of land, and produces, by that means, a lowness of intereft. But though both these effects, plenty of money and low intereft, naturally arife from commerce and induftry, they are altogether independent of each other. For fuppofe a nation removed into the Pacific ocean, without any foreign commerce, or any knowledge of navigation: Suppose, that this nation poffeffes always the fame ftock of coin, but is continually encreafing in its numbers and induftry: It is evident, that the price of every commodity muft gradually diminish in that kingdom; fince it is the proportion between money and any fpecies of goods, which fixes their mutual value; and, upon the prefent fuppofition, the conveniencies of life become every day more abundant, without any alteration on the current fpecie. A lefs quantity of money, therefore, among this people, will make a rich man, during the times of industry, than would fuffice to that purpose, in ignorant and flothful ages. Lefs money will build a house, portion a daughter, buy an eftate, fupport a manufactory, or maintain a family and equipage. These are the uses for which men borrow money; and therefore, the greater or lefs quantity of it in a flate has no influence on the intereft. But it is evident, that the greater or less ftock of labour and commodities must have a great influence; fince we really and in effect borrow thefe, when we take money upon intereft. It is true, when commerce is extended all over the globe, the most induftrious nations always abound moft with the precious metals: So that low intereft and plenty of money are in fact almoft infeparable. But ftill it is of confequence to know the principle whence any phenomenon arifes, and to diftinguish between a caufe and a concomitant effect. Befides that the fpeculation is curious, it may frequently be of use in the conduct of public affairs. At least, it must be owned, that nothing can be of more ufe than to

improve,

improve, by practice, the method of reafoning on these fubjects, which of all others are the most important; though they are commonly treated in the loosest and most careless manner.

Another reafon of this popular mistake with regard to the cause of low intereft, feems to be the inftance of fome nations; where, after a fudden acquifition of money, or of the precious metals, by means of foreign conqueft, the intereft has fallen, not only among them, but in all the neighbouring states, as foon as that money was difperfed, and had infinuated itself into every corner. Thus, intereft in SPAIN fell near a half immediately after the discovery of the WEST INDIES, as we are informed by GARCILASSO DE LA VEGA: And it has been ever fince gradually finking in every kingdom of EUROPE. Interest in ROME, after the conquest of EGYPT, fell from 6 to 4 per cent, as we learn from DION †.

The causes of the finking of intereft, upon fuch an event, feem different in the conquering country and in the neighbouring ftates; but in neither of them can we juftly afcribe that effect merely to the encrease of gold and filver.

In the conquering country, it is natural to imagine, that this new acquifition of money will fall into a few hands, and be gathered into large fums, which seek a fecure revenue, either by the purchase of land or by intereft; and confequently the fame effect follows, for a little time, as if there had been a great acceffion of induftry and commerce. The encrease of lenders above the borrowers finks the intereft; and fo much the fafter, if thofe, who have acquired thofe large fums, find no industry or commerce in the state, and no method of employing their money but by lending it at intereft. But

† Lib. li

after

after this new mafs of gold and filver has been digested, and has circulated through the whole ftate, affairs will foon return to their former situation; while the landlords and new money-holders, living idly, fquander above their income; and the former daily contract debt, and the latter encroach on their ftock till its final extinction. The whole money may ftill be in the ftate, and make itself felt by the encrease of prices: But not being now collected into any large maffes or ftocks, the difproportion between the borrowers and lenders is the fame as formerly, and confequently the high intereft returns.

Accordingly we find, in ROME, that, fo early as TIBERIUS's time, intereft had again mounted to 6 per cent. * though no accident had happened to drain the empire of money. In TRAJAN's time, money lent on mortgages in ITALY, bore 6 per cent. † ; on common fecurities in BITHYNIA, 12 . And if intereft in SPAIN has not rifen to its old pitch; this can be ascribed to nothing but the continuance of the fame caufe that funk it, to wit, the large fortunes continually made in the INDIES, which come over to SPAIN from time to time, and supply the demand of the borrowers. By this accidental and extraneous cause, more money is to be lent in SPAIN, that is, more money is collected into large fums than would otherwife be found in a ftate, where there are fo little commerce and induftry.

As to the reduction of intereft, which has followed in ENGLAND, FRANCE, and other kingdoms of Europe, that have no mines, it has been gradual; and has not proceeded from the encrease of money, confidered merely in itself; but from that of industry, which is the natural

* COLUMELLA, lib. iii. cap. 3

PLINII epift. lib. vii. ep. 18.

Id. lib. x. ep. 62.

3

effect

effect of the former encrease, in that interval, before it raifes the price of labour and provisions. For to return to the foregoing fuppofition; if the induftry of ENGLAND had risen as much from other caufes, (and that rife might eafily have happened, though the stock of money had remained the fame) muft not all the fame confequences have followed, which we obferve at prefent? The fame people would, in that cafe, be found in the kingdom, the fame commoditics, the fame industry, manufactures, and commerce; and confequently the fame merchants, with the fame ftocks, that is, with the fame command over labour and commodities, only reprefented by a smaller number of white or yellow pieces; which being a circumftance of no moment, would only affect the waggoner, porter, and trunk maker. Luxury, therefore, manufactures, arts, induftry, frugality, flourishing equally as at prefent, it is evident, that intereft must alfo have been as low; fince that is the necef fary refult of all thefe circumflances; fo far as they determine the profits of commerce, and the proportion between the borrowers and lenders in any ftate.

IT

ESSAY V.

Of the BALANCE of TRADE

'T is very usual, in nations ignorant of the nature of commerce, to prohibit the exportation of commodities, and to preferve among themselves whatever they think valuable and useful. They do not confider, that, in this prohibition, they act directly contrary to their intention; and that the more is exported of any commodity, the more will be raised at home, of which they themselves will always have the first offer.

It is well known to the learned, that the ancient laws of ATHENS rendered the exportation of figs criminal; that being fuppofed a fpecies of fruit fo excellent in ATTICA, that the ATHENIANS deemed it too delicious for the palate of any foreigner. And in this ridiculous prohibition they were fo much in earneft, that informers were thence called fycophants among them, from two GREEK words, which fignify figs and discoverer †: There are proofs in many old acts of parliament of the fame ignorance in the nature of commerce, particularly in the reign of EDWARD III. And to this day, in FRANCE, the exportation of corn is almoft always prohibited; in order, as they fay; to prevent famines; though it is evident, that nothing contributes more to PLOT. De Curiofitaté, Y

VOL. I.

the