Sunday, September 9, 2012


STRICTLY speaking, there is no act of government but what has
some influence upon production. I shall confine myself in this
chapter to such as are avowedly aimed at the exertion of such influence ; reserving the effects of the monetary system, of loans, and
of taxes, to be treated of in distinct chapters.
The object of governments, in their attempts to influence production, is, either to prescribe the raising of particular kinds of produce
which they judge more advantageous than others, or to prescribe
methods of production, which they imagine preferable to other
methods. The effects of this two-fold attempt upon national wealth
will be investigated in the two first sections of this chapter; in the
remaining two, I shall apply the same principles to the particular
cases of privileged companies, and of the corn-trade, both on accouni
of their vast importance, and for the purpose of further explaining
and illustrating the principles. We shall see, by the way, what
reasons and circumstances will require or justify a deviation from
general principles. The grand mischiefs of authoritative interference
proceed not from occasional exceptions to established maxims, but
from false ideas of the nature of things, and the false maxims built
upon them. It is then that mischief is done by wholesale, and evil
pursued upon system; for it is well to beware, that no set of men
are more bigoted to system, than those who boast that they go upon
Effect of Regulations prescribing the Nature of Products.
The natural wants of society, and its circumstances for the time
being, occasion a more or less lively demand for particular kinds of
products. Consequently, in these branches of production, productive services are somewhat better paid than in the rest; that is to say,
the profits upon land, capital and labour, devoted to those branches
of production, are somewhat larger. This additional profit naturally attracts producers, and thus the nature of the products is always
regulated by the wants of society. We have seen in a preceding
chapter (XV.,) that these wants are more ample in proportion to the
sum of gross production, and that society in the aggregate is a larger
purchaser, in proportion to its means of purchasing.
When authority throws itself in the way of this natural course of
things, and says, the product you are about to create, that which
yields the greatest profit, and is consequently the most in request, is
oy no means the most suitable to your circumstances, you must
undertake some other, it evidently directs a portion of the productive energies df the nation towards an object of less desire, at the
expense of another of more urgent desire.
In France, about the year 1794, there were some persons persecuted, and even brought to the scaffold, for having converted cornland into pasturage. Yet the moment these unhappy people found it more profitable to feed cattle than to grow corn, one might have been sure that society stood more in need of cattle than of corn, and that greater value could be produced in one way than in the
But, said the public authorities, the value produced is of less
importance than the nature of the product, and we would rather
have you raise 10 dollars worth of grain than 20 dollars worth of
butcher's meat. In this they betrayed their ignorance of this simple truth, that the greatest product is always the best; and that an
estate, which should produce in butcher's meat wherewith to purchase twice as much wheat as could have been raised upon it, produces, in reality, twice as much wheat as if it had been sowed with
grain; since wheat to twice the amount is to be got for its product.
This way of getting wheat, they will tell you, does not increase its
total quantity. True, unless it be introduced from abroad; but
nevertheless, this article must at the time be relatively more plentiful than butcher's meat, because the product of two acres of wheat,
is given for that of one acre of pasture.* And, if wheat be sufficiently scarce, and in sufficient request to make tillage more profitable than grazing, legislative interference is superfluous altogether;
for self-interest will make the producer turn his attention to the former.
The only question then is, which is the most likely to know what
kind of cultivation yields the largest returns, the cultivator or the
government * and we may fairly take it for granted, that the cultivator, residing on the spot, making it the object of constant study
and inquiry, and more interested in success than anybody, is better
informed in this respect than the government.

Should it be insisted upon in argument, that the cultivator knowonly the price-current of the day, and does not, like the government,
provide for the future wants of the people, it may be answered, that
one of the talents of a producer, and a talent his own interest obliges
him assiduously to cultivate, is not the mere knowledge, but the foreknowledge, of human wants.
An evil of the same description was occasioned, when, at another
period, the proprietors were compelled to cultivate beet-root, or
woad in lieu of grain: indeed, we may observe, en passant, that it
is always a bad speculation to attempt raising the products of the
torrid, under the sun of the temperate latitudes. The saccharine and
colouring juices, raised on the European soils, with all the forcing in
the world, are very inferior in quantity and quality to those that
grow in profusion in other climates ;f while, on the other hand, those
soils yield abundance of grain and fruits too bulky and heavy to be
imported from a distance. In condemning our lands to the growth
of products ill suited to them, instead of those they are better calculated for, and, consequently, buying very dear what we might have
cheap enough, if we would consent to receive them from places
where they are produced with advantage, we are ourselves the
victims of our own absurdity. It is the very acme of skill, to turn
the powers of nature to best account, and the height of madness to
contend against them; which is in fact wasting part of our strength,
in destroying those powers she designed for our aid.
