(lass HP>lfc3 Rnnk , Q-t^ Co^yg AN INQUIRY tf?^ INTO THE VARIOUS SYSTEMS OF POLITICAL ECONOMY; THEIR ADVANTAGES AND DISADVANTAGES; AND THE THEORY MOST FAVOURABLE TO THE INCREASE OF *f NATIONAL WEALTH. BY CHARLES J3AN1LH, ADVOCATE, TRANSLATED FROM THE FRENCH BY D. BOILEAU, Author of " An Introduction to the Study of Political Economy" fyc, Hanc veniam damus, petimusque vicissim, Horace, NEW-YORK PUBLISHED BY PETER A. MES1ER, NO. 107 PEARL-STREET. 1312, V THANRFERRES F*a» * tfP2Vil!« Printed by D. & G. BRUCE, No. 20 Slote-Lane. ADVERTISEMENT, J\o study can be more attractive to a benevo- i^-l, lent mind than that which investigates the means of providing a plentiful national income, and in- suring the happiness of the individual members of the community, by enabling them to obtain the supply of their wants through the exertions of their industry. That commerce is one of the most powerful of those means has long been ac- knowledged in this country : but that this truth should find an able advocate in France, at a time when her ruler is bent upon destroying commerce, is a circumstance as extraordinary as it is honoura- ble, to the author of the Inquiry into the various Systems of Political Economy, The impartiality and the soundness of the views which he displays in his work give it a particular claim to the atten- tion of the English nation ; and it is with the view to render its circulation more general, that I have attempted a translation, in which I have chiefly aim- ed at fidelity and perspicuity. Brompton Moad, March 6tk ? 181£, AN INQUIRY INTO THE VARIOUS SYSTEMS OF POLITICAL ECONOMY. PLAN OF THE WORK JjiVER since modern countries have reached a degree of opulence unknown to the nations of antiquity and the middle age, and particularly since Wealth has been discovered to be altogether the basis and measure of the relative and absolute power of states ; the sources whence Wealth is produced, the measures which accelerate its growth, the laws by which it is distri- buted and circulated, and the means of regulating its employment, increasing its abundance, and insuring its constant progress, have frequently been investi- gated. This subject, known at present by the name of Political Economy, (no doubt, because it embraces individual efforts and national regulations, and blends them in one point of view,) has been amply dis- cussed in all its bearings and applications. Several works published in England, Italy, and France, mostly of great merit, and all of them more or less 2 ON THE VARIOUS SYSTEMS useful, have thrown considerable light upon this de- partment of human knowledge ; and, by disclosing its importance, have at length placed Political Eco- nomy in the first rank of political sciences. But, as if the inability of ascending to general causes were the inevitable lot of man, the sources of Wealth have hitherto escaped the most laborious re- search. The solitary and combined efforts of the most distinguished writers among the most celebrated na- tions of Europe, have alike been unable to dispel the clouds in which these sources are enveloped. Opin- ions, arguments, and controversies, have been heaped together, which by their variety and multitude em- barrass and fatigue the mind. The difficulty of choos- ing among them disheartens the student, and leaves him in doubt and uncertainty. If he should wish to know wherein national wealth consists ; how great will be his surprise at meeting with so many different and even contrary opinions in the most esteemed authors ! Some state the wealth of a nation to consist in the totality of the private property of its individuals *; others, in the abundance of its commodities, f Some, distinguishing public from private wealth, assign to the former a value in use, but no value in exchange ; and to the latter, an exchangeable value, * Sir William Petty's Treatise on Taxes and Contributions; l667. Gregory King's Calculation, published by Davenant. Adam Smith's Wealth of Nations, B. iv. c. 1. Dr. Beeke's Observations on the Produce of the Incorie-Tax. t Dixme vpyale «lu. Marechal $e Vatdwm. - - , ■ — i OF POLITICAL ECONOMY. 3 but no value in use ; and make public wealth to con- sist in the exchangeable value of the net produce.* Others state wealth to consist of all the material commodities which man may use to supply a want, or to procure an enjoyment either to his sensuality, his fancy, or his vanity, j" One writer considers wealth as being the posses- sion of a thing more desired by those who have it not, than by those who possess it. J Another defines wealth, whatever is superfluous. § A modem French writer calls wealth the accumu- lation of superfluous labour: || and a noble English author, who, like the French economists, distinguishes individual riches from public wealth, submits that " the latter may be accurately defined to consist of all ■" that man desires as useful or delightful to him ; " and the former to consist of all that man desires " as useful or delightful to him, which exists in a de- u gree of scarcity."^ * Physiocratie, p. 118.. Philosophic rurale, ou Economie generate et politique de l'Agriculture, p. 60. f Essai sur la nature du Commerce, par Cantillon. — Abreg6 des Principes d'Economie Politique, par Mr. le Senateur Germain Gar- nier ; Paris, 1796*. X Richezza e il possesso d'alcuna cosa che sia piu desiderata dal aU tri, che dal possessore. Galiani della Moneta. %.Il_superfluo costituisce la richezza. Palmieri publica Felicita, vol. i. p. 155. || Principes d'Economie Politique, par JB. V. F. Canard. Paris, 1801. fl An Inquiry into the Nature and Origin of public Wealth, by the Earl of Lauderdale. Edinb. 1 804; " ch. ii. p. 56, 57. But the French author, by saying, " qui distwgve, la- rkhesse partial 4 ON THE VARIOUS SYSTEMS The same uncertainty, the existence of which we deplore concerning the nature of wealth,* prevails with regard to the means of contributing to its pro- gress and increase. Those who first wrote upon this important subject, being misled by appearances, assigned the precious metals obtained in return for the raw and manufac- tured produce exported, as the cause of the wealth of nations, f " here de a richesse generate, definit la premiere tout ceque Vhomme " desire comme atile ou agreable, et la seconde tout ce que Vhomme " disie comme utile ou agriable, mats qui n'existe que dans un certain " degre de raretd ;" states the very reverse of what His Lordship has asserted.— T f * According to one German writer, National Wealth is the sum total of productive powers actually exerted in a nation. C. D. Voss, Staatstcirthschqftslehre. Erste abtheilung. Zweyter Abschnitt. Leipz. 179S. According to another, it is the aggregate of all the property belonging to 1 a nation, and to every one of its individual members. L. H. Jakob, i Grundsatze der National Oekonomie ; Halle, 1805. See also page 6, of Boileau's Intro- duction to the Study of Political Economy. The definition of public wealth, as " the surplus of the national income above the actual " expenditure of a nation," given in the second page of that work, appears equally correct, since it is out of this surplus that whatever constitutes public or private property, is obtained. — T. f In England, Raleigh in his Essay on Commerce ; 1595. Ed- ward Misselden on Commerce ; lfj23. Lewis Roberts, the Treasure of Traffic; 16*41. Thomas Mun's England's Treasure by Foreign Trade; 1664. Fortrey's Interests and Improvements of England? 1664. Davenant's Works relating to the Trade and Revenue of England ; 1696. M. Martin, Inspector-General of the Customs, King's British Merchant, or Commerce Preserved ; 1713* In Holland, Jean de Witt Memoires ; 1669. 4)F POLITICAL ECONOMY. A Others ascribed the origin of wealth to the lower- ing of the legal rate of interest.* Deluded by a fascinating and captious theory, the French economists greatly extolled the Agricultural system, f ' Adam Smith gave the preference to " Labour im- " proved by subdivision, which fixes and realizes " itself in some particular object or vendible com- lt modity, which lasts for some time, at least, after " that labour is past. "£ Lord Lauderdale, in the work which we have quoted before, and which is remarkable for the saga- city of its views, states that, " man owes his wealth " to the power of directing his labour to the increasing " of the quantity or the meliorating of the quality of In Italy, Sdrra Breve Trattato delle Cose che possono far abon- dare li Regni d'Oro; l6l3. Genovesi, Lezioni di Econom. Civile ; 17^4. Muratori, Felicit. publ. cap. 16. *sul principio. Corniani, Reflez. sul le Monete. In France, the Cardinal de Richelieu, and Colbert . Ordonnances et Reglemens pendant leur Administration. * Thomas Culpeper's useful Remarks on the Mischief of an high National Interest; 1641. Sir Josiah Child's Brief Observations concerning Trade and Interest of Money; 1651. Samuel Lamb on Banks; \6o7. William Paterson, author of the Project of the London Bank ; lo"94. Barnard's Discourses on the lowering of the Interest of Money ; 1714. f Physiocratie. t Adam Smith's Wealth of Nations, Eleventh Edition, 1805, voj. ii. b. ii. c. 3. p. 2. David Hume has probably suggested the idea of this theory to Adam Smith. He expressly says: <{ Every thing in *' the world is purchased by labour." Hume's Essays, Edinb. 1S04,- 8ve. vol. i. Essay on Commerce, p. 177- b ON THE VARIOUS SYSTEMS " the productions of nature, and to the powei 4 of sup- " planting and performing labour by capital."* The same variety of opinions prevails respecting the action or influence of the causes of wealth, their immediate or distant effects, their apparent or actuaj results. Some systems agree on a few points, and are at variance upon others ; and generally they disagree ' in so many respects, that they cannot possibly be reconciled, reduced to common tenets, or condensed into a general theory. Hence that variety of systems among authors, of methods among governments, of opinions among the learned ; hence the discouragement of those who are desirous of studying the science, and the indifference of those whom a sense of duty should prompt to acquire the knowledge of it; hence also the little consideration which Political Economy enjoys in the world, and its total exclusion from the official routine of practical statesmen. Some, in other respects well-informed men, doubt the existence of the science ; others are even tempted to consider it as an occult one, the mysteries of which are revealed only to a few initiated individuals : thus ignorance, in this as in many other instances, begets alike incredulity and superstition. When, in the course of private life, certain indivi- duals get rich while others grow poor, the generality * An Inquiry into the Nature and Origin of Public Wealth, and into the Mea»s and Causes of its Increase ; by the Earl of Lauder- dale. Edinb. ?804. p. 363. OF POLITICAL ECONOMY. 7 of mankind, ignorant whence this wealth or poverty arises, boldly ascribe it to good or bad fortune. By a singular conformity, when governments, not with* standing the efforts and promises of ignorant and, visionary projectors, find themselves reduced to dis- tress, they are often inclined to attribute it to occult causes, the influence of which is to be remedied by specifics and secrets unknown to the learned. They eagerly search after, and even flatter themselves they have hit upon financial plans capable of relieving the distress of the state, without either impairing the for- tune of individuals, or accelerating the decay of public wealth. As well might they seek for means to enable men to exist without food, to have their warits supplied without labour, and to grow rich by prodigality. And can this credulity be wondered at ? Does not the sect of the Economists, who cannot be accused of being deficient in knowledge or candour, seriously assert that governments ought to leave industry to its natural course ; and that they have done every thing, when in fact they have done nothing ?* A paradox, this, extremely convenient for ignorance, intrigue, and ambition, and particularly agreeable to those who are entrusted with the management of national affairs. In a certain point of view, this paradox undoubtedly contains a very profound meaning and conveys a les- son highly useful in many respects. Individuals gene- rally display more sagacity in the management of their own concerns, than governments in the regulations, * Physiocratif* 8 ON" THE VARIOUS SYSTEMS statutes, privileges, prohibitions, premiums, and boun- ties, with which they think to provide for the greater prosperity of individuals and nations. Did govern- ments suffer private individuals to act as they think proper, without attempting to regulate their affairs ; their conduct certainly would be more conducive to wealth : in such instances, the maxim of the Econo- mists is indeed an enlightened censure, and cannot be regarded as paradoxical. But it ought not to be supposed that a government intimately acquainted with the interests of a country, and attentive to follow the progress and direction of private industry, should be utterly unable to invigo- rate the impulse of this industry when it happens to be beneficial, to prevent its aberrations when they might prove hurtful, or to lead it into more enlarged, more extensive, and more profitable channels. Eliza- heth in England, Richelieu, and above all Colbert in France, are for ever entitled to the gratitude of their country and the veneration of all enlightened ages.* It is admitted by the Economists themselves, " that *' a great empire ought not to quit the plough for the " carrying trade ; and that, at the example of a cele- " brated minister of state, wealth ought not to be * " The more simple ideas of order and equity are sufficient to Ci guide a legislator in every thing that regards the internal adminis- " tration of justice : but the principles of commerce are much more " complicated, and require long experience and deep reflection " to be well understood in any state. The real consequence of a *' law or practice is there often contrary to first appearances." Hume's Histfi-y of England, London, 1802. vol. iii. Henry VI L; pi 397. OF POLITICAL ECONOMY. 9 " derived from manual dexterity to the prejudice of il the primary source of wealth."* Would they then be sorry if governments should apply all the" means in their power to favour agriculture in preference to industry and commerce, and to derive public wealth from an increased net produce ? Adam Smith is not more consistent than the Eco- nomists. He laughs at a statesman who should attempt to direct the employment of the capital of the nationf ; and yet he points out the conduct go- vernment ought to pursue, to encourage manufac- tures necessary for the defence of a country, to fa- cilitate the exportation of the manufactured pro- duce, and to favour the importation of the raw pro- duce to which the manufacturer superadds his labour. Let us therefore conclude, that, though it be the duty of governments to give the utmost latitude to private industry, it is yet of serious importance to nations, that their statesmen be intimately acquainted * Physiocratie. f " What is the species of domestic industry which his capital " can employ, and of which the produce is likely to be of the u greatest value, every individual, it is evident, can, in his local sit- " uation, judge much better than any statesman or lawgiver can do "for him. The statesman who should attempt to direct private peo- " pie in what manner they ought to employ their capitals, would ?' not only load himself with a most unnecessary concern, but as- " sume an authority which could neither be safely trusted to anv " single person, nor to any council or senate whatever, and which lt would no-where be so dangerous as in the hands of a man who had " the folly and presumption to fancy himself fit to exercise it." Adam Smith's Wealth of Nations. Eleventh Edit. London, 1805. vohii. B. iv, c, 2. p. 1,90. 10 ON THE VARIOUS SYSTEMS i with a science that teaches the means of deriving the greatest benefits from industry and capital, and of directing both into the most profitable channels. It is only when a government is deficient in knowledge that its absolute inactivity is desirable. The salutary influence of political economy is not confined to governments ; it is still more sensibly felt in legislation. Its principles, tenets, and theory, are closely allied and identified with the principles, tenets, and theory of legislation ; they act upon each other with an incalculable and assuredly unexpected force. In every system of political economy, wealth is the work of men. It owes its existence to their passions, and its perservation to their moral dispositions. Hence wealth is necessarily modified by their political ex- istence, just as their political existence is necessarily modified by the system that regulates wealth, A political system which reduces the largest por- tion of the people to servitude, must have upon wealth an effect very different from one that insures the li- berty of all the individual members of a nation, and admits them all to share in the benefits of the social compact, in proportion to their knowledge, talents, industry and activity. But even though the political system does not in- fringe upon the liberty of the subject ; if the law does not cause all kinds of propertv to be respected ; if it restrains the disposal and circulation of any property whatever ; if wealth is suffered to flow exclusively into the lap of certain classes or individuals to the prejudice of all the otl\er classes or individuals of the community, it is again evident that the law in this OF POLITICAL ECONOMY. 11 case must have upon wealth an influence different from that which it exercises when it watches alike over the safety of persons and the security of proper- ty ; when it protects every kind of labour and indus- try ; and when it leaves individuals at liberty to con- tract for and dispose of whatever is their own. How greatly do they err, who suppose political eco- nomy a stranger to politics, legislation, and govern- ment, and judge it possible to have good laws with a bad system of political economy, or a good system of political economy together with bad laws ! Wealth depends as much on politics, legislation, and govern- ment, as on political economy : these sciences are con- nected by indissoluble chains; they support or oppose, and ultimately uphold or destroy each other. Inattention to combine the elements of those diffe- rent sciences in the constitution, laws and government of a country, gives birth to that clashing of public and private interests, that absence of character and phisi- ognomy in modern nations, those false measures and oscillations of governments, and that want of public spirit ; the necessary results of the conformity of in- dividual passions with public ambition. This opposition of views and interests, of theory and practice, of principles and conduct, is sure to dis- appear in proportion as political economy is improved; as its study is rendered less difficult and more general; as the ways of acquiring wealth are better known; and as the necessity of combining the political civil and administrative systems with the system of political economy, is more sensibly felt. Durst I even venture freely to deliver my senti- 12 ON THE VARIOUS SYSTEMS ments, I would assert that the progress of national prosperity, the consolidation of public order, and a higher degree of civilization, are closely connected with the study of political economy. Methods to ac- quire riches are necessarily methods of wisdom and good conduct. If dissolute individuals rarely grow rich, the mal-administration of governments must necessarily impoverish the people. Were the conse- quences of their faults as evident as those of individual errors ; could the effects of public mal-administration be as accurately ascertained as those of private miscon- duct; there is every reason to suppose that public ca- lamities would be more unfrequent and less disastrous. The depositaries of the fortune of nations would no longer sacrifice it to the delusions of vanity, to the deceitful promises of ambition, to the captivating splendour of a frivolous and transitory grandeur : or if they should happen to be misled by the violence of passion, their errors would be of short duration. Like Louis XII. and Francis I. of France, who, by the parsimony of the latter part of their reign, atoned fo:< the prodigality and profusion of their younger years; princes, ever so little ambitious of true glory and de- sirous of the love of their people, would stop at a considerable distance from the precipice which threat- ens to engulph them together with public wealth. Under the impression that I may perhaps accelerate that fortunate period by exhibiting, comparing, and contrasting the various systems of which the science of political economy is at present composed ; I shall discuss their respective advantages and inconvenien- cies, and adopt that theory which, in a moral, political, civil, and economical respect; appears entitled to the Of POLITICAL ECONOMY. 18 ^preference. The task, I know, is not easy, and lit- tle flattering to self-love. The merit of originality will rarely be mine. It would indeed be difficult to say any thing on this subject which has not been said already ; but my satisfaction will be great, if I should remove the innumerable difficulties which I encountered when inclination led me to a science to which my previous studies and ordinary occupations had kept me a stranger. Above all, I shall deem myself happy if I have avoided the inconvenience into which all the writers on this subject appear to have fallen. Their plans are generally defective. None has chosen one in which he could treat of every branch of the science In its natural order. None has used the analytical method which connects the different parts of science^ and combines them into a whole. I hope I shall at least approximate that desired perfection, by investi* gating successively, in as many separate books, the various systems concerning, "I. The sources of wealth, and II. Their divers ramifications, such as labour, cap- itals, the circulation of commodities or commerce, and the revenue or consumption; and particularly by stating in distinct chapters the various theories or opinions, and the controversies to which they have given birth, in every branch of the science. This division appears to embrace the science in its general bearings, in its principal parts, and in its most minute details. It commands attention without fa- tiguing the mind ; allows every separate portion to be examined without losing sight of the whole; a&d 3* ON THE VARIOUS SYSTEMS forms a picture which a person of the least discern- ment may readily contemplate in its full extent with- out being bewildered by the multitude of the details. But is wealth of sufficient importance, utility, or benefit, to individuals or nations, to become the ob- ject of a science, to engage the attention of enlight- ened minds, and to require particular rules of con- duct for public and private management ? Is not that rather true which Plato said, that " gold and ' virtue are two opposite weights in a balance, one * e of which cannot rise unless the other sinks ?"* Does not wealth deserve the stigma which so many moralists, politicians, and religious sectaries, have af- fixed to it? And would it not be better to teach men the precious advantage of an honourable mediocri- ty, than to entice them to the fatal and deplorable road to riches ? Though sufficiently resolved by both the eagerness with which all nations press forward on the road to wealth, and the important part which wealth per- forms in all public and private transactions, this su- perannuated problem appears yet entitled to a serious inquiry. I have discussed it in the Introduction to my work. A science ought indeed to be proved to be useful, before it is taught ; and it is only because the utility of political economy seemed evident to me, both in a moral and political point of view, that I have investigated whatever 1 thought worthy to be considered as pertaining to the science, and calcula- ted to simplify its study, to accelerate its improve- ment, and to insure its success. * Travels of Anacharsis. Engl, transl. vol. iv. c. 55. p. 363; OP POLITICAL ECONOMT. 15 ON THE VARIOUS SYSTEMS OF POLITICAL ECONOMY, INTRODUCTION. On the Nature of Wealth. JrOLITICAL sciences afford few subjects of medi- tation more extensive, more complicated, more in- structive, and more productive of important conse^- quences than the problem of the moral and politi- cal advantages and inconveniences of Wealth ; a subject which has been so frequently discussed, and so variously resolved in every treatise on morals and politics. When we consider how little, in this respect, men have been anxious to make their opinions agree with their practice, their principles with their conduct, and their morality with their actions ; the solution of the problem becomes still more difficult : men appear to have prescribed duties for themselves merely for the purpose of transgressing them, or, at least, to have imagined that to transgress them was allowable as often as it might prove useful. Let it not be suppo- sed, however, that this inconsistency is peculiar to 16 ON THE VARIOUS SYSTEMS some individuals, some classes, or corporations, cer- tain times and certain countries; it is common to alt men, to all nations* and all times. Though despised by the wise, condemned by religious tenets, accused by moralists and publicists of the perversity of indi- viduals, the depravity of manners, the decline of na- tions, and the fall of empires, Wealth is yet every where the object of the ambition of individuals and nations ; the cause of their quarrels and contentions, and but too often the reward of violence, of fraud and injustice, and of the infraction of all laws human and divine. Every where poverty, though praised, com- mended, and ranked among the virtues most honour- able to humanity, is regarded as a misfortune, some- times as a disgrace, and almost always as a symptom of vice, or of an inferiority of either physical or in- tellectual faculties. To reconcile this singular contradiction, to devel- ope, its causes, and dt *ide between the passions and the instructors of man ind, is certainly no easy task. It ought, however, tobt less difficult, now that polit- ical economy indicates pure and salutary sources of wealth, the abundance of which may be increased by means conformable to reason, justice, and morality ; equally beneficial to the rich and poor, and as lawful as honourable in their application. Yet, by a Strang^ fatality, this precious discovery has not cured public opinion of its prejudice against riches ; and to write in behalf of wealth, is still as rash, as it is rare to see poverty honoured in a drawing-room. If political economy has hitherto been unable to make men relinquish their erroneous notions concern- OF POLITICAL ECONOMY. gl ing wealth, or to convince them of its being morally and politically beneficial, it is to be feared that the same fatal prejudice will be extended to the theory of Wealth, and that mankind will not feel greatly dis- posed to patronize a science, the object of which is little valued. There is, at least, no hope that it will be diligently studied, successfully cultivated, and eagerly diffused among the enlightened classes of the community, on whose patronage alone the progress of science depends, and without whose co-operation the solitary efforts of a few courageous partisans, who have to struggle against the torrent of general indif- ference, must always prove unavailing. It is, therefore, of the utmost importance for the success of Political Economy, that the mysterious veil, which has hitherto concealed the true nature of wealth, should be removed. The origin of a preju- dice so ancient against riches, and the source of the charms whieh wealth, in despite of this prejudice 2 constantly possesses iii the eyes of individuals and na- tions, must be investigated. It must be known whe- ther the disastrous effects of which wealth is accu- sed, spring from its nature or from extraneous cau- ses. It must, in fine, be ascertained whether wealth has been the parent of more virtues than vices; whether it deteriorates more than it improves the condition of nations ; and whether it has been more prejudicial to the duration and safety of empires, thau favourable to their elevation and grandeur. Wealth is now performing so great a part in all domestic, national, and foreign concerns, and in every public avid private transaction? that it is a matter of 23 ON THE VARIOUS SYSTEMS. much importance not to mistake its essence, its origin* its effects, and the universal application of which it is susceptible. The indifference which has proved so fatal to the theory of wealth, cannot be persevered in without endangering the social bonds of modern na- tions. At a, time when Europe, shaken in her very foundations, is about to be re-established on a new basis, and when it is at length acknowledged that true politics ought no longer to separate the power of governments from the welfare of the people, it parti- cularly behoves us to form correct notions of wealth, and to be acquainted both with the benefits which we are to expect from it, and, the calamities which fol- low in its train. If wealth be useful, its advantages will be the greater for being more justly appreciated; if prejudicial, its disastrous effects will be better avoided or prevented by being known. Though truth be not always certain to please, it is yet sure of a fa- vourable reception whenever it is beneficial to man- kind. Wealth, in the simplest and most general accepta- tion of the term, consists in the surplus of produce above consumption, or of income above expenditure. The extent both of public and private wealth depends on the accumulation of this surplus, and on the man- ner in which it is managed and applied.* The passion for wealth is general, universal, and, * When individuals, hordes, tribes, and nations, have not enough, to supply their wants, they are poor ; when their means are adequate to their wants, they are equally removed from poverty and wealth : when they have a surplus left after having supplied all ^their wants, ilris surplus constitutes their wealth. 