value to what a shilling was formerly. In a word, when money is scarce, it must bear a high value: it must in particular go far in the purchase of goods; which we express by saying, that goods are cheap. Put next the case, that by some accident our coin is instantly doubled: the result must be, not instantaneous indeed, to double the price of commodities. Upon the former supposition, a sixpence is in effect advanced to be a shilling: upon the present supposition, a shilling has in effect sunk down to a sixpence. And here again it ought to be observed, that though the price is augmented, there is no real alteration in the value of commodities. A bullock that, some years ago, could have been purchased for ten pounds, will at present yield fifteen. The vulgar ignorantly think, that the value of horned cattle has arisen in that proportion. The advanced price may, in some degree, be occasioned by a greater consumption; but it is chiefly occasioned<144> by a greater quantity of money in circulation.4
Combining all the circumstances, the result is, that if the quantity of goods and of money continue the same, the price will be in proportion to the demand. If the demand and quantity of goods continue the same, the price will be in proportion to the quantity of money. And if the demand and quantity of money continue the same, the price will fall as the quantity increases, and rise as the quantity diminishes.
These speculative notions will enable us with accuracy to examine, how industry and commerce are affected by variations in the quantity of circulating coin. It is evident, that arts and manufactures cannot be carried on to any extent without coin. Persons totally employed in any art or manufacture require wages daily or weekly, because they must go to market for every necessary of life. The clothier, the taylor, the shoemaker, the gardener, the farmer, must employ servants to prepare their goods for the market; to whom, for that reason, wages ought to be regularly paid. In a word, commerce among<145> an endless number of individuals, who depend on each other even for necessaries, would be inextricable without a quantity of circulating coin. Money may be justly conceived to be the oil, that lubricates all the springs and wheels of a great machine, and preserves it in motion.* Supposing us now to be provided with no more of that precious oil than is barely sufficient for the easy motion of our industry and manufactures, a diminution of the necessary quantity must retard them: our industry and manufactures must decay; and if we do not confine the expence of living to our present circumstances, which seldom happens, the balance of trade with foreign nations will turn against us, and leave us no resource for making the balance equal but to export our gold and sil-<146>ver. And when we are drained of these metals, farewell to arts and manufactures: we shall be reduced to the condition of savages, which is, that each individual must depend entirely on his own labour for procuring every necessary of life. The consequences of the balance turning for us, are at first directly opposite: but at the long-run come to be the same: they are sweet in the mouth, but bitter in the stomach. An influx of riches by this balance, rouses our activity. Plenty of money elevates our spirits, and inspires an appetite for pleasure: we indulge a taste for show and embellishment, become hospitable, and refine upon the arts of luxury. Plenty of money is a prevailing motive even with the most sedate, to exert themselves in building, in husbandry, in manufactures, and in other solid improvements. Such articles require both hands and materials, the prices of which are raised by the additional demand. The labourer now whose wages are thus raised, is not satisfied with mere necessaries, but insists for conveniencies, the price of which also is raised by the new demand. In short, increase of money raises the price<147> of every commodity; partly from the greater quantity of money, and partly from the additional demand for supplying artificial wants. Hitherto a delightful view of prosperous commerce: but behold the remote consequences. High wages at first promote industry, and double the quantity of labour: but the utmost exertion of labour is limited within certain bounds; and a perpetual influx of gold and silver will not for ever be attended with a proportional quantity of work: The price of labour will rise in proportion to the quantity of money; but the produce will not rise in the same proportion; and for that reason our manufactures will be dearer than formerly. Hence a dismal scene. The high price at home of our manufactures will exclude us from foreign markets; for if the merchant cannot draw there for his goods what he paid at home, with some profit, he must abandon foreign commerce altogether. And, what is still more dismal, we shall be deprived even of our own markets; for in spite of the utmost vigilance, foreign commodities, cheaper than our own, will be poured in upon us. The last scene<148> is to be deprived of our gold and silver, and reduced to the same miserable state as if the balance had been against us from the beginning.
However certain it may be, that an addition to the quantity of money must raise the price of labour and of manufactures, yet there is a fact that seems to contradict the proposition, which is, that in no other country are labour and manufactures so cheap as in the two peninsulas on the right and left of the Ganges, though in no other country is there such plenty of money. To account for this singular fact, political writers say, that money is there amassed by the nabobs, and withdrawn from circulation. This is not satisfactory: the chief exportation from these peninsulas is their manufactures, the price of which comes first to the merchant and manufacturer; and how can that happen without raising the price of labour? Rice, it is true, is the food of their labouring poor; and an acre of rice yields more food than five acres of wheat: but the cheapness of necessaries, though it hath a considerable influence in keeping down the price of labour, cannot keep it constantly down, <149> in opposition to an overflowing current of money. The populousness of these two countries is a circumstance totally overlooked. Every traveller is amazed how such swarms of people can find bread, however fertile the soil may be. Let us examine that circumstance. One thing is evident, that, were the people fully employed, there would not be a demand for the tenth part of their manufactures. Here, then, is a country where hand-labour is a drug for want of employment. The people, at the same time, sober and inclining to industry, are glad to be employed at any rate; and whatever pittance is gained by labour, makes always some addition. Hence it is, that in these peninsulas, superfluity of hands overbalancing both the quantity of money and the demand for their manufactures, serves to keep the price extremely low.
What is now said discovers an exception to the proposition above laid down. It holds undoubtedly in Europe, and in every country where there is work for all the people, that an addition to the circulating coin raises the price of labour and of manufactures: but such addition has<150> no sensible effect in a country where there is a superfluity of hands, who are always disposed to work when they find employment.
From these premises it is evident, that, unless there is a superfluity of hands, manufactures can never flourish in a country abounding with mines of gold and silver. This in effect is the case of Spain: a constant influx of these metals, raising the price of labour and manufactures, has deprived the Spaniards of foreign markets, and also of their own: they are reduced to purchase from strangers even the necessaries of life. What a dismal condition will they be reduced to, when their mines come to be exhausted! The Gold coast in Guinea has its name from the plenty of gold that is found there. As it is washed from the hills with the soil in small quantities, every one is on the watch for it; and the people, like gamesters, despise every other occupation. They are accordingly lazy and poor. The kingdom of Fidah, in the neighbourhood, where there is no gold, is populous: the people are industrious, deal in many branches of manufacture, and are all in easy circumstances.5<151>
To illustrate this observation, which is of great importance, I enter more minutely into the condition of Spain. The rough materials of silk, wool, and iron, are produced there more perfect than in any other country; and yet flourishing manufactures of these, would be ruinous to it in its present state. Let us only suppose, that Spain itself could furnish all the commodities that are demanded in its American territories, what would be the consequence? The gold and silver produced by that trade would circulate in Spain: money would become a drug: labour and manufactures would rise to a high price; and every necessary of life, not excepting manufactures of silk, wool, and iron, would be smuggled into Spain, the high price there being sufficient to overbalance every risk: Spain would be left without industry, and without people. Spain was actually in the flourishing state here supposed when America was discovered: the American gold and silver mines enflamed the disease, and consequently was the greatest misfortune that ever befel that once potent kingdom. The exportation