Again, it is laid down as a maxim, that it is better to buy products
dear, when the price remains in the country, than to get them cheap
from foieign growers. On this point I must refer my readers to that
analysis of production which we have just gone through. It will
there be seen, that products are not to be obtained without some
sacrifice,—without the consumption of commodities and productive
services in some ratio or other, the value of which is in this way
as completely lost to the community, as if it were to be exported.
I can hardly suppose any government will be bold enough to
object, that it is indifferent about the profit, which might be derived
from a more advantageous production, because it would fall to tho
lot of individuals. The worst governments, those which set up their
own interest in the most direct opposition to that of their subjects,
have by this time learnt, that the revenues of individuals are the
regenerating source of public revenue; and that, even under despotic
and military sway, where taxation is mere organized spoliation, the
subjects can pay only what they have themselves acquired.
The maxims we have been applying to agriculture are equally
applicable to manufacture. Sometimes a government entertains a
notion, that the manufacture of a native raw material is better for
the national industry, than the manufacture of a foreign raw material
It is in conformity to this notion, that we have seen instances of
preference given to the woollen and linen above the cotton manufacture. By this conduct we contrive, as far as in us lies, to limit the
bounty of nature, which pours forth in different climates a variety
of materials adapted to our innumerable wants. Whenever human
efforts succeed in attaching to these gifts of nature a value, that is to
say, a degree of utility, whether by their import, or by any modification we may subject them to, a useful act is performed, and an
item added to national wealth. The sacrifice we make to foreigners
in procuring the raw material is not a whit more to be regretted,
than the sacrifice of advances and consumption, that must be made
in every branch of production, before we can get a new product.
Personal interest is, in all cases, the best judge of the extent of the
sacrifice, and of the indemnity we may expect for it; and, although
this guide may sometimes mislead us, it is the safest in the long-run,
as well as the least costly.
But personal interest is no longer a safe criterion, if individual interests are not left to counteract and control each other. If an individual, or one class, can call in the aid of authority to ward off the effects of competition, it acquires a privilege to the prejudice and at the cost of the whole community; it can then make sure of profits
not altogether due to the productive services rendered, but composed
in part of an actual tax upon consumers for its private profit; which
tax it commonly shares with the authority that thus unjustly lends
its support.
The legislative body has great difficulty in resisting the importunate demands for this kind of privileges; the applicants are the producers that are to benefit thereby, who can represent, with much plausibility, that their own gains are a gain to the industrious classes,
and to the nation at large, their workmen and themselves being
members of the industrious classes, and of the nation.*
When the cotton manufacture was first introduced in France, all
the. merchants of Amiens, Rheims, Beauvais, &c. joined in loud
remonstrances, and represented, that the industry of these towns
was annihilated. Yet they do not appear less industrious or rich
than they were fifty years ago; while the opulence of Rouen and
all Normandy has been wonderfully increased by the new fabric.
The outcry was infinitely greater, when printed calicoes first
came into fashion; all the chambers of commerce were up in arms;
meetings, discussions everywhere took place; memorials and deputations poured in from every quarter, and great sums were spent in
the opposition. Rouen now stood forward to represent the misery
about to assail her, and painted, in moving colours, "old men,
women, and children, rendered destitute; the best cultivated lands
in the kingdom lying waste,, and the whole of a rich and beautiful
province depopulated." The city of Tours urged the lamentations
of the deputies of the whole kingdom, and foretold " a commotion
that would shake the frame of social order itself." Lyuns could not
view in silence a project " which filled all her manufactories with
alarm." Never on so important an occasion had Paris presented
itself at the foot of a throne, " watered with the tears of commerce."
Amiens viewed the introduction of printed calicoes as the gulf that
must inevitably swallow up all the manufactures of the kingdom.
The memorial of that city, drawn up at a joint meeting of the three
corporations, and signed unanimously, ended in theseterms: "To
conclude, it is enough for the eternal prohibition of the use of printed
calicoes, that the whole kingdom is chilled with horror at the news
of their proposed toleration. Vox populi vox dei."
