place to place in a chariot, instead of riding on horseback, or walking, he must engage somebody to make the machine: this is a farther extension to occupation, on the side of those who labour. but the consequence of the employment is very different, when considered with regard to the simplicity of manners. The reason is plain: the ingenuity here must be paid for; and this superfluity in the hands of the workman is a fund for his becoming luxurious.

Industry destroys simplicity of manners in him who gives an equivalent for an article of superfluity; and the equivalent given frequently gives rise to a subordinate species of luxury in the workman. When industry therefore meets with encouragement from individuals, who given an equivalent in order to satisfy growing desires, it is a proof that they are quitting the simplicity of their manners. In this case, the wants and desires of mankind are the sources of industry, which was the supposition in the first book; because, in fact, the industry of Europe is owing to this cause alone.

But the industry of ancient times was very different, when the multitude of slaves ready to execute whatever was demanded, either by the state or by their masters, for the equivalent of simple maintenance only, prevented wealth from ever falling into the hands of industrious free men; and he who has no circulating equivalent to give for satisfying a desire for superfluity, must remain in his former simplicity. The labour therefore of those days producing no circulation, could not corrupt the manners of the people; because, remaining constantly poor, they never could increase their consumption of superfluity.

I must, in this place, insert the authority of an ancient author, in order both to illustrate and to prove the justness of this representation of the political oeconomy of the ancients.

There remains a discourse of Xenophon upon the improvement of the revenue of the state of Athens. Concerning the authenticity of this work, I have not the smallest doubt. It is a chef d'oeuvre of its kind, and from it more light is to be had, in relation to the subject we are here upon, than from any thing I have ever seen, ancient or modern.

From this ancient monument we learn the sentiments of the author with regard to the proper employment of the three principal classes of the Athenian people, viz. the citizens, the strangers, and the slaves. From the plan he lays down we plainly discover, that, in the state of Athens, (more renowned than any other of antiquity for the arts of luxury and refinement,) it never entered into the imagination of any politician to introduce industry even among the lowest classes of the citizens; and Xenophon 's plan was to reap all the benefits we at present enjoy from it, without producing any change upon the spirit of the Athenian people.

The state at this time used to impose taxes upon their confederate cities, in order to maintain their own common people, and Xenophon's intention in this discourse was to lay down a plan for improving the revenue of the state in such a manner as out of it to give every citizen a pension of three oboli a day, or three pence three farthings of our money.

I shall not here go through every branch of his plan, nor point out the resources he had fallen upon to form a sufficient fund for this purpose; but he says, that in case of any deficiency in the domestic revenue of the state, people from all quarters, Princes and strangers of note, in all countries, would be proud of contributing towards it, for the honour of being recorded in the public monuments of Athens, and having their names transmitted to posterity as benefactors to the state in the execution of so grand a design.

In our days, such an idea would appear ridiculous; in the days of Xenophon, it was perfectly rational. At that time great quantities of gold and silver were found locked up in the coffers of the rich: this was in a great measure useless to them, in the common course of life, and was the more easily parted with from a sentiment of vanity or ostentation.

In our days, the largest income is commonly found too small for the current expence of the proprietor. From whence it happens, that presents, great expence at funerals and marriages, godfathers' gifts, &c. so very familiar among ourselves in former times, are daily going out of fashion. These are extraordinary and unforeseen expences which our ancestors were fond of; because they Battered their vanity, without diminishing the fund of their current expence: but as now we have no full coffers to fly to, we find them excessively burthensome, and endeavour to retrench them as soon as we can, not from frugality, God knows, but in consequence of a change in our manners.

Besides providing this daily pension of three pence three farthings a day for every citizen of Athens, rich and poor, he proposed to build, at the public charge, many trading vessels, a great many inns and houses of entertainment for all strangers in the sea-ports, to erect shops, warehouses, exchanges, &c. the rents of which would increase the revenue, and add great beauty and magnificence to the city. In short, Xenophon recommends to the state to perform, by the hands of their slaves and strangers, what a free people in our days are constantly employed in doing in every country and industry. While the Athenian citizens continued to receive their daily pensions, proportioned to the value of their pure physical-necessary, their business being confined to their service in the army in time of war, their attendance in public assemblies, and the theatres in times of peace, clothed like a parcel of capucins, they, as became freemen, were taught to despise industrious labour, and to glory in the austerity and simplicity of their manners. The pomp and magnificence of the Persian Emperors were a subject of ridicule in Greece, and a proof of their barbarity, and of the slavery of their subjects. From this plain representation of Xenophon's plan, I hope, the characteristic difference between the ancient and modern economy is manifest; and for such readers as take a particular delight in comparing the systems of simplicity and luxury, I recommend the perusal of this most valuable discourse.

To put this matter past all dispute, and to prove that the simplicity of the manners, as well as the idleness of the common people of Athens in Xenophon's time, proceeded from refinement not from ignorance, I shall here insert a passage from President Goguet's Origin of Laws, Arts, and Sciences, with the authorities he cites in part 3d, book 4th, chap. 3d.

'Hesiod and Plutarch have observed,' says he, 'that, in the ages I am now speaking of (before the reign of Cyrus) commerce was held in great honour among the Greeks. No labour, say these authors, was accounted shameful, no art, no trade, placed any difference among men. This maxim, so reasonable and so useful to such a nation as the Greeks, was, nevertheless, altered. We see by the works of Xenophon, of Plato, of Aristotle, and of many other writers of merit, that, in their age, all professions which were calculated to gain money, were regarded as unworthy of a freeman. Aristotle maintains, that, in a well ordered state, they will never give the right of citizens to artisans. Plato would have a citizen punished who should enter into commerce. In fine, we see these two philosophers, whose sentiments, on the principles and maxims of government, are otherwise so opposite, agreeing to recommend that the lands should be cultivated by slaves: only. It is very surprising,' concludes the President, 'that with such principles, which all the Greeks appear to have imbibed, they should ever have been so intelligent in commerce, and so powerful at sea, as they are known to have been in some ages.'

