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ESSAY III.

OF MONEY.

MONEY

one

ONEY is not, properly speaking, one of the

subjects of commerce; but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is none of the wheels of trade: It is the oil which renders the motion of the wheels more smooth and easy. If we consider

any kingdom by itself, it is evident, that the greater or less plenty of money is of no consequence; since the prices of commodities are always proportioned to the plenty of money, and a crown in HARRY VII's time served the same purpose as a pound does at present. It is only the public which draws any advantage from the greater plenty of money; and that only in its wars and negociations 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 expence as a French army twice as numerous.' The English fleet, during the U 3

late

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 *.

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 pofsefsed, and which enable them to trade on 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 much abound in gold and silver, Manufactures, there, fore, gradually shift their places, leaving those countries and provinces which they have already enriched, and flying 10 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 every thing, from plenty of money, is a disadvantage, which attends an established commerce, and fets bounds to it in every country, by enabling the poorer states to undersel the richer in all foreign markets.

* See NOTE [P].

This has made me entertain a 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 encrease 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 poffeffion of these precious metals, and the weight, which they give the nation in all foreign wars and negociations. But there appears no reason for encreasing that inconvenience by a counterfeit money, which foreigners will not accept of in any payment, and which any griat disorder in the state will reduce to nothing. There are, it is true, many people in every rich ftate, who, having large sums of money, would prefer paper with good security; as being of more easy transport and more tafe 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 that paper-credit, which always will have place in every opulent kingdom. But to endeavour artificially to encrease such a credits can never be the interest of any trading nation; but must lay them under disadvantages, by encreasing 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 †, and never augmented the

† This is the case with the bank of AMSTERDAM.

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circulating

circulating coin, as is usual, by returning part of its trea-
sure 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 dire Nors and tellers of this bank (for,
according to the preceding supposition, it would have no
profit from its dealings), the national advantage, result-
ing 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 convenience in times of great public danger
and distress; and what part of it was used might be
replaced at leisure, when peace and tranquillity was
restored to the nation,

But of this subject of paper credit we fhall treat more
largely hereafter. And I fall finish this essay on money,
by proposing and explaining two observations, which
may, perhaps, serve to employ the thoughts of our spę.
culative politicians.

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 arith-
metic. 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
have no effect, cither good or bad, taking a nation within
itself; any more than it would make an alteration on a
merchant's books, if, instead of the ARABIAN method

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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 conclufion, which must be allowed just, it is certain, that, fince the discovery of the mines in AMERIca, industry has encreased in all the nations of EUROPE, except in the poffefors of those mines; and this may justly be ascribed, amongst other reasons, to the encrease of gold and silver. Accordingly we find, that, in every kingdom, into which money begins to flow in greater abundance than formerly, every thing takes a new face; labour and industry gain life; the merchant becomes more enterprising, the manufaciurer 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 every thing 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 neceflary consequence of the encrease of gold and silver, yet it follows not immediately upon that encrease; but some time is required before the money circulates through the whole state, and makes its eífect 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

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