Hear what Roland de la Platiere, who had the presentation of
these remonstrances in quality of inspector-general of manufactures,
says on this subject, " Is there a single individual at the present moment, who \s mad enough to'deny, that the fahric of printed caii
coes employs an, immense number of* hands, what with the dressing
of cotton, the spinning, weaving, bleaching, and printing? This
article has improved the art of dyeing in a few years, more than all
the other manufactures together have done in a century."
I must beg my readers to pause a moment, and reflect, what firmness and extensive information respecting the sources of public prosperity were necessary to uphold an administration against so general
a clamour, supported, amongst the principal agents of authority, by
other motives, besides that of public utility.
Though governments have too often presumed upon their power
to benefit the general wealth, by prescribing to agriculture and
manufacture the raising of particular products, they have interfered
much more particularly in the concerns of commerce, especially of
external commerce. These bad consequences have resulted from a
general system, distinguished by the name of the exclusive or mercantile system, which attributes the profits of a nation to what is
technically called a favourable balance of trade. Before we enter
upon the investigation of the real effect of regulations, intended to
secure to a nation this balance in its favour, it may be as well to
form some notion of what it really is, and what is its professed
object; which I shall attempt in the following
The comparison a nation makes between the value of its exports
to, and that of its imports from, foreign countries, forms what is
called the balance of its trade. If it have exported more commodities than it has imported, it is taken for granted that the nation has
to receive the difference in gold and silver; and the balance of trade
is then said to be in its favour; and when the case is reversed, the
balance is said to be against it.
The exclusive system proceeds upon these maxims: 1. That the
commerce of a nation is advantageous, in proportion as its exports
exceed its imports, and as there is a larger cash balance receivable
in specie, or in the precious metals: 2. That by means of duties,
prohibitions, and bounties, the government can make that balance
more in favour of, or less against, the nation.
These two maxims must be analysed minutely in the first place;
then, let us see what is the course of practice.
When a merchant sends goods abroad, he causes them to be there
sold; and receives, by the hands of his foreign correspondents, the
price of his goods, in the money of the country. If he expects to
\nake a profit upon t^e return cargo, he causes that price to be laict
out in foreign produce, and remitted home to him. The operation
V* with little variation the same, when he begins at the other end:
that is to saj, by making purchases abroad, which he pays for remitting domestic products thither. These operations are not
always executed on account of the same merchant. It sometimes
happens that the trader, who undertakes the outward, will not undertake the homeward adventure. In that case he draws bills payable
after date, or upon sight, upon his correspondents, by whom the
goods have been sold; these bills he sells or negotiates, to somebody,
who sends them to the place they are drawn upon, where they are
made use of in the purchase of fresh goods, which the last mentioned person imports himself.
In both cases, one value is exported, another value is imported in
return; but we have not to stop to inquire, if any part of the value
either exported or imported consisted of the precious metals. It
may reasonably be assumed, that merchants, when left the free
choice of what goods they will speculate in, will prefer those that
offer the largest profit; that is to say, those which will bear the
greatest value when they arrive at the place of destination. For
example, a French merchant has consigned brandies to England,
and has to receive from England for such his consignment, 1000/.
sterling: he naturally sits down to calculate the difference between
what he will receive, if he import his 1000/. in the shape of tho
precious metals, and what he will receive, if he import that sum in
the shape of cotton manufactures.
If the merchant find it more advantageous to get his returns in
goods than in specie, and if it be admitted, that he knows his own
•nterest better than anybody else, the sole point left for discussion
is, whether returns in specie, though less advantageous to the merchant, may not be better for the nation, than returns of any other
article: whether, in short, it be desirable in a national point of view,
that the precious metals should abound, in preference to any othe.
What are the functions of the precious metals in the community 
If shaped into trinkets or plate, they serve for personal ornament, for
the splendour of our domestic establishments, or for a variety of
domestic purposes; they are converted into watch-cases, spoons,
forks, dishes, coffee-pots; or rolled out into leaves for the embellishment of picture frames, book-binding, and the like; in which case,
they form part of that portion of the capital of the community, which
yields no interest, but is devoted to the production of utility or pleasure. It is doubtless an advantage to the nation, that the material,
whereof this portion of its capital consists, should be cheap and abundant. The enjoyment they afford in these various ways is then
obtained at a lower rate, and is more widely diffused. There are
many establishments on a moderate scale, which, but for the discovery of America, would have been unable to make the show of plate
that is now seen upon their tables. But this advantage must not be
over-rated; there are other utilities of a much higher order. The window-glass, that keeps out the inclemency of the weather, is of
much more importance to our comfort, than any species of platu
whatsoever, yet no one has ever thought of encouraging its import
or production by special favour or exemptions.