Putting, therefore, all these circumstances together, and comparing them with the contrast, which is found, as to every particular, in our times, I think it is but doing justice to the moderns, to allow, that the extensive luxury, which daily diffuses itself through every class of a people, is more owing to the abolishing of slavery, the equal distribution of riches, and the circulation of an adequate equivalent for every service, than to any greater corruption of our manners, than what prevailed among the ancients.

In order to have industry directed towards the object of public utility, the public, not individuals, must have the equivalent to give. Must not the employment be adapted to the taste of him who purchases it? Now, in ancient times, most public works were performed either by slaves, or at the price of the pure physical-necessary of free men. We find the price of a pyramid, recorded to us by Herodotus, in the quantity of turnips, onions, and garlic, consumed by the builders of it. Those who made the via appia, I apprehend, were just as poor when it was finished as the day it was begun; and this must always be the case, when the work requires no peculiar dexterity in the workmen. If, on the other hand, examples can be brought where workmen gained high wages, then the consequences must have been the same as in our days.

As long, therefore, as industry is not directed to such objects as require a particular address, which, by the principles laid down in the twenty-first chapter, raises profits above the physical-necessary, the industrious never can become rich; and if they be paid in money, this money must return into the hands of those who feed them: and if no superfluity be found any where but in the hands of the state, such industry may be the means of consuming a surplus of subsistence, but never can draw one penny into circulation. This I apprehend to be a just application of our principles, to the state of industry under the Roman republic: and it is this species of industry which we call labour. We are not therefore to ascribe the taste for simplicity in those days to the virtue of the times. A man who had riches, and who spent them, spent them no doubt then, as at present, to gratify his desires; and if the simplicity of the times furnished no assistance to his own invention, in diversifying them, the consequence was, that the money was not spent, but locked up. I have heard many a man say, had I so much money I should not know how to spend it. The thing is certainly true; for people do not commonly take it into their head to lay it out for the public.

Nobody, I believe, will deny that money is better employed in building a house, or in producing something useful and permanent, than in providing articles of mere transitory superfluity. But what principle of politics can influence the taste of the proprietors of wealth? This being the case, a statesman is brought to a dilemma; either to allow industry to run into a channel little beneficial to the state, little permanent in its nature, or to deprive the poor of the advantage resulting from it. May I not farther suggest, that a statesman, who is at the head of a people, whose taste is directed towards a trifling species of expence, does very well to diminish the fund of their prodigality, by calling in, by the means of taxes, a part of the circulating equivalent which they give for it? When once he is enriched by these contributions, he comes to be in the same situation with ancient statesmen, with this difference, that they had their slaves at their command, whom they fed and provided for; and that he has the free, for the sake of an equivalent with which they feed and provide for themselves. He then can set public works on foot, and by his example, inspire a taste for industry of a more rational kind, which may advance the public good and procure a lasting benefit to the nation.

I have frequently said, that the acquisition of money, by the sale of industry to strangers, or in return for consumable commodities, was a way of augmenting the general worth of a nation. Now I say, that whoever can transform the most consumable commodities of a country into the most durable and most beneficial works, makes a high improvement. If therefore meat and drink, which are of all things the most consumable, can be turned into harbours, high roads, canals, and public buildings, is not the improvement inexpressible? This is in the power of every statesman to accomplish, who has subsistence at his disposal; and beyond the power of all those who have it not. There is no absolute occasion for money to improve a country. All the magnificent buildings which ornament Italy, are more properly the representation of a scanty subsistence, than of the gold and silver in that country at the time they were executed. Let me now conclude with a few miscellaneous observations on what has been said.

Obser. 1. When I admire the magnificence and grandeur of public works in any country, such as stupendous churches, amphitheatres, roads, dykes, canals; in a word, when I examine Holland, the greatest work perhaps ever done by man, I am never struck with the expence. I compare them with the numbers of men only who have lived to perform them. When I see another country well inhabited, where no such works appear, the contrast suggests abundance of reflections.

As to the first, I conclude, that while these works were carrying on, either slavery or taxes must have been established; because it seldom happens, that a prince will, out of his own patrimony, launch out into such expences, purely to serve the public. Public works are carried on by the public; and for this purpose, either the persons or purses of individuals, must be at its command. The first I call slavery; that is service: the second taxes; that is public contributions in money or in necessaries.

Obser. 2. I farther conclude, that nothing is to be gathered from those works, which should engage us to entertain a high opinion of the wealth, or other species of magnificence in the people who executed them. All that can be determined positively concerning their economy as to this particular, is, that at the time they were performed, agriculture must have been exercised as a trade, in order to furnish a surplus sufficient to maintain the workmen; or that subsistence must have come from abroad, either as a return for other species of industry, or gratuitously, that is, by rapine, tribute, &c.

Obser. 3. That the consequence of such works, is, to make meat, drink, and necessaries circulate from the hands of those who have a superfluity of them, into those who are employed to labour; or to oblige those who formerly worked for themselves only, to work also in part for others. To execute this, there must be a subordination: for who will increase his labour, voluntarily, in order to feed people who do not work for himself, but for the public? This combination was neglected throughout the first book; because we there left mankind at liberty to follow the bent of their inclinations. This was necessary to give a right idea of the subject we then intended to treat, and to point out the different effects of slavery and liberty; but now, that we have formed trading nations, and riveted a multitude of reciprocal dependences, which tie the members of them together, there is less danger in introducing restraints; because the advantages which people find, from living in a well ordered society, make them put up the better with the inconveniences of supporting and improving it. It is an universal principle, that instruction should be given with gentleness. A young horse is to be carressed when the saddle is first put upon his back: any thing that appears harsh, let it be ever so useful or necessary, must be forborn in the beginning, in order to captivate the inclination of the creature which we incline to instruct.