0F POLITICAL ECONOMY, 23 as it were, inherent in mankind. The history of man and civil society shows it always active and enter- prising. It is the spring of every private action, the principle and end of all publie resolutions. In every country, in every nation, among the Scythian or Tar- tar hordes, among the tribes of Arabia or the savages of America, among the ancients and moderns, at all times and under all governments, the desire of riches exercises the same influence ; whether mankind live insulated or collected in societies, whether they be governed b} T instinct or obedient to reason, this de- sire never varies but in its direction and its means. The passion for wealth is not peculiar to mankind exclusively : vestiges of it are even found among some species of the brute creation. Several animals reserve the surplus of their provisions for future wants. By this reservation, they indicate the instinct of riches; and it is extremely remarkable, that these economi- cal and provident classes of creatures happen also to he the most laborious of the animal kind. But, in the brute creation, this propensity is limit- ed ; in men, it is without bounds. It has not influ- enced animals to proceed a step beyond the instinct for their own preservation ; while, in men, it has been the principle and promoter of intellectual faculties, of liberal and mechanical talents, of ingenious and active industry : it has afforded mankind ample means and vast resources ; secured them against want, procured them conveniencies, comforts and en- joyments the most exquisite ; and extended, as it were, the domain which nature destined for man, so that the distance which separates mankind from the %4> ON THE VARIOUS -SYSTEMS animal creation, might be measured by the distance of the most refined enjoyments from the most ordi= nary wants, or, in other words, by the distance of wealth from poverty. Unfortunately, this passion for riches, which nature designed for such useful and beneficial purposes, has long been a constant source of disorder, violence, and calamities, among individuals and nations. Ancient history, and the records of the middle age, continually 'exhibit the passion for wealth to the philosophical observer as an obstacle to the safety, liberty, and hap- piness of individuals, to the independence and pros- perity of nations, and to the increase and welfare of mankind : it is always arming men against men, ci- ties against cities", and people against people. Dur- ing those two periods, it seemed as if one man could not possess more than he stood in need of, without depriving another of the necessaries of life ; as if cities could not be rich but at the expense of the country, and as if a nation could not be wealthy but by impoverishing other nations. Every where wealth is wrested from poverty, and opulence amassed out of the wrecks of indigence. Ages had rolled along before men perceived, or even before they sus- pected a more productive, a more abundant source of wealth, than the misery of their fellow-creatures. Communities, or individuals, all fancied they could not be rich but .by seizing the property of others ; and all attempted to secure a surplus by depriving others of their absolute necessary. With this intent were framed the constitutions of the ancients, and of the people of the middle age_^ OF POLITICAL ECONOMY, 21 in this spirit were their laws conceived, digested, and executed : su< h was the peculiar character of their institutions, governments, and public and private manners ; such the end of their social compact. The servitude of the most numerous part of the people was the first consequence of this system. We find slavery established in the most remote times ; and this circumstance has betrayed some writers (in other respects estimable) into the supposition that servitude is a law of nature. Independently of the greatest part of the people being enslaved, we find another considerable portion plunged into a depth of misery little preferable to •slavery, and opulence reserved for a few privileged beings, ubose number bears no proportion to the mul- titude bending under the load of social calamities. To what cause ou*;ht we to ascribe a distinction so degrading to humanity ? Not to human nature : it makes neither masters nor slaves, neither rich nor poor. The inequality of strength, courage, and ac- tivity, may have produced the inequality of riches; but it could not be the immediate cause of servitude and misery. The individual who is least favoured by nature, may much more easily do without the as- sistance of his fellow-creatures, in the social state, than in the state of nature: and surely it was not for the greater benefit of the weak man,, that he was reduced to slavery by the strong one; nor was it from a motive of humanity, or by way of kindness, that the rich rendered the misery of the poor subservient to the increase of their riches. .This distinction of masters and slaves, of rich and 9& Oft THE VARIOUS SYSTEMS poor, was, in ancient times and in the middle age, the unavoidable consequence of their civil associations being founded upon a system which stripped the weak for the benefit of the strong ; or, rather, upon the wrong direction given to the inexhaustible passion for wealth. Aware that they could not grow rich with- out their assistance, men used every means in their power to subdue their fellow- creatures, and to impose upon them the yoke of their caprices and vices, and the care of supplying their wants and providing for their enjoyments. Man became the property of man, and in this respect J. J. Rousseau was right when he asserted, that he who laid the first foundation of pro- perty, was guilty of treason against humanity, and deserved the curses of mankind. Fatal as this attempt of the passion for riches proved, every where, to the most numerous part of the people, it was yet repeated with the same ardour, and, at first, with the same success, by nations against each other. They were all anxious to appropriate to themselves the wealth of other states, and to submit them to their domination. Hostilities became perma- nent, and in this general struggle, a few proving vic- torious, subdued the others and stripped them of their riches. But punishment followed close upon the crime. The predominating states were no sooner arrived at the summit of power, than they fell with the same rapidity, and, to use the more correct than elegant comparison of Fergusson*, they disappeared all at once, and "the conflagration, which had filled * Fergusson's Higtory of Civil Society. OF POLITICAL ECONOMY. 23 " the world with its flames, subsided like a wax-ta- " per under an extinguisher." The causes and effects of this political phenomenon are established beyond contradiction, by the annals of all the distinguished nations of antiquity. The Persians, who appear first on the theatre of history, were wretchedly poor when Cyrus led them on to the conquest of the rich provinces of Asia. The hope of emerging from misery was their only motive for war. They became conquerors for the sole pur- pose of enriching themselves ; which they accom- plished by stripping the vanquished of their wealth.. The treasures of the conquered kings were distributed by the conquerors among the army, the generals and grandees, and all who, by their services, had deserved well of the country. Thus the wealth acquired by conquest contributed, at first, to the grandeur of the monarch, and the splendour of the empire : but it soon devolved to a few favourites, courtiers, and slaves ; to all, in short, who, under absolute govern- ments, feed upon the depravity and vices of their masters. From that instant the power of the Persians declined, until it vanished before an army of thirty- five thousand tnen, who issued from the barren moun- tains of Macedonia, or enlisted from among the Pro- letarians of Greece.* * The Proletarians (Proletarii ct prole creandd) were those citi- zens among the Romans who, being possessed of no more than fif- teen hundred sesterces, had nothing to contribute to the exigences of the state but their children. Asperis reipublica temporibus cum jwoentutis inopia esset, Proletarii in militiam tmmiltuatiam leg$hanp(r s , Aul. Gel!, xvi. 10.— T, 24 ON". THE VARIOUS SYSTEMS. The Spartans, not less celebrated for their contempt of riches than for their astonishing exploits, appear little entitled to the praises with which they have been honoured by posterity. They reduced the Helotes, or inhabitants of Laconia, to servitude, for the pur- pose of imposing upon them the task of supplying their wants. The laws of Lycurgus, which had grounded the happiness of the Spartans upon disin- terestedness, and ^obtained' the approbation of the gods, could not guard them against the dangerous seduction of riches. Scarcely had their illustrious Lawgiver ended his days, than, regardless of both his laws and the gods, who had, as it were, declared them- selves the patrons of those laws, the Spartans con- quered Messene, and exterminated, banished, or en- slaved its inhabitants : and it is this very period of oppression and robbery which marks the beginning of their importance and consideration among the na- tions of Greece/ The Spartans did not shew them- selves more rigid observers of the laws of Lycurgus against riches at any other period of their history : the ransom of the prisoners of war, and the booty of Piataea, were eagerly heaped up in their public exche- quer ; and, as Plutarch justly observes, " private in* i( dividuals took care-not to despise the wealth which " the public held in estimation ; and the law which " watched at the gate of their houses to keep them " shut against gold proved less powerful than the ex- " ample of the people, who opened their hearts to " cupidity." Their best generals, and even the chiefs of the state, were bribed by the gold of the great ©F POLITICAL ECONOMY. 25 king, and the owls of Athens* crept under the roof of the covetous Spartan. But the wealth which the Spartans so anxiously coveted, could only be obtained by reducing other nations to poverty and wretchedness ; and when, in spite of the laws of Lycurgus, riches had been accu- mulated in the hands of a few citizens, Sparta had no longer any virtue, glory, or power, leftf . 'Attica, a dreary and barren country, could never have emerged from the state of indigence to which it was condemned by nature, had not the road to wealth and the career of ambition been opened to it, by its sharing in the booty of Piatsea, and in the plunder of the cities of Asia Minor, which had declared for Xerxes. This first favour of fortune proved a power- ful stimulus to fresh usurpations. The Athenians seized the chest containing the contributions which the confederate cities of Greece levied among them- selves to repel the attacks of the great king. Then arbitrarily raised the rate of contribution, subdued several towns and islands of Greece, stripped them of their riches, and exacted exorbitant tributes Thus the * The money of Athens bore the impression of an owl. t It has been remarked by historians, that when, after th« battles of Leuctrum and Mantinsa, the power of Sparta declined., the Lacedemonians were more attached to their gold than to their country ; and though their laws condemned the passion for riches., their avarice was carried so far, that of the nine thousand families who in the time of Lycurgus shared the whole wealth of the state, there remained not above seven hundred in the reign of Agis, of which perhaps, one hundred had estates in lands, Plutarch's Lives* Lsadon. 1SQ5* Vol. iv. dgis. p. 3S5. £6 ON THE VARIOUS SYSTEMS Athenians grew rich by plundering, oppressing, and impoverishing other nations, and as their wealth got into the hands of a few citizens, it caused the ruin of the state*. A few huts, built by strangers and fugitives on the sea-shore, were the slender foundations on which arose the magnificent towers of proud Carthage. Though at first indebted for her wealth to commerce, it was the plunder of the small nations by which she was sur- rounded, and the conquest and spoliation of the prin- cipal islands of the Mediterranean and of a large por- tion of Africa, which gave Carthage so considerable a mass of riches, that many of her private citizens were said to have been as wealthy as monarchsf. The history of Carthage does not inform us what became of her riches, and whether they fell exclusively into the hands of a few citizens, as they did among the other nations of antiquity : but it positively acquaints us with the inordinate passion of the Carthagenians for wealth. The citizens were obliged to pay for what- ever the state might or ought to have given them, and were paid for every service rendered to the statej. This mutual avarice of the citizens and of the state caused the misfortunes and ruin of Carthage, and produced precisely the same effects which wealth, ex- clusively possessed by a small portion of the people, Jiad produced in other countries. * There were citizens at Athens, whpse landed estates were three aiiles in extent ; while others had not sufficient to pay for theif burial. De Paw, sur les Grecs. ■f Montesgukv. Granpeur ft Decadence des Bomains, c, 4. £ Ibid, OF POLITICAL ECONOMY. 27 It was the fear of having their treasures diminished by extraordinary expellees, which, in the first Punic war, induced that celebrated people to submit to the laws of the conqueror. During the second Punic war, the interested policy of Carthage confined her attention to the preserva- tion of her wealth. She did not extend her views to futurity, nor did she appreciate the genius of Hanni- bal. The Carthaginians were alarmed at the expences to which they were driven by the illustrious exploits of that great man ; while they ought to have sacri- ficed the whole of their riches to his glory. And it may be asserted of this extraordinary people, that if the passion for riches was the principal cause of their greatness and power, it was the dread of poverty which occasioned their decline and ruin. Rome, founded by robbers and fugitive slaves who were seeking an asylum against the justice of the laws, had for a long time nothing to subsist upon but what the Romans seized from the harvest of their neighbours. " Romulus was almost constantly at " war to procure citizens, women, or lands. " The Romans used to return loaded with the " spoils of the vanquished, which consisted in sheaves " of corn and droves of cattle. This proved the occa- " sion of great rejoicings. " Rome being without commerce, and almost with- " out arts, pillage was the only road to wealth. There " was, nevertheless, a kind of order and regularity " observed in plundering. The booty was collected ei into one heap, and distributed amongst the soldiers. " The citizens, who had been left at home shared 28 ON THE VARIOUS SYSTEMS " likewise in the fruits of victory. Part of the " conquered lands was confiscated and divided into " two lots; one was suld for the benefit of the pub- " lie, and the other given to the. poor citizens, at an ** annual rent paid to the state. " As the glory of a general rose in proportion to 6i the quantity of gold and silver that graced his *' triumph, none was left to the vanquished. " Rome continued enriching herself, and every f< successive war enabled her to undertake a new one. " Her allies, or friends, ruined themselves by the " astonishing quantity of presents which they made (t to obtain a greater degree of favour, or to secure " that which they enjoyed: half of the sums sent to *' Rome for this purpose, would have been sufficient " for her overthrow. * Masters of the world, the Romans arrogated to 41 themselves all its treasures. Their rapacity as " conquerors was less unjust, than as legislators, il Having heard of the immense wealth of Ptolemy, " king of Egypt, they passed a law by which they " constituted themselves heirs of a living monarch, "and confiscated the dominions of an ally.* " The cupidity of private individuals was not *< backward in seizing whatever had escaped public *' avarice. Magistrates and governors made a traffic " of their injustice to princes. Competitors vied u in rushing to their ruin to purchase a doubtful * Montesquieu. Grandeur et Decadence ties Romains. c. 6. The example has not been lost. Theconduct of Fiance towards Spain is the exact copy.— »T. OF POLITICAL ECONOMY. 29 " protection against a rival whose means were not- il yet completely exhausted ; and the grandees of ic Rome showed themselves devoid of that kind of ff probity which even robbers observe in their crimes. " No right, in short, lawful or usurped, could be u . kept safe but by means of bribes. To obtain mo- i: ney, princes robbed the temples of their gods, and '''confiscated the property of their richest subjects ; H. they perpetrated a thousand crimes, to throw all " the money of the world into the lap of the ROh '* mans."* This eloquent sketch of the passion for wealth among the Romans, sufficiently explains the motive of their wars and the cause of their victories, con- quests, domination, and power; and it is with as much justice as truth that the immortal Montesquieu has ranked their passion for wealth among the causes of their grandeur. The riches accumulated at Rome by the pillage of Italy, Gaul, Spain, Africa, and the opulent countries of Asia, became the exclusive patrimony of the Pa- tricians, and caused those perpetual complaints of the Plebeians against them. They gave birth to the dissentions which convulsed the republic, and repeat- edly threatened its dissolution. They furnished * The nations by which the empire was surrounded in Europe, ab- sorbed, by degrees, the wealth of the Romans ; and as they had grown, powerful because the neighbouring monarchs had sent them their gold and silver, they grew weak, because their treasures were carried to other nations. Montesquieu, Grandeur et Decadence des Rnmain%> 30 ON THE VARIOUS ■' .SYSTEMS Julius Cassar with the means of destroying public liberty, and enslaving his country. It was the prodi- gious wealth which the proscriptions of the richest citizens of Rome had placed at his disposal, that en- abled Octavius to raise the Roman empire on the wrecks of the republic, It was, also, merely by lav- ishing upon the legions, Praetorian bands, and Barba- rians, (by whose seditions and continual incursions their power was constantly menaced,) the produce of the proscriptions, murder and spoliation of the richest individuals of Rome and the empire, that his-suc- cessors maintained themselves on the imperial throne. As long as mere private persons,, whom their riches assimilated to kings, were smarting under the extor- tion of the emperors, the people felt no abhorrence for their execrable crimes : but as soon as the increasing load of taxes began to fall heavy upon themselves, the nation revolted against their oppressors ; and from that instant the empire rapidly declined, and shortly became the prey of the Barbarians.* Lastly, it was with the sole view to possess them- selves of the wealth of which the Romans had strip- ped the then known world, that the barbarous nations which surrounded the empire from the north to the east, commenced their harassing incursions, and con- tended for its wrecks. Thus wealth, among the nations of antiquity, was alike the object of individual and public ambition, and the principal cause of the elevation and gran- deur, and of th£ decline and utter ruin of states. * See the preceding note. OF POLITICAL 'ECONOMY. 31 The people of the middle age exhibited the same ■spectacle, and experienced thesame fate, " The country of the Scythians being almost un- " cultivated," says Montesquieu, " its inhabitants '* were su' ject to frequent famines : they partly * subsisted upon their trade with the Romans, who " used to bring them provisions from the provinces '* bordering on the Danube ; the Barbarians gave them "in return the commodities they had gained by pil- : iC lage, the prisoners they had made, and the gold and " silver they had been paid to keep the peace : but " when the Romans became unable to grant them " tributes sufficient for their maintenance, the Scy=- ^ thians were forced to seek for settlements."* Wherever they settled, they possessed themselves of a more or less considerable portion of land, of slaves, and moveable wealth; and although these riches must have appeared immense comparatively to their former poverty, they yet failed to produce upon them any of the effects which they had produced upon the nations of antiquity. The Barbarians underwent none of the vicissitudes which those nations had ex- perienced. They preserved their spirit, their 'man- ners, their character, and their propensity to robbe- ry and devastation. " To have no one to rob was to " them a state of slavery ."t When they had no more enemies to fight, no more booty to share, no more wealth to wrest by conquest * Montesquieu, Grandeur et Decadence des Romains. f Etenim hoc Hits servitns est mdlos habere quos deprtsdanttt? iLibanius. 32 ON THE VARIOUS SYSTEMS from strangers, they warred with themselves to strip each other ; and hurried along by their insatiable cupidity, they paid no respect either to the identity of origin, to the ties of blood, to political connexions, or even to social and domestic relations. Fathers, children, and brothers, kings and barons, lords and "vassals, all fought against each other to increase their riches by the misery and poverty of their enemies : but their culpable expectations were deceived. Their general and continued hostilities, instead of enriching them, created ev^ry where wretchedness and indi- gence; harbingers of the revolution which caused the destruction of the feudal government. The barrenness of the soil introduced, among the Arabs, a maxim in which they have confided, and which they have practised ever since the most remote times : they suppose that, by the division of the earth, the rich and fertile climates have been assign- ed to other branches of the human race ; and that the posterity of the proscribed Ismael, from whom they are descended, may recover, by fraud or violence, that portion of his inheritance of which he has been unjustly deprived. According to Pliny, the Arabs are equally addicted to theft and commerce ; the caravans which journey across the desert, must either ransom themselves, or submit to be pillaged : and ever since the remote times of Job and Sesostris, their neighbours have been the victims of their rapa- city. * Mahomet took advantage of this rapacious dispo- Dioclorus Siculus. vol. i. Book J. OF POLITICAL ECONOMY. 33 sition, and, by methodizing it, united all the Arabs under the banners of religion "and 'plunder. He set apart the fifth of the gold and silver, prisoners, cat- tle, and moveables, for pious uses ; the rest was divi- ded in equal portions among the soldiers who had contributed to the victory and those who were left to guard the camp. The share of those who had fallen in battle, was given to their widows and orphans. The first caliphs who succeeded Mahomet, took no more from the public revenue than was requisite to supply their wants, which were extremely moderate ; the remainder was scrupulously applied to the saluta- ry work of spiritual and temporal conquests. The Abassides impoverished themselves by the mul- titude of their wants, and their neglect of economj*. Instead of taking ambition for their guide, as the first ealiphs had done, their leisure, their affections, and the faculties of their minds, were solely engrossed with the pomp of feasts and pleasures. The rewards due to valour were dissipated by women and eunuchs ; and the royal camp was incumbered with the luxury of the palace. The same vices spread among their subjects ; and from that instant their tottering em- pire, dismembered and disunited, left nothing in their impoverished hands but the barren deposit of the laws and religion of Mahomet. This hasty sketch of the passion for wealth among the nations of antiquity and the middle age, of the course it followed s and the share it had in their eleva- tion and decline, leaves no doubt respecting the power and empire which it exercised over them. Notwith- standing the high colouring employed by historians, 34 Qtt THE VARIOUS SYSTEMS misled or prepossessed by their splendid exploits, to disguise it under the veil of their love of country, glory, or religion, truth pierces every where; the in- satiable thirst for riches betrays itself in all their pri^ vate actions and public concerns ; and the illusions of the hi ■ torian, and the fascinating powers of the orator, are both dispelled by the torch of history. Modern nations are not less addicted to the passion for wealth, than the nations of antiquity and the middle age : but they have been more enlightened, or more fortunate in thedirection which they have given to that passion ; and- their wisdom or good fortune has not only guarded them against the perils and cala- mities attached to riches, but has also made them sensible of the unforeseen, incalculable, and unbound- ed benefit, which wealth is capable of affording * •> Venice, Genoa, Pisa, and Florence, which first * I fear, the moderns are little entitled to this compliment. Nei- ther nations nor individuals are content to grow rich by labour and industry, until they are precluded from becoming so by plunder and violence. This is sufficiently proved by the behaviour of all Euro- pean nations to the natives of the East and West Indies, and by the revival of slavery in its most odious form, wherever the inferiority of one race rendered it safe for the other to exercise such an unjust do- minion. The secret partisans of the Slave-trade are still too nume- rous, even in the country whose laws have acknowledged its barba- rity, and pronounced it felony, to allow any shouts of triumph on account of the improved dispositions of mankind with regard to their desire of riches. The immutability of human nature, in this respect, is unfortunately too strongly confirmed by the conduct of the two most enlightened nations of Europe in our times : the En- glish, some years ago in the East Indies, and the French all over the continent, and at this very hour, in Spain.— T. OF POLITICAL ECONOMY. 35 attract our attention in modern history, turned their passion for wealth to labour, industry and commerce* Though they sometimes fought for the advantages of an exclusive commerce, yet their wars had less ten- dency to enrich them with the spoils of their enemies, than to remove competitors and i/vals, and to enjoy a monopoly, of which the ignorMice of the times magnified the benefits, and kept the vices and incpn- veniencies out of sight. It was only in labour, manufactures, and com- merce, that the Hanseatic towns and the cities of Spain, France, and Germany, when they escaped from feudal depredations,, sought for means to enrich themselves : the object of their league was merely a system of defence contrived for the interest of the confederates, and inoffensive in every other respect. History ac- cuses them neither of violence nor of usurpation. Though the Portuguese and Spaniards, who first sailed beyond the Cape of Good Hope, and found a new world, shewed themselves on the outset as con- querors in the countries which they discovered ; though they carried thither the spirit of rapine and conquest which was still predominant in Europe, and stripped the vanquished of their manufactured and agricultural produce ; the impossibility of turning this produce to advantage, without exchanging it for other commodities, subjected them to the law of competition, which, as it excludes every idea of force and violence, is intimately allied to notions of justice and equality, and connects all men by the need \ti which they stand of each other. This barter, exchange, or commerce, which was S6 ON THE VARIOUS SYSTEMS become the basis of the connection of the European nations with each other, exercised also a favourable influence over their relations with the nations of Hin- dostan and America. In vain do force and violence still attempt to keep them in subjection, and to main- tain an odious monopoly in those two portions of the globe. Modern Nations have no solid and durable means to enrich themselves, but by labour, by the developement and improvement of their faculties, by the economy and rapid circulation of their pro- duce, and by its wise application, distribution, and consumption. From Kamtschatka to the Pillars of Hercules, from the Elbe to the Ionian Sea, labour is the power which distributes wealth, and whose favours all nations implore ; and it is particularly worthy of remark, that this wealth, far from occasioning the destruction or decline of opulent nations, has proved the firmest support of their prosperity, power, and grandeur. Whenever particular causes have dried up or diminished the source and abundance of this wealth, nations have declined in consideration, gran- deur, and power, iu the ratio oftheir impoverishment Venice, Genoa, Florence, the Hanseatic Towns, and even Holland, lost their preponderance, or political influence, only when their commerce, the principal source of their riches, declined, and, taking a differ^ entroad, went to enrich nations possessed of a more extensive territory and a larger population. Thus, the nations of antiquity, as well as those of the middle age and modern times, have all been ruled by the passion for riches : they only differ in the means employed to satisfy that passion, This differ- OF POLITICAL ECONOMY. $7 mce satisfactorily explains the various effects which wealth has had upon these different nations, and throws a brilliant light upon its true nature. The ancients and the people of the middle age knew and practised but one way to grow rich, and to Increase and keep their riches : they placed their hope and confidence in the right of the strongest, to which they made their institutions, their laws, their man- ners, and their customs, subservient. Their only object was to render their population numerous, brave, skilled in arms, and always ready to sacrifice themselves for the purpose of subduing other nations and seizing their wealth. But, by a singular fatality, it happened that, in proportion as these nations improved in military science, as their arms were successful and their wealth augmented by victories, their domination lost its stability, they became less able to defend themselves, their grandeur shortly declined, and they were soon subdued. Both moralists and publicists have observed this phenomenon, and have thence inferred that wealth caused the fall of the great empires of antiquity : and it must be confessed, that their opinion appears indeed an immediate consequence of the most certain and best authenticated facts. But have they not gone too far, when they magnified this consequence into a principle, and pronounced the wealth and safety of nations, and the Opulence and preservation of empires, to be absolutely incompatible? Had they inquired without prejudice into the caus^> 6 S8 Otf THS VARIOUS SYSTEMS which rendered riches fatal to the Persians, to the Greeks, to the Carthaginians, to the Romans, and to the nations of the middle age, they would have perceived that these causes did not arise from a vice particularly inherent in wealth, but from the system of violence by which these nations acquired their riches ; from the nature of their military government, which concentrated wealth in the least numerous class, and, as it enslaved or impoverished the other classes, rendered wealth equalfy fatal to the rich and to the poor, to individuals and to the state. Among* the Persians, the Greeks, and the Romans, the people were divided into two classes. One, com- posed of slaves, formed three-fourths, two-thirds, or at least half of the population. The other, composed of freemen, formed the state, the nation, the country. Although all the individuals of this class had an equal right to the benefits of the social compact, they yet did not share these benefits in equal portions. Independently of the inequality of individual facul- ties which in every community opposes the equal distribution of wealth, an essentially military govern- ment favoured this inequality, and aggravated its pressure and misery. At the origin of empires, the vices of this concen- tration were not felt, because the military force con- sisted of all the citizens, and all had more or less sriare in the booty and riches conquered upon the enemy. The desire of wealth was at that period the surest pledge of victory, and the most powerful cause of the elevation and grandeur of the state. But when the whole body of the citizens was no longer wanted- OF POLITICAL ECONOMY. 