The other utility of the precious metals is, to act as the material
of money, that is to say, of that portion of the national capital,
which is employed in facilitating the interchange of existing values
between one individual and another. For this purpose, is it any
advantage that the material selected should be abundant and cheap?
Is a nation, that is more amply provided with that material, richer
than one which is more scantily supplied ?

I must here take leave to anticipate a position, established in
Chap. XXI. of this book, wherein the subject of money is considered,
namely, that the total business of national exchange and circulation,
requires a given quantity of the commodity, money, of some amount
or other. There is in France a daily sale of so much wheat, cattle,
fuel, property movable and immovable, which sale requires the
daily intervention of a given value in the form of money, because
every commodity is first converted into money, as a step towards its
further conversion into other objects of desire. Now, whatever be
the relative abundance or scarcity of the article money, since a given
quantum is requisite for the business of circulation, the money must
of course advance in value, as it declines in quantity, and decline
in value as it advances in quantity. Suppose the money of France
to amount now to 3000 millions of francs,* and that by some event,
no matter what, it be reduced to 1500 millions; the 1500 millions
will be quite as valuable as the 3000 millions. The demands of
circulation require the agency of an actual value of 3000 millions;
that is to say, a value equivalent to 2000 millions of pounds of sugar,
(taking sugar at 30 sous per lb.) or to 180 millions of hectolitres of
wheat (taking wheat at 20 fr. the hectolitre). Whatever be the
weight or bulk of the material, whereof it is made, the total value of
the national money will still remain at that point; though in the latter
case, that material will be twice as valuable as in the former. An
ounce of silver will buy eight instead of four lbs. of sugar, and so
of all other commodities; and the 1500 millions of coin will be equivalent to the former 3000. But the nation will be neither richer nor
poorer than before. A man who goes to market with a less quantity
of coin, will be able to buy with it the same quantity of commodities.
A nation that has chosen gold for the material of its money, is equally
rich with one that has made choice of silver, though the volume of
its money be much less. Should silver become fifteen times as
scarce as at present, that is to say, as scarce as gold now is, an ounce
of silver would perform the same functions, in the character of money,
as an ounce of gold now does ; and we should be equally rich in
money. Or, should it fall to a par with copper, we should not be a ?ot the richer in the article of money; we should merely be encumbered with a more bulky medium of circulation.
On me score, then, of the other utilities of the precious metals, and
on that score only, their abundance makes a nation richer, because it
extends the sphere of those utilities, and diffuses their use. In the
cnaracter of money, that abundance no wise contributes to national
enrichment;* but the habits of the vulgar lead them to pronounce an
individual rich, in proportion to the quantity of money he is possessed of; and this notion has been extended to national wealth, which
is made up of the aggregate of individuals' wealth. Wealth, however, as before observed, consists, not in the matter or substance, but
in the value of that matter or substance. A money of large, is worth
no more than a money of small volume; neither is a money of small,
of less value than one of large volume. Value, in the form of commodities, is equivalent to value to the same amount in the form of
It may be asked, why, then, is money so generally preferred to
commodities, when the value on both sides is equal 1 This requires
a little explanation. When I come to treat of money, it will be
shown, that the coined metal of equal value commands a preference,
because it insures to the holder the attainment of the objects of desire
by means of one exchange instead of two. He is not, like the holder
of any other commodity, obliged, in the first instance, to exchange
his own commodity, money, for the purpose of obtaining, by a
second exchange, the object of his desire; one act of exchange suffices ; and this it is, combined with the extreme facility of apportionment, afforded by graduated denominations of the coin, which renders it so useful in exchanges of value. Every individual, who has an exchange to make, becomes a consumer of the commodity, money; that is to say, every individual in the community; which
accounts for the universal preference of money to commodities at large, where the value is equal.