Obser. 4. When a statesman knows the extent and quality of the territory of his country, so as to be able to estimate what numbers it may feed; he may lay down his plan of political economy, and chalk out a distribution of inhabitants, as if the number were already compleat. It will depend upon his judgment alone, and upon the combination of circumstances, foreign and domestic, to distribute, and to employ the classes, at every period during this execution, in the best manner to advance agriculture, so as to bring all the lands to a thorough cultivation. A ruling principle here, is, to keep the husbandman closely employed, that their surplus may be carried as high as possible; because this surplus is the main spring of all alienation and industry. The next thing is to make this surplus circulate; no man must eat of it for nothing. What a prodigious difference does a person find, when he considers two countries, equally great, equally fertile, equally cultivated, equally peopled, the one under the economy here represented; the other, where every one is employed in feeding and providing for himself only.

A statesman, therefore, under such circumstances, should reason thus: I have a country which maintains a million of inhabitants, I suppose, and which is capable of maintaining as many more; I find every one employed in providing for himself, and considering the simplicity of their manners, a far less number will be sufficient to do all the work: the consequence is, that many are almost idle, while others, who have many children, are starving. Let me call my people together, and shew them the inconvenience of having no roads. He then proposes that every one who chooses to apply to this work, shall be fed and taken care of by the community, and his lands distributed to those who incline to take them. The advantage is felt, the people are engaged to work a little harder, so as to undertake the cultivation of the portions of those who have abandoned them. Upon this revolution, labour is increased, the soil continues cultivated as before, and the additional labour of the farmers appears in a fine high road. Is this any more than a method to engage one part of a people to labour, in order to maintain another?

Obser. 5. Here I ask, whether it be not better to feed a man, in order to make him labour and be useful, than to feed him in order to make him live and digest his victuals? This last was the case of multitudes during the ages of ancient slavery, as well as the consequence of ill-directed modern charity. One and the other being equally well calculated for producing a simplicity of manners: and Horace has painted it to the life, when he says,

Nos numerus sumus, et fruges consumere nati.

This I have heard humorously translated, though nastily I confess; We add to the number of t-d mills. A very just representation of many of the human species! to their shame be it spoken, as it equally casts a reflection on religion and on government.

Consistently with these principles, we find no great or public work carried on in countries of great liberty. Nothing of this kind is to be seen among the Tartars or hunting Indians. These I call free nations, but not our European republics, where I have found just as much subordination and constraint as any where else.

I have on several occasions, let drop some expressions with regard to charity, which I am sensible may be misinterpreted. It will therefore be proper to make some apology, which nobody can suspect of insincerity; because my reason for introducing it, is with a view to a farther illustration of my subject.

When I see a rich and magnificent monastery of begging friars, adorned with profusion of sculpture, a stupendous pile of building, stately towers, incrustations of marble, beautiful pavements; when I compare the execution and the expence of all these, with the faculties of a person of the largest fortune, I find there is no proportion between what the beggars have executed with the produce of private charities, and what any Lord has done with his overgrown estate. Nay monasteries there are which, had they been executed by princes, would have been cited by historians, from generation to generation, as eternal monuments of the greatest prodigality and dissipation. Here then is an effect of charity, which I have heard condemned by many, and I think without much reason. What prostitution of riches! say they: how usefully might all this money have been employed, in establishing manufactures, building a navy, and in many other good purposes? Whereas I am so entirely taken up with the effects arising from the execution of the work, that I seldom give myself time to reflect upon the use of it. The building of this monastery has fed the industrious poor, has encouraged the liberal arts, has improved the taste of the inhabitants, has opened the door to the curiosity of strangers: and when I examine my purse, I find that instead of having contributed to the building of it from a charitable disposition, my curiosity to see it has obliged me to contribute my proportion of the expence. I spend my money in that country, and so do other strangers, without bringing any thing away for it. No balance of trade is clearer than this. The miraculous tongue of St. Anthony of Padua, has brought more clear money into that city than the industry of a thousand weavers could have done: the charity given is not to the monks, but to the poor whom they employ. If young wits, therefore, make a jest of such a devotion; I ask, who ought to be laughed at, those who give, or those who receive money for the show?

In a country where such works are usually carried on, they cease in a great measure to be useful, whenever they are finished; and a new one should be set on foot directly, or what will become of those who are without employment? It must not be concluded from this, that the usefUlness of public works is not a principal consideration. The more a work is useful after it is done, so much the better; because it may then have the effect of giving bread to those who have not built it. But whether useful or not afterwards, it must be useful while it is going on; and many, who with pleasure will give a thousand pounds to adorn a church, would not give a shilling to build Westminster bridge, or the port of Rochefort; and the poor live equally by the execution of either. Expensive public works, are therefore a mean of giving bread to the poor, and of advancing industry, without hurting the simplicity of manners; which is an answer to the seventh question.

Obser. 6. Great works found in one country and none found in another, is no proof that the first have surpassed the second in labour and industry: the contrast marks only the different division of property, or taste of expence. Every undertaking points out a particular interest. Palaces are a representation of rich individuals; snug boxes, in the neighbourhood of cities, represent small but easy fortunes; huts point out poverty; aqueducts, highways, &c. testify an opulent common good: and if these be found in a country where no vestige of private expence appears, I then must conclude that they have been executed by slaves, or by oppression; otherwise somebody, at least, would have gained by the execution; and his gains would appear in one species of expence or another.

Obser. 7. In countries where fortunes have been unequally divided, where there have been few rich and many poor, it is common to find lasting monuments of labour; because great fortunes only are capable of producing them. As a proof of this let us compare the castles of ancient times (I mean four or five hundred years ago) with the houses built of late. At that time fortunes were much more unequal than at present, and accordingly we find the habitations of the great in most countries not numerous, but of an extraordinary bulk and solidity. Now a building is never to be judged of by the money it cost, but by the labour it required. From the houses in a country, I judge of the opulence of the great, and of the proportion of fortunes among the inhabitants. The taste in which these old castles are built, marks the power of those who built them, and, as their numbers are small, we may judge from the nature of man, who loves imitation, that the only reason for it was, that there were few in a condition to build them. Why do we find in modern times a far less disproportion between the convenience with which every body is lodged, than formerly; but merely because riches from the operations of industry above-described are more equally divided.