3$. cither for defence or for attack, when one part of the forces of the state sufficed for its views and projects, the military government became concentrated, and wealth, following the laws of this concentration, passed almost exclusively into the hands of those who were invested with power. In vain did the classes, deprived of their share in the general riches, murmur and revolt at the voice of a tri- bune, a demagogue, an ephorus, or a popular orator; their cries were stifled or appeased, but the wrongs of which they complained were not repaired, and wealth always followed the bias of concentration. Mattery went so far, that the greatest number of freemen had no means of subsistence, but what they derived from the generosity of their patrons, the liberality of can- didates, and the distributions made by the public exchequer. Such a distribution of wealth must inevitably prove fatal It gave every thing to a small number of indi- viduals, and denied every thing to the general mass of citizens. It created at once extreme poverty and extreme wealth; it placed want on one side, and on the other the arbitrary power of prolonging or ending its misery. It inevitably occasioned every disorder attendant on general depravity, perverted institutions, laws, and manners, corrupted the morals of the people, and subverted justice and humanity. Slaves, over whom their masters generally had the right of life and death, were and must necessarily have been the passive instruments of their caprices and vices. The freemen who were poor, and dependent for 40 ON THE VARIOUS SYSTEMS their subsistence on the liberality and munificence of the wealthy, had not, and could not have, any other conduct, morality, or virtue, than that of their pa- trons, magistrates, and benefactors. The rich themselves, while they enjoyed their immense riches, had nothing to fear, nothing to liope, nothing to wish for What virtues must they Jhave been possessed of, not to be absolutely vicious ! What notions could they have of domestic duties, of the relations of masters and slaves, magistrates and citizens, nations and individuals ! The power of sa- tisfying every desire vitiates them all, and renders virtue too difficult, not to say, impossible. This distribution of wealth smothered every private and public virtue in the bud, and nurtured only the vices destructive of social order. Both the slaves who were submissive to the will of their masters, and the freemen who depended on the kindness of their patrons, were indifferent to the fate of their country, and took no interest either in its safety or in its glory. The rich, as sole possessors of wealth, and exclu- sively invested with public offices, shared, or contend- ed for, the supreme power, made war or peace, main- tained public order or fomented civil discords, and acted right or wrong, at their convenience or pleasure. This concentration of wealth and power among the rich had so reduced the number of individuals inte- rested in the safety of the state, that every page of ancient history records the difficulty of finding de- fenders for the country, and of levying and recruiting OF POLITICAL ECONOMY. 4i armies. We see the number of combatants deceas- ing every where in proportion to the increased wealth of the state and its concentration in one single class. When the law of the Ephorus Epitadeus allowed the Spartans to sell their landed property and to dis- pose of it by will, and when the estates which had been distributed by Lycurgus among nine thousand citizens, were possessed by one hundred individuals, Sparta had no longer any soldiers, army, or power. When Athens contained within her walls individ- uals possessed of three miles of land, while others had not wherewith to get buried, Demosthenes vain- ly proposed to raise an army of two thousand foot and five hundred horse ; a third only of which was to consist of citizens ; no one was ready to defend a country which was become the property of a few fa- milies. At Carthage, the wealth produced by commerce and conquest did not follow the law of concentration of military governments : her political constitution did not accumulate it exclusively in the lap of one class of the people. Hence her citizens were not in- fected with any of the vices that occasioned the ruin of the other ancient nations, and though Carthage perished like them, it was neither from the same caus- es nor by the fatal influence of wealth. But her riches did not prove of great utility for her defence; perhaps they were even rather unfavourable to those civil and political virtues which are so es- sential to the prosperity and preservation of states : the reason of this may again be found in the polluted .source from which her riches sprang. As the fruits of 4£ ON THE VARIOUS SYSTEMS commerce and conquest, the wealth of Carthage, par- took of the vices of both : the parsimony of the merchant tarnished the warlike virtues of the soldier, and the avidity of the soldier impaired the social virtues of the merchant ; both were less occupied with the state than with their private interests, and less anxious for their country than for their wealth. Eut in this instance, these vices were not the offspring of wealth, they proceeded chiefly from the conquests to which the Carthaginians owed the greatest part of their riches. The influence of the commercial spirit, could not prevail over the spirit of conquest ; they mutually perverted each other, and became equally incapable of saving and defending the country. Lastly ; Rome, which during the second Punic war counted two hundred and fifty thousand men under arms, beheld, when she was become mistress of the world, her liberty decided at Pharsale by sixty-three thousand combatants, forty-one thousand of whom were in the army of Pompey, and twenty-two thou- sand in that of Caesar ; and the world submitted to the decision of that famous battle.* - What more striking proof can there be required of the fatal effects of the concentration of riches? And is it possible to ascribe to any other cause the number- * The lands of Italy, which had been originally distributed to poor bur free families, were insensibly purchased or usurped by the avarice of the nobles, and in the century which preceded the fall of the republic, there were scarcely two thousand citizens possessed of an independent fortune sufficient for their maintenance. Gibbon's Decline and Fall of the Roman Empire. OF POLITICAL ECONOMY. 43 less calamities which hurled all the empires of fcti- cmity from the summit of grandeur and power ? The Barbarians who invaded the Roman empire in the middle age, left to the vanquished a part of their riches, and shared in the other part: this parti- tion divided wealth among two classes of men, but in proportions so unequal, that, if it did not occasion a concentration similar to that which existed at Spar- ta, Athens, and Rome, it caused at least so great a disparity, that the people were again divided in three classes ; one composed of slaves and bondmen, the second of small proprietors, and the third of the owners of large estates. The bondmen, like the slaves of the ancients, were condemned to labour for their masters, and had no more rank in the state than the slaves of Athens and Rome and the Helotes of Sparta. The class doom- ed to this servitude, composed the major part of the people. The small proprietors, much more numerous than the great land-owners, were indebted to the latter for their safety and part of their means of subsistence; and in both respects resembled the Proletarians and the poorer citizens of Rome and other ancient states. The great land-owners, as they disposed of the bondmen and small proprietors, whom the}^ attached to their fortune or rendered dependent, defied public power, warred with each other, and regarded them- selves as so many independent sovereigns. This an- archy, again, had evidently its soureein the concentra- tion of wealth : a concentration, the strength of whicb. 44 ON THE VARIOUS SYSTEMS incased as the public power was enfeebled ; its ex- cess occasioned that general misery which every where provoked resistance, and finally delivered Eu- rope from feudal oppression. Again, therefore, does the history of this period impute the calamities of the times to the concentra- tion of riches, and absolve wealth itself of the re- proaches with which many philosophers have judged themselves authorized to load it. But its moral and political effects, as soon as it cir- culated, with comparatively less obstacles, in every class and among all individuals, ought in my opinion, to remove every doubt respecting the nature of wealth and the estimation in which it is to be held. From that period, which separates modern times from the middle age, wealth has been as productive of public and private prosperity, as it had been before of general and individual distress. Produced by labour, it rendered men particularly attentive to the means of augmenting the productive- ness of labour. They soon perceived, that the free labourer who works for his profit, multiplies the pro- duce he consumes during his labour; while the slave or bondman scarcely replaces what he consumes* In proportion as this truth was diffused by experi- ence, the passion for wealth broke the fetters with which it had held mankind enslaved. On the other hand, the free but poor class that till then had lived dependent on the great land-owners* being enriched by labour, shook off this dependence, afforded to the public power a force formerly devoted OF POLITICAL ECONOMY 45 to the private power of the great land-owners, in- ferred upon civil society a greater stability and ex- tent, and gave it a stronger and more secure direction. By being rendered more general, the interests of the community were aggrandized, the commonwealth ceased to be a private concern, and actually became common. The interest of the hitherto oppressive and domineering rich was no longer ~an obstacle to good laws, a protecting government, and a public power capable of watching over and maintaining the rights and interests of all. The ideas of morality, justice, and humanity, which axe effaced when poverty is oppressed by wealth, resumed their force, as soon as riches circulated in every rank of the community ; the poor had no longer to dread the oppression of the rich, the laws guarded every private interest, and governments directed their attention to the interests of all. As wealth diffused itself in every rank of the com- munity, it consolidated for ever this beneficial revo- lution by affording to every class the means of know- ledge, instruction, and wisdom, formerly confined to the rich alone. Nations, as they grew more enlight- ened, became better acquainted wkh their own inter- ests, and better disposed to perform every individual, domestic, and social duty. Knowledge exercised a re- action upon wealth, and imparted to it a power which rules alike individuals, associations? and empires. The social compact, the constitution, the laws and the institutions of every people, were gradually direct- ed towards the maintenance,, preservation, extension, 46 ON THE VARIOUS SYSTEMS; and possession of those riches, which every one may acquire by labour, industry and commerce. Even in the foreign concerns of nations, and hi their treaties with others, diplomacy had no other object in view than the preservation and extension of their respective riches, Thus, that passion for wealth, which had armed the nations of antiquity and the middle age, which had continually excited them to battles, rapine, destruc- tion, and conquest, and filled up the measure of so- cial calamities, enticed the moderns to labour, manu- factures and commerce, and inspired them with the love of peace and feelings of general benevolence and friendship. On this new road to wealth, indi- viduals, communities and empires have found all the prosperity which may reasonably be expected in civ- ilized society. Wealth, produced by labour, maintains, in eighteen twentieths of the people, the strength, energy, and dexterity, with which man is endowed by nature, and developes, in the two remaining twentieths, those fa- culties of the mind whichseem beyond thesphere of hu- manity, and bring man as it were nearer ta the divine nature. Produced by labour, wealth banishes idleness and the vices unavoidably connected with idleness ; it renders man laborious, patient, sober, economical, and adorns him with those precious qualities, the sources of individual, domestic and social virtues. It binds the natives of the same land by the most powerful of all ties, mutual wants, reciprocal services^ and the general consideration, which they entail upon their country. OF POLITICAL ECONOMY. 47 It restores man to his primitive dignity, through the sentiment of his independence, through his obe- dience to laws common to all, and his sharing in the benefits of society in proportion to his services. It has rendered nations more powerful, because eve- ry individual member is interested in the success of national affairs, all bear their weight, and all share in the advantages which they procure. This communi- ty of good and evil, to which the circulation of wealth calls every individual of the nation, affords the great- est strength which the social compact possibly can or ever did produce. The conquering nations of anti- quity and the middle age, were acquainted with this stimulus, and employed it during their conquests ; it constantly insured their success, but they neglect- ed it after victory ; they attached the rich alone to the interests of the community, and from that instant their power declined, and was shortly annihilated. This stimulus is as active among industrious and commercial, as among conquering nations, and its strength and intensity can never be impaired or lost, whatever may be the stock of riches accumulated through labour, it impoverishes no one; on the contrary it enriches every individual : it is the instrument of general wealth, it increases the mass of labour,, and the sum of its produce, and consequently augments the resources of the laborious and the treasures of the rich. Modem wealth affords yet another inestimable ad- vantage to civil society ;, the more it is generally dif- fused, the more it renders obedience light and easy, government strong and powerful and public .author-. 48 ON THE VARIOUS SYSTEMS I ity just and absolute. The rich man is every where the most submissive, the most disposed to obey the laws of his country, because he is sensible that to them he owes the preservation of his wealth. The poor man, on the contrary, obeys only by constraint and neces- sity, and consequently lives in a continual hostility against society. Had the science of statistics arrived to that degree of improvement which it is desirable that it should reach, the ratio of the security and power of governments might, by an algebraic calcu- lation, be determined by the ratio of wealth and pov- erty ; and political revolutions might be foretold with as much certainty as astronomers foretel the re- volutions of the heavenly bodies. Lastly, the effects of wealth, produced by labour, are felt alike by the nations that compose the great family of mankind, and by the individuals who com- pose each national family. In this system, man is no longer an obstacle to man, nations are no longer obstacles to nations. It is the interest of all to labour the one for the other, to inter- change the respective produce of their labour, and to increase the domain of general wealth. The labour, industry, and commerce of every individual is useful to all, whatever portion of the globe they may inha- bit; the more extensive agriculture of one country is beneficial to all laborious, manufacturing, and trading nations ; it increases the produce destined for general consumption, which, in its turn, augments population ; and this augmented population affords new consumers to the productions of the industry of every nation. OF POLITICAL ECONOMY. 49 Thus all nations share in the prosperity of each, and the portion of each is proportioned to its labour, manufactures, and commerce. In vain do nations exert, fatigue, and exhaust them- selves in military, diplomatic, and commercial com- binations, to obtain, by cunning or force, a larger or smaller share of the general wealth. Thei r efforts are abortive; the distribution of wealth follows the ratio of labour, manufactures, and commerce; and as these obey neither fqrce nor cunning, and only yield to equivalents, blind ambition will, necessarily, at last be obliged to submit to their peaceable rule. If the combinations of force are delusive and de- ceitful, and cannot be substituted for the toilsome and painful efforts of labour, manufactures, and commerce* those of monopoly -are neither wiser nor more bene- ficial. The charges of a monopoly absorb its profits ; and monopolizing nations are actually impoverishing themselves, whenever they want to turn the prosperity of other nations to their own particular advantage.* In short, to prevent wealth from flowing into the channels which labour, manufactures, and commerce, have dug for it, is impossible ; and if we deplore the blindness of the times when military force fancied it could extract treasures from the misery, indigence, * As the French begin to perceive the inutility of the devices of force to obtain wealth, it is not unreasonable to hope, that the English will also, at length, perceive the inutility of schemes of monopoly. England's aim at monopolizing the trade with colonial produce, though it cannot excuse the ambitious attempts of France, must yet be acknowledged as one of their causes.-— T. SO ON THE VARIOUS SYSTEMS and calamities of the world ; the moment is not far distant, when monarchs will acknowledge that there are no safe, legitimate, and honourable means to grow rich but through labour, manufactures, and conv merce. Let us, therefore, conclude, that wealth, in all ages and under all governments, exercised an absolute power over individuals, nations, and empires ; and that, according as it was attempted by force, con- quest, and devastation, or by labour and economy, its effects have been fatal or salutary to the human race. How greatly then have they erred, who thought they could apply to modern wealth the results and effects of the wealth of the nations of antiquity and the middle age ! One is no more to be compared to the other, than the offensive and defensive weapons of the ancients can be compared with those of the moderns, or their tactics with ours. Their wealth had its source in the impoverishment of nine-tenths of the people : modern wealth is derived from the riches of the whole population. The former enerva- ted, effeminated, and depraved the rich, perverted and degraded the poor, and rendered them strangers to the community : the latter furnishes the rich with the means of knowledge and instruction, and ena* bles them to direct labour, industry and commerce, it insures to the less fortunate class, and even to those who are the most needy, a portion of the ge- neral wealth, which portion is always proportioned to the extent of that wealth. Thus the interest of the poor is never separated from the interest of the rich ; they lend each other a mutual support. OF POLITICAL ECONOMY. 51 The wealth of the ancients kept all nations in a permanent state of hostility, devastation, and servi- tude ; and, consequently, held out a permanent ob- stacle to the general civilization and improvement of mankind. Modern wealth connects all nations ; it binds them by common interests, causes them to forward the same ends by the sentiment of their pri- vate interest, and associates them, in some degree, to the progress of the civilization and amelioration of the human race. One is, therefore, as desirable as the other is odi- ous ; and one ought to be as much extolled, as the other has been justly reprobated by all enlightened writers. Those nations which ambition is still propelling towards domination, as well as those who possess a sentiment of real grandeur, and know that it consists in a noble independence, are equally interested in studying the causes of modern wealth, and in disco- vering and improving the methods by which it may be increased and rendered useful in its application : they ought, therefore, to patronize the progress of political economy by all the means in their power. 62 ON THE VARIOUS SYSTEMS BOOK I. OF THE VARIOUS SYSTEMS CONCERNING THE SOURCES OF WEALTH. Jl HE most ancient system concerning the sources of Wealth derives wealth from foreign commerce ; that is to say, from that commerce in which one nation sells more to other nations than it purchases, and is paid for the surplus of its sales over its purchases in precious metals. This doctrine was adopted with- out any limitation by the authors who first wrote upon Political Economy in England,. Italy, and France, during the sixteenth, seventeenth, and up to the middle of the eighteenth century ; and although it has been strenuously combated by later writers, it has yet prevailed and still prevails in the opinion of indi- viduals, nations, and governments : all consider com- merce as the true way to grow rich ; and by commerce they all understand the exchange of commodities with foreign nations. An opinion so general, so an- cient, so lasting, can neither be ascribed to blind prepossession, nor to vain credulity or foolish ob- stinacy. Time, which has destroyed so many errors^ superstitions, and inveterate habits, almost coeval with the social state., would not have respected OF POLITICAL ECONOMY. S3 a doctrine contrary to private and public interest. What then has so long protected this doctrine against the outrages of time, the progress of knowledge, and the charm of innovations ? Is it not its resting on the authority of facts, on the experience of ages, on every thing that is certain and evident among men ? The conjecture is not improbable. If we ascend ever so high in the history of Wealth, we find that wealth always followed the direction of foreign commerce, and remained faithful to its ban- ners and ships. During eight hundred years, the commerce of the Phoenicians fixed wealth, in the ports of Sidon and Tyre. In these celebrated cities it long bade defiance to the avarice of the greatest conque- rors of the East ; and when the conquest and ruin of these industrious cities forced wealth to seek for a fresh asylum, it went over to the nations that inher- ited their commerce. The Greek and Ionian cities, Alexandria, Marseilles, and Carthage, which gathered the wrecks of the trade of Sidon and Tyre, were not less celebrated for their wealth. Carthage, in particular, rose to the highest degree of splendour and power, struggled successful- ly for a length of time against the fortune of the Ro- mans, and delayed for more than a century the sub- jection of the other nations. When the Genius of Rome grounded on the ruins of Carthage the conquest of the world, the sources of wealth were dried up in Europe, in Asia, and in Africa ; because these countries had no longer any commercial communication. The treasures which had been accumulated at Rome 54 on 1 tftfif VARiotjtf srstEJirs by the plunder of all nations, did not prove a soared of wealth for any country ; they fertilized no lands^ improved no kind of industry, and did not ess* tend the bounds of civilization in any one res- pect. They were exhausted by purchasing the rich productions of Asia, appeasing the seditions of the cohorts, saving the empire from the successive de- predations of the Barbarians, and satisfying their in- satiable avidity. They vanished without leaving a vestige behind, and Rome, her provinces, and her tributary nations, differed only in the degree of mise- ry and wretchedness. During the eight centuries which followed the overthrow of the Western Empire, under the rapid succession of Barbarians, who left nothing behind but the remembrance of their ferocity, rapacity, and de- vastations ; during that long period of violence, an- archy, and crimes, the opulence of a few individuals condemned the whole population to general misery, Constantinople, it is true, was the centre of an immense variety of political and commercial affairs ; but the great extent of the empire, the majesty of a conquering nation surrounded by barbarous and rapa- cious neighbours, the magnitude of the tributes, the sums accumulated in the imperial exchequer, stifled that emulation, that activity and energy, for which commerce is distinguished, and through which it yields abundant riches. It may therefore truly be said, that, from the destruction of Carthage to aft advanced period in the middle age, that is to say, for more than thirteen centuries, the sources of wealth were dried up throughout the Roman empira, and »p political economy. 55 consequently throughout the whole then known world. It was only in the twelfth century that these sources xvere again opened, and Europe was again indebted for wealth to foreign commerce. Venice, Genoa, Pisa, and Florence, though doomed to poverty by the barrenness or smallness of their territory, acquired yet great wealth by their com- merce with the produce of the East and North. Not less powerful than Tyre, Sidon, and Carthage, they dictated laws to the Greek empire, bade defiance to the greatest monarchs, and balanced for more than three centuries the fate of Europe. Their grandeur declined with their wealth, which they imprudently sacrificed to expensive wars, to a fatal rivalship, and an unbounded ambition; it vanished for ever when unforeseen events turned aside the current of their trade, and reduced them to the resources of their territorial riches and local industry. The numerous factories which these cities had established in the north of Europe, at Lubeck, Bre- men, Hamburgh, Bruges, and Antv/erp, created there new sources of wealth and prosperity. Towns hardly known before the introduction of foreign com- merce, were soon distinguished for their wealth, splen- dour, and power. Wiser than the cities of Italy, they guarded against the dangers of rivalship, formed a. confederacy for the protection and defence of their trade, and laid the foundations of the Hanseatic league, that monument of boldness and prudence in a barbarous age and among a rude people. Strengthened by the accession of one hundred and 56 ON THE VARIOUS SYSTEMS sixty towns of Flanders and the Baltic, the Hanseatic league rapidly attained a great commercial and poli- tical prosperity: the wisdom of its conduct was equal to the wisdom of its institution; it opposed a salu- tary resistance to the progress of feudal anarchy, en- lightened the people concerning their true interests, and caused the spirit of commerce, manufactures, and labour, to prevail over the spirit of murder, rapine, and devastation. The services which the Hanseatic league rendered to humanity in those bar- barous times, are invaluable, and yet they scarcely occupy a few pages in the records of Europe* ; while many volumes are filled with the history of the cru- sades by which Europe was devastated, of the ambi- tious pretensions of the Pontiffs of Rome, by which she was disgraced, and of the quarrels of vassals and lords, by which she was oppressed and kept in servi- tude. Is it possible that the picture of public vices should be more attractive to mankind than the spec- tacle of public virtues? Or is there no other title to the remembrance, consideration, and veneration of men, than the harm which is done to them ? The Hanseatic league, that perfect paragon of a wise political association, only ceased to exist, when its existence was no longer necessary to the protection and safety of its commerce, and when the towns of which it was composed found, in the government of the countries in which they were situated, a full * The late professor J. Fisher, of Halle, published an excellent history of the Hanseatic League, in German, about five-and-twenty years ago. — T. OF POLITICAL ECONOMY. 