we shall find that it must first quicken the diligence of every individual, before it increase the price of labour.
And that the specie may increase to a considerable pitch before it have this latter effect appears, amongst other instances, from the frequent operations of the French king on the money; where it was always found that the augmenting the numerary value did not produce a proportional rise of the prices, at least for some time. In the last year of Louis XIV. money was raised three-sevenths, but prices augmented only one. Corn in France is now sold at the same price, or for the same number of livres it was in 1683; though silver was then at thirty livres the mark, and is now at fifty;[14] not to mention the great addition of gold and {p33} silver which may have come into that kingdom since the former period.
From the whole of this reasoning we may conclude that it is of no manner of consequence, with regard to the domestic happiness of a state, whether money be in a greater or less quantity. The good policy of the magistrate consists only in keeping it, if possible, still increasing; because, by that means, he keeps alive a spirit of industry in the nation, and increases the stock of labour, in which consists all real power and riches. A nation whose money decreases is actually, at that time, much weaker and more miserable than another nation which possesses no more money but is on the increasing hand. This will be easily accounted for if we consider that the alterations in the quantity of money, either on the one side or the other, are not immediately attended with proportionable alterations in the prices of commodities. There is always an interval before matters be adjusted to their new situation, and this interval is as pernicious to industry when gold and silver are diminishing as it is advantageous when these metals are increasing. The workman has not the same employment from the manufacturer and merchant, though he pays the same price for everything in the market; the farmer cannot dispose of his corn and cattle, though he must pay the same rent to his landlord. The poverty, and beggary, and sloth which must ensue are easily foreseen.
The second observation which I proposed to make with regard to money may be explained after the following manner. There are some kingdoms, and many provinces in Europe (and all of them were once in the same condition), where money is so scarce that the landlord can get {p34} none at all from his tenants, but is obliged to take his rent in kind, and either to consume it himself, or transport it to places where he may find a market. In those countries the prince can levy few or no taxes but in the same manner; and as he will receive very small benefit from impositions so paid, it is evident that such a kingdom has very little force even at home, and cannot maintain fleets and armies to the same extent as if every part of it abounded in gold and silver.[15] There is surely a greater disproportion betwixt the force of Germany at present and what it was three centuries ago, than there is in its industry, people, and manufactures. The Austrian dominions in the empire are in general well peopled and well cultivated, and are of great extent, but have not a proportionable weight in the balance of Europe; proceeding, as is commonly supposed, from the scarcity of money. How do all these facts agree with that principle of reason, that the quantity of gold and silver is in itself altogether indifferent? According to that principle, wherever a sovereign has numbers of subjects, and these have plenty of commodities, he should of course be great and powerful, and they rich and happy, independent of the greater or lesser abundance of the precious metals. These admit of divisions and subdivisions to a great extent; and where they would become so small as to be in danger of being lost, it is easy to mix them with a baser metal, as is practised in some countries of Europe, and by that means raise them to a bulk more sensible and convenient. They still serve the same purposes of exchange, whatever their number may be, or whatever colour they may be supposed to have.
To these difficulties, I answer that the effect here supposed to flow from scarcity of money really arises from the manners and customs of the inhabitants, and that we mistake, as is too usual, a collateral effect for a cause. The {p35} contradiction is only apparent, but it requires some thought and reflection to discover the principles by which we can reconcile reason to experience.
It seems a maxim almost self-evident that the prices of everything depend on the proportion between commodities and money, and that any considerable alteration on either of these has the same effect, either of heightening or lowering the prices. Increase the commodities, they become cheaper; increase the money, they rise in their value. As, on the other hand, a diminution of the former and that of the latter have contrary tendencies.
It is also evident that the prices do not so much depend on the absolute quantity of commodities and that of money which are in a nation, as in that of the commodities which come or may come to market, and of the money which circulates. If the coin be locked up in chests, it is the same thing with regard to prices as if it were annihilated; if the commodities be hoarded in granaries, a like effect follows. As the money and commodities, in these cases, never meet, they cannot affect each other. Were we, at any time, to form conjectures concerning the price of provisions, the corn which the farmer must reserve for the maintenance of himself and family ought never to enter into the estimation. It is only the overplus, compared to the demand, that determines the value.
To apply these principles, we must consider that in the first and more uncultivated ages of any state, ere fancy has confounded her wants with those of nature, men, contented with the productions of their own fields, or with those rude preparations which they themselves can work upon them, have little occasion for exchange, or at least for money, which, by agreement, is the common measure of exchange. The wool of the farmer’s own flock, spun in his own family, and wrought by a neighbouring weaver, who receives his payment in corn or wool, suffices for furniture or clothing. The carpenter, the smith, the mason, the tailor are retained by wages of a like nature; and the landlord himself, dwelling in the neighbourhood, is contented to receive his rent in {p36} the commodities raised by the farmer. The greatest part of these he consumes at home, in rustic hospitality; the rest, perhaps, he disposes of for money to the neighbouring town, whence he draws the few materials of his expense and luxury.
But after men begin to refine on all these enjoyments, and live not always at home, nor are contented with what can be raised in their neighbourhood, there is more exchange and commerce of all kinds, and more money enters into that exchange. The tradesmen will not be paid in corn, because they want something more than barley to eat. The farmer goes beyond his own parish for the commodities he purchases, and cannot always carry his commodities to the merchant who supplies him. The landlord lives in the capital, or in a foreign country, and demands his rent in gold and silver, which can easily be transported to him. Great undertakers, and manufacturers, and merchants arise in every commodity; and these can conveniently deal in nothing but in specie. And consequently, in this situation of society, the coin enters into many more contracts, and by that means is much more employed than in the former.
The necessary effect is, that, provided the money does not increase in the nation, everything must become much cheaper in times of industry and refinement than in rude, uncultivated ages. It is the proportion between the circulating money and the commodities in the market which determines the prices. Goods that are consumed at home, or exchanged with other goods in the neighbourhood, never come to market; they affect not in the least the current specie; with regard to it they are as if totally annihilated; and consequently this method of using them sinks the proportion on the side of the commodities and increases the prices. But after money enters into all contracts and sales, and is everywhere the measure of exchange, the same national cash has a much greater task to perform: all commodities are then in the market; the sphere of circulation is enlarged; it is the same case as if that individual sum were to serve a larger kingdom; and therefore, the {p37} proportion being here lessened on the side of the money, everything must become cheaper, and the prices gradually fall.
By the most exact computations that have been formed all over Europe, after making allowance for the alteration in the numerary value or the denomination, it is found that the prices of all things have only risen three, or at most, four times, since the discovery of the West Indies. But will any one assert that there is not much more than