Obser. 8. From this we may conclude, that lasting monuments are no adequate measure of the industry of a country. The expence of a modern prince, in a splendid court, numerous armies, frequent journeys, magnificent banquets, operas, masquerades, tournaments, and shews, may give employment and bread to as many hands, as the taste of him who built the pyramid; and the smoke of the gun-powder at the reviews, and of the flambeaus and wax lights at the entertainments, may be of as great use to posterity, as the shadow of the pyramid, which is the only visible effect producted by it; but the one remains for ever, the other leaves no vestige behind it. The very remaining of the work, however useless in itself, becomes advantageous, so far as it is ornamental, and inspires sentiments of emulation to succeeding princes, the effects of which will still be productive of the good consequences of keeping people employed. The expence of the other flatters the senses, and gives delight: there is no choice here. All such useless expence gratifies vanity only; accident alone makes one species permanent, another transitory.

Those who have money may be engaged to part with it in favour of the poor, but never forced to part with it to the prejudice of their posterity. Inspire, if you can, a good and useful taste of expence; nothing so right; but never check the dissipation of ready money, with a view to preserve private fortunes. Leave such precautions to the prudence of every individual. Every man, no doubt, has as good a right to perpetuate and provide for his own posterity, as a state has to perpetuate the welfare of the whole community; it is the combination of every private interest which forms the common weal. From this I conclude, that, without the strongest reasons to the contrary, perpetual substitutions of property should be left as free to those who possess lands, as locking up in chests should be permitted to those who have much money.

Quest. 8. What are the principles which influence the establishment of mercantile companies; and what effects do these produce upon the interests of trade?

There is a close connection between the principles relating to companies and those we have examined in the twenty-third chapter, concerning corporations. The one and the other have excellent consequences, and both are equally liable to abuse. A right examination of principles is the best method to advance the first, and to prevent the latter.

The advantages of companies are chiefly two.

1. That by uniting the stocks of several merchants together, an enterprise far beyond the force of any one, becomes practicable to the community.

2. That by uniting the interests of several merchants, who direct their foreign commerce towards the same object, the competition between them abroad is taken away; and whatever is thus gained, is so much clear profit, not only to the company, but to the society of which they are members.

It is in consideration of the last circumstance, that companies for foreign commerce have a claim to extensive privileges. But no encouragement given to such associations should be carried farther than the public good necessarily requires it should be. The public may reward the ingenuity, industry and inventions of particular members, and support a private undertaking as far as is reasonable; but every encouragement given ought to be at the expence of the whole community, not at that of particular denominations of inhabitants.

The disadvantages proceeding from companies are easily to be guessed at, from the very nature of the advantages we have been setting forth: and the relation between the one and the other will point out the remedies.

First, the weight of money in the hands of companies, and the public encouragement given them, crush the efforts of private adventurers, while their success inspires emulation, and a desire in every individual to carry on a trade equally profitable.

Here a statesman ought nicely to examine the advantages which the company reaps from the incorporation of their stock, and those which proceed from the public encouragement given to the undertaking; that with an impartial hand, he may make an equal distribution of public benefits. And when he finds it impossible to contribute to the advancement of the public good, by communicating the privileges of companies to private adventurers, he ought to facilitate the admittance of every person properly qualified into such associations.

Secondly, The second disadvantage of companies, is, a concomitant of that benefit so sensibly felt by the state, from the union of their interest, while they purchase in foreign markets: the same union which, at the time of buying, secures the company from all competitions, proves equally disadvantageous to those who purchase from them at home. They are masters of their price, and can regulate their profits by the height of demand; whereas they ought to keep them constantly proportioned to the real value of the merchandize.

The advantage resulting from the union of many private stocks is common to all companies; but those we have mentioned to proceed from the union of their interest, is peculiar to those who carry on an exclusive trade in certain distant parts of the world. We have, in a former chapter, laid down the maxims which influence the conduct of a statesman in regulating the prices of merchandize, by watching over the balance of work and demand, and by preserving the principles of competition in their full activity. But here a case presents itself, where, upon one side of the contract, competition can have no effect, and where its introduction is forbidden for the sake of the public good, because it destroys the exclusive privilege of the company to trade in certain countries.

What method, therefore, can be fallen upon to preserve the advantage which the nation reaps from the company's buying in foreign parts without being exposed to competition; and at the same time to prevent the disadvantage to which the individuals of the society are exposed at home, when they endeavour, in competition with one another, to purchase from a company, who, in virtue of the same exclusive privilege, are united in their interest, and become masters to demand what price they think fit?

It may be answered, that it cannot be said of companies as of private dealers, that they profit of every little circumstance of competition, to raise their price. Companies have a fixed standard, and all the world buys from them at the same rate; so that retailers, who supply the consumption, have in one respect this notable advantage, that as all buy from them at the same price, no one can undersell another; and the competition between themselves secures the public from exorbitant prices.

I agree that these advantages are felt, and that they are real; but still they prove no more than that the establishment of companies is not so hurtful to the interest of those who consume their goods, as it would be could they profit to the utmost of their exclusive privilege in selling by retail. But it does not follow from this, that the profits upon such a trade do not rise (in consequence of their privilege) above the standard proper for making the whole commerce of a nation flourish. The very jealousy and dissatisfaction, conceived by other merchants, equally industrious and equally well deserving of the public, because of the great advantages enjoyed by those who are incorporated, under the protection of exclusive privileges, is a hurt to trade in general, is contrary to that principle of impartiality which should animate a good statesman, and should be prevented if possible. Let us therefore go to the bottom of this affair; and, by tracing the progress of such mercantile undertakings, as are proper objects for the foundation of companies, and which entitle them to demand and to obtain certain exclusive privileges, let us endeavour to find out a method by which a statesman may establish such societies, so as to have it in his power to lay their inland sales under certain regulations, capable to supply the want of competition; and to prevent the profits of exclusive trade from rising, considerably, above the level of that which is carried on without any such assistance from the public.