But this superiority of money, in the interchange between individuals, does not extend to that between nation and nation. In tH
latter, money, and, d, fortiori, bullion, lose all the advantage of their
peculiar character, as money, and are dealt with as mere commodities. The merchant, who has remittances to make from abroad,
looks at nothing but the gain to be made on those remittances, and
treats the precious metals as a commodity he can dispose of with
more or less benefit. In his eyes, an exchange more or less is no
object; for it is his business to negotiate exchanges, so as to get a
profit upon them. An ordinary person might prefer to receive
money instead of goods, because it is an article, whose value he is
better acquainted with: but a merchant, who is apprised of the
prices current in most of the markets of the world, knows how to
appreciate the value he receives in return, whatever shape it may
appear under.
An individual may be under the necessity of liquidating, for the
purpose of giving a new direction to his capital, or of partition, or the
like. A nation is never obliged to do so. This liquidation is effected
with the circulating money of the nation, which it occupies only for
the time; the same money going almost immediately to operate
another act of liquidation or of exchange.
We have seen above (Chap. XV.) that the abundance of specie is
not even necessary for the national facilitation of exchanges and
sales; for that buyers really buy with products,—each with his
respective portion of the products he has concurred in creating: that
with this he buys money, which serves but to buy some further product; and that, in this operation, money affords but a temporary
convenience; like the vehicles employed to convey to market the
produce of a farm, and to bring back the articles that have been purchased with the produce. Whatever amount of money may have
been employed in the purchase of liquidation, it has passed for as
much as it was taken for: and, at the close of the transaction, the
individual is neither richer nor poorer. The loss or profit arises out
of the nature of the transaction itself, and has no reference to the
medium employed in the course of it.
In no one way do the causes, that influence individual preference
of money to commodities, operate upon international commerce.
When the nation has a smaller stock than its necessities require, its
value within the nation is raised, and foreign and native merchants
are equally interested in the importation of more: when it is redundant,
its relative value to commodities at large is reduced, and it becomes
advantageous to export to that spot, where its command of commodities may be greater than at home. To retain it by compulsory
measures, is to force individuals to keep what is a burthen to them.
And here 1 might, perhaps, now dismiss tho subject of the balance
of trade; but such is the prevailing ignorance on this topic, and S6
novel are the views I have been taking, even to persons of the better classes, to writers and statesmen of the purest intentions and well
informed on other points, that it may be worth while to put the
reader on his guard against some fallacies which are often set up in
opposition to liberal principles, and are unfortunately the groundwork of the prevailing policy of most of the European States. I
shall uniformly reduce the objections to the simplest terms possible,
that their weight may be the more easily estimated.
It is said, that, by increasing the currency through the means of a
favourable balance of trade, the total capital of a nation is augmented,
and, on the contrary, by diminishing it, that capital is reduced. But
it must be always kept in mind, that capital consists, not of so much
silver or gold, but of the values devoted to reproductive consumption, which values necessarily assume an infinite variety of successive forms. When it is intended to vest a given capital in any
concern, or to place it out at interest, the first step is undoubtedly to
realize the amount, by converting* into ready money the different values one has at command. The value of the capital, thus assuming
the transient form of money, is quickly transmuted by one exchange
after another into buildings, works, and perishable substances requisite for the projected enterprise. The ready money employed for
the occasion passes again into other hands, for the purpose of facilitating fresh exchanges, as soon as it has accomplished its momentary
duty; in like manner as do many other substances, the shape of
which this capital successively assumes. So that the value of capital is neither lost nor impaired by parting with its value, whatever
material shape it happens to be under, provided that we part with it
in a way that ensures its renovation.
Suppose a French dealer in foreign commodities to consign to a
foreign country a capital of 10,000 dollars in specie for the purchase
of cotton; when his cotton arrives, he possesses 20,000 dollars value
in cotton instead of specie, putting his profit out of the question for
the moment. Has anybody lost this amount of specie ? Certainly
not: the adventurer has come honestly by it. A cotton manufacturer gives cash for the cargo; is he the loser of the price? No, surely: on the contrary, the article in his hands will increase to twice its value, so as to leave him a profit, after repaying all his advances.
If no individual capitalist has lost the 20,000 dollars exported, how
can the nation have lost them? The loss will fall on the consumer,
they will tell you: in fact, all the cotton goods bought and consumed
will be so much positive loss; but the same consumers might have
consumed linens or woollens of exactly the same value, without one
dollar of the 20,000 being sent out of the country, and yet there
would equally be a loss or consumption to that amount of value.