67 security of persons and property. By its generously confining its interests to the care of all, the Hanse- atic league left the world an honourable remembrance consoling to humanity. The discovery of America and of a passage to the East Indies by the Cape of Good Hope, the abun- dance of the precious metals which it caused to cir- culate in Europe, the general comforts, which were an obvious consequence of this discovery, every cir- cumstance of this ever-memorable event confirmed the opinion respecting foreign commerce, and left no doubt about its being the true source of wealth. But how does commerce enrich a country? By what channels does it pour its benefits ? And how is the productiveness of commerce to be increased and its prosperity insured ? The majority of writers supposed, that foreign commerce enriches a country by the plenty of gold and silver which it causes to circulate f and govern- ments, in conformity to this doctrine, endeavoured to retain the precious metals, or to invite them by encouraging national manufactures, by directly or in- directly prohibiting the produce of foreign industry, or by procuring to the produce of national industry, * We must do the justice to Davenant to confess, that, although a partisan of the mercantile system, he did not limit its advantages to the abundance of precious metals which it accumulates in a country. This justly celebrated author, on the contrary, lays it down as a principle, that every trade is advantageous, provided its returns be more considerable than the goods exported, even though the return? should consist in perishable commodities. Vol. ii. p. 11. 58 OK THE VARIOUS SYSTEMS an easy and even privileged introduction into foreign countries. Such was, and such is stilj, some few mo- difications excepted, the system which places the source of wealth in foreign commerce ; and which, on that account, is called the Mercantile System. The great estimation in which a gold and silver currency was every where held, naturally led some philosophers to watch its progress, its distribution, its circulation, and, above all, its influence upon pri- vate and public concerns ; and it was not long before the inconveniencies which might be apprehended, and the advantages which might be expected from it, were discovered. The Italian writers soon pointed out the vices of the prevailing monetary system, and threw great light upon that important part of the science. Towards the end of the sixteenth and in the begin- ning of the seventeenth century, Davanzati at Flo- rence, and Turbolo at Naples, gave excellent instruc- tions on metallic currency.* But their writings proved unavailing against the disorders which they wanted to stop or to preyent. When we peruse these ancient writings, we do not know whether we ought to be more surprised at the extensive light they throw on the subject which they discuss, or at the small influence they had upon their own times. \t is as if their country was to give to the rest of Europe the example of the calamities which result from the dis- * Lezione delle Monete di Bernardo Davanzati. Florentine. 1588. — Discorsi et Relazioni sulle Monete del regno di Napoli $ Gian Donato Turbulo. Napolitano, 1629. OF POLITICAL ECONOMY. £§ ordered state of a currency, and of the theory best adapted to avoid such a disorder. Ten very distin- guished treatises, published in Italy since the middle of the eighteenth century, by men of powerful under standings arid most distinguished for the eminent offices which they had held, attest, at once, the greatness of the evil and the impotance of the remedy.* Existing circumstances have predomina* ted over human combinations, and Italy has always been remarkable for the worst currency and the besfe works on money. The English writers were also aware of the obstacles which a vicious monetary system opposes to the pro- gress of wealth ; but the measures pointed out by Locke and Newton, remedied the evil in England,, and the Bank subsequently contributed to guard against its recurrence.')" It appears, that before the middle of the eighteenth century, the French had not paid any serious atten- tion to their monetary system. In vain did the peo- ple complain against its defects ; in vain did they submit to the greatest sacrifices ; their complaints were- listened to, their sacrifices accepted, but recourse was * Montaneri? Broggia, Galiani, Neri, Carl'i, Genovesi, Beccaria? Bandini, Vasco, et Corniani. f To this praise the Bank of England, unfortunately, has no lon- er any claim, since its late issue of bank tokens, worth scarce- ly two shillings and sixpence, at three shillings: so that the same quantity of silver as was formerly contained in fifty shillings, now represents sixty. — See the Speech of Mr. Johnstone, on the third read** ing ofL&rd. Sis/nhopt's BilL Booker,. 18 H ^T, 60 ON THE VARIOUS SYSTEMS bad to mere temporary measures, which are always impotent against urgent evils. Statesmen were even inclined to fancy the calamity less than it was pre- tended to be ; their ignorance stifled their remorses ; and we shall presently find, that he who first wrote on that subject in France, although a very enlightened man in other respects,* firmly believed the evil which was complained of, to be merely imaginary, and to have no way impaired either public or private wealth. Can we wonder after this, at the slow progress of wealth in France,— in a country where it ought to have surpassed that of all other nations, had her in- habitants known how to avail themselves of her na- tural advantages ? While, in Italy, philosophers were endeavouring to regulate the circulating medium of gold and silver, and in France every regulation was imprudently de- rided, a more particular attention was paid in Eng- land to the influence of the medium of exchange upon wealth ; and some English writers! did not he- sitate to maintain that wealth depended on the low- ering of the interest of money, were it even forced. The exaggeration of this opinion did not tend to its discredit; it was faithfully followed in England for nearly two centuries, and it constantly regulated the views, determinations, and financial measures of her legislature and government. Her bank, her sinking fund, her public credit, are all built upon the princi- ple of the utility of lowering the interest of money. * Melon, Essai Politique sur le Commerce en 1734. t Thomas (Jitlpeper? Sir Josiak Child, Locke, Paterson, and Bar* •nard. OF POLITICAL ECONOMY, <5l This doctrine, which was introduced in France by the famous Law, was as fatal to that country as it had proved beneficial to England ; and the reason of this difference is easily perceived. When Thomas Cul- peper in 1641, Sir Josiah Child in 1670, Paterson'in 1694, Locke in 1700, and Barnard in 1714, solicited the lowering of the rate of interest, public opinion had already anticipated their efforts. The interest of money had been lowered in all private transactions, and the law did nothing but countenance the gene- ral disposition of the people. The case was widely different in France. When Law proposed to lower the rate of interest by indirect and forced means, confidence was destroyed, the dis- credit general, and money hoarded ; it could scarce- ly be had even at the highest interest. The two countries were in a totally different situa- tion, and by an infallible consequence, the measure which succeeded in England, failed, and must neces- sarily have failed, in France, where it produced the most disastrous effects, and formed one of the most: lameutable periods of the history of her wealth. May this event be a lesson to all governments, and guard them against absolute principles in political econo- my, and, above all, against specifics which the sci- ence disclaims, and which are an insult to reason ! Shaken in its very foundations by the doctrine of the forced lowering of the rate of interest, and by an excessive paper-circulation, wealth, in France, had no longer any solid basis, fixed principle, or steady di- rection. Though it was still supposed to have its source 9 OU ON THE VARIOUS SYSTEMS in foreign commerce, and in the abundance of gold and silver, which are to be obtained only by com- merce ; people yet could not perceive how a good metallic currency increases and preserves wealth. In the midst of this general disposition of men's minds, a writer, remarkable for his knowledge, infor- mation, and talents, , gave them a fresh impulse by starting the most whimsical and revolting paradox. Melon pretended " that the weight and fineness of " money ought to be exclusively attended to, and " not its current value, which is indifferent, and *' which, having been raised from one to above six- "ty, without injuring commerce and finances, could ''never be prejudicial to either." This assertion was completely destructive of the mercantile system, since it debased their gold and silver currency, and afforded the means of increasing it by augmenting its numeric value. Hence it excited a lively controversy between the French and Italian writers. Dutot in France,* and the Italian authors quoted above, proved to demonstration that a metallic currency facilitates exchanges merely on account of the value of the metals of which it is com- posed, and up to that value only ; and that, when ever this fundamental principle of circulation is lost sight of, considerable losses accrue to individuals and to the state. The result of this discussion, as generally happens » in almost all controversies, proved very different from Reflexions £olitiques sur les Finances, OF POLITICAL ECONOMY. 63 that which was expected. It was inferred, that gold and silver, which, till then, had been considered as true wealth, are only the instruments of its circula- tion ; and this view of the subject gave birth to fresh inquiries into the nature of wealth.* Dr. Quesnay in particular acquired great celebrity by the new and transcendant views of his Theory of the Sources of Wealth. He does not place the source of wealth in com- merce, because all its operations are limited to the conveyance of the produce of the soil and industry from one place to the other. Neither can industry aspire to this eminent prero- gative ; because it only transforms the territorial pro- duce into different shapes, without adding any thing to its quantity ; and because its productions are only the material representatives of the produce of the soil which the manufacturer has employed or consumed. Land alone is the true source of wealth ; because it produces every thing that man desires for the sup- ply of his wants, for his enjoyments, his pleasures? and his fancies ; and because it constantly re-produces a quantity superior to what has been consumed to effect its re-production. This excess of re-produc- tion, this gratuitous gift of the soil, this net produce, is the only fund that can be employed to encourage the progress of labour, to reward its success, to pro- mote improvements, and indefinitely to increase the sum of public and private wealth. * La Mofieta non e Richezza, ma magitie sua cd Islrumento di r% girarla. Galiani della Moneta. 04 ON THE VARIOUS SYSTEMS Agricultural labour, by a necessary consequence,, is the only productive one; all other labours are bar- ren and unproductive. By another consequence not less just^ the surplus of the produce of the soil above all expences to obtain it, beinga gratuitous gift of the land, ought to belong- to the land-owners ; they alone can distribute it to the ather classes of the community ; which circumstance gives them the character of paymasters, and to those who receive it the character of mercenaries. On this respective paying and being paid, the eco- nomists built the relative rights of governors and governed. They asserted, that the land-owners, as paying, ought alone to share in the government ; and that all those who are paid, cannot take any part in it without an evident and manifest usurpation. And, finally, Dr. Quesnay maintained that, the net produce being the sole disposable wealth, the public revenue can only be derived from part of this produce; that the act of sharing in the net produce renders go- vernment a co proprietor of the soil ; and that this co-propriety constitutes its right to government ; which right is limited by its co-proprietors. This doctrine caused a strong sensation. It pre* rented an idea simple and easy to comprehend ; flat-^ tered the pride of the land-owners, that important class entitled to so.much regard and consideration ; and fead a tendency to mrtigate the lot of the husbandmen, j the most numerous and undoubtedly the most wretched portion of inhabitants in every country and under all governments ; yet its success was not equal taits bril- liant fame, With the exception of two authors who OF POLITICAL ECONOMY* §5 attempted 'to propagate it in Italy,* all those who at that time wrote on subjects connected with political economy in England and Italy, continued more or less attached to the system of foreign commerce. U Sir James St eu art, in England, published in an ex- tensive work, a complete theory of the mercantile system; and, as if he had wished to oppose it to the theory of the French economists, he distinguished two sorts of agriculture, one abusive, or useless, which provides only for the maintenance of the husband- men, and is of no benefit to the community ; the other useful, which produces not only the subsistence of the husbandmen, but also that of all other classes of the community, and which he calls commercial agriculture, f But it was particularly in Italy that the mercantile system met with eloquent and celebrated panegyrists t Genovesi, Beccaria, Carli, Verri, made wealth depend on the unlimited liberty of foreign commerce, and triumphantly refuted the system of the French econo- mists. At that time the Italians infinitely surpassed the rest of Europe in the science of political economy; they kept this superiority until Adam Smith inquired into the nature and causes of the wealth of nations, % and combating the mercantile and agricultural sys- tem with weapons equally formidable, assigned other * Discorso Economico dalV Archid. Bandini. Paoletti dell' Annona. f Sir James Steuart's Inquiry into the Principles of Political Ec< nomy. 1760. book i. ch. 14. I In 1776, 66 0"N THE VARIOUS SYSTEMS principles to political economy* and was, as it were, the creator "of the science. But it must be owned, that this justly celebrated writer, by not separatingthe con- troversial from the dogmatical part, has rendered his work rather diffuse and obscure ; and that it is some- times difficult to discover his precise tenets on the sources of wealth.* A modern English author (the Earl of Lauderdale) has even asserted that Adam Smith had no fixed opi- nion on that important point. The noble lord grounds this strange assertion upon several passages! extract- ed from the work of that celebrated writer. Indeed Adam Smith in one place states, that " the "annual labour of every nation is the fund which " oiiginally supplies it with all the necessaries and " conveniences of life, which it annually consumes, " and which consist always either in the immediate " produce of that labour, or in what, is purchased u with that produce from other nations. "J Elsewhere — "Lands, mines, and fisheries," are * The circumstance, that the valuable treatise of Adam Smith is incumbered with highly important, but perhaps too extensive and rather misplaced digressive accompaniments, has led many students of political economy to wish for a more easy access to the science, and produced several elementary works in France and Germany. It was also with the view to smooth the approach to the science, that I discussed the elements of political economy in regular order and suc- cinct language, in An Introduction to the study of Political Economy , published by Cadell and Davies, Strand ; 1811. — T. j Earl of Lauderdale's Inquiry into the Nature and Origin of Pul> lie Wealth. Edin. 1804. p. 11(5. % Adam Smith's Wealth of Nations, eleventh edition. Lotidur, 1805. Vol.i. page 1. OF POLITICAL ECONOMY, &7 regarded by Adam Smith, as "replacing with profit " not only the capitals employed on them, but all the u other capitals employed in the community.*" In another place, plain reason is stated by him to dictate, " that the real wealth of a country consists " in the annual produce of its land and labour. -j" However, in another part of his work, he teaches, that "land and capital stock are the two original " sources of all revenue, both private and public : u capital stock pays the wages of productive labour, " whether employed in agriculture, manufactures, or " commerce. £" Lastly, Adam Smith in another part of his work asserts, that we ought to consider land, labour, and capital, as being all three sources of wealth : for " whoever derives his revenue from a fund that is his " own, must draw it either from his labour, his stocky " or his land,§" All these passages, which it is difficult to reconcile, appear to warrant the conclusion drawn by Lord Lau- derdale, that "Adam Smith seems to have had no fixed " ideas in relation to the sources of wealth." But after having attentively studied his work, we are fully con- vinced that he has placed the source of wealth in " labour, which fixes and realizes itself in some parti- " cular subject, that lasts for some time at least after " that labour is past, whose power is augmented by * Wealth of Nations, vol. ii. book ii. chap. 5. page 48. f Ibid. vol. ii. book iv. chap, 1. page 16*5, % Ibid. vol. iii. book v. chap. 2. page 254, \ Ibid, vol. i. book L chap. 6, page 81. ■ 6S ©N YHE VARIOUS SYSTEM'S u sub- division, which is developed by the freedom of " trade, improved by competition, and proportioned " to the extent of the market, capitals, and wages." This theory, admirable for the greatness of the mind by which it was conceived, commands still greater respect for the profundity of the views of its author, the sagacity of his discoveries, and-his conca- tenation of effects with causes, and of consequences with principles. The usefulness of each kind of la- bour, of every employment of capital, of each species of commerce, and of every sort of consumption, is submitted to calculations that are sometimes strict, frequently plausible, and always ingenious. Even when we are forced to doubt their accuracy, the very principles which the author has established serve to guard us against their fallacy, and manifest again the beauty of his doctrine. If, after having earnestly meditated and mastered the theory of that importaut work, we direct our attention to one that was published nearly at the same time bj 7 the abbe Ortes at Venice, we are not a little surprised at the eccentricities of the human mind*. It is difficult indeed to conceive how a subject which drew from Adam Smith so many just observa- tions, ingenious combinations, and important results, could appear to the abbe Ortes nothing but a brilliant chimera, a delusive dream, a captivating error. Like Plato, the Abbe fancies no advantage or benefit can accrue to any individual or nation, but another individual or nation must suffer an injury, and no one * Economic Nationale, par VAbbe Ortes. OF POLITICAL ECONOMT. 69 can be a gainer without another being a loser. With him, wealth, grandeur, and power, are synonymous with pillage, robbery, and ruin : they are but ephe- meral and precarious, as they cause an increase of population which.soon re-establishes the level of the wants of misery and poverty ; so that the unem- ployed, the idle, and the poor, are always in ratio of the labouring, industrious, and rich. The author even goes farther ; he considers the idleness of the unemployed as the result of the extreme avidity of the laborious. Were the latter less covetous, less active, and less skilful, the unemployed would be less idle and less poor; and there is not any poor man that would not rather be indebted for his means of subsis- tence to his labour than to the labour and charity of others. I shall not pursue any farther this monstrous and discouraging system, which holds out the painful prospect of unavoidable and continued misery. For- tunately, it rests upon false notions of political eco- nomy, and will be completely refuted in the sequel of the work which I have undertaken. I hope, at least, I shall make it evident to the least sagacious and most inattentive observer, that in the theory of " wealth proceeding from the exchanged produce of labour, there is no robbery nor injury committed ■ against any individual ; that, on the contrary, all may be benefited and rich. Ever since Adam Smith established this funda- mental truth of his system, no other theory has been proposed ; and though he may not have assigned the limits of the science, he yet has so well determined its 10 70 ON THE VARIOUS SYSTEMS principles, that it will be impossible to go astray and mistake the true doctrine. The Earl of Lauderdale has, it is true, criticized some fundamental points of his doctrine : but the criticisms of the noble Lord rather tend to subvert the established system, than to create a new one. This noble author derives wealth from land, labour, and capitals : he even attempts to determine the share of each of these sources in the formation of public wealth. His Lordship states, that, in the earliest stages of society, man derives the greatest portion of his wealth from the surface of the earth : but that this period is of short continuance, because nature, whilst she has implanted in him the seeds of an unbounded variety of desires, has scattered with so sparing a hand the means of satisfying them, that the assistance of labour is early called in either to increase thequantity or improve the quality of the productions of the soil: and that he can accomplish either by means only of capitals, which shorten his labour and enable him to perform such as would have been above his strength. Whether these remarks be well founded or not, is of little consequence in this pkce : it is sufficient to observe, that they only tend to modify ami not to raise a new theory of the sources of wealth ; and on this account we shall not dwell upon them any longer. Such are the various systems concerning the sou r ces of wealth. Though they appear at variance, or at least offer different points of view, their difference i? however merely nominal, and of very little impor- tance to the science. OF POLITICAL ECONOMY. 71 The partisans of the inercantilesystem, for instance, do not think, and have never asserted, that the pre* cious metals which commerce accumulates in a coun- try are not derived from the produce of land, labour, and capitals ; on the contrary, they uniformly take it for granted that it is so. Again, the French economists, as founders of the tgrituitural system, though very positive in their doe- trine, do not assert that the soil spontaneously yields wealth; on the contrary, they allow that, if land be the source of wealth, it is agriculture that multiplies it : and by agriculture they understand the labour and stock advancesof the husbandman ; they even admit that the exchangeable value of the agricultural pro- duce is the measure of the wealth of a nation ; and that this exchangeable value can only be obtained by the free concurrence of the home and foreign trade : thus the French economists themselves derive wealth from land, labour, capitals, and commerce. By placing the source of wealth in labour, which fixes and realizes itself in some permanent object, Adam Smith also admits the concurrence and co-ope- ration of land, labour, capitals, and commerce. Lastly ; the system of Lord Lauderdale differs from the other systems only as far as his lordship assigns a particular importance to capitals. In every other respect the noble author co-incides more or less with the agricultural system aud the system of labour. Thus, after all, it is not properly concerning the sources of wealth that the different systems vary ; they all come pretty nearly to the same conclusion on this important point ; they all implicitly' acknowledge 7% ON THE VARIOUS SYSTEMS that wealth is produced by the concurrence of labour, land, capitals, and commerce ; they only differ res- pecting the more or less important share which they assign to each of these causes: in this only consists their contradiction, or their difference ; it is herein lies all the difficulty of the Science. The only pro- blem which is actually to be resolved, is this:— Of those three causes, labour, capitals, and commerce ; which is best calculated to produce public and pri- vate wealth ? This is the point which it is useful to discuss, and which I shall attempt to settle in the fol- lowing books. 0£ POLITICAL ECONOMY. 7S BOOK II. OF THE VARIOUS SYSTEMS CONCERNING LABOUR CONSIDERED AS A SOURCE OF WEALTH. INTRODUCTION. XN every system of political economy, labour has the greatest share in the formation, increase, and pre- servation of wealth. If the labourer finds the pre- cious seeds of wealth in the spontaneous gifts of the soil, he fertilizes, multiplies, varies them by his ac- tivity, his skill, and his industry : and obtains re- sults so new, so different, and so remote from their nature, that one might be tempted to regard him rather as the creator than as the co-operator of wealth ; and it is, undoubtedly, -this circumstance which has in^ duced a modern French writer to define wealth, an accumulation of superfluous labour* Is this productiveness of wealth exclusively reserv- ed to one, peculiar to a few, or common to all sorts of labour ? Is there, among the different kinds of labour, any one more especially productive, and fa^ vourable to the progress, of wealth ? Is agriculture * Principes d' Economic Politique, par B. V, F. Canard, Paris ; 1S01. ' ~ V 74 ON THE VARIOUS SYSTEMS more conducive to wealth than manufactures and commerce ? What are the means of rendering these divers labours more productive and more profitable B Which are the obstacles that oppose their progress" and impede their success ? These are the different points of view under which labour has been considered, and concerning which numerous controversies have arisen, which it is inter- esting to investigate and to appreciate, for the pur- pose of forming correct notions of this important part of political economy. —»-i-j.-i. CHAP. I. Is the productiveness of Wealth exclusively reserved to one sort of' Labour. X HE French writers, known by the name of Econo- mists, or Physiocrats, assign exclusively to agricul- tural labour the power of producing wealth, and re- gard every other labour as barren and unproductive. They, however, do not deny the usefulness of barren and unproductive labour : they only limit its utility, and assert that, with regard to manufactures, this util- ity consists in the adaptation of the agricultural pro- duceto consumption ; with regard to commerce, in its conveyance to the consumer ; and with regard to sci- ences, literature, andarts> in their defending* protect- ing, and encouraging all kinds of labours ; in multi- plying the enjoyments of life, and in extending and OF POLITICAL ECONOMY. 75 improving the moral and intellectual faculties of man: services, no doubt, of the utmost importance, but which only modify, or transport the agricultural pro- duce, add nothing to its quantity, and yield no new produce : whence they infer, that agricultural labour is the only productive one, and that all other labours are barren and unproductive. This system made a great noise by its novelty* but was not otherwise successful ; it was not adopted by any English or Italian writer;* not even by those who consider agricultural labour as the most produc- tive of ail labours. I should not, therefore, have ranked it among those systems, the examination of which has any interest for the science ; and the fee- ble sensation which it caused would have alike justi- fied and excused my silence. But the apology which one. of our most esteemed writers on political economy,! has lately made of this system, the plausible arguments on which he relies, to make it triumph over the doctrine of Adam Smith, and over the opinion of all the writers who have ! ' ' '' I ' ' , " ' ; . "" i ~ •'■ ■■ ■ ' - * Except the Curate Paoletti, in his work urs. He even was so enamoured of this opinion, that he thought he should be able to make it triumph over the authority of facts, and the experience of ages. He allowed, however, that manufactures and commerce have more contributed to increase the wealth of modern nations, than. agriculture ; but he thought their superiority to be owing merely to the peculiar favour which they have enjoyed above agri- culture. In France, where agriculture has always predomi- nated, the writers on political economy have general- ly granted agriculture the precedency before com- merce and manufactures.* In Italy, opinions have been divided; and accord- ing as they inhabited either the interior or the mari- time provinces, the writers on subjects connected with political economy, have extolled agriculture, or man- ufactures and commerce. f Amidst this struggle of contrary or various opin- ions, I think no satisfactory solution can be obtained * I know but two French writers who have given the preference to manufactures and commerce before agriculture ; namely, Dangeul, in his Remarques sur les Avantages et les Desavantages de la France et de la Grande Bretagne, 1754; and Forbonnais, in his Etfmens de. Commerce, f The Curate Paoletti, a Milanese, Beccaria, a Milanese, and Cor- nxani of Bi-escia, rank agriculture above manufactures and commerce j Galiani r Genovesi, and Pahnieri, of Naples, give the preference tt». commerce and manufactures before agriculture^ 13 24 ON THE VARIOUS SYSTEMS on so important a point of the science, but by at- tempting to determine whether agriculture, or com- merce and manufactures, are most conducive to the grow th of public and private wealth, to the welfare of individuals, the prosperity of nations, and their ab- solute and relative power ; or, in other words, by de- termining which of these labours obtains the greatest value for its produce on its being exchanged ; which circumstance is, at once, the promoter, regulator, and arbitrator of wealth. When, after having for a long time subsisted on the produce of hunting, fishing, and their flocks, men prefer to such precarious, uncertain, and limited means of subsistence, the more abundant, more vari- ous, and more certain productions of agriculture £ this direction of their labour undoubtedly opens a road to wealth : but whitherdoes this road lead them ? By this new application of labour, men may suc- ceed in procuring corn and cattle for their food, and raw materials for their raiments and dwellings; per- haps they may even acquire sufficient abilities to give convenient forms and shapes to these objects of first necessity. But here the progress of wealth stops ; and how it could go beyond their actual wants, or how they could think of producing any surplus, or of saving and accumulating any stock, it is impossible to con- ceive. Were even the inclination of mankind for propa- gating a sufficient inducement to accumulate, mea- sures of foresight would be limited to individuals ; they would not always be successful, and would fre- OF POLITICAL ECONOMY. 