While the interest of companies is in few hands, the union of the members is more intimate, and their affairs are carried on with more secrecy. This is always the case in the infancy of such undertakings. But the want of experience frequently occasions considerable losses; and while this continues to be the case, no complaints are heard against such associations. Few pretend to rival their undertaking, and it becomes at first more commonly the object of raillery than of jealousy. During this period, the statesman should lay the foundation of his authority; he ought to spare no pains nor encouragement to support the undertaking; he ought to inquire into the capacity of those at the head of it; order their projects to be laid before him; and when he finds them reasonable, and well planned, he ought to take unforeseen losses upon himself: he is working for the public, not for the company; and the more care and expence he is at in setting the undertaking on foot, the more he has a right to direct the prosecution of it towards the general good. This kind of assistance given, entitles him to the inspection of their books; and from this, more than any thing, he will come at the exact knowledge of every circumstance relating to their trade. By this method of proceeding, there will be no complaints on the side of the adventurers, they will engage with chearfulness, being made certain of the public assistance in every reasonable undertaking; their stock becomes in a manner insured, individuals are encouraged to give them credit, and from creditors they will naturally become associates in the undertaking. So soon as the project comes to such a bearing as to draw jealousy, the bottom may be enlarged by opening the doors to new associates, instead of permitting the original proprietors to augment, and thus the fund of the company their stock with borrowed money; may be increased in proportion to the employment found for it, and every one will be satisfied.

When things are conducted in this way, the authority of public inspection is no curb upon the trade; the individuals who serve the company are cut off from the possibility of defrauding; no mysteries, no secrets, from which abuses arise, will be encouraged; trade will become honourable and secure, not fraudulent and precarious; because it will grow under the inspection of its protector, who protects it for the public good only.

Why do companies demand exclusive privileges, and why are they ever granted, but as a recompense to those who have been at great expence in acquiring a knowledge which has cost nothing to the state? And why do they exert their utmost efforts in order to conceal the secrets of their trade, and to be the only sharers in the profits of it, but to make the public refund tenfold the expence of their undertaking?

When companies are once firmly established, the next care of a statesman is, to prevent the profits of their trade from rising above a certain standard. We speak at present of those only, whom by exclusive privileges, are exposed to no competition at their sales. One very good method to keep down prices, is, to lay companies under a necessity of increasing their stock as their trade can bear it, by the admission of new associates; for by increasing the company's stock, you increase, I suppose, the quantity of goods they dispose of, and consequently diminish the competition of those who demand of them: but as even this will not have the effect of reducing prices to the adequate value of the merchandize (a thing to be done by competition only), the statesman himself may interpose an extraordinary operation. He may support high profits to the company, upon all articles of luxury consumed at home, and favour the keeping down of the prices of such goods as are either for exportation or manufacture.

This can be done when he has companies only to deal with: in every other case, the principles of competition between different merchants, trading in the same goods, upon separate interests, makes the thing impossible. But where the interests of the sellers, which are the company, are united, and where there is no competition, they are masters of their price, according to the principles laid down in the seventh chapter. Now, provided the dividend upon the whole stock be a sufficient recompense both for the value of the fund, and the industry of those who are employed to turn it to account, the end is accomplished. Extraordinary profits upon any particular species of trade cast a discouragement upon all others.

We very frequently see that great trading companies become the means of establishing public credit; on which occasions, it is proper to distinguish between the trading stock of the company, which remains in their possession, and the actions, bonds, annuities, contracts, &c. which carry their name, and which have nothing but the name in common. The price of the first is constantly regulated by the profits upon the trade; the price of the other, by the current value of money.

Let me next observe the advantage which might result to a nation, from a prudent interposition of the statesman, in the regulation of a tariff of prices for such goods as are put to sale without any competition on the side of the sellers.

The principles we have laid down, direct us to proscribe, as much as possible, all foreign consumption, especially that of work: and to encourage as much as possible the exportation of it. Now, if what the India company of England, for example, sells to strangers, and exports for a return in money, be equal to the money she herself has formerly exported, the balance upon the India trade will stand even. But if the competition of the French and Dutch be found hurtful to the English company in her outward sales, may not the government of this nation lend a hand towards rising the profits of the company, upon tea, china, and japan wares, which are articles of superfluity consumed by the rich at home, in order to enable the company to afford her silk and cotton stuffs to strangers, at a more reasonable rate? These operations, I say, are practicable, where a company sells without competition, but are never to be undertaken, but when the state of its affairs are perfectly well known; because the prices of exportable goods might, perhaps, be kept up by abuse and mismanagement, and not by the superior advantages which other nations have in carrying on a like commerce. The only remedy against abuse is reformation. But how often do we see a people lid under contribution in order to support that abuse!

Companies, we have said, owe their exclusive privileges to the difficulties to which an infant commerce is exposed: these difficulties once surmounted, and the company established upon a solid foundation, new objects of profit present themselves daily; so much, that the original institution is frequently eclipsed, by the accessary interests of the society. It is therefore the business of a statesman to take care that the exclusive privileges granted to a society, for a certain purpose, be not extended to other interests, nowise relative to that which set the society on foot, and gave it a name. And when exclusive privileges are given, a statesman should never fail to stipulate for himself, a particular privilege of inspection into all the affairs of the company, in order to be able to take measures which may effectually prevent bad consequences to the general interest of the nation, or to that of particular classes.

Let this suffice at present, as to the privileges enjoyed by companies in foreign trade. Let me now examine the nature of such societies in general, in order to discover their influence on the mercantile interests of a nation, and how they tend to bring every branch of trade to perfection, when they are established and carried on under the eye of a wise administration.

Besides the advantages and disadvantages above mentioned, there are others found to follow the establishment of trading companies. The first proceed from union, that is, a common interest; the last from disunion, that is, from separate interests.

