commerce, the state must confift chiefly of landed gentry, whofe prodigality and expence make a continual demand for borrowing; and of peafants, who have no fums to fupply that demand. The money never gathers into large stocks or fums, which can be lent at intereft. It is difperfed into numberless hands, who either fquander it in idle fhow and magnificence, or employ it in the purchase of the common neceffaries of life. Commerce alone affembles it into confiderable fums; and this effect it has merely from the industry which it begets, and the frugality which it infpires, independent of that particular quantity of precious metal which may circulate in the state.

THUS an increase of commerce, by a neceffary confequence, raises a great number of lenders, and by that means produces a lownefs of intereft. We mustnow confider how far this increase of commerce diminishes the profits arifing from that profeffion, and gives rife to the third circumftance requifite to produce a lowness of interest.

It may be proper to obferve on this head, that low intereft and low profits of merchandize are two events, that mutually forward each other, and are both originally derived from that extenfive commerce, which produces opulent merchants, and renders the monied intereft confiderable. Where merchants poffefs great stocks, whether reprefented by few or many pieces of metal, it must frequently happen, that when they either become tired of bufinefs, or have heirs unwilling or unit to engage in commerce, a great deal of these riches naturally seeks an annual and fecure revenue. The plenty diminishes the price, and makes the lenders accept of a low intereft. This confideration obliges many to keep their ftocks in trade, and rather be content with low profit than difpofe of their money at an under-value. On the other hand, when commerce has become very extenfive, and employs very large ftocks, there muft arife rivalships among the merchants, which diminish the profits of trade, at the fame time that they increase the trade itself. The low profits of merchandize induce the merchants to accept more willingly of a low intereft, when they leave off bufinefs, and begin to indulge themfelves in eafe and indolence. It is needlefs, therefore, to enquire, which of thefe circumftances, viz. low interests or low profits, is the caufe, and which the effect? They both arife from an extenfive commerce, and mutually forward each other. No man will accept of low profits, where he can have high intereft; and no man will accept of low intereft, where he can have high profits. An extensive commerce, by producing large stocks, diminishes both interest and profit; and is always affifted, in its diminution of the one, by the proportional finking of the other. I may add, that as low profits arife from the increase of commerce and induftry, they ferve in their turn to the farther increase of commerce, by rendering the commodities cheaper, encouraging the consumption, and heightening the industry. And thus, if we confider the whole connection of causes and effects, intereft is the true barometer of the ftate, and its lowness is a fign almoft infallible of the flourishing of a people. It proves the increase of induftry, and its prompt circulation thro' the whole ftate, little inferior to a demonstration. And tho', perhaps, it may not be impoffible but a fudden and a great check to commerce may have a momentary effect of the fame kind, by throwing fo many ftocks out of trade; it must be attended with fuch mifery and want of employment in the poor, that, befides its fhort duration, it will not be poffible to, miftake the one cafe for the other.

THOSE

THOSE who have afferted, that the plenty of money was the cause of low intereft, feem to have taken a collateral effect for a caufe; fince the fame industry which finks the intereft, does commonly acquire great abundance of the precious metals. A variety of fine manufactures, with vigilant enterprifing merchants, will foon draw money to a ftate, if it be any where to be found in the world. The fame cause, by multiplying the conveniencies of life, and increasing industry, collects great riches into the hands of perfons, who are not proprietors of land, and produces by that means a lownefs of intereft. But tho' both thefe effects, plenty of money and low intereft, naturally arife from commerce and industry, they are altogether independent of each other. For, fuppofe a nation removed into the Pacific ocean, without any foreign commerce, or any knowlege of navigation: Suppose, that this nation poffeffes always the fame ftock of coin, but is continually increasing in its numbers and industry: 'Tis evident, that the price of every commodity muft gradually diminish in that kingdom; fince 'tis the proportion betwixt money and any fpecies of goods, which fixes their mutual value; and, upon the present fuppofition, the conveniencies of life become every day more abundant, without any alteration on the current fpecie. A lefs quantity of money, therefore, amongst this people, will make a rich man, during the times of induftry, than would ferve to that purpose, in ignorant and flothful ages. Lefs money will build a house, portion a daughter, buy an estate, support a manufactory, or maintain a family and equipage. These are the ufes for which men borrow money; and therefore, the greater or lefs quantity of it in a state has no influence on the intereft. But 'tis evident, that the greater or less stock of labor and commodities must have a great influence; fince we really and in effect borrow thefe, when we take money upon intereft. 'Tis true, when commerce is extended all over the globe, the most industrious nations always abound most with the precious metals: So that low intereft and plenty of money are in fact almost inseparable. But ftill 'tis of confequence to know the principle whence any phaenomenon arifes, and to diftinguish betwixt a caufe and a concomitant efect. Befides that the speculation is curious, it may frequently be of ufe in the conduct of public affairs. At least, it must be owned, that nothing can be of more ufe than to improve, by practice, the method of reafoning on thefe fubjects, which of all others are the most important; tho' they are commonly treated in the loosest and moft careless manner.