9-5 quently prove useless to those who should take them ; whilst they might he necessary to those by whom they had been neglected What expedient would be resorted to in that case ? What could induce indivi- duals or families, that had stored a surplus whicij they do not want, to cede this surplus to those to whom idleness, improvidence, the vicissitudes of temperature, and accidents inseparable from agricul- tural pursuits, had rendered them necessary ? Would they make them a free gift of their stores ? In that case, they would not be very eager to reproduce them. Would they ask for an equivalent in return ? But how could any equivalent be obtained, all agri- cultural productions being uniform and identic in the same country ? Under this supposition, the. circula- tion of any surplus, if not absolutely impossible, would be, at least, extremely difficult ; and it is very proba- ble, that, in this case, a population continually expo- sed to wants, for which they can obtain no supplies, would frequently be reduced to the same condition, as brutes that never multiply beyond the average pro- portion of the spontaneous produce of the soil. Let us, however, admit, that the combined progress of agriculture and population should lead to the di- vision of labour, and the separation of the labouring classes; and let us inquire, what would be the growth of public and private wealth under this hypothesis ? As agricul ural productions afford the means of subsistence, the wages of all labour, the patrimony of all labouring classes, they would be distributed in proportion to the wants of the husbandmen, and thf D6 on the various systems progress of agriculture ; consequently, the share of the industrious classes would be small, and would not allow them to extend, to prosper, or to aspire to a free and independent condition ; industry would vegitate in a state similar to that in which it is found in small market-towns and villages, and could never be drawn from this confined condition by the solita- ry operation of agricultural labour. Let us advance one step farther, and connect again by a fresh hypothesis, a chain which is broken at every link : let us suppose that the division of labour multiplies population and agricultural produce to such a degree, that the land-owners obtain their net produce without any labour; and that this net pro- duce is sufficiently large to procure them a comforta- ble and even affluent existence : how many obstacles must be overcome, how many difficulties conquered, how much time passed, before this net produce could develope the powers of industry, multiply the indus- trious classes, raise a great number of wealthy and populous cities, and create all the phenomena of ge- nius, arts, and commerce ! That such would be the many and splendid results of agricultural labour, may amuse the fancy of a credulous and confident reader ; "but cannot stand the test of philosophical doubts and inquiries. I know that these observations on the slow progress of wealth in the agricultural system, are contradicted by the example of ancient Egypt, China, and North America, where agriculture has raised a numerous population, accumulated vast riches, and multiplied the benefits of civilization. But are these examples OF POLITICAL ECONOMY. 97 as conclusive as some philosophers have endeavoured to believe ; and may they not be accounted for by peculiar circumstances, foreign to the agricultural system ? The distinction of the Egyptians in casts; the di\ i*- sion of lands, among these casts ; the influence of poli*- tical, religious, and civil institutions upon each cast ; their manner of cultivating a soil rendered productive beyond measure by the overflowing of the Nile ;* the temperance so natural to the people of the South, and so imperiously prescribed to the inhabitants of Egypt ; and, above all, the immense extent of their passive trade with the nations of Africa, Hindostan, Arabia, and Asia ; all these causes, unconnected with agriculture, explain the phenomenon of the wealth and population of Egypt, but cannot be applied to the people of the North, who live in a climate less favoured by nature, under different constitutions and laws ; who are forced, or accustomed to a great con- sumption ; and who would find but few resources in their agriculture, were it even encouraged by the pas- sive trade of other nations. The Chinese, of whom we have so many various accounts, are yet too little known to allow us to argue with -any degree of certainty respecting their innu- merable population, and the prodigies of their agri- culture, their wealth, and their civilization. The clouds in which their mysterious opulence is envelop- * The soil requires no other expeuce than the seed : some sorts of grain, like doura and millet, give an incredibly multiplied pro* duce. De Paw, sur les CMnois et les Egyptiens, $8 ON THE VARIOUS SYSTEMS ed, are rendered still more impenetrable by the contra- dictory narratives of travellers, and leave us no means to re-ascend from effects to causes, and to obtain cer- tain and positive results. There is no doubt that the Chinese honour agriculture; and it is, perhaps, to their gratitude for an art productive of food and raw materials for commerce and industry, that the honours which they pay to it must be ascribed. But does this art owe its progress to its own impulse ! May not the political and civil institutions of China, the extraordinary fertility of her climate,** the innume- rable channels by which her vast empire is intersected and supplied with an immense quantity of fish,t the variety of the productions of her territory, which is equal in extent to the whole of Europe ; and, lastly, her passive trade with all the nations of the world ; mpy not these circumstances have as great a share, as agriculture, in whatever travellers relate of the wealth and population of China ? The problem has not yet been resolved, and is perhaps incapable of being resolved in the present state of our knowledge of the * If China contains an immense population, it is because rice is the only food of the multitude ; in several provinces it yields annu- ally three abundant harvests. The soil wants no rest in China, and its produce is frequently hundredfold. Le Commerce et le Gouverne- ment, par Condillac. Essai sur la Nature du Commerce en general, par Ganiillon. t It is even possible that the oleaginous parts of fish are more productive of the matter which serves for generation. This circum- stance would account for the immense population of Japan and China, where fish is almost the sole food. Montesquieu, Esprit des Lois, book xxiii. chap. 13. OF POLITICAL ECONOMY. 99 economical system of the Chinese. It would there- fore be the height of imprudence to ground upon the Chinese system of political economy that of nations dwelling in a temperature less prodigal of its gifts, and in a climate which, as has been observed by one of the most celebrated French philosophers, produces nothing spontaneously but forests, stones, and wild fruits.* If North America be indebted to her agriculture for the rapid increase of her population and riches, her agriculture owes its growth and success to the capitals and industry of Europe ; to these she owes the sale of her produce, its abundance, and her prosperity. Had she been confined to agriculture, unconnected with the Old World and without any foreign trade, she would have advanced less rapidly on the road to wealth ; and instead of being quoted as an instance of the power of the agricultural sys- tem, she would afford a memorable example of its inconsiderable influence upon the grandeur and des- tiny of nations, j* Ancient Egypt, China, and North America, are therefore but equivocal and suspicious evidences of the power of agriculture and its productiveness of wealth. * Voltaire, Essai sur-les Mceurs, vol. i. page 302. Edition of 1785. f " In our North American colonies, the plantations have con- " stantly followed either the sea-coast or the banks of the navigable ** rivers, and have scarcely any where extended themselves to a^y M considerable distance from both/' — >Adam Smith's Wealth of iV =. lions; Eleventh Edition, London, 18Q5„ vol. i. book u chap. 3. page 31. 100 ©N THE VARIOUS SYSTEMS But were it even true that the agricultural system could by itself raise a numerous, rich, and flourishing- population, it would not be productive of any great moral and political virtues, of the energy, public spirit, and eminent qualities which form great nations, ren- der mankind illustrious, and honour humanity. The industrious and commercial classes being necessarily limited to the lowest rate of wages, would be discouraged and degraded ; destitute of talents, activity, and energy, and confined to mechanical trades, they never could ascend to the brilliant con- ception of the liberal arts ; to those inspirations of genius which open new sources to the prosperity, opulence, and splendour of nations, mitigate human misery, render life supportable, and produce ages of glory and grandeur. Possessing hereditary comforts or riches; certain of their concomitant honours, distinctions, and consi- derations; without rivals and competitors; and allured by none but sensual pleasures, the agricultural classes would be little disposed to devote themselves to the painful and laborious toils attendant on the study of sciences, and on the cultivation of the arts of peace and war, or their efforts would be limited to the first starts of genius, and they afterwards would drag along on the same road through the duration of ages. Such is the state of the inhabitants of China and India : it is the unavoidable consequence of the preference which these two countries have given to agriculture over industry and commerce. The views, the hopes, the ambition of every one would be turned to agriculture, as the only lucrative, OF PQMTICAI* ECONOMY. JO* ' honourable, and honoured profession ; the people would be divided into two classes, one domineering, and the other servile ; and the government set over both, not finding any support in the intermediate classes> would be forced to be the tool of the rich, and the agent or accomplice of their tyranny. A constitution so vicious and so opposite to the progress of civilization, would be still more deplorable and prejudicial with regard to its foreign relations, and afford little or no security to the national inde- pendence and glory. Whence indeed could it derive its political force, its means of resistance and attack, of power and grandeur ? The agricultural class forming more than three- fourths of the people, and being the only rich and flourishing class, could not be removed even for a moment from their agricultural labours, without this essential branch of labour being a sufferer by their absence; their produce would be diminished, and this diminution would inflict a fatal blow to public wealth and national power. The industrious and commercial class might more conveniently be called out for the service of the state, because the defalcation of their produce would only occasion the deprivation of enjoyments, which is always easily borne. But this class would be too inconsiderable to afford any great assistance ; at the utmost they would form a sixth of the population, and leave but a very small number of defenders that could never be formidable to the enemies of the state, - • . 14 102 ON THE VARIOUS SYSTEMS Were a military cast formed, and endowed with a portion of the territory, as in ancient Egypt ; we need only remember how fatal it proved to the Egyp- tians, to be convinced that it wouldafford little security. " In none of the known periods of their history " were the Egyptians ever formidable ; never did an " enemy enter their country, but they were subdued. '* The Scythians were the first who invaded Egypt. " After the Scythians came Nabuchodonosor, who con- " quered Egypt without meeting with any resistance. " Cyrus achieved its conquest by merely sending one " of his lieutenants. When the Egyptians revolted " under Cambyses, a single campaign sufficed to sub- " due them. Darius Ochus reduced Egypt to a " province of his kingdom. Alexander, Caesar, Au- - gustus, and the Caliph Omar, conquered Egypt " with the same facility. The Mamelukes possessed " themselves of that country in the time of the Cru- " sades. Lastly, Selim the First conquered Egypt " in a single campaign."* The Chinese have experienced the same fate ; they never resisted any hostile attack. Several times sub- dued by the Tartars, they have submitted to the yoke which it pleased the conquerors to impose upon them. And that the calamities with which these nations have been afflicted are no unusual attendants on the vices of their system of political economy, is proved to a certain- degree by the circumstance that Africa, Sicily, and Poland, which were essentially agricultural countries, have experienced the same fate, and been, * Veltaire, Essai sur les Moeurs, vol. i. p. 117, Edit, of 1785-.. OF POLITICAL ECONOMY. 10S unable to preserve their liberty and independence, and to maintain themselves in the rank of nations. What more striking proofs can there be required of the vices of the agricultural system with regard to political independence, national power, and public wealth ? These vices equally shew themselves in the small extent of general labour, in the insulated condi- tion of individuals, in the weakness of government, and in national impotency and general indifference. They ought to alarm all who might be blind enough to share in Dr. Quesnay's predilectionfor the agricultural sys- tem, and to suffer themselves to be fascinated by the •harms with which it has been invested by his nume- rous proselytes, and against which even Adam Smith has been unable to guard Agriculture can no longer be considered either as exclusively productive of wealth, or as the most productive of all labours; miich less can it be regarded as possessing the eminent pre- rogative of forming the " natural constitution of a " government the best adapted to the human race.'* Do manufactures and commerce afford the advan- tages which we have denied to agriculture ? " It is true, that men begin by tilling their lands " before they build ships to go in search of new lands " beyond the seas : but those who are forced to de- " vote themselves to maritime commerce, soon ac- " quire that industry, the offspring of want, which " does not stimulate other nations."* This industry must particularly acquire a great superiority, when labour is subdivided, when the * Voltaire, Essai sur les Mceurs, vol. i. p. 73, Edit, of 1785, 104 ok tut Various systems manufacturing and trading classes, breaking the fet- ters which kept thern enchained to the agricultural classes* labour without Waiting for the demand, sub- mit their productions to commercial exchanges^ and derive from the equivalents obtained in return, their subsistence, their comforts, and their wealth. Their economical notions then take a new course, their relations become complicated ; the results of their commerce are lost in an obscurity so profound, that they are not always clear to the most acute and best exercised understandings) and their advantages and inconveniences are frequently mistaken. The happy effects of this revolution are not even yet completely demonstrated, and its benefits have long been in ex- istence, thoUgli the channels through which they are poured are not yet sufficiently known and described. Let us attempt to throw some light Upon these abys- ses of political economy. As soon as the labouring classes, whether agricul* tufal, or manufactural and commercial, carry to mar- ket the surplus of their produce above their consump- tion, and exchange one for the other, general indus- try receives a fresh impulse follows another direction, and attains a higher destiny. The producer does not Wait for the produce being consumed, before he re-produces it ; neither does he limit his productions to the local consumption, or to his present and actual wants. Commerce meets production ; it stimulates the consumer by thfc presence of the produce, and the producer by the certitude of obtaining equivalents in return, in this system, every producer is a con- sumer; all productions are thrown into the scales of a OF POLITICAL ECONOMY. 105 general exchange ; and commerce foments general production by general consumption. The labour of the husbandman is no longer confined to obtain the produce necessary for his subsistence, and the wages of those who assist him with their ser- vices. He also labours to procure commodities with which he is yet unacquainted, to have a surplus, and to be enabled to purchase objects, the sight of which in the market may inspire him with the desire of possessing them. The industrious classes do not wait for orders to labour. They create, invent, perfect the means of rendering life convenient, comfortable, and agreea* ole ; of multiplying enjoyments and satisfying every desire ; they do not embarrass themselves about the sale of their productions or the return of equivalents ; they depend upon the market, which rarely disap- points their expectations. Lastly, the trading classes are no longer reduced to a mercenary and not very lucrative hawking ; they collect and keep in their warehouses the surplus of productions which have not met with any demand, and endeavour to provide consumers for it on every point of the globe where nature and the labour of man yield any productions capable of exciting de- sire, nattering taste, and multiplying enjoyments. In this twofold respect, the, trading classes produce, preserve, and multiply wealth. Riches now no longer consist in the proportion of produce to wants, of income to expenditure, of pro- duction to consumption; but in the accumulation of a surplus stored up for unforeseen wants, accidents, 106 ON THE VARIOUS SYSTEMS and enjoyments. This surplus is a resource for the existing population against the uncertainty of the seasons ; it is a stock, a sort of patrimony, a premium for their increase ; by means of this surplus, man soars above the animal creation ; he avoids the cala- mities to which he was doomed by nature ; and in- sures to himself a destiny which he had been origin- ally denied Individuals are multiplied in propor- tion to the surplus that is accumulated, nations pros- per in the compound ratio of the mass of their sur- plus and the increase of their population, and public wealth results from the exchange of the surplus pro- duce of general labour. Any new object which is conveyed by commerce to the general market, which excites fresh desires, and which the multitude may acquire by labour, aug- ments the emulation of the labourers, gives a new impulse to general labour, and accelerates the pro- gress of opulence in an indefinite proportion. When after the discovery of the New World, that effort of genius or audacity, productions till then un- known were brought into the market of Europe, ev- ery one redoubled his exertions, activity, and indus- try, to procure them, and public wealth was increas- ed by both the productions imported from the New World, and those produced in Europe to serve as equivalents. Gold and silver, which were only circulating among the rich and prosperous classes, being, all at once, profusely scattered among the industrious and labour- ing classes, excittd a general emulation, multiplied individual, domestic* and social relations, and pro- OF POLITICAL ECONOMY. 107 duced results little observed, and yet worthy of the greatest attention, because they are immediately con- nected with the causes of the wealth of modern na- tions, the peculiar object of political economy. If, as it must be acknowledged, property is the spring of labour and wealth, the foundation of social order, and the support of public and private prosper- ity ; how much must its power have been augment- ed by the abundance of gold and silver, which cau- sed property to reach even the poorest classes of the community, acquainted them with its value and ad- vantages, gave them the hope of comforts, and flat- tered them with the idea of civil independence! What peculiar charms must they not have found in pro- perty which may be either hidden or shewn, kept or transmitted, stored up or used at the call of their passions, propensities, and dispositions, and accord- ing to-, the circumstances in which they are placed ! By diffusing the advantages of property among the labouring classes, the precious metals united them with the other classes of the community by the gen- eral name of proprietors, inspired them with senti- ments of justice and mutual benevolence, and bound them to each other by the indissoluble ties of com- mon interests. Even governments must have felt the effects of this general impulse ; they must have more carefully regulated and moderated their authority, when they perceived that it might be prejudicial to property and injurious to wealth, the basis of their strength and power. 1 shall not examine here the numerous controversies 108 ON THE VARIOUS SYSTEMS that have arisen about the effects of the plenty of gold and silver with regard to circulation; that discussion will find its place elsewhere :*■■ but I may observe, that the effects which necessarily result from the plen- ty of the precious metals, considered merely as mer- chandize, belong exclusively to manufactures and commerce, and could never have taken place in the agricultural system. This shews already, at what dis- tance those two kinds of pursuits are from each other, and how greatly their reciprocal influence on labour and wealth differs. Ho w confined the action of agri- culture, which has nothing but wages to offer to man- ufactures and commerce, and builds upon the portion of its produce destined for such wages, all its hopes of wealth ! How extensive, on the contrary, the ac- tion of manufactures and commerce, which put ail the powersof labour into motion, multiply its produce by exchanges, and redouble their efforts in proportion to their success ! In the agricultural system, labour is paid for by the idle land owner, who fancies himself the richer for having less to pay : in the mercantile system, labour rewards labour, and even the idleness of the wealthy; it never receives without giving, and never gives without receiving. The universal ex change of the produce of labour enables the nations, tribes, and savage hordes dispersed on the globe, re- ciprocally to encourage each other to fresh labour by the hope of fresh enjoyments ; immense deserts which nature had doomed to everlasting sterility, are peo~ See hereafter, book iv« chap. 5. OF POLITICAL ECONOMY. 109 pled, cultivated, fertilized ; the Hindoo renounces his indolence, and the seas that wash the poles are rendered productive, and afford mankind new sour- ces of wealth. This superiority of manufactures and commerce over agriculture, which is founded on the nature of things, is also proved by the history of wealth among all ancient and modern nations. Sidon, Tyre, Corinth, Athens, Syracuse, and Car- thage, in ancient times, acquired by their industry and commerce riches of which there is no example in any agricultural nation ; and what is not less worthy of remark, their riches raised them to a degree of pow- er and consideration to which their territory and their population would not have allowed them to aspire. Even the immense wealth of Rome, under the re- public and during the three first centuries of the empire, cannot counterbalance the authority of these instances ; because she was not indebted for it to ag- riculture, but to the power of her arms, the spolia- tion of the vanquished, and the tributes of the sub- dued nations. In the middle age, Constantinople, by her industry and commerce, preserved the wealth acquired by her arms ; and these riches, thus purified by labour, pro- tected herfor along time against the attacks of the Bar- barians; prolonged her resistence, and retarded her fall, which was hastened by her follies, disorders, and vices. In modern times, Venice, Genoa, Pisa, Florence^ the Hanseatic towns, Holland,* and England, have The territory of Holland is only from eight to nine, millions of IS 110, ON THE VARIOUS SYSTEMS alternately acquired, by manufactures and commerce? riches which have enabled them to act an important part in the political world, and even placed some of them in the rank of preponderating powers. These splendid testimonies of history did not es- cape the attention and profound sagacity of Adam Smith ; and he has neither denied their importance nor disputed their consequences; on the contrary, he has betrayed in several parts of his work the impres- sions which they made upon his mind. In one place he states that " it is the great multi- plication of the productions of the different arts, " in consequence of the division of labour, which oc- lt casions in a well-governed society, that universal " opulence which extends itself to the lowest ranks '* of the people."* Elsewhere he acknowledges, that " it is upon the " sea-coast, and along the banks of navigable rivers/ ' that industry of every kind naturally begins to sub- divide and improve itself; aud it is frequently not w till a longtime after, that those improvements ex- a tend themselves to the inland parts of a country. "f acres. Her population does not exceed two millions of individuals ; and yet what a figure did she make in Europe in the seventeenth cen- tury ! what wars she sustained ! what forces she resisted, and what power she attained ! She is subject to frequent invasions ;. her har- bours are bad ; she annually spends immense sums, not to be swal- lowed up by the waves of the sea; and all these difficulties have been overcome by her indefatigable industry. Devenant, vol. ii. page 193. * Adam Smith's Wealth of Nations, edVtion of 1805. vol. i. book K chap. 1/page. 17. f Ibid, vol, i.. book i, chap. 3. page 29. OF POLITICAL ECONOMY. Ill In another place he admits, that " the revenue of " a trading and manufacturing country must, other f things being equal, always be much greater than "that of one without trade or manufactures."* And yet, notwithstanding this homage paid to the power of commerce and industry, he gives the pre- ference to agriculture. I feel almost tempted to ac- cuse him of having contradicted himself, and to re- fute him by his own statements. But although this kind of refutation gives great advantages, it would be ill-timed and unbecoming towards an author so il- lustrious, and to whom the science of political econ- omy owes its progress and consideration. « I shall ra- ther endeavour to discover what were the motives of his predilection for the agricultural system, and ap- preciate their merits and strength. He asserts, that if social institutions had never de- ranged the order of things, the wealth and increase of the country would have advanced with equal steps with the improvement and, cultivation of cities ; and that, if public wealth has been indebted fc*r its pro- gress to the industry of the towns rather than to ag- riculture, it ought to be attributed merely to thejm- vilegesand monopolies granted to towns, to the pre- judice of thecountry^f Although his observations in this part of his work are extremely acute and ingenious, and although he must be acknowledged to have been right when he imputed the misery of the country to the monopoly * Wealth of Nations, vol. iii. book iv, chap.J}. page 25, 26, t Ibid, the whole of the third book. 112 ON THE VARIOUS SYSTEMS of the towns : yet it may easily be proved, that, even if these particular calamities had not existed, com- merce and manufactures would always have obtained the same superiority over agriculture ; because this superiority arises from the nature of things, and can be neither arrested nor impeded by the combinations of men. Agricultural produce is common to all countries, and has every where to struggle against a general competition ; whilst commerce and manufactures are peculiar only to some countries and some govern- ments, and have of course no general competition to encounter. Agriculture does not require any great talents ; u nature performs a great part of the work ;"* its improvements are slow, and the discoveries by which they may be hastened are soon known to all agricul- tural nations. The case is diiferent with manufac- tures and commerce ; they require a certain intelli- gence, are continually improved, reach to a degree Of superiority difficult to be attained, and rarely lose the superiority which they have once acquired. Agriculture is subject to numerous accidents. Bad seasons often disappoint the hopes of the hus- bandman : wild beasts devour part of his harvest, another part is spoiled and damaged ; he is constant- ly at the mercy of accidents, and his fortune is con- tinually menaced. The risks of industry and com- merce are less numerous, and above all, less fatal. •If there be no demand for their productions in one •. * This is a mouafit of .VV?m Smun s OF POLITICAL ECONOMY. 4\S country, they are carried to another. If, by some fortuitous or unforeseen cause, they be damaged or part of them lost, that which remains is sold dearer, and the loss is covered by the high price occasioned by their scarcity. Agriculture cannot extend its produce beyond the extent of the territory and agricultural popu- lation ; neither can it accumulate or store up large quantities of its productions, because they would require immense and costly buildings, and, above all, because they rapidly perish. Manufactures and c6n.' finding out easier, and readier methods of per- * 4 forming it OF POLITICAL ECONOMY. 135 "The inaccuracy of the fact cannot escape any *' one co versant with the history of machinery — M It is certain, on ihe contrary, that it is to the cha- " raeteristic- faculty which man possesses, from the "earliest period of his existence, of applying macha- ''nical principles to the construction of tools and u machines, calculated to perform and supplant la- " bo r, and to his powers of using capital for the same "purpose, in all his commercial relations, as well as " in every transaction which requires the exertion of " labour, that he owes the ease and wonderful rapid,!- *' ty with which labour is executed ; and consequent- " iy, that extended opulence which expands itself *' throughout civilized society."