A common interest unites, and a separate interest disunites the members of every society; and did not the first preponderate among mankind, there would be no society at all. Those of the same nation may have a common interest relative to foreigners, and a separate interest relative to one another. those of the same profession may have a common interest relative to the object of their industry, and a separate interest relative to the carrying it on: the members of the same mercantile company may have the same interest in the dividend, and a separate interest in the administration of the fund which produces it. The children of the same family, nay even a man and his wife, though tied by the bonds of common interest, may be disjoined by the effects of a separate one. Mankind are like loadstones, they draw by one pole, and repel by another. And a statesman, in order to cement his society, should know how to engage every one, as far as possible, to turn his attracting pole towards the particular centre of common good.

From this emblematical representation of human society, I infer, that it is dangerous to the common interest, to permit too close an union between the members of any subaltern society. When the members of these are bound together, as it were by every articulation, they in some measure become independent of the great body. when the union is less intimate, they admit of other connections, which cement them to the general mass.

Companies ought to be permitted, consistently with these principles. Their mercantile interests alone ought to be united, so far as union is required to carry on their undertaking with reasonable profits; but beyond this, every collateral advantage by which the associates might profit, in consequence of their union, ought to be cut off; and the public should take care to support the interest of private persons against them, on all occasions, where they take advantage of their union to hurt the right of individuals. Let me illustrate this by an example. Several weavers, fishermen, or those of any other class of the industrious, unite their stocks, in order to overcome those difficulties to which single workmen are exposed, from a multiplication of expences, which can be saved by their association. This company makes a great demand for the materials necessary for carrying on their business. By this demand they attach to themselves a great many of the industrious not incorporated, who thereby get bread and employment. So far these find an advantage: but in proportion as the undertaking is extended, and the company becomes able to engross the whole, or a considerable part of such a manufacture, they destroy all competition for it: and by forming a single interest, in the purchase of it, as well as in the sale of their own manufactures, they profit in the first case, by reducing the gains of those who are not incorporated, below the proper standard; and in the second, they raise their own profits too far above what is necessary.

The method, therefore, to prevent such abuses, is, for a statesman to interpose; not by restraining the operations of the company, but by opposing the force of principles similar to those by which they profit, in such a manner as to render their unjust dealings ineffectual. If the weavers oppress the spinners, for instance, methods may be fallen upon, if not by incorporating the last, at least by uniting their interests, so as to prevent a hurtful competition among them. If the dealers in wool in England, profiting of the prohibition to export this commodity, should enter into a concert against the growers of it, in order to have the wool at their own price; government may easily disappoint them, by receiving in every county, at a reasonable price, all the wool which remains unsold. This quantity government may export, with far less hurt to England, than what the nation suffers by the concert among the wool merchants against the landed interest. He may likewise discourage too extensive companies, by establishing and supporting others, which may serve to preserve competition; and he may punish, severely, every transgression of the laws tending to establish an arbitrary dependence on the company. In short, while such societies are forming, he ought to be their protector; and, when they are formed, he ought to take those under his protection, whom they might be apt to oppress.

In establishing companies for manufactures, it is a good expedient to employ none in such undertakings, but those who have been bred to the different branches of their business. When people of fortune, ignorant and projecting, interest themselves in infant manufactures, under the pretext of public spirit, though merely with a view to become suddenly rich, they are so bent upon making vast profits, proportioned to their stock, that their hopes are generally disappointed, and the undertaking fails. Pains-taking people, bred to frugality, content themselves with smaller gains; but under the public protection, these will swell into a large sum, and the accumulation of small profits will form a new class of opulent people, who adopt, or rather retain the sentiments of frugality with which they were born.

Thus, for instance, in establishing fisheries, instead of private subscriptions from those who put in their money from public spirit, and partly with a view to draw an interest for it; or from those who are allured by the hopes of being great gainers in the end, (the last I call projectors) the public should defray the great expence: and coopers, sail-makers, rope-makers, ship-carpenters, net-makers; in short, every one useful to the undertaking, should be gratuitously taken in for a small share of the profits; and by their being lodged together in a building, or town, proper for carrying it on, every workman becomes an undertaker to the company, for the articles of his own work. No man concerned directly in the inter-prize, should reside elsewhere than in the place: any one of the associates may undertake to furnish what cannot be manufactured at home at fixed prices. Thus the whole expence of the public in the support of the undertaking, may circulate through the hands of those who carry it on; and every one become a check upon another, for the sake of the dividend upon the general profits. One great advantage in carrying on undertakings in this manner, is, that although those concerned draw no profit at all upon the undertaking itself, they find their account in it, upon the several branches of their own industry. The herring trade was at first set on foot in Holland by a company of merchants, who failed; and their stock of busses, stores, &c. being sold at an under value, were bought by private people, who had been instructed (at the expence of the company's miscarriage) in every part of the trade, and who carried it on with success. Had the company been set up at first in the manner here mentioned, their trade never would have suffered any check.

Quest. 9. What are the principles which influence the fluctuations in the price of subsistence, in countries where agriculture, trade, and industry are solidly established? And by what rule can we form a judgment, when such prices are too high for the prosperity of manufacturers, and when they are too low for the interests of agriculture?

The price of subsistence is fixed, as has been said, (chap. 28 of this book,) by the quantity which can be brought to market, and the number of those who must buy it. This price may rise and fall according to circumstances. When the quantity at any time brought to market, exceeds the demand of the day, the sellers who are the most pressed for money, lower the price. When the quantity at any time brought to market, is less than the demand of the day, the buyers who are the most pressed to have food raise the price by their competition. In countries of agriculture, of industry, and of free-trade with the world, such fluctuations are confined within certain limits, namely, they cannot rise higher than the faculties of the buyers can afford to pay for the shortest subsistence; they cannot sink lower than what the goods can be exported for with profit.

The faculties of the buyers of subsistence, are very different; because every man here may be supposed to be a buyer, except the farmers, and such landlords whose rents are paid in articles of subsistence. The faculties, therefore, of the lowest and most numerous class, are these which circumscribe the rising of the price.