ANOTHER reafon of this popular mistake with regard to the caufe of low interest, seems 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 interest has fallen, not only among them, but in all the neighboring ftates, 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 since gradually finking in every kingdom of EUROPE. Intereft in ROME, after the conqueft 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 neighboring ftates; but in neither of them can we justly afcribe that effect merely to the increase of gold and filver.

• Lib. 51.

In the conquering country, 'tis natural to imagine, that this new acquifition of money will fall into a few hands, and be gathered into large fums, which feek 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 industry and commerce. The increase of lenders above the borrowers finks the intereft; and fo much the fafter, if those who have acquired thofe large fums, find no industry or commerce in the ftate, and no method of employing their money but by lending it at intereft. But after this new mafs of gold and filver has been digefted, and has circulated, thro' the whole ftate, affairs will foon return to their former fituation: while the landlords and new money-holders, living idly, fquander above their income; and the former daily contract debt, and the latter incroach on their stock till its final extinction. The whole money may ftill be in the state, and make itself felt by the increase 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 interest re

turns.

ACCORDINGLY we find, in ROME, that fo early as TIBERIUS's time, interest had again mounted to 6 per cent. tho' 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 afcribed to nothing but the continuance of the fame cause that funk it, viz. 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 caufe, more money is to be lent in SPAIN, that is, more money is collected into large fums, than would otherwife be found in a state, where there are fo little commerce and industry.

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 increase of money, confidered merely in itself; but from the increase of induftry, which is the natural effect of the former increase, in that interval, before it raifes the price of labor and provifions. For to return to the foregoing fuppofition; if the induftry of ENGLAND had rifen as much from other caufes, (and that rife might easily have happened, tho' the stock of money had remained the fame) muft not all the fame confequences have followed, which we obferve at present? The fame people would, in that case, be found in the kingdom, the fame commodities, the fame industry, manufactures, and commerce; and confequently the fame merchants, with the fame ftocks, that is, with the fame command over labor and commodities, only represented 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, 'tis evident that interest must also have been as low; fince that is the neceffary refult of all these circumstances; so far as they determine the profits of commerce, and the proportion betwixt the borrowers and lenders in any state.

COLUMELLA, lib. 3. cap. 3. + PLINII epift. lib. 7. ep. 18.

Id. lib. 10. ep. 62.

ESSAY

TWO

ADDITIONAL ESSAY S.

H

ESSAY

VI.*

OF THE JEALOUSY OF TRADE.

AVING endeavoured to remove one fpecies of ill-founded jealousy, which is fo prevalent among commercial nations, it may not be amifs to mention another, which feems equally groundless. Nothing is more ufual, among states which have made fome advances in commerce, than to look on the progrefs of their neighbours with a fufpicious eye, to confider all trading states as their rivals, and to fuppofe that it is impoffible for any of them to flourish, but at their expence. In oppofition to this narrow and malignant opinion, I will venture to affert, that the increase of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours; and that a state can scarcely carry its trade and industry very far, where all the furrounding states are buried in ignorance, floth, and barbarism.