* I thought it my duty not to omit any of the nu- merous considerations which Lord Lauderdale has supposed calculated to discredit the division of la- lour, that main pillar of thedoctrine of Adam Smith; because it is of essential importance not to leave any doubts on this part of the science, and because it is equally dangerous to abandon oneself to-a blind cre- dulity, or to shut one's eyes to certain and positive truths. I shall not examine whether the effects of the divi- sion of labour were known to the nations of antiqui- ty, vihetheTjthey occasioned the distinction of certain people into casts, whether the invention of machinery has been antecedent to the division of labour, and ■ — ■ ■ — — --■ — .. . _ - - - . , , _ , w , * An Inquiry into the Nature and Oiigin of Public Weal t la : by the Earl of Lauderdale. Edinb. 18 04. chap, v, pages 286,296* .297, 300, 301, 302. 136 ON THE VARIOUS SYSTEMS whether the instruments of agriculture deserve the honour of being ranked among the machines which shorten and facilitate labour. All these inquiries are more curious than useful, of little interest to politi- cal economy, and can neither directly or indirectly contribute to its progress. The question, whether machinery is more condu- cive than the division of labour to develope the ener- gies of the labourer, improve his faculties, increase his produce, and ameliorate its qualily, appears at first sight of higher importance : but a little atten- tion soon shews this view of the matter to be erro- neous and delusive. The division of labour imparts to the labourer, not only greater facility, dexterity, and intelligence, to perform the labour he has undertaken ; but what is far more important, it distributes every part of the labour in the manner best calculated to hasten and improve its performance;. so that if it even were true that the labourer as agent of the labour, receives greater assistance from machinery than from the di- vision of labour, we should yet be obliged to admit that, with regard to labour in general, the distribution of the different parts of labour renders services superior to those of machinery. The division of labour ap- pears in every respect entitled to be compared with the direction of labour It is true, that each labourer performs more labour than the undertaker ; neverthe- less, the latter contributes more to its performance than each of the individual labourers. Machines are but more diligent, more active, and less expensive labourers : the /li vision of labour is the undertaker OF POLITICAL ECONOMY. IS? that directs them, regulates their movements, and guides them to their end by the straightest line. The division of labour relates to labour in general ; it prepares the links of that immense chain which con- nects individuals with individuals, families with fa- milies, nations with nations, and converts the whole world into a single workshop, a general manufactory. To confine the effects of divided labour to that por- tion of labour which it performs beyond what undi- vided labour would have performed, is to be ignorant of its nature, advantages, and benefits. It must, however, be admitted, that the effects of the division of labour, the advant-ges of which are universally acknowledged with regard to manufactures and commerce, are not so certain with regard to agri- culture. The point is not yet decided, whether the division of agricultural labour is more profitable than its concentration ; or, in other words, whether small or large farms are more advantageous to public wealth. Both opinions have numerous and illustrious defenders. "There is no maxim of political economy more " true," says Dr. Price, " than this : the division of 9 wages of labour down to the lowest rate was the true way of reducing the price of commodities, and insu- ring their sale abroad and at home. Adam Smith has triumphantly refuted these doc- trines, really distressing to humanity. He maintains, that the high price of the wages of labour is equally profitable to the state, and to general wealth. He first shews that the cheapness or dearness of provisions has but little influence on the rate of the wages of labour, and that this rate is chiefly fixed by the demand for labour. If this be progressive, wages rise; if stationary, they decline ; if retrograde, they leave but a very small pittance to the labourers. These general rules are modified by several parti- cular circumstances, such as the pleasantness or un- pleasantness of the labour, the facility or difficulty of learning it, its being continued or interrupted, its re- quiring a greater or smaller degree of trust in the la- bourer, the greater or smaller probability of its sue cess, the greater or smaller competition occasioned by apprenticeships, corporations, duties, and more or less facility in circulating the productions of labour. Finally, he shews that the amelioration of the con- dition of the lower classes of the people is beneficial to population, which in civilized society is limited only by the scarcity of provisions among the lower orders ; that it accelerates the progress of industry, tends to produce more work within less time and with less trouble ; and that this increased produce com- pensates, and even exceeds the increase of wages. This doctrine of Adam Smith concerning the wa- ges of labour, leaves no doubt or uncertainty in this 160 ON THE VARIOUS SYSTEMS part of the science, and must henceforth be consider- ed a9 classical. Wages of labour are no longer to be considered as arbitrary and depending on the high or low price of provisions. The price of labour has its laws, its principles, and its limits in the demand for labour; and this demand is constantly in proportion to the progressive, stationary, or retrograde state of national wealth. / . . A rise in the labour of wages, when it is the mere result of these general causes, ought not to occasion any uneasiness. It does not even raise the price of the productions of labour, because being better paid, the labourer works more, and his productions are both in greater quantity and of better quality. Thus the price of labour is, after all, independent of human passions and combinations ; and it is ex- tremely remarkable, that the principles by which it is regulated are all favourable to the interests of indi- viduals, to the prosperity of nations, and to the pro- gress of national wealth, OF POLITICAL ECONOMY. 161 CHAP. VIII. Conclusion of the Second Book. ON recapitulating the results of our inquiry into the nature and effects of labour, and into the causes which accelerate or impede its progress, we derive a lively satisfaction from the consideration that those doctrines by which labour is rendered barren, insula- ted, and subjected to restrictive laws, and by which its liberty is obstructed and its wages are reduced and limited, oppose an insurmountable obstacle to the formation and progress of wealth, to the developement of social energy, and to the political power of nations; whilst the theory which is favourable to the efforts of the labourer, which improves labour by sub-dividing it, allows complete liberty to the labourer, and liber- ally rewards his toils, gives to wealth an unlimited, impulse, and is productive of great national benefits. These happy results ought to encourage philosophi- cal inquirers in their meditations, enlighten legisla- tors in their labours, and guide practical statesmen in the choice of their measures. 1 16% ON THE VARIOUS SYSTEMS BOOK III. OF THE VARIOUS SYSTEMS ON CAPITAL CHAR I. Wherein do Capitals consist? .1 HE theory of capitals is new. and entirely of Adam Smith's creation. The notions afloat on this subject prior to his time, were confused, partial and limited. The nature, formation, employment, and general and particular influence of capitals, were so many pro- blems, or gave rise to numberless errors and miscon- ceptions. The first writers on political economy made capi- tals consist in metallic currency, and derived them from foreign commerce ; which caused their system to be denominated the mercantile system. The French economists who attacked this system, and substituted the agricultural system, acknowledg- ed no capitals but the advances on cultivation. Adam Smith took a more extensive view of capitals. He stated them to consist in the advances and prime materials of all labours, in the improvements of the soil, in the implements and machines of agriculture, manufactures, and trade, which comprise both metallic OF POLITICAL ECONOMY. 163 mud paper currencies, and in commodities reserved for general consumption.* This enumeration of capitals is not absolutely above criticism. It certainly is a matter of surprise, that commodities reserved for consumption, and incapable of being accumulated, should be ranked among capi- tals, which, according to Adam Smith himself, are the produce of accumulation ; but as this criticism is of no utility to the science, I shall not dwell upon it. Some modern French writers appear disposed to assign the rank of capitals to lands, mines, and fish- eries, which they regard as instruments of produc- tion, and little different from any other machine or implement destined to produce commodities. -f Lastly, a Noble English Author limits capitals to the instruments and machines proper to shorten and facilitate labour.J I think I shall give a correct and comprehensive definition of capital, by stating it to consist in the accumulation of the produce of labour. > According to this definition, lands, mines, and fisheries, in their original state, would not be com- prised among capitals; but, stripped of the improve- ments, instruments, and machines, which render them productive, they scarcely deserve to hold a place in the capital stock of any nation. Their spontaneous pro- duce is but the smallest part of the general produce of * Adam Smith's Wealth of Nations, vol. i. book ii. chap. 1. and following. t De Sau and Canard, I The Earl of Lauderdale, |(>4 ON THE VARIOUS SYSTEMS labour, and cannot constitute any separate article ia the wealth of nations. If we deduct from agricultural produce, the part which is due to cultivation; from the produce of fisheries, that which is due to the implements and tools for fishing, and particularly to the art of salting, drying, and curing fish ; and from the produce of mines, that which is due to the aid of machines and extraordinary labours ; there remains so little, that there is no danger of erring in ranking them among- the produce of labour, and admitting them only as such among capitals. Capital, then, consists in the accumulation of the produce of labour. In theory, capitals offer three different considera- tions, equally interesting to the science, to its pro- gress, and to its results, viz. their formation, their employment, and their influence upon public and pri- vate wealth. Each of these considerations has given birth to various opinions, which it is important to analyse and investigate. OF POLITICAL ECONOMY. \65 CHAP. II. How are Capitals formed ? R. Quesnay derives capitals from "economy in Cl the costs of agricultural labour, from the savings " in the expences of the land-owners, as far as those " savings are applied to improve the soil, and from " the increased price of commodities through foreign " trade." But these means being analysed and reduced to their just value, contribute simply to form capitals by economy in consumption. The saving in the costs of agricultural labour is no- wise different from economy in consumption. The expences of agricultural labour, like those of all other labours, consist in consumption. Consequently, the saving of agricultural expences is an actual economy in consumption, an economy no-wise distinct from that of the expellees of the land-owners, which Dr. Quesnay considers as forming capitals, when they are, applied to improve the soil.* The increased price of agricultural produce through * The greatest part of the expences of land-owners are, at least, unproductive expences. Those only can be excepted which they in- cur to maintain and improve their estates, and to augment the culti- vation of their lands. Physwcratic, Setonde Observation ■u/r le Tab* lean Economique. 166 ON TflE VARIOUS SYSTEMS. foreign commerce appears, at first sight, different from the two other means of forming capitals. But when analysed with care, it is evident that it can contri- bute to the formation of capital, only as far as it tends to increase the means of economy in the consump- tion of the land owners. According to Dr. Quesnay's system, the increased price' of commodities, through foreign commerce, gives no advantage to the national over the foreign produce. He literally states that, " in the foreign "trade, there is but an exchange of value for equal M value, without- any profit or loss on either side.'"* Thus foreign commerce gives neither more nor less commodities than what the exchanged home pro- duce contained ; it only gives different commodities : but as it is only after its price has been fixed in mo- ney, that the national and foreign produce is inter- changed, it follows that the increased price of the national produce, through foreign commerce, only bestows upon it a greater value in money; that is to say, that a quarter of wheat, which without foreign commerce would have been worth only eighteen shillings, is worth twenty-four through the foreign, commerce. But by whom is this increase of six shillings per quarter paid ? Not by the foreigner, since there is no other exchange with him than of value against equal value, without any profit or loss on either side ; it is paid by the national consumer, and consequent^ the increase of price, through foreign commerce, has no other effect than to diminish the share of the f Fhysiocrathe, Obs, 4 et 5, sur It Tableau Economique. OF POLITICAL ECONOMY. 16*7 labouring, or paid classes, in the national produce, and to augment that of the land-owners or paymas- ters; an augmentation advantageous to the forma- tion of capital only as far as the land-owners apply it to improve the soil. The increased price of agricultural produce through foreign commerce, like economy in the costs of labour, is therefore not distinct from economy in the ex- pencesof the land-owners; and, consequently, it may be affirmed that, in Dr. Quesnay's system, nothing contributes to the formation of capital but the savings of the land-owners, when they are devoted to agri- cultural improvements. That this is the Doctor's opinion, cannot be doubt- ed, since he positively denies to the savings of the paid or mercenary classes the faculty of increasing the capital stock; and the reason which he gives for. it, is, that these classes cannot have any means of saving ; and that, if they should happen to have any surplus, it could only proceed from an error or disor- der in civil society.* Thus, according to the system of the French eco- nomists, nothing contributes to the formation of capitals but the savings of the net produce, when employed in agricultural improvements. Adam Smith derives capitals from the greater or smaller quantity of productive labour relatively to un- aj , __ ! ! _-_ * If the unproductive class save to increase their money — their labours and profits will be diminished in the same proportion, and their decline certain. P/ii'viocrcitie, Wd'ge W& !6t> em the various systems ■ productive labour, from the proportion of the pro- ductive to the non-productive consumers, and from economy in privatexonsumption.* Let us investigate these different sources of capita!, and we shall again see that they simply consist in economy in private consumption. The proportion of productive to unproductive la- bour contributes, in Adam Smith's opinion, to the formation of capitals when it is in favour of the pro- ductive classes, when it leaves in their hands a, dis- posable produce to be economized and used in ex- tending and improving their labour. This proportion then affords nothing but a power of saving, and cannot be viewed in any other light. The same may be affirmed of the proportion between the productive consumers and those whom Adam Smith denominates unproductive consumers. If this proportion be in favour of the productive con- sumers, if the latter exceed the number necessary for the maintenance of the non-productive consumers, they have a greater stock of disposable produce left, which they may economize and employ in more or less productive labours. Thus the two first means, which, in Adam Smith's opinion, contribute to the formation of capitals, con- tribute to it merely by economy in consumption, and are necessarily the same with it. We are not afraid of mistaking his opinion in this respect, since he positively states, that " capitals are * Adam Smith's Wealth of Nations, vol. ii. book ii. chap. 3. OF POLITICAL ECONOMY. l6§ ; £; suade the proprietors of stock, from whom sucTi 2 1 O M 5PH E V A Kicks' S Y S i L M S " extensive purchases would have been made by the " commissioners of the sinking fund, all at once to " spend as revenue, that which habit had taught " them to regard as capital; or in other words, all 11 at once to ruin themselves in order to counteract " the bad effects of this miserly policy in government. . " Unless, however, the stock-holder could have M been persuaded thus to expend his capital, fifteen " millions a year less must have been expended in " the different articles the country produced or ma- " nufactured ; that is, a portion of demand would at 4i once have been withdrawn from commodities of kw British growth or manufacture. " But ii it is true, (which all writers on political " economy, however much they may differ on other "subjects, concur in asserting,) that the whole quan- " tityof industry employed to bring any commodity "to the market, naturally suits itself to the effectual 11 demand, and constantly aims at bringing the pre- " cise quantity thither that is sufficient to supply the "demand ; it follows, that thisdimiuutionof demand li must occasion a similar diminution of the procinc " tions of the country. " Though the opinions of great and eminent men " arc here referred to for establishing the position, that "a diminution of demand must occasion a diminu- " tion of produce, that is, of wealth; it is not on jbu- M thority alone that this inference rests ; reason also " shews that it must be so. It follows, therefore, that " three hundred millions (calculating the value of " the fifteen millions of produce which must have w been annihilated, at twenty years purchase) of real OF POLITICAL ECONOMY. 217 " wealth would have been extinguished before- this " accumulating fund, with all its boasted activity, " could have, in all probability, converted one hun- " died millions of the revenue into capital. " Dismal as the consequences .of this experiment '* must have been in diminishing the re-production " and revenue,, there appear, on the other hand, no " good effects likely to have resulted from it In rela- " tion to the capital of the country, to counteract its "evil effects on the revenue. "The stockholders, who would have been tempted " to sell by the offer of the commissioners of this sink- " ing fund, would, it is evident, have had in their " possession fifteen millions of capital, upon the " employment of which, in such a manner as to re- " turn a profit, their income, that is, their subsist- " ence, must have depended. To acquire a profit, " we know that capital must be applied to supplant " or perforin a portion of labour in producing or " giving form to commodities ; and it is hardly pos- " sible to suppose, that there could have existed any " new channels of so employing a capital, at a mo~ " ment when there was forcibly created a diminution " of demand for commodities to the extent of fifteen " millions. " So far from its being reasonable to suppose there " could have existed, under such circumstances, any " opportunity of employing an additional quantity fct of capital, it is certain, that so great a diminution "of demand must have thrown out of employ some " of that capital which was useful in supplanting la- ' hour, in the progress of bringing to market those 218 UN - THE, VARIOUS SYSTEMS " commodities for whieh there could no longer have "subsisted a demand. "The only means, therefore, those stock-holders *' could have had of forcing the capital in their hands " into employment, must have been by offering to "supplant labour at a cheaper rate than that at which " it was antecedently performed. A competition "would thus have arisen ; the profit of capital must "'have been diminished ; the interest paid for stock " or money must have fallen ; and, of course, the " value of fixed annuities, or government securities, 44 must have risen ; and this must have continued " progressively till capital became so abundant and " its profits so diminished, that the proprietors would " have been induced to remove it to other countries, il where higher profits might be made: and France " would inevitably have been amply supplied with •' capital, the want of which is the great drawback " on her industry. •' Neither is it theory alone which points out these " evils as the necessary result of such a measure ; for, " as far as practice gives us an opportunity of judg- " ing, the accuracy of the inference is uniformly con- " firmed by experience. " When Pope Innocent XL reduced the interest "of his debt from four to three per cent, and " employed the sum saved to accumulate, but a " short time elapsed till the new three per cent fund " sold at 1 12. In like manner, when the interest "of the national debt of England was reduced, in '5 1717, from six to five per cent, and the saving ■ { devoted to accumulation ; the consequence was. OF POLITICAL ECONOMY. 21$ —■■ —,. , M , . ., , ^.. ll0 l l , „ * Adam Smith's Wealth @f Nations, book ii. chap, 5, 234 ON THE VARIOUS SYSTEMS other employment is more or less favourable to wealth. In short, we must follow capitals in their progress, ascertain their effects, and determine in some degree their absolute and relative power. This examination will either unveil the error, or confirm the accuracy, of the fascinating doctrine of Adam Smith. If a nation possessed of a territory of large extent, great fertility, and fit to be cultivated, had large capi- tals, and employed them chiefty in agriculture ; that nation would undoubtedly obtain a very considerable agricultural produce : but this produce, whatever might be its magnitude, would not of itself consti- tute any real and effective wealth; it would be wealth only when it had the power of obtaining in exchange all the other objects which the cultivators of the soil might be in want of, or which might suit their convenience. That part of produce which they could neither consume nor exchange, would be without any value, and as if it did not exist. A country possessed of none but such wealth, would be completely wretch- ed. If agricultural produce is to constitute wealth, it is absolutely necessary that it may easily be ex- changed against equivalents. But where are we to look for, where to find these equivalents, which alone can give it a value, and raise it to the rank of wealth ? Is it in the interior of the country, where the agri- cultural produce has been gathered ? The attempt will prove abortive, if manufactures and commerce have not made a progress similar to that of agriculture; if the manufacturing and trading classes are inconsid- erable in number, and not sufficiently rich to give OF POLITICAL ECONOMY. 235 equivalents in exchange for the agricultural produce offered to them. "The extent of the home-market, for corn," says Adam Smith, "must be in proportion to the, general industry of the country where it grows."* If this maxim be correct ; how can the employ- ment of capital in agriculture be the most profitable, the best calculated to enrich the society to which it belongs ? How can the manufacturing and trading classes, when deprived of the capitals reserved for agriculture, rise and prosper so as to give any value to the produce of the agricultural class ? And with- out this value, what will become of the agricultural produce ? The nations of ancient and feudal times employed their capitals exclusively in agriculture, and yet they never arrived at wealth ; or at least their wealth was confined to the hands of a few individuals, and did not circulate in the nation. The agricultural produce, however abundant for each land-owner, created neither commerce nor manufactures. Every rich and power- ful individual had in his house slaves whose labour supplied his wants ; and having nothing to ask of his fellow-citizens, he had nothing to oifer them When- ever his wealth became excessive, he imagined no other way of using or employing it than to erect public monuments, and to entertain the people with sump- tuous. feasts, or to surround himself with a numerous train of courtiers, flatterers, and valets ; so that it . — . — * * Adam Smith ; Wealth of Nations ; London, !S05, vol ii. 1 iv. chap. 5, page '321. S536 ON THE VARIOUS SYSTEMS was consumed without any re-production, and with- out any advantage to national wealth and population. Such was the effect of the employment of capital in agriculture. Prejudicial as it was to the nations of antiquity and of the middle age, it would yet prove much more fa- tal to modern nations. It then produced at least pri- vate wealth, because agriculture was entrusted to slaves and bond-men, whom fear condemned to la- bour : but at present it would not even produce pri- vate wealth. Not finding any vent for the surplus of their produce, the agricultural classes would only* labour up to their wants, and all means of attaining wealth and prosperity would vanish for ever.* Will it be said, that the agricultural country may sell her produce abroad ? But if other countries also employed their capitals in agriculture, if they too neglected manufactures and commerce, her hopes would be disappointed and her * In our modern states, lands are unequally distributed. They yield more produce than those by whom they are cultivated can consume ; and if arts be neglected, and agriculture alone practised, the country cannot be peepled. Those who till, or cause the ground to be tilled, having a surplus of produce, nothing stimulates them to labour the following year ; neither is the produce consumed by the idle, because the idle have not wherewith to purchase it. Arts must therefore be introduced, that the produce may be consumed by artists and workmen. In short, it is necessary, in -modern slates, that many should raise agricultural produce beyond what they want. For this purpose, a wish must be excited in them to possess super- fluities ; and these are afforded only by artisans. Montesquieu, Es- prit des LoiXf Li v. Ixiii. chap. 16. OF POLITICAL ECONOMY. Q3T* produce without value. Were some nations even less favourably situated for agriculture, or blind enough to apply their capital to manufactures; if navigation had no-wheremade a progress proportioned to that of agriculture, (which would infallibly be the case, if the employment of capital in agriculture were the most beneficial ;) there would be no vent for the sur- plus of agricultural produce, aud consequently all superfluous re-production would beat an end. Adam Smith was no doubt aware of these results, when he said that " the agricultural system can en- rich a country only by rearing artisans, merchants, and manufacturers ; and that this can only be accom- plished by giving the utmost liberty to commerce and manufactures." But he also was so sensible of the insufficiency of these means, that he says, " the agricultural system discourages, in the end, the very industry which it ought to favour. ," If the agricultural system can enrich a country only by creating industry and commerce, and if, instead of favouring it, it discourages them ; it is self-evi- dent that this system never can in any case enrich a country, and consequently no country can, without prejudice to her interests, employ her capitals in agrir culture. Will it be said, that the surplus of capitals which cannot be employed in agriculture, is applied to man- ufactures and commerce, and that this employment, by causing the latter to prosper, confers upon the ag- ricultural produce a value and power which it had not of itself? 31 $3& ON" THE VARIOUS SYSTEMS The consequence may at least be doubted ; it is much more probable, that being incited to labour by their wants, the agricultural classes will only rear as much produce as is sufficient to supply these wants, and never will have a surplus to devote to the establish- ment and maintenance of manufactures and commerce. But admitting that there is a surplus of agricultu- ral produce which, by its new employment, might create manufactures and commerce ; if this surplus, by creating manufactures and commerce, is the true cause of the wealth of the agricultural classes, it must be acknowledged that the most useful employment of capital is not that which supports agriculture, but that which supports manufactures and commerce. And let it not be supposed, that if the employment of capital in agriculture be not the most useful in the infancy of wealth and capitals, it is more beneficial when wealth has reached a certain pitch, and capitals are abundant and nearly sufficient for the support of every branch of labour. The influence of capitals employed in agriculture upon public prosperity even then can only be proportioned to the success of the capitals employed in manufactures and commerce. Even then agriculture can prosper only through the prosperity of manufactures and commerce. How can the employment of capital in agriculture be the most useful and most profitable, when its utility is depen- dent on the utility of the capitals employed in manu- factures and commerce ; when the nation to whom these different capitals belong, can expect wealth on- ly from manufactures and commerce, which enrich, agriculture and render it productive ? OF POLITICAL ECONOMY. 