Let me call the classes who buy, by the letters of the alphabet a, b, c, d, e, f. If there be subsistence to be sold, amply sufficient, and no more than sufficient, for these six classes, which I suppose to be ranged according to the ease of their circumstances, from a, the highest, to f, the lowest; then the price of full subsistence will be in proportion to the faculties of f. Should the provision prove insufficient for the ample subsistence of all the classes, the price will rise; and f will be able to buy a part only. But should this part become less than the shortest subsistence for f, the demand of f would be withdrawn from the market, which then would be overstocked for the demand of the higher classes.

Now in countries of industry, this never can be the case; because the class f is there the most numerous of any; and before it can be reduced to the last stage of want, the diminution of its consumption will far exceed all deficiencies of crops, and will carry the supply for the higher classes far beyond the proportion of their demand; and prices will fall: to prevent which fall, the proprietors of the subsistence mechanically adjust the price they sell at, to the abilities of the lowest class to purchase the shortest subsistence; and beyond this prices never can rise.

Let me apply this reasoning to the situation of Scotland for three years preceding March 1768.

The price of oat-meal, in the southern parts of the country was, during this period, constantly at or above one shilling per peck of eight pounds Amsterdam weight; and no misery was complained of by day-labourers who gain three shillings and sixpence and four shillings per week. This I reckon the class f in Scotland. From which I must conclude, that one shilling per peck of oat-meal, is compatible with the faculties of the Scots class of f. Again, four shillings per week is 10 l.8s. per annum; and the usual computation for the food of a strong man in oat-meal is six bolls one half per annum, (or 832 pounds Amsterdam weight,) which, at one shilling per peck, is 5 l. 4s. From this it appears, that in Scotland, and according to the manner of living in this country, as long as the grain consumed by our lowest class, does not exceed the value of one half of their gains, no distress is found. I must further observe, that this computation as to their gains, regards married men with wives and children; and as it is a matter of fact, well known here, that families do subsist on such gains, and at such prices; the ascertaining of this circumstance is far more useful for determining the important question concerning the proportion between the faculties of the lowest classes, and the rate of subsistence, than any calculation which can be made. From this I am led to demand, if prices be higher, and wages lower in England, than with us?

A quarter of wheat is reckoned for the subsistence of an inhabitant in England: and in France, where the people live in a manner upon bread alone, three septiers, or thirteen Winchester bushels, is a very reasonable allowance. There is also another very good way of comparing gains in England, with the rate of markets; namely, by observing how the sober married men among foot soldiers are found to live.

If a foot soldier have eight pence per diem, he is in a higher class than a Scots labourer who gains eight pence per diem; because he is paid for Sundays, as well as days of sickness and interruption from labour. The gains of the soldier are four shillings and eight pence every week in the year, the gains of the Scots labourer are four shillings, when he meets with no interruption.

Now in England, the lowest class, except the foot soldier, and the most numerous of any in the kingdom, is the country labourer who gains at least one shilling a day, in all seasons, of the year; as it appears from a late publication, intitled, 'A Six Weeks Tower through the Southern Counties of England and Wales.'

This author informs us, that in 1767, when high prices were so much complained of, bread was universally almost, at two-pence per pound, beef and mutton at four-pence; and that two-pence per diem is supposed to be equal to small beer; and in p. 179, he observes, that one shilling per diem the year round, with small beer, that is to say fourteen pence per diem, is excessively cheap labour. Now allowing an English labourer one pound and an half of bread, and three quarters of a pound of meat, with small beer, the expence will be eight-pence a day; consequently his food is but one penny more than one half of his wages, and day labourers are evidently the lowest class of industrious people all over England. What therefore are we to think of the universal clamour raised in the nation at that time, upon account of the distress of the industrious poor? What judgement are we to form concerning the universal acquiescence to the truth of these complaints by those who must have been the best informed concerning the true state of the matter? unless we suppose it to have been all a mere farce, or what the French call the secret of the comedy, to wit, a thing which every one knows, although nobody be supposed either to know it or to believe it.

The soldiers are evidently the class f in England. But the number of them is so small, when compared with any of the industrious classes, especially with the day labourers, that were it not for the frequent celibacy among them, I am persuaded high prices would greatly distress them, before any other class of men. The smallness of their numbers, I say, is an additional disadvantage to them; because it is the great number of the lowest class, which (for the reason already given) chiefly prevents prices from rising above their abilities to purchase a short subsistence.

While a foot soldier, then, can subsist upon his pay, at the rate of the English market, I never shall believe that any class of industrious people there, can be in such want as to require an extraordinary relief from the state; one especially which involves the landed interest (that is the farmers) in so great a distress, as to have the price of their grain diminished, without augmenting the quantity of it. This is the material difference between a reduction of prices when produced by plenty, and when produced by importation.

If it be said, that it is great severity to reduce people who labour hard, to the subsistence of an idle soldier, I answer, that people who labour hard, and those who added to their diligence, have also a share of ingenuity in their several professions, constantly receive wages proportionally higher. The example of the soldier is taken in order to form an estimate only of the price at which people may subsist; and not to determine the rate of wages; which the rate of demand for their labour will constantly regulate, independently of the price of subsistence; and this leads me to another branch of this doctrine, which is, That the rate of wages is in proportion to the value of the work performed, relatively to the person who employs the workman, and not in proportion to the price of subsistence.

This I take to be an universal principle, in all countries of industry. It is this which distinguishes the industrious free-man from the poor slave. The industrious free-man must share in the profits of him who employs him; the poor slave can demand of his master no more than subsistence.

Let therefore subsistence be ever so cheap, the free-man will insist upon wages in proportion to the value of his work, when brought to market. Should his employer tell him, that because subsistence is at a low price, he must therefore work cheaper, he will tell his employer, that since on this account he sells no cheaper to his customers, neither will he work cheaper for him; and his argument is good; because were subsistence to rise ever so high, this would be no inducement to his employer to raise his wages in proportion, as long as the rate of the market for goods or labour, stands the same as at other times.

