from the greater plenty of money, and that only in its wars and negotiations with foreign states. And this is the reason why all rich and trading countries, from Carthage to Britain and Holland, have employed mercenary troops, which they hired from their poorer neighbours. Were they to make use of their native subjects, they would find less advantage from their superior riches, and from their great plenty of gold and silver, since the pay of all their servants must rise in proportion to the public opulence. Our small army in Britain of 20,000 men is maintained at as great expense as a French army thrice as numerous. The English fleet, during the late war, required as much money to support it as all the Roman legions which kept the whole world in subjection during the time of the emperors.[12] {p28}
The greater number of people and their greater industry are serviceable in all cases—at home and abroad, in private and in public. But the greater plenty of money is very limited in its use, and may even sometimes be a loss to a nation in its commerce with foreigners.
There seems to be a happy concurrence of causes in human affairs which checks the growth of trade and riches, and hinders them from being confined entirely to one people, as might naturally at first be dreaded from the advantages of an established commerce. Where one nation has got the start of another in trade it is very difficult for the latter to regain the ground it has lost, because of the superior industry and skill of the former, and the greater stocks of which its merchants are possessed, and which enable them to trade for so much smaller profits. But these advantages are compensated, in some measure, by the low price of labour in every nation which has not an extensive commerce, and does not very much abound in gold and silver. Manufactures, therefore, gradually shift their places, leaving those countries and provinces which they have already enriched, and flying to others, whither they are allured by the cheapness of provisions and labour, till they have enriched these also and are again banished by the same causes. And, in general, we may observe that the dearness of everything, from plenty of money, is a disadvantage which attends an established commerce, and sets bounds to it in every country by enabling the poorer states to under-sell the richer in all foreign markets. {p29}
This has made me entertain a great doubt concerning the benefit of banks and paper-credit, which are so generally esteemed advantageous to every nation. That provisions and labour should become dear by the increase of trade and money is, in many respects, an inconvenience; but an inconvenience that is unavoidable, and the effect of that public wealth and prosperity which are the end of all our wishes. It is compensated by the advantages which we reap from the possession of these precious metals, and the weight which they give the nation in all foreign wars and negotiations. But there appears no reason for increasing that inconvenience by a counterfeit money, which foreigners will not accept in any payment, and which any great disorder in the state will reduce to nothing. There are, it is true, many people in every rich state who, having large sums of money, would prefer paper with good security, as being of more easy transport and more safe custody. If the public provide not a bank, private bankers will take advantage of this circumstance; as the goldsmiths formerly did in London, or as the bankers do at present in Dublin; and therefore it is better, it may be thought, that a public company should enjoy the benefit of the paper-credit which always will have place in every opulent kingdom. But to endeavour artificially to increase such a credit can never be the interest of any trading nation; but must lay them under disadvantages, by increasing money beyond its natural proportion to labour and commodities, and thereby heightening their price to the merchant and manufacturer. And in this view, it must be allowed that no bank could be more advantageous than such a one as locked up all the money it received,[13] and never augmented the circulating coin, as is usual, by returning part of its treasure into commerce. A public bank by this expedient might cut off much of the dealings of private bankers and money-jobbers; and though the state bore the charge of salaries to the directors and tellers of this bank (for, according to the preceding {p30} supposition, it would have no profit from its dealings), the national advantage, resulting from the low price of labour and the destruction of paper-credit, would be a sufficient compensation. Not to mention that so large a sum, lying ready at command, would be a great convenience in times of public danger and distress; and what part of it was used might be replaced at leisure, when peace and tranquillity were restored to the nation.
But of this subject of paper-credit we shall treat more largely hereafter, and I shall finish this essay on money by proposing and explaining two observations, which may perhaps serve to employ the thoughts of our speculative politicians, for to these only I all along address myself. It is enough that I submit to the ridicule sometimes in this age attached to the character of a philosopher, without adding to it that which belongs to a projector.
It was a shrewd observation of Anacharsis the Scythian, who had never seen money in his own country, that gold and silver seemed to him of no use to the Greeks but to assist them in numeration and arithmetic. It is indeed evident that money is nothing but the representation of labour and commodities, and serves only as a method of rating or estimating them. Where coin is in greater plenty, as a greater quantity of it is required to represent the same quantity of goods, it can have no effect, either good or bad, taking a nation within itself; no more than it would make any alteration on a merchant’s books if, instead of the Arabian method of notation, which requires few characters, he should make use of the Roman, which requires a great many. Nay, the greater quantity of money, like the Roman characters, is rather inconvenient, and requires greater trouble both to keep and transport it. But notwithstanding this conclusion, which must be allowed just, it is certain that since the discovery of mines in America industry has increased in all the nations of Europe, except in the possessors of those mines; and this may justly be ascribed, amongst other reasons, to the increase of gold and silver. Accordingly, we find that in every kingdom into which {p31} money begins to flow in greater abundance than formerly everything takes a new face; labour and industry gain life, the merchant becomes more enterprising, the manufacturer more diligent and skilful, and even the farmer follows his plough with greater alacrity and attention. This is not easily to be accounted for, if we consider only the influence which a greater abundance of coin has in the kingdom itself, by heightening the price of commodities, and obliging every one to pay a greater number of these little yellow or white pieces for everything he purchases. And as to foreign trade, it appears that great plenty of money is rather disadvantageous, by raising the price of every kind of labour.
To account, then, for this phenomenon, we must consider that though the high price of commodities be a necessary consequence of the increase of gold and silver, yet it follows not immediately upon that increase; but some time is required before the money circulates through the whole state, and makes its effects be felt on all ranks of people. At first, no alteration is perceived; by degrees the price rises, first of one commodity then of another, till the whole at last reaches a just proportion with the new quantity of specie which is in the kingdom. In my opinion, it is only in this interval or intermediate situation, between the acquisition of money and rise of prices, that the increasing quantity of gold and silver is favourable to industry. When any quantity of money is imported into a nation, it is not at first dispersed into many hands, but is confined to the coffers of a few persons, who immediately seek to employ it to the best advantage. Here are a set of manufacturers or merchants, we shall suppose, who have received returns of gold and silver for goods which they sent to Cadiz. They are thereby enabled to employ more workmen than formerly, who never dream of demanding higher wages, but are glad of employment from such good paymasters. If workmen become scarce, the manufacturer gives higher wages, but at first requires an increase of labour; and this is willingly submitted to by the artisan, {p32} who can now eat and drink better, to compensate his additional toil and fatigue. He carries his money to market, where he finds everything at the same price as formerly, but returns with greater quantity and of better kinds, for the use of his family. The farmer and gardener, finding that all commodities are taken off, apply themselves with alacrity to the raising more; and at the same time can afford to take better and more clothes from their tradesmen, whose price is the same as formerly, and their industry only whetted by so much new gain. It is easy to trace the money in its progress through the whole commonwealth;