239 It appears to me fully demonstrated, that in this first supposition, in the case of an agricultural country with an extensive territory, the employment of capital in agriculture is not the most advantageous, and can- not lead to wealth : a nation can only grow wealthy, as has also been remarked by Adam Smith, by some great manufacture destined to ansxver the demands of foreign countries. But would not the case be different with regard to a people whom nature or fate has cast on some barren shore or deep marsh-land, whence the sea has receded, but which it still threatens every moment with a fresh incursion ? In this case, I think again, that to propose to such a people to employ their capitals in agriculture would be condemning them to eternal misery. If, on the contrary, they apply their savings to manufactures, commerce, and navigation ; this em- ployment opens inexhaustible sources of wealth, which, pouring in from abroad, are concentrated in the country, and render barrenness itself productive. Of this, both ancient and modern history afford nu- merous and striking examples. Tyre, Athens, Carthage, Constantinople, Venice, Genoa, and Holland, rose to wealth and power by employing their capitals in industry and commerce ; and, what is equally remarkable, history does not offer a single nation that, by the exclusive employment of capitals in agriculture, accumulated with so little means and resources such extensive wealth, enjoyed so great a consideration, and attained such an emi- nent degree of power and grandeur. How then is it 240 ON THE VARIOUS SYSTEMS possible to compare, and even to prefer, the employ- ment of capital in agriculture to its employment in manufactures and commerce ? Adam Smith again furnishes us with an argument conclusive against his system, and all in favour of manufactures and commerce. He acknowledges, that " the first improvements of art and industry must have been made on the sea- coast and along the banks of navigable rivers, where the conveniency of water carriage opens the whole world for a market to the produce of every sort or labour."* How has it happened, that a truth so pregnant with consequences did not wean him from the system he adopted ? How was it that he did not perceive, that if industry and commerce owed their first progress to causes unconnected with agriculture, if they prosper by themselves and independently of agricultural wealth, nothing can hinder capitals, thus employed, from enriching the people to whom they belong, as well as capitals employed in agriculture ? The fact cannot be denied. Although Adam Smith laid the foundations of the mercantile system, he yet could not detach himself from the impression which agricultural ideas had made on his mind. Though he attached great importance to manufactures and commerce, he yet considered them simply as the instruments, agents, and distributors of agricultural wealth. He constantly kept very close to the system * Adam Smith's Wealth of Nations, London, 1805, vol. i. book i. chap. 3, page 31. OF POLITICAL ECONOMY. g41 of the French economists which he had combated, and in the end gave it the preference over the system he had created. But he has himself provided us with the means of avoiding the error into which he fell, by the very lights which he disseminated and neglected. Why should capitals employed in agriculture be more advantageous to a nation than capitals employed in manufactures and commerce ? It is, says he, be- cause in this kind of labour nature does a third or a fourth of the work, and, consequently, economizes a third or a fourth of the capitals. But the produce of labour, according to his own principles, is not valued by what it has cost, nor by its use, but by its value in exchange : of course it matters little* whether the agricultural produce costs more or less to be raised, if it has not a greater value or even less value in exchange. A quarter of wheat, though it cost less to produce than a large looking- glass, and though its value in use be far superior to that of a mirror, may, however, have no value at all, if no one wants it ; while a mirror may have a very great value, if desired by many individuals. It is, therefore, neither this nor that particular produce which constitutes wealth ; it is the exchangeable va~ lue of all produce, and the capitals which confer the greatest exchangeable value .upon the produce of a country are the most useful and most favourable to the wealth of that country. Capitals employed in manu- factures and commerce are eminently possessed of that faculty, because they afford the produce most in request, and find consumers and commodities in §42 ©N THE VARIOUS SYSTEMS exchange for it in every part of the globe. The na- tion which employs its capitals in manufactures and commerce is therefore evidently nearer the source of -wealth, than the nation which employs them in agri- culture, and which, under the most favourable sup- position, can, after all, derive no wealth but from the prosperity of manufactures and commerce. And what ought particularly to recommend this system to every friend of humanity and social hap- piness, is this : while the agricultural system, accor- ding to Adam Smith himself, always tends ultimately to discourage manufactures and commerce, through which alone it can prosper ; it is in the very nature of the mercantile system to encourage agriculture, to develope its power, and to carry it to the highest degree of improvement of which it is susceptible. The characteristic of the mercantile system is every where to stimulate labour, to acGumulate its produce, and to increase wealth. The greater the wealth of the country, the more it prospers ; it increases by the very increase which it affords to public wealth. The capitals which commerce employs must therefore he the most beneficial, not only to the wealth of one nation, but even to universal wealth. The mercan- tile system is as preferable to the agricultural system with regard to the employment of capital, as with regard to the nature and effects of labour. If it b« advantageous for mankind to prefer the labours of industry and commerce to those of agriculture, it is equally advantageous for them to employ then- savings and capitals in the same way. The greater their progress in manufactures and commerce, the OF POLITICAL ECONOMY. 243 nearer will they be to wealth, and their wealth will be so much the larger, the more capitals they have employed in manufactures and commerce. This result of facts and reason is also that of the human instict, of the propensity of man to exchange commodities, and of his fondness for all those enjoy- ments which can be had only by means of such ex- changes. Adam Smith is of opinion, that, " had not social institutions deranged the order of things, the wealth and aggrandizement of towns would in every civiliz- ed society have advanced with equal steps with the improvements of the agriculture of the country." I think, on the contrary, that if social institutions had seconded, or, at least, not thrown any obstacle in the way of, the developement of human faculties, these faculties would have been turned to those la- bours, the produce of which is most sought for, and which afford most objects of exchange : and as man- ufactures and commerce are eminently possessed of this privilege, the mercantile would every where have been preferred to the agricultural system. The least industrious and skilful would alone have continued at- tached to the rude and less productive labours of ag- riculture. And in spite of those social institutions which o-n- pose the developement of industry and commerce, is it not still to manufactures, commerce, and the arts, that the most industrious, the most ingenious individuals, those whom nature and education have endowed with most talents and faculties, devote them- selves ? And is not agriculture the lot of men the ON THE VARIOUS SYSTEMS least endowed by nature, and the least disposed to occupations which require dexterity and talents ? This general tendency of men to industry and com- merce renders it impossible to be blind to their ad- vantages ; and it is without any foundation, that. Adam Smith asserted that capitals employed in agri- culture are more favourable to national wealth, than those employed in manufactures and commerce. The most profitable capitals are not those which put most labour, but the most useful labour, into motion ; not those which employ most, but the most skilful indi- viduals ; not those which yield the largest, but the- most valuable produce. . The most profitable capitals are, consequently, those employed in manufacture* and commerce, CHAP. V. Of the Profit of Stock ADAM SMITH is the first and only writer on po- litical economy, who discovered the laws which regu- late the rent of capitals or profit of stock ; and this theory has not met with any criticism, nor does it appear susceptible of being criticized. , He observes, first, that the profit of capital stock employed in any private business, is so very fluctua- ting, that the person who carries on a particular trade, cannot always tell himself what is the average OF POLITICAL ECONOMY. 245 of his annual profit. It varies not only from year to year, but from day to day, and almost from hour to hour. To ascertain what is the average profit of all the different trades carried on in a great kingdom, must therefore be much more difficult. The only rule which can direct us in this difficult and complicated research, is the rate of the interest of money in a given country, and at a given time. According as the usual market-rate of interest varies in any country, we may be assured that the ordinary profits of stock must vary with it, must sink as it sinks, and rise as it rises ; whence Adam Smith draws various consequences relative to the progress of wealth in France, England, Holland, and Mexico.* But this rule is liable to several exceptions, which render its application extremely doubtful and uncer- tain. According as circumstances augment or diminish capitals, or bad laws derange the monetary system of a country, the profits of stock may be more consider- able than they ought to be. Certain it is, in general, that the profits of stock decrease in proportion to the. increase of wealth, and augment in proportion to its decline. When a country possesses the sum of capi- tals which it wants, the profits of stock are very low. Such is the doctrine of Adam Smith on this part of political economy. Though it does not afford much positive information, and is confined to mere conjec- tures, it yet furnishes us with one corollary worthy to be treasured up ; namely, that the operations of governments, when not conducted with proper know- * Adam Smith's Wealth of Nations, vol. i. book i. chap. inferred. Ever"since social order has been consolidated, and since the mercantile system exercises a salutary influ- ence over the political system,- money has experienced OF POLITICAL ECONOMY. 269 greater variations than corn, because commerce and industry have introduced a quantity of money supe- rior to the quantity of corn with which agriculture has been able to furnish commerce; and particularly because money, by being abundantly diffused among all the classes of the people, has conferred a greater exchangeable value upon corn ; stipulations to be paid in corn must therefore have become more ad- vantageous than stipulations to be paid in money. But, if the military system had prevailed and con- centrated all the precious metals in the metropolis and among a small number of individuals, would not the contrary have happened, and would. not those stipu- lations to be paid in money, which are so detrimental to proprietors and creditors, and so profitable to far- mers and debtors, have proved ruinous to the latter and favourable to the former ? The stipulations to be paid in corn would have afforded results similar to those arising from stipulations to be paid in money. Let us therefore conclude, that men are deluding themselves when they imagine they can subject futu- rity to steady and permanent laws, and imprint on their power, which is limited and circumscribed by the fluctuation of events, the immensity and immobi- lity of eternity. Whatever efforts we may make, we shall never be able to extend our dominion beyond the present moment, or to give, during this short space of time, a fixed and steady value to things. That value is subject to the laws of exchanges, and. to the pro- portion of the demand to the abundance or scarcity, which is always fluctuating, and which cannot be fix- ed nor subjected to steady and permanent rule*. S70 ON THE VARIOUS SYSTEMS We must however acknowledge with Adam Smith ? that this perpetually fluctuating value of things tends to being fixed, since it always gives the producers the equivalent of what their production has cost. Else productions that do not obtain this equivalent, this just return, would no longer be reproduced, or they would be reproduced only in a proportion calculated to re-establish the equilibrium of their exchangeable value. Thus a natural proportion is, as it were, es- tablished between the different productions of man's labour; none has a lasting and permanent prepon- derance over the other, but up to what it has cost. Beyond this all are measured, not by their real, but by their relative value ; not by their cost price, but by what they are worth. So that it is the exchange- able value which ultimately gives to every producer the equivalent of what his commodity cost to produce, and consequently secures the producers against loss. But does not this exchangeable value afford to some producers profits superior to those which it gives to others ; and are commercial exchanges to be con- tinued, and circulation to be maintained in its activi- ty, in that case ? In spite of the tendency of exchangeable value to insure to every producer the equivalent of what his production has cost, it yet cannot be denied that, when exchangeable value has. reached this point, it is liable to vary and to grant to some producers advantages which it denies to others. Suppose a farmer expends, either in wages, interest of capital, or rent, one hun- dred pounds sterling, to grow fifty quarters of corn ; whilst a manufacturer of woollen cloth expends only OF POLITI6AL ECONOMY. £71' seventy-five pounds to manufacture one hundred yards of cloth, the exchangeable value of which is one hundred pounds ; it is obvious that the farmer, if he obtain only one hundred pounds for his fifty quarters of corn, is less benefited by a foilrth or five- and-t wenty pounds, than the manufacturer ; and that, as long as their respective situation is the same, the wealth of the manufacturer is progressive, and that of the farmer stationary. Adam Smith observes, that the superiority of cer- tain labours and employments of capital over other labours and employments of capital cannot be of long duration, because those which are least favoured go over to the most favoured ones, and by their compe- tition re-establish, if not a perfect equality, at least a certain proportion' between the profits of all labours and employments of capital. This is, no doubt, the case when the exchangeable value does no longer afford to a labour or employment of capital, the equivalent of what its produetion has cost; because, in that instance, the smallness of the equivalent informs the producer of his loss : but it is difficult to conceive how this can happen, when the equivalent covers all the expences of the producer, when nothing informs him that what he has obtained as an equivalent has not cost so much to produce as his production. I am even convinced that it never happens in common life, and that among all labourers and employers of capital, there are not two classes, or perhaps not two individuals, capable of discovering which labours and which employments of capital yield '$72 ON THE VARIOUS SYSTEMS the best returns. Every one is attached to the la- bour or employment of capital to which he has giv- en the preference ; and when he begins to perceive that it is not as profitable as others in which he might have embarked, it is generally too late to quit his pursuit and to go over to that which he ought to have preferred. To inquire into the most advantageous employment of capital appears, after all, not desirable ; the private wealth of certain classes and individuals resulting from the advantages which exchangeable value gives them, affords aii incitement to general emulation, ac^ tivity, and industry, and to aim at effecting a propor- tionate equality in the benefits of all labours and all employments of capital, would perhaps be attended with pernicious consequences. The case is different when the advantages which exchangeable value gives to certain productions are derived from bad laws or the partiality of govern- ments, and due to monopolies, privileges, and boun- ties. Discouraged by the privations to which they are doomed, and sometimes by the sacrifices to which they are forced, the labouring classes are then pining, they attach less importance to the increase of their capitals, and both their industry and wealth decline- apace. Except this highly important case, which is little attended to, I think national wealth has nothing to ap- prehend from, and cannot be injured by, the inequali- ty of profits resulting from the various exchangeable value of the produce of labour which is circulated at home. OF POLITICAL ECONOMY. 273 But is the inequality of profits in the exchange of home for foreign produce equally harmless ? Suppose a nation excels another in industry, in the accumulation of capitals, and in sciences and arts, and both nations interchange the produce of their labour ; will not the productions of the industrious, enlighten- ed, and wealthy country, have a more considerable ex- changeable value, than those of the country inferior in knowledge, industry, and wealth ? As her productions are really better, , more acceptable, and cheaper, will they not be preferred ? And if the circulation of the foreign commodities meet with no obstacles, will not labour diminish in one country, and augment in the other ; or, at least, will not one nation appropriate to itself the most lucrative labour, and steadily advance on the road to wealth, whilst the other, being confined to the least profitable labour, pines in continual and intolerable misery ? Among the distinguished writers who hold this opinion, David Hume and Cantillon, in particular, think that rich nations are far from having the ad- vantage in their dealings with poor nations, and that the latter generally get rich in the end at the expence of the former. "The advantages of a rich trading country," says David Hume, " are compensated in some measure by the low price of labour in every nation which has not an extensive commerce. Manufactures gradually shift their places, leaving those countries and provinces which they have already enriched, andflying to others, whither they are allured by the cheapness of provisions §74 ©N THE VARIOUS SYSTEMS i and labour, till they have enriched these also, and are again banished by the same causes."* But the observation is more specious than founded. A country can grow rich only when industry is fa- vowed by nature, and ably seconded by government c in proportion as prosperity increases, the wages of the labouring classes are raised But let it not be supposed that increased wages are necessarily productive of higher prices. When the labourer is well paid, he la- bours more and better ; the high price of his labour is profitably compensated by an enlarged and impro- ved produce. The fact is established by every tra- veller who has compared the produce of labour in countries where labour is badly or well paid. The cheapness of capitals, on the other hand, sinks the price of the productions of the rich country, be- cause it affords the means of setting up machines which shorten and facilitate labour, of selecting the best raw materials, and of granting long credits ; all which .are advantages so superior to lew wages of la- bour, that they insure to the nations that enjoy these advantages, an absolute preponderance over those that have them not. ' Lord Lauderdale says precisely the same. The noble' Earl thinks, that David Hume " did not suffi- ciently attend to the unlimited resources that are to be found in the ingenuity of man in inventing means of supplanting labour by capital; for any possible aug- mentation of wages that increased opulence can occa- * Essays by David Hume, Edin. 1804, vol.i. ©f Money, p. 300, OE POLITICAL ECONOMY. 273 sion, is but a trifling drawback on the great advanta- ges a country derives, not only from the ingenuity of man in supplanting labour by machinery, but from capital laid out in roads, canals, bridges, inclosures, shipping, and employed in the conduct of home and foreign trade. "* * The sentiments of Cantillon and David Hume on this subject ought therefore not to arrest our atten- tion any longer. But Dr. Quemay has started a singular opinion, He not only is not afraid of the augmentation of the wages of labour raising the prices of productions and injuring their sale; but he even wishes to per- suade us that the low price of labour, which sinks the exchangeable value of commodities, renders the trade with a foreign country less profitable. " The nation- al income," says he, " is always greater in proportion as the exchangeable value of commodities is high. Abundance and dearness are opulence, "f This doctrine is absolutely contrary to the elemen- tary notions of political economy If man's propensi- ty to truck and barter, or rather his desire of enjoy- ment and happiness, promotes the circulation of the produce of labour, it must be more active when the number of those who have any thing to exchange is considerable, and when the objects to be exchanged are in great quantity and variety ; when the commo- dities to be exchanged originally cost little, and when their price is within the reach of a larger number of * The Earl of Lauderdale's Inquiry, chap. v. page 299, J Pkysiocratie, Max. IS, page 1 J 6, 276 ON THE VARIOUS SYSTEMS consumers ; or, in other words, the cheaper commo- dities are, the more consumers do they find, the less precarious is their sale, and the more profitable are their returns. Mr. Say has expressed this truth by an image of great brilliancy and admirable correctness. " Consumption," he says, " resembles a huge pyra- mid; the breadth of the pyramid represents the num- ber of Consumers, or the extent of the demand; and its height the price of the commodity :* the higher the price, the smaller the breadth; that is, the de- mand. Sometimes the natural price of certain com- modities rises higher than the pyramid; that is, to a height where there is no demand ; such commodities are no longer produced."* If such be the ultimate result of the high price of labour, (and the fact is certain,) it is evident that op- ulence does not consist in abundance and dearness, which are incompatible ; but in abundance and cheap- ness, which always harmonize. In short, nations are so much the richer qs commodities are in greater plenty and at lower prices ; and by a consequence equally infallible, their commerce is so much the more profitable, as the productions of their labour are cheap. What then ought nations to do that are poor, or inferior in wealth, and do not derive from the gene- ral circulation of the produce of their labour the same profits as rich nations ? Must they insulate themselves, multiply custom- houses and prohibitions, and refuse to communicate with richer nations ? * Traite d' Economic Politique, par Say, tome ii. pagG 72. OF POLITICAL ECOtfO^IY. , . ±77 The best-guarded toll-bars are generally powerless against the cheapness and perfection of foreign com- modities. Private interest easily overleaps them, and turns them to the disadvantage of the people whom they keep confined. These bars not only do not exclude the productions of rich countries, but this very obstruction causes them to stand much dearer to the poor country, and, what is still more deplorable, forces the poor country to sell its own produce cheaper, because there are less competitors to export it. Thus poor nations are punished for their endeavours to do without the raw and manufactured produce of rich countries. And were their imprudent efforts crowned with success, they would be still more miserable. They would deprive themselves of the certain profits arising from the cheapness of the foreign commodities and from the dearness of their own pro- ductions. For it is an undoubted truth, that foreigu produce is imported only as far as it is cheaper than the home-produce ; and for the same reason, home- produce is exported only because it obtains higher prices abroad than in the home-market. The rule is infallible ; it proceeds from the immutable order of things, and is not liable to any exception. Nature has granted every country some particular advantages, of which she cannot be stripped, and of which others can partake only as far as they let her enjoy part of the advantages of which she is deprived. Nations that resist this communication of mutual benefits, are dooming themselves to fruitless priva- tions. To attempt to conquer such difficulties by na- tional industry, is often impossible, and always more 36 573 OK THE VARIOUS SYSTEMS expensive, than to acquire the foreign commodities by an interchange of national productions. Com- merce preserves to every country her advantage in the kind of industry for which she is peculiarly fit, and allows that industry to be improved by a concentra- tion of capital ; whilst the attempt to rival foreign industry in every particular, and to do without fo- reign produce, weakens and splits its capitals, hurts national industry, impedes its productiveness, stints jts growth, and converts its ramifications into as ma- ny parasite branches which unprofitahly suck the sap of the tree and remain barren twigs. Left without rivals, without competition, and aban- doned to its own impulse, national industry painfully drags along in the beaten tract, it derives no benefit from the progress of general industry, and without having decayed, experiences a fatal decline. Such is the ultimate fate of every nation that disdains foreign commerce, and fancies it can exist without any inter- course with other nations, or at least that deems itself so much the richer as its exterior communications are few, and as i,t has more internal means to supply its wants. It stops the progress of wealth, condemns itself to everlasting mediocrity, and obstructs the grandeur of its destiny. There is however, it must be confessed, one pecu- liar case in which a nation ought to renounce all in- tercourse with other nations ; this is, when its govern- ment is so bad, that it strips it of all means to rival other nations in any production and in any branch of industry whatever. Such a nation is forced to renounce general commerce, otherwise its resources OF POlltlCAt ECONOMY. 37$ would soon be exhausted, it would become tributary to nations that are better governed, and never could shake off its dependence. Nations smarting under a bad government would labour for those which enjoy a good administration, and the latter would enrich themselves with the sweat of their brows : sad and deplorable result, which teaches the depositaries of the fate of nations the necessity of attentively study- ing the causes of their prosperity, which is the basis of political power. Adam Smith states three other cases in which na- tions ought to restrain the circulation of the produce of general labour. The first is, when the safety of the country is con- cerned ; which was, says he, the case with England when her act of Navigation was framed ; " an act prejudicial to the growth of wealth : but as defence is of much more importance than opulence, the act of Navigation is, perhaps, the wisest of all the com- mercial regulations of England,"* This manner of viewing the English act of Navi- gation betrays in the author a greater attachment to his country than to truth. Before this act Of Navigation, the Dutch had the greatest share in the maritime commerce of the world, and were indebted to their trade for a formidable navy and immense riches. But whatever might have been their power in both these respects, it could not threaten the safety of England; and it cannot be supposed that * Wealth of Nations, London, 1805) vol. ii. book iv. chap. 2 ? page 203, 280 ON THE VARIOUS SYSTEMS a population of about two millions of individuals, who had scarcely attained the rank of a free and in- dependent nation, could inspire with serious alarms a population of five or six millions, who were still burn- ing with the enthusiasm of liberty. Adam Smith himself acknowledges as much. " In the Dutch war," he says, " during the go- vernment of Cromwell, the navy of Great Britain was superior to that of Holland ; and in the war which broke out in the beginning of the reign of Charles II. it was at least equal, perhaps superior, to the united natives of France and Holland."* The safety of England, therefore, was not, as Adam Smith pretends, the true cause of the framing of the act of Navigation. Its regulations proceeded from national animosity, rivalship, and ambition ; and they certainly were well calculated to gratify such dreadful passions. By excluding from the ports of England vessels that imported any other produce than that of their own country, the act of Navigation seemed to invite all maritime nations to share in the ad vantages of navi- gation which the Dutch enjoyed, as it were, exclu- sively. But as those nations had no vessels, they could not avail themselves of the advantage that was offered, j, nor enrich themselves with the spoils of Holland ; so that this measure weakened the naval power of Hol- land without any benefit to the maritime nations. No one except England reaped any profit from it : not only was her naval strength increased by the weakness * Wealth of Nations, vol. ii. book iv. chap. 7, page 454.. OF POLITICAL ECONOMY. 