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commerce, the state must consist chiefly of landed gentry, whose prodigality and expence make a continual demand for borrowing; and of peasants, who have no sums to supply that demand.' The money never gathers into large stocks or sums, which can be lent at interest. It is dispersed into numberless hands, who either squander it in idle show and magnificence, or employ it in the purchase of the common necessaries of life. Commerce alone assembles it into considerable sums; and this effect it has merely from the industry which it begets, and the frugality which it inspires, independent of that particular quantity of precious metal which may circulate in the state.
Thus an increase of commerce, by a necessary consequence, raises a great number of lenders, and by that means produces a lowness of interest. We must. now consider how far this increase of commerce diminishes the profits arising from that profession, and gives rise to the third circumstance requisite to produce a lowness of interest. .
It may be proper to observe on this head, that low interest 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 interest considerable. Where merchants possess great stocks, whether represented by few or many pieces of metal, it must frequently happen, that when they either become tired of business, or have heirs unwilling or unât to engage in commerce, a great deal of these riches naturally seeks an annual and secure revenue. The plenty diminithes the price, and makes the lenders accept of a low interest. This consideration obliges many to keep their stocks in trade, and rather be content with low profit than dispose of their money at an under-value. On the other hand, when commerce has become very extensive, and employs very large stocks, there must arise rivalships among the merchants, which diminish the profits of trade, at the same time that they increase the trade itself. The low profits of merchandize induce the merchants to accept more willingly of a low interest, when they leave off business, and begin to indulge themselves in eise and indolence. It is needless, therefore, to enquire, which of these circumstances, viz. low interests or low profits, is the cause, and which the effect? They both arise from an extensive commerce, and mutually forward each other. No man will accept of low profits, where he can have high interest ; and no man will accept of low interest, where he can have high profits. An extensive commerce, by producing large stocks, diminishes both interest and profit; and is always asisted, in its diminution of the one, by the proportional sinking of the other. I may add, that as low profits arise from the increase of commerce and industry, they serve in their turn to the farther increase of commerce, by rendering the commodities cheaper, encouraging the confumption, and heightening the induitry. And thus, if we consider the whole connection of causes and efects, interest is the true barometer of the state, and its lowness is a sign almost infallible of the flourishing of a people. Io proves the increase of industry, and its prompt circulation thro' the whole state, little inferior to a demonstration, And tho', perhaps, it may not be imposible but a sudden and a great check to commerce may have a momentary effect of the same kind, by throwing so many stocks out of trade ; it must be attended with such misery and want of employment in the poor, that, besides its short duration, it will not be possible to miftake the one care for the other.
THOSE Those who have asserted, that the plenty of money was the cause of low interest, seem to have taken a collateral effect for a cause; since the same industry which sinks the interest, does commonly acquire great abundance of the precious metals. A variety of fine manufactures, with vigilant enterprising mercharts, will soon draw money to a state, if it be any where to be found in the world. The same cause, by multiplying the conveniencies of life, and increasing industry, collects great riches into the hands of persons, who are not proprietors of land, and produces by that means a lowness of interest. But tho’ both these effects, plenty of money and low intereft, naturally arise from commerce and industry, they are altogether independent of each other. For, suppose a nation removed into the Pacific ocean, without any foreign commerce, or any knowlege of navigation : Suppose, that this nation possesses always the same stock of coin, but is continually increasing in its numbers and industry: 'Tis evident, that the price of every commodity must gradually diminish in that kingdom ; since 'tis the proportion betwixt money and any species of goods, which fixes their mutual value ; and, upon the present supposition, the conveniencies of life become every day more abundant, without any alteration on the current specie. A less quantity of money, therefore, amongst this people, will make a rich man, during the times of industry, than would serve to that purpose, in ignorant and nothful ages. Less money will build a house, portion a daughter, buy an estate, support a manufactory, or maintain a family and equipage. These are the uses for which men borrow money; and therefore, the greater or less quantity of it in a state has no influence on the interest. But 'tis evident, that the greater or less stock of labor and commodities must have a great influence ; since we really and in effect borrow these, when we take money upon interest. 'Tis true, when commerce is extended all over the globe, the most industrious nations always abound most with the precious metals: So that low interest and plenty of money are in fact almost inseparable. Bụt still 'tis of consequence to know the principle whence any phaenomenon arises, and to distinguish betwixt a cause and a concomitant e fect. Befides that the speculation 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 use than to improve, by practice, the method of reasoning on these subjects, which of all others are the most important; tho they are commonly treated in the loosest and most careless manner.
Another reason of this popular mistake with regard to the cause of low intereft, seems to be the instance of some nations ; where, after a sudden acquisition of money or of the precious metals, by means of foreign conquest, the interest has fallen, not only among them, but in all the neighboring states, as soon as that money was dispersed, and had insinuated itself into every corner. Thus, interest 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 sinking 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 sinking of interest upon such an event, seem different in the conquering country and in the neighboring states; but in neither of them can we justly ascribe that effect merely to the increase of gold and silver.