The loss of value we are now speaking of is not occasioned by the
export, but by the consumption, which might have taken place without
any export whatever. I may, therefore, say, with the strictest truth,
that the export of the specie has caused no loss at all to the nation.
It has been urged, with much confidence, that, had the export of
20,000 dollars never been made, France would remain in possession
of that additional value; in fact, that the nation has lost the amount
twice over; first, by the act of export; secondly, by that of consumption : whereas, the consumption of an indigenous product would
have entailed a single loss only. But I answer as before, that the
export of specie has occasioned no loss; that it was balanced by
equivalent value imported; and that it is so certain, that nothing has
been lost except the 20,000 dollars worth of imported commodities,
that I defy any one to point out any other losers than the consumers
of those commodities. If there has been no loser, it is clear there
can have been no loss.
Would you put a stop to the emigration of capital ? It is not to
be prevented by keeping the specie in the country. A man resolved to
transfer his capital elsewhere can do it just as effectually by the consignment of goods, whose export is permitted.* So much the bet ter, we may be told; for our manufacturers will benefit by the
exports. True; but their value exists no longer in the nation, since
they bring back no return wherewith to make new purchases; there
has been a transfer of so much capital from amongst you, to give
activity not to your own, but to some other nation's industry. This
is a real ground of apprehension. Capital naturally flows to those
places that hold out security and lucrative employment, and gradually retires from countries offering no such advantages: but it may
easily enough retire, without being ever converted into specie.
If the export of specie causes no diminution of national capital,
provided it be followed by a corresponding return, on the other
nand, its import brings no accession of capital, For, in reality,
before specie can be imported, it must have been purchased by an
equivalent value exported for that purpose.
On this point it has been alleged, that by sending abroad goods
Instead of specie, a demand is created for goods, and the producers
enabled to make a profit upon their production. I answer, that,
even when specie is sent abroad, that specie must have been first
obtained by the export of some indigenous product; for, we may
rest assured, that the foreign owner of it did not give it to the French
importer for nothing; and France had nothing to offer in the first
instance but her domestic products. If the supply of the precious
metals in the country be more than sufficient for the wants of the
country, it is a fitter object of export than another commodity; and,
if more of the specie be exported than the excess of the supply above
the demand for the purposes of circulation, we may calculate with
certainty, that, since, the value of specie must have been necessarily
raised by the exportation, other specie will be imported to replace
what has been withdrawn; for the purchase of which last, home
products must have been sent abroad, which will have yielded a
profit to the home producers. In a word, every value sent out of
France, for the purchase of foreign returns for the French market,
may be resolved into a product of domestic industry, given either
first or last, for France has nothing else to procure them with.
Again, it has been argued, that it is better to export consumable
articles, as, for instance, manufactures, and to keep at home those
products not liable to consumption, or, at least, not to quick consumption, such as specie. Yet objects of quick consumption, if more
in demand, are more profitable to keep than objects of slower consumption. It would often* be doing a producer a very poor service,
to make him substitute a quantity of commodities of slow consumption, for an equal portion of his capital of more rapid consumption.
If an ironmaster were to contract for the delivery to him of a
quantity of coal at a day certain, and when the day came the coal
could not be procurable, and he should be offered the value in money
if in its stead, it would be somewhat difficult to convince him of the service done him by the delivery of money; which is an object of
much slower consumption than the coal he contracted for. Should
a dyer send an order for dying woods from abroad, it would be a
positive injury to send him gold, on the plea, that, with equal value,
it has the advantage of greater durability. He had no occasion for
a durable article whatever; what he wanted was a substance, which,
though decomposed in his vats, would quickly re-appear in the
colours of his stuffs.
If it were no advantage to import any but the most durable items
of productive capital, there are other very durable objects, such as
stone or iron, that ought to share in our partiality with silver and
gold. But the point of real importance is, the durability, not of any
particular substance, but of the value of capital. Now the value of
capital is perpetuated, notwithstanding the repeated change of the
material shape in which it is vested. Nay, it cannot yield either
interest or profit, unless that shape be continually varied. To confine it to the single shape of money would be to condemn it to remain unproductive.