It is obvious, that the domestic industry of a people cannot be hurt by the greatest profperity of their neighbours; and as this branch of commerce is undoubtedly the most important in any extenfive kingdom, we are fo far removed from all reafon of jealoufy. But I go farther, and obferve, that where an open communication is preferved among nations, it is impoffible but the domeftic industry of every one must receive an increase from the improvements of the others. Compare the fituation of GREAT BRITAIN at prefent, with what it was two centuries ago. All the arts both of agriculture and manufactures were then extremely rude and imperfect. Every improvement which we have fince made, has arisen from our imitation of foreigners; and we ought so far to esteem it happy, that they had previously made advances in arts and ingenuity. But this intercourfe is ftill upheld to our great advantage: Notwithstanding the advanced ftate of our manufactures, we daily adopt in every art, the inventions and improvements of our neighbours. The commodity is first imported from abroad, to our great difcontent, while we imagine that it drains us of our money: Afterwards, the art itself is gradually imported, to our vifible advantage: Yet we continue ftill to repine, that our neighbours fhould poffefs any art, induftry, and invention; forgetting

*

To be placed after the Effay on the Balance of Trade, Page 185.

that

that had they not first inftructed us, we fhould have been at prefent barbarians and did they not ftill continue their inftructions, the arts muft fall into a state of languor, and lofe that emulation and novelty which contribute fo much to their advancement.

THE increase of domestic industry lays the foundation of foreign commerce. Where a great number of commodities are raised and perfected for the homemarket, there will always be found fome which can be exported with advantage. But if our neighbours have no art nor cultivation, they cannot take them; because they will have nothing to give in exchange. In this refpect, ftates are in the fame condition as individuals. A fingle man can fcarce be induftrious, where all his fellow-citizens are idle. The riches of the feveral members of a community contribute to increase my riches, whatever profeffion I may follow. They confume the product of my industry, and afford me the product of theirs in return.

NOR need any ftate entertain apprehenfions, that their neighbours will improve to fuch a degree in every art and manufacture, as to have no demand from them. Nature, by giving a diversity of geniuses, climates, and foils to different nations, has fecured their mutual intercourfe and commerce, as long as they all remain industrious and civilized. Nay, the more the arts increase in any ftate, the more will be its demands from its induftrious neighbours. The inhabitants having become opulent and skilful, defire to have every commodity in the utmost perfection; and as they have plenty of commodities to give in exchange, they make large importations from every foreign nation. The industry of the nations from whom they import it, receives encouragement: Their own is also increased, by the fale of the commodities which they give in exchange.

BUT what if a nation has any staple commodity, fuch as the woollen manufacture is to England? Muft not the interfering of their neighbours in that manufacture be a lofs to them? I anfwer, that when any commodity is denominated the staple of a kingdom, it is fupposed that that kingdom has fome peculiar and natural advantages for raifing the commodity; and if, notwithstanding these advantages, they lofe fuch a manufactory, they ought to blame their own idleness, or bad government, not the industry of their neighbours. It ought also to be confidered, that by the increase of industry among the neighbouring nations, the confumption of every particular species of commodity is also encreased; and though foreign manufactures interfere with us in the market, the demand for our product may ftill continue, or even encreafe. And even should it diminish, ought the confequence to be esteemed fo fatal? If the spirit of industry be preserved, it may easily be diverted from one branch to another; and the manufacturers of wool, for instance, be employed in linen, filk, iron, or any other commodities, for which there appears to be a demand. We need not apprehend, that all the objects of industry will be exhausted, or that our manufacturers, while they remain on an equal footing with thofe of our neighbours, will be in danger of wanting employment. The emulation among rival nations ferves rather to keep induftry alive in all of them: And any people is happier who poffefs a variety of manufactures, than if they enjoyed one fingle great manufactory, in which they are all employed. Their fituation is lefs precarious, and they will feel lefs fenfibly thofe revolutions and uncertainties to which every particular fpecies of commerce will always be expofed.

THE