• Lib. 51.
In the conquering country, 'tis natural to imagine, that this new acquisition of money will fall into a few hands, and be gathered into large fums, which seek a secure revenue, either by the purchase of land or by intereft ; and consequently the same 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 sinks the intereft ; and so much the faster, if thofe who have acquired those large sums, find no industry or commerce in the state, and no method of employing their money but by lending it at interest. But after this new mass of gold and silver has been digested, and has circulated, thro' the whole ftate, affairs will soon return to their former situation : while the landlords and new money-holders, living idly, squander above their income ; and the former daily contract debt, and the latter incroach on their stock till its final extinction. The whole money may still be in the state, and make itself felt by the increase of prices: But not being now collected into any large masses or stocks, the difproportion between the borrowers and lenders is the same as formerly, and confequently the high interest returns.
ACCORDINGLY we find, in Rome, that so 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. t; on common securities in BITHYNIA, 12 I. And if interest in SPAIN has not risen to its old pitch ; this can be ascribed to nothing but the continuance of the same cause that sunk 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 cause, more money is to be tent in SPAIN, that is, more money is collected into large fums, than would otherwise be found in a state, where there are so little commerce and industry. : 'As to the reduction of interest, 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, considered merely in itself ; but from the increase of industry, which is the natural effect of the former increase, in thạt interval, before it raises the price of labor and provisions. For to return to the foregoing supposition ; if the industry of ENGLAND had risen as much from other causes, (and that rise might easily have happened, tho' the ftock of money had remained the same) must not all the same consequences have followed, which we observe at present? The same people would, in that case, be found in the kingdon), the fame commodities, the same industry, manufactures, and commerce ; and consequently the same merchants, with the same stocks, that is, with the same command over labor and commodities, only represented by a smaller number of white or yellow pieces; which being a circumstance of no moment, would only affect the waggoner, porter, and trunk-maker. Luxury, therefore, manufactures, arts, industry, frugality, Aourishing equally as at present, 'tis evident that interest must also have been as low ; since that is the necessary result of all these circumstances; so far as they determine the profits of commerce, and the proporzion betwixt the borrowers and lenders in any state,
* Columella, lib. 3. cap. 3.
+ Plinii epist. lib. 7. ep. 18.
Id. lib. 10. ep. 62.
T YAVING endeavoured to remove one species of ill-founded jealousy,
which is so prevalent among commercial nations, it may not be amiss to
mention another, which seems equally groundless. Nothing is more usual, among states which have made some advances in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to fourish, buc at their expence. In opposition 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 surrounding states are buried in ignorance, noth, and barbarism.
It is obvious, that the domestic industry of a people cannot be hurt by the greatest prosperity of their neighbours; and as this branch of commerce is undoubtedly the most important in any extensive kingdom, we are so far removed from all reason of jealousy. But I go farther, and observe, that where an open communication is preserved among nations, it is impossible but the domestic industry of every one must receive an increase from the improvements of the others. Conipare the situation of Great BRITAIN at present, 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 since 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 intercourse is still upheld to our great advantage : Notwithstanding the advanced state 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 discontent, while we imagine that it drains us of our money : Afterwards, the art itself is gradually imported, to our visible advantage: Yet we continue still to repine, that our neighbours should possess any art, industry, and invention ; forgetting
* To be placed after the Esay on the Balance of Tradi, Page 186.
that had they not first instructed us, we should have been at present barbarians ; and did they not still continue their instructions, the arts mult fall into a state of languor, and lose that emulation and novelty which contribute so 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 some 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 respect, states are in the same condition as individuals. A single man can scarce be industrious, where all his fellow-citizens are idle. The riches of the several members of a community contribute to increase my riches, whatever profession I may follow. They consume the product of my industry, and afford me the product of theirs in return.
Nor need any state entertain apprehensions, that their neighbours will improve to such 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 secured their mutual intercourse and commerce, as long as they all remain industrious and civilized. Nay, the more the arts increase in any state, the more will be its demands from its industrious neighbours. The inhabitants having become opulent and skilful, desire 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, such as the woollen manufacture is to England ? Must not the interfering of their neighbours in that manufacture be a loss to them? I answer, that when any commodity is denominated the staple of a kingdom, it is supposed that that kingdom has some peculiar and natural advantages for raising the commodity; and if, notwithstanding these advantages, they lose such a manufactory, they ought to blame their own idleness, or bad government, not the industry of their neighbours. It ought also to be considered, that by the increase of industry among the neighbouring nations, the consumption 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 still continue, or even encrease. And even should it diminish, ought the consequence to be esteemed so 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, silk, 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 riations ferves rather to keep induftry alive in all of them: And any people is happier who pofless a variety of manufactures, than if they enjoyed one single great manufactory, in which they are all employed. Their situation is less precárious, and they will feel less sensibly those revolutions and uncertainties to which every particular species of commerce will always be exposed.
ery hole such a minus commodity kingdom has to confumred, that by the i the industry or they ought it notwithstand peculiar an