But I will go a step further, and, having shown that there is no
advantage in importing gold and silver more than any other article
of merchandise, I will assert, that, supposing it were desirable to
have the balance of trade always in our favour, yet it is morally
impossible it should be so.
Gold and silver are like all the other substances that, in the aggregate, compose national wealth; they are useful to the community no
longer than while they do not exceed the national demand for them.
Any such excess must make the sellers more numerous than the
Duyers; consequently must depress the price in proportion, and thus
create a powerful inducement to buy in the home market, in the
expectation of majring a profit upon the export. This may be
illustrated by an example.
Suppose for a moment the internal traffic and national wealth of a
given country to be such as to require the constant employ of a
thousand carriages of different kinds. Suppose, too, that, by some
peculiar system of commerce, we should succeed in getting more
carriages annually imported, than were annually destroyed by wear
and tear; so that, at the year's end, there should be 1500 instead of
1000; is it not obvious, that there would be in that case 500 lying
by in the repositories quite useless, and that the owners of them,
rather than suffer their value to lie dormant, would undersell each
other* and even smuggle them abroad if it were practicable, in the
hope of turning them to better account 1 In vain would the govern-
ment conclude commercial treaties for the encouragement of their
import: in vain would it expend its efforts in stimulating the export
of other commodities, for the purpose of getting returns in the shape
of carriages; the more the public authorities favoured the import,
the more anxious would individuals be to export.
As it is with carriages, so is it with specie likewise. The demand is limited; it can form but a part of the aggregate wealth of
the nation. That wealth can not possibly consist entirely of specie ;
for other things are requisite besides specie. The extent of the demand for that peculiar article is proportionate to the general wealth;
in the same manner, as a greater number of carriages is wanted in a
rich than in a poor country. Whatever brilliant or solid qualities
the precious metals may possess, their value depends upon the use
made of them, and that use is limited. Like carriages, they have a
value peculiar to them; a value that diminishes in proportion to the
increase of their relative plenty, in comparison with the objects of
exchange, and increases in proportion to their relative scarcity.
One is told, that every thing may be procured with gold or silver.
True; but upon what terms? The terms are less advantageous, when
these metals are forcibly multiplied beyond the demand; hence their
strong tendency to emigration under such circumstances. The export of silver from Spain was prohibited; yet Spain supplied all
Europe with it. In 1812, the paper money of England having
rendered superfluous all the gold money of that country, and made
that metal too abundant for its other remaining uses, its relative
value fell, and her guineas emigrated to France, in spite of the ease
with which the coasts of an island may be guarded, and of the denunciation of capital punishment against the exporters.
To what good purpose, then, do governments labour to turn the
balance of commerce in favour of their respective nations? To
none whatever; unless, perhaps, to exhibit the show of financial
advantages, unsupported by fact or experience.* How can maxims
so clear, so agreeable to plain common sense, and to facts attested by
all who have made commerce their study, have yet been rejected in
practice by all the ruling powers of Europe,f nay, even have been attacked by a number of writers, that have evinced both genius
and information on other subjects 1 To speak the truth, it is because
the first principles of political economy are as yet but little known;
because ingenious systems and reasonings have been built upon hollow foundations, and taken advantage of, on the one hand, by interested rulers, who employ prohibition as a weapon of offense 
an instrument of revenue; and, on the ether, by the personal avarice
of merchants and manufacturers, who have a private interest in exclusive measures, and take but little pains to inquire, whether their
profits arise from actual production, or from a simultaneous loss
thrown upon other classes of the community.
A determination to maintain a favourable balance of trade, that is
to say, to export goods and receive returns of specie, is, in fact, a
determination to have no foreign trade at all; for the nation, with
whom the trade is to be carried on, can only give in exchange what
it has to give. If one party will receive nothing but the precious
metals, the other party may come to a similar resolution; and, when
both parties require the same commodity, there is no possibility of
any exchange. Were it practicable to monopolize the precious
metals, there are few nations in the world that would not be cut off
from all hope of mutual commercial relations. If one country afford
to another what the latter wants in exchange, what more would she
have X or in what respect would gold be preferable ? for what else
can it be wanted, than as the means of subsequently purchasing the
objects of desire.
The day will come, sooner or later, when people will wonder at
the necessity of taking all this trouble to expose the folly of a
system, so childish and absurd, and yet so often enforced at the
point of the bayonet.

A Treatise on Political Economy

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