When the rate of the market for goods or labour is therefore raised upon any branch of industry; whether in consequence of a rise in the price of subsistence, or in consequence of a higher demand; then wages will rise, in spight of all attempts to circumscribe them. If, on the other hand, the rate of the market for goods or labour shall either stand the same, or even diminish, the employer will give no augmentation of wages, let provisions be ever so dear.

The poor slave, again, who gets no more than his subsistence at all times, is in the situation of the poor labouring horse, who is fed with the same provender, let it be dear or cheap.

What I have said, I take to be a fair and candid representation of general principles, which no state can alter: and when an attempt is made to counteract them, it will not succeed. Some individuals, indeed, may be relieved by it; but by stopping a small hole, a breach will be made in another part.

In every industrious society, the lowest class is frequently found reduced to the barely necessary. The competition among themselves to obtain employment at any rate, produces this effect; and competition must be allowed its free course.

I must now set forth the strongest objection which can be made against this whole doctrine; and, in my answer to it, I shall have an opportunity of explaining my meaning better than as yet I have done. The objection is this:

If it be true that in an industrious nation where, upon the average, grain is annually exported, the price of the shortest subsistence can at no time rise above the faculties of the lowest class of those who go to market; then we must say, that no scarcity whatsoever can there reduce the quantity of subsistence below what is barely necessary to feed the people.

Were I at once frankly to avow this consequence, and say, that in industrious nations, who on the average of years are subsisted on their own growth, the difference of crops is not greater than the difference between ample and bare subsistence, many at first sight, might be startled at so bold an assertion.

I must therefore say, that where crops are so precarious, as, in some years, to deprive the people of the shortest subsistence, no nation can be industrious. What trade, what industry can stand its ground, while a part of the inhabitants are absolutely starving?

I have only one objection more to obviate, which is: That the supposition I have been reasoning on, to wit that England produces in the worst years a bare subsistence for all her inhabitants, cannot be admitted to be true.

The fact I apprehend to be really so: as I may, however, be mistaken, I must next propose a proper remedy even against this problematical want (of) subsistence.

We cannot reasonably suppose this deficiency to exceed (on the average of years) the greatest quantity of subsistence that ever was imported in any one year. Now this quantity is not equal to 200,000 quarters of all sorts of grain, as has been observed above. Let government, therefore, be at the expence of laying up upon the first appearance of plenty, 200,000 quarters of wheat and rye. Let them be deposited in some of the most considerable ports in the kingdom, and let none of this quantity ever be sold cheaper than at the price which at present is thought so high as to engage us to take off the duties on importation.

Were it to be issued at a lower rate than this the whole intention of such granaries would be defeated. Nay, were they to contain many millions of quarters in place of 200,000, still were they opened at a cheaper rate than at the highest price which grain ever ought to bear, they would soon be exhausted; because it is the high price only which circumscribes the consumption of the lowest class to the barely necessary, even in the times of free importation.

I am very far from wishing to see any industrious person in distress for want of food. The expedients I have been proposing, namely the raising of their wages, and establishing a granary, would, I am persuaded, prove much more certain and salutary expedients than any other, to prevent so great a distress. But I think, on the other hand, that the more soberly our lowest classes are made to live at all times, the cheaper may our manufactures be sold; and the better will foreign Markets for them be supplied.

Every one will acknowledge, that the cheapness of subsistence is never attended with a proportional fall in the price of commodities; and many know by experience, that it is more commonly attended with the riot and idleness of those upon whom the greatness of this nation principally depends, namely, the lower classes of our people.

I shall therefore conclude by observing, First, That the best, and indeed the only way to judge of reasonable prices, is to compare, as I have said, the gains of the lower classes with the price of the shortest subsistence; and that as long as the latter does not rise above the proportion of the first, nothing is to be feared. Secondly, That while there remains some small advantage in this proportion in favour of the lower classes, no great harm can ensue; but as soon as all proportion is totally lost, by the low price of provisions, industry runs a great risk to suffer in place of gaining ground.

Thirdly, That this proportion is to be maintained by granaries in years of scarcity, and by bounties in years of plenty. And, fourthly, That until experience shall evince, that the expedients here proposed are ineffectual, all importation should be laid aside, as a remedy violent in its nature; destructive to agriculture, and tending to diminish the balance of our trade, with which alone we can discharge the heavy debt we owe to other nations.

Bounties which promote exportation, and which raise the prices of grain to the due proportion of the gains of the lowest class, even in years of plenty, resemble, in a great measure, an excise laid upon the luxury of the lower classes. The difference consists in this; that in bounties, the public incurs an expence, which not only remains at home, but has the effect of bringing in a great addition of wealth from our neighbours. This first circulates among ourselves, and at last finds its way into the exchequer. An excise again, brings money directly thither, without any circulation at all among ourselves, which is undoubtedly less advantageous to a trading nation.

Importation in England did not, while the ports were open in 1768 produce, I confess, any very hurtful consequences; because it then happened, that no nation in Europe enjoyed so great plenty of wheat, as to bring the price of this grain, so low as to hurt the English farmer. But it was not so in Scotland; where a very small importation of the poorest subsistence (oat-meal) will at any time bring our markets so low as to throw many of our farmers into the greatest distress.


1. The cities of the Austrian Netherlands are, from these causes, at present in a state of depopulation; and the industrious classes are assembling in the villages, which are beginning to rival the populousness of the cities. In these villages, the privileges of the cities are not established. Privileges which will in all probability end in their bankruptcy as well as depopulation. The depopulation will follow from the causes already mentioned; the bankruptcy from the sums these corporations lend to the sovereign, on the credit of new impositions constantly laying upon every branch of consumption. This is so true, that the acquisition of this country (one of the most fertile and most populous in Europe) would hardly be worth the having, if the debts due to the corporations were to be fairly paid, and their ruinous privileges (as they are called) allowed to subsist without alteration.

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