282 of her rival, but she also succeeded Holland in that maritime trade which she had interdicted. From that instant the naval power of Great Britain acquired an absolute preponderance over that of all other nations, and ruled the seas. Had the maritime and continental nations of Eu- rope been alive to their true interests, they might ea- sily have counteracted a measure pernicious to the circulation of their produce. It would have been sufficient to exclude from their ports British ships loaded with any other than British produce ; and the consequence would have been this : England, being reduced to carry in her ships her own raw and manufactured produce, could not have profited by the spoils of Holland, nor could she have grown rich by the losses of the Dutch. Her naval power, limited by that of her rival, could not have dictated laws to the other seafaring nations. Sweden alone dared to resist this imperious meas- ure, and forced England to relinquish it towards ^ier. * But the example was not followed. The other nations submitted to the yoke ; and from that instant * MacpJtersons Annals of Commerce, vol. ii. page 552 ; or An- derson's Origin of Commerce, vol. ii. pages 145, 146; where it is said, that : although one of Sir Josiah Child's most principal aims was the pointing out the increasing commerce of Holland, yet in the close of his Preface, he observes, that the Swedes have laid such high impositions on their own merchandize, unless they be carried in Swe- dish bottoms, as amounts to almost a navigation act in Sweden." — T. 282 ON THE VARIOUS SYSTEMS England exercised an absolute dominion over general circulation, or commerce. It is therefore without any foundation that Adam Smith has tranformed the English act of Navigation into an act of safety. It is evidently nothing but an act of hostility and ambition, incapable of forming a just exception to the necessity of a free circulation of the produce of general labour. The second case, which, according to Adam Smith, ought to induce a nation to restrict the liberty of commerce, is when the produce of foreign industry is not burthened with a tax equal to that imposed upon the produce of inland industry. He thinks it is then reasonable that an equal tax should be imposed upon the like produce of foreign industry, because foreign industry would else have a certain advantage over the produce of national industry. The second limitation of the fredom of trade has led Adam Smith to examine whether it ought to be extended to the produce imported from countries which impose no tax upon objects of the first neces* sity, whilst in the country into which they are import- ed the necessaries of life are burthened with a tax, And although this second case appears every way sim- ilar to the first* his decision is precisely the contrary to what it had been in the former case. The arguments on which he grounds this diversity of opinion, are : 1. That it might always be known with great ex- actness how far the price of such a commodity could be enhanced by such a tax : but how far the general enhancement of the price of labour might affect the Or POLITICAL ECONOMY. 383 price of every different commodity about which la- bour was employed, could never be known with any tolerable exactness. 2. That taxes upon the necessaries of life have nearly the same effect upon the circumstances of the people, as a poor soil and a bad climate ; and as in this case it would be absurd to direct the people in what manner they ought to employ their capitals and in- dustry ; it would be equally absurd, on account of an artificial scarcity arising from such taxes. To be left to accommodate their industry to their situation, and to find out those employments in which, not- withstanding their unfavourable circumstances, they might have some advantage either in the home or in the foreign market, is what in both cases would evi- dently be most for their advantage. 5. That, to lay a tax upon the foreign produce, because the home produce is already overburthened with taxes, and to make the natives pay dear for the greater part of other commodities, because the ne^- cessaries of life are dear, are certainly two most ab- surd ways of making amends.* But in spite of Adam Smith's endeavours to estab- lish a difference between the two cases, I think there is none : to burthen the produce of foreign industry with taxes equal to those imposed upon the produce of national industry, and not to impose any tax upon the raw produce of a foreign country, although the produce of the soil at home isburthened with a tax, appears a contradiction. If, in the first case, national * Width of Nations; London, 1805; vol. ii. b. iv. ck. 2, p. 206*. S84 ON THE VARIOUS SYSTEMS industry would be discouraged, national agriculture would be alike discouraged in the seconth Conse- quently, if the equality is to be restored in one case, it ought to be so in the other. The question therefore remains, and we must still examine, whether nations ought to refuse circulating the raw and manufactured produce of other countries, under the pretence that the exchangeable value of their productions does not afford them equivalents equal to those which the foreign producer receives. I think the question is completely answered by what I have stated above. If the equivalent obtained by commerce does not repay the national producer for what his commodity has cost him to produce, he will cease producing it, and employ his capital and industry in some other labour in which he is enabled to stand the competi- tion, and to reap profits equal to those of the foreign trader; or if all productions are burthened with taxes to such a degree, that none can stand the competition with foreign productions, not even in the home-mar- ket, government in that case is so bad, that it be- comes a matter of indispensable necessity to stop all kind of foreign commerce. Finally, Adam Smith examines how far it may be proper to continue the free importation of certain foreign goods, when the foreign nation restrains, by high duties or prohibitions, the importation of some of our manufactured produce into their country ; and he justly decides, that when there is no probability that retaliation will procure the repeal of such prohibitions, it is a bad method of compensating the injury done to OF POLITICAL ECONOMY. ^85 certain classes of our people, to do another injury ourselves, not only to those classes, but to almost all classes of the community. Such law would impose a real tax upon the whole country, not in favour of that particular class of workmen who were injured, but of some other class.* Thus, of all the motives which may induce a nation to prohibit the importation of the produce of other countries, there is but one that is reasonable and just, because it is necessary ; I mean when the government of our own country is so defective, that none of oui home-productions can stand a competition with foreign productions even in the home-market, when national industry is not capable of being stimulated by the rivalship of foreign industry ; and when the people, being discouraged and debased, abandon theniselves to sloth and misery. Except this case, foreign com- merce or general circulation is beneficial, useful, and profitable to all, and contributes, if not with equal, at least with certain success, to the progress of pub- lic and private wealth. * The author says : " Autrement cest imposer une taxe sur tout le pays en faveur de la classe d' ouvriers qui Jburnit les produits pro- hibes ;" which is perfectly correct : but Adam Smith shews parti- cularly, that the workmen who suffer by our neighbour's prohibi- tion are not benefited by ours, which is the main point of the ques- tion. (Wealth of Nations, 1805, vol. ii. book iv. chap. 2, pages 207 — 210.) — It is this point which the framers of the famous Eng- lish Orders in Council, by which it was intended to retaliate upon France, appear not to have sufficiently considered. — T. 37 286 Ott THE VARIOUS SYSTEMS CHAP. III. Of the influence of Money and Credit upon the Civ* dilation of the Produce of Labour, As soon as mankind discovered that commodities have no value but what is determined by their being exchanged, they must easily have perceived that this value is always in proportion to the extent of the competition ; that is to say, that the more a produce is sought for, the more is its exchangeable .value en- hanced : of course, every producer would carry his productions to the place where the competition was the most considerable, and consequently the market of the borough must have been preferred to the vil- lage-market, that of the town to the borough's, that of the capital to the town's, and that of great fairs and staple cities to the market of capitals. This direction of the circulation of the produce of labour is visibly the work of commerce ; and it? is exclusively to merchants that we are indebted for the benefits which it diffuses. The interest of the producers and traders would, however, have been but imperfectly consulted, if on the most advantageous spot for their exchanges they should have been unable to procure the commodities they wanted otherwise than by the actual interchange of raw and manufactured produce. How many exchanges would they have been obliged to make OF POLITICAL ^ECONOMY, 287 before the grower of a quarter of corn could have obtained a dozen of stockings or a pair of boots, or before the corn-merchant could have exchanged his stock of wheat for the commodities he wanted ! What toils, what trouble must they have undergone, how much time must they have lost, before they could accomplish an operation so simple and so easy 1 How was this operation discovered ? how was the material or actual exchange of produce avoided, and yet its reciprocal value fixed, as if the exchange had been effected with material produce ? Adam Smith supposes, that after the first establish- ment of the division of labour, every prudent man, in every period of society, must naturally have en- deavoured to manage his affairs in such a manner as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry ; that many different commodities were at different times employed for this purpose. In the first ages of Greece, cattle was thus employed j in Abyssinia, salt ; in some parts of the coast of India, a species of shells; dried cod, at Newfoundland ; to- bacco, in Virginia ; sugar, in some of the West-India islands ; and hides, or dressed leather, in some other countries.* - It evidently follows from these facts, that, in the very first stages of civilization, men determined the exchangeable value of the produce of their labour, * Wealth of Nations, vol. i. book i. chap. iv. page 36. 288 ON THE VARIOUS SYSTEMS not by comparing it with the commodities offered to them in exchange, but by comparingit with a prefer- red produce. Thus the owner of a quarter of corn did not say : ' My quarter of ccrn is worth the dozen of stockings, or the pair of boots that I am offered for it;' but ' it is worth so much of the preferred commodity, as will get me a dozen of stockings, or a pair of boots.' — This new mode of exchanging sim- plifies the operation, and yet leads to the same results. Had matters continued in this primitive simplicity, the nature of the preferred commodity and its func- tions in exchanges would never have been mistaken, and the numberless and fatal errors of the monetary system would have been avoided. But merchants having succeeded in making all ci- vilized nations receive gold and silver as the preferred produce, it became necessary to fix the exchangeable value of the precious metals, to divide them in por- tions proportioned to the wants of commerce, and to assign to each portion a value strictly proportioned, to the totality of the value assigned to a certain mass of gold and silver. This operation appeared impossible, not only on account of the exchangeable value of gold and silver, being liable to fluctuate like all other values, but also from the difficulty of giving to the coined metals a numeric value and an invariable fineness always equi- valent to their intrinsic value. This second impossibility has been officially and solemnly recognised at a period not very remote from our time. In 1788, the French government consulted the OF POLITICAL ECONOMY. 289 Royal Academy of Sciences, to know whether it was possible to give to coined metals a monetary value and an invariable fineness always equivalent to their intrinsic value. Five academicians,* who were named commissioners for this purpose, demonstrated by dif- ferent experiences, that it was not possible to fix with strict accuracy the relation of two representative and intrinsic values, both because it is impossible to determine the quantity of alloy to be added to the precious metals for the purpose of giving the coin that resistance and incorruptibility which form one of its essential properties, and because it is extremely difficult to render perfectly homogeneous a mixture of metals which prevents the precise quantity of each being ascertained, as the alteration which the action of the fire may produce upon them cannot be fore- seen.f This defect, peculiar to the converting of g-old and silver into money, was, however, neither the most disagreeable nor the most prejudicial to the general circulation of commodities. An enlightened govern- ment might wish to make it disappear, and to give its coin the highest attainable degree of perfection : but this praiseworthy attempt could not remedy the ori- ginal defect inherent in metallic money ; that is, it could not conferupon gold and silver coin a positive and absolute exchangeable value, when that value is and can be but relative to the demand for coin and to the quantity in circulation. It is this defect which f Horde, Condorcet, La Grange, Lavoisier, and Tilkt, -f Histoirc de I'Acad&mie des Sciences, anwe 1788. 9.90 ON THE VARIOUS SYSTEMS has given rise to the frequent alterations of the mone- tary system, to the numerous errors with which these alterations have been attended, and the countless sys- tems invented to correct or prevent them. The first difficulty on this subject is to know what is meant by money, what is its nature, and wherein it consists. Several writers, and among them the celebrated Montesquieu, consider money as an ideal and arbi- trary sign of value ; and it will easily be credited that a doctrine, so favourable to the supreme authority, was immediately adopted by all governments. They have alternately raised or sunk the nominal value of money according to their wants and temporary interests ; and what is not less strange is, that when this injury was done to public and private property, governments were ignorant of the nature and extent of the evil which they brought upon individuals and -nations. The most intelligent men of all nations have been obliged to devote their studies to elucidate this important part of the science ; and it is now de- monstrated that the value of money can only be rais- ed or sunk in three different ways : Either by altering its fineness and standard ; Or by diminishing its weight; Or by giving it a value superior to the exchangea- ble value of the metals of which it is composed. When governments alter the fineness or standard of money, and yet retain its nominal value; if the alteration amounts to ]-20th, the state loses 1-spth of what is due to it from abroad ; or, if the state is" indebted to foreign countries, it pays I -20th more, OF POLITICAL ECONOMY. 291 because the foreigner is paid in merchandize, and gets l-20th more than he would have got had not the standard of money been altered. Foreigners even do not confine themselves to this benefit ; they introduce counterfeit money into the country, and gain the difference between the nominal value of the new and the real value of the ancient coin. The advantages which foreigners derive from the altered standard of money, influence the exchange,, turn it against the state, and in a short time exhaust the country of its wealth. An alteration in the weight of coin, without med- dling with its standard and its nominal value, is liable to less inconveniencies, because the nation imme- diately perceives this alteration, and guards against it by raising the price of the produce of labour. But this raising of prices in proportion to the di- minution in the weight of money, does not either prevent or stop the evil. The heavy coin is exported or melted ; the active debts which the state has out- standing abroad, are reduced by the whole amount of this diminution in the weight of the coin ; which reduction occasions incalculable losses in trade. Finally, the raising the value of money without altering either its standard or its weight, furnishes foreigners with the means of liquidating their debts with a smaller quantity of the precious metals, or getting paid for what is due to them by requiring a more considerable value ; of purchasing the national produce cheaper, and selling their own at the same price as before ; of introducing counterfeit money into .the state, and of profiting by the difference 292 ON THE VARIOUS SYSTEMS between this counterfeit coin and the real price of the precious metals, This occasions the same disadvantages in. the ex- change, which have been observed with regard to the alteration of the fineness or standard of money. Independently of the losses which the alteration of money brings upon nations in their commercial deal- ings with other nations, its effects are not less disas- trous in their interior, civil, and domestic concerns. 1. It causes money to be hoarded, which obstructs payments, multiplies failures, impairs credit, dimi- nishes and interrupts labour, reduces the labourers to misery, and occasions universal despair. 2. It alters the price of wages and of personal ser- vices, and the stipulations of contracts, deprives la- bourers, servants, pensioners, and creditors, of part of what is due to them, encourages bad faith, and inflicts a fatal blow to morals. 3. It deprives the sovereign of part of his revenue, forces him to disastrous measures, exposes the state and the subjects to violent commotions, and carries disorder and confusion into every department of civil society. Not only ought money not to undergo any altera- tion in its standard or fineness, or in its weight and ex- changeable value ; but if it be composed of different metals, the proportion of their exchangeable value must also be strictly preserved ; so that if the exchange- able value of gold is to that of silver as one to fifteen, that proportion must be accurately observed between the two metals ; else the coin, the exchangeable va- lue of which is superior to its nominal value, would OF POLITICAL ECONOMY. 293 immediately be exported or melted, whilst that of which the exchangeable value is inferior to its nomi- nal value, would occasion an importation of counter- feit coin, which would bring a double loss upon the state and injure internal circulation. Lastly, the coin of a country ought not only to preserve the proportion of its exchangeable value ; that proportion ought also to be observed in the frac- tions of coin, else the nation is again exposed to have its over-heavy fractional pieces of coin exported or melted, and the lighter ones counterfeited. These inconveniencies of the monetary system, which have been so well developed by celebrated writers,* overturned the opinion which had at first been formed of money, and it was no longer consi- dered as an ideal and arbitrary sign of value. It was supposed that the share which money has in the inter- change of commodities consists in fixing the value of each produce. Accordingly, the most enlightened writers, among whom ranks David Hume, taught that money is "nothing but the representation of labour and commodities, and serves only as a method for rating or estimating them." " Money," says Hume, " is not, properly speak- ing, 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 not one of the wheels of trade ; it is the oil which * In England, by Locke; in France, by Dutot ; in Italy, by Da- vanzati, Broggia, Galiani 7 C&rli, Neri^ and Beccaria, 38 f i£4 <6m the various systems . . renders the motion of the wheels more smooth and easy." 5 * Though this opinion is rather incorrect, (as we shall see hereafter,) it yet had one good effect ; it led to the inference, that since money is the standard mea- sure of value, it cannot be altered without injuring commerce. To augment the" value of a coin, a sixth, by altering its standard, its weight, or the exchange- able value of the metal of which it is composed, was perceived to be exactly the same operation as if the capacity of a bushel was reduced by a sixth, and that measure yet retained the same name. It hastened the discovery that such an alteration destroyed commer- cial relations, injured civil transactions, and paralysed business ; and the necessity of respecting the stand- ard measure of exchangeable value was at length submitted to. Enlightened by the errors of the writers who had gone before them, Count Verri in Italy, and Adam Smith in England, gave accurate notions of the na- ture and functions of money. '* Some," says Count Verri, " fancy that money * Hume's Essays, Edinb. 1804-, vol. i. of Money, page 299- But the quotation in the French has this comparison : " L'argent pent etre compare d, beaucbup d' egards aux voiles d' mi vaisseau sans le secoitrs desquelles un bailment ne pour roil traverser I' espace des mers et naviguer dans les pays les plus eloignes," Which is probably taken from one of the first editions of Hume's Essays ; for I have not been able to find this comparison in any of the later editions: Its pur- port is, that money may, in many respects, be compared to sails, without. which a, ship could not cross the seas and reach the most distant shores. — T. • " ? •' OF POLITICAL ECONOMY. %95 is the representative of the value of things .: but mo- ney is a commodity, a metal, whose value is repre- sented by the commodity for which it is exchanged ; and the property of representing value is common to any other merchandize. * Others think money is a pledge, an instrument to obtain merchandize : but merchandize is likewise a pledge, an instrument to obtain money ; and any mer- chandize is also a pledge, an instrument to obtain any other merchandize. " Others still define money the common measure of things ; they forget that money is a value, and the raw material of many manufactures, and that what- ever has a value is measured by the value of other commodities. " These definitions, therefore, do not particularly agree with money, and do not comprise all its attri- butes. The error arises from the anxiety of consid- ering money as something more than a simple metal. Money has a stamp, but receives no value from this stamp. " Money is the universal merchandize, that is, the merchandize which, on account of the smaliness of its volume, which renders its transport easy, and on account of its divisibility and incorruptibility, is uni- versally acceptable and taken in exchange for any other merchandize; I therefore think that consider- ing money in this point of view, is attaching to it the idea which corresponds with all its functions."* The definition which Adam Smith gives of money, * DeUa-Econ, Poiit, § 2. 2$6 ON THE VARIOUS SYSTEMS though less circumstantial than that of Count Verri, is precisely the same. "In all civilized nations," says Adam Smith, " money has become the universal instrument of com- merce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another."* Reduced to its true nature, that is, considered as a preferred commodity, and, as such, as a general inp strument of commerce, money has been released from that dependent and arbitrary state to which it had been too frequently exposed, and henceforward it is safe against ail financial or fiscal operations. As a produce of labour, money has an exchangeble value, which is determined by the demand for it, and by its abundance* or scarcity. As a perferred commo- dity, it has a higher exchangeable value : but for this increased value it is indebted merely to the nature of the metals of which it is composed. Public authori- ty, which by its stamp confers upon it the character of legal money, adds nothing either to those metals or to their exchangeable value, and therefore cannot give it any other value than what commerce confers upon those metals. The monetary law is simply declarato- ry of the fact, and can neither change nor modify this fact ; it never can be arbitrary. Should modern sovereigns assign to money a value in exchange superior to what general commerce as- signs to it, either by thealteration of the standard of the metal, the diminution of its weight, or the raising of * Wealth of Nations, 1805, vol. iV book i. page 44. OF POLITICAL ECONOMY. 297 its price or exchangeable value, they would be the victims of their error, and would entail upon their subjects immense losses, which would soon have been a powerful re-action upon themselves. The prosperity of nations, it seems, has nothing more to dread from adulterations of coin, and this is an essential service derived from the progress of political economy. But although all good writers are now agreed, that the law cannot confer upon money any other value than that of the metals of which it is composed ; there are some very enlightened authors who think that a small addition to that value might be of use to pre- vent the exportation of money, and that a slight du- ty upon its coinage would accomplish this salutary end. ".A small seignorage, or duty," says Adam Smith, " upon the coinage of both gold and silver would pro- bably increase still more the superiority of those me- tals in coin above an equal quantity of them in bul- lion. The coinage would in this case increase the va- lue of the metal coined, in proportion to the extent of this small duty; for the same reason that the fashion increases the value of plate in proportion to the price of that fashion. The superiority of coin above bul- lion would prevent the melting down of the coin, and would discourage its exportion. If, upon any public exigency, it should become necessary to export the coin, the greater part of it would soon return again of its own accord. Abroad, it could sell only for its weight in bullion, At home, it would buy more than that weight. There would be a profit, therefore, in bringing it home again. In France a seignorage of about eight per cent, is imposed upon the coinage 3 ©If THE VARIOUS SYSTEM^- and the French coin* when exported, is said to return home again of its ow>i accord. "* Several distinguished writers are of an opinion di- lectly opposite to that of Adam Smith. They think that all duties on money are had, and that the expence of coining ought to form part of the public expences. Mr. Henry Thornton s opinion on this point is enti- tled to particular attention.! But I shall not quote his opinion because the mo- tives on which he builds it are grounded upon the nature and principles of a combined circulation of paper and metallic currency : and the investigation of these motives might betray me into an unavoida- ble confusion that would require extensive develope- ments. My regret at being obliged to omit the opin- ion of that distinguished writer is, however, lessened by the hope of refuting Adam Smith even without his assistance. When a country cannot pay with the produce of her labour for the value of the foreign produce which she consumes, she has no other means of acquitting herself, than by exporting her metallic money ; and whatever value she may have set upon her coin, it obtains no other value with the foreign creditor than that of the metal of which it is composed, and is re- ceived in payment only up to that value. The seigno- rage or duty on coinage is reckoned for nothing ani does not prevent the money being exported. * Wealth of Nations, vol. i. page 70. f Henry Thorntvtfi Inquiry into the Nature ami Effects of Pape* Credit, page 205, " ■ QF POLITICAL ECONOMY. %gQ When circumstances change, and the country, on re-establishing her affairs, instead of being indebted to a foreign country, becomes her creditor, the balance is then paid to her in her own coin, but n6t according to its metallic value, as she has paid it, and as Adam Smith seems to suppose, but according to its numeric value ; so that the foreign country benefits the value of the coinage superadded to its metallic value. The surcharge of a duty on coinage or seignorage, far from being advantageous, is extremely detrimen- tal to nations ; it aggravates the distress of their situ- ation when they are obliged to export their money,, and impedes there establishment of their affairs when they begin to take a favourable turn. In fine, if money be nothing but a preferred com- modity, as I think I have shewn; a commodity for which every one readily consents to exchange any other produce ; its exchangeable value is determined by the exchangeable value of the metal of which it is composed, or, in other woifds, by the proportion of the demand for it to its abundance or scarcity ; and as the duty on coinage or seignorage adds nothing either to the demand for it, or to its abundance or scarcity; it has no influence whatever upon its exchangeable value. Not only does such a duty on coinage afford none of the advantages that Adam Smith has ascribed to it, but, in my opinion, it is liable to very great incon- veniencies. , . . . ]. It augments the charges of the circulation of commodities, and of course raises their price ; and though this increase of price be not considerable, it 300 ON THE VARIOUS SYSTEMS may yet be prejudicial to their/ being sold abroad, restrict their consumption at home, and even insure to foreign commodities, which are not liable to it, a preference over those which are burthened with this duty. % It keeps bullion from the countries where it is deprived of the facility of being converted into mo- ney, or where, at least, that faculty is burthened with a duty ; and consequently it must render coin scarcer than in countries where bullion is converted into money without paying any duty or seignorage. Every thing therefore tends to shew, that even the smallest duty upon coinage is of no avail to keep me- tallic money in the country, that it alters its destina- tion and its functions, and injures the general circu- lation of the produce of labour. Another question, originating in the very nature of money, has occupied the attention of governments and philosophical inquirers, and has not yet been generally answered ; that is, whether either gold or silver alone ought to be admitted as money, or whe- ther equal favour ought to be shewn to both these metals. The doubts on this question arise from the circum- stance, that if it be difficult to fix the fluctuating exchangeable value of mone}% the inconvenience is still more serious when the exchangeable value of two metals is to be fixed, which, varying in their value, render commercial exchanges unequal, and subject them to chances which carry confusion intomercan- ; tile operations. Suppose a person sells four quarters of wheat for ten OF POLITICAL ECONOMY. 301 guineas. If gold and silver perform alike the func- tions of money, the purchaser may pay the ten guin- eas either in gold or in silver : yet it may not be im- material to the vender, whether he be paid in gold or in silver. If the proportion between the two metals be not accurate; if gold, which, according to its market- price, should be fixed in the proportion of fifteen to one, be only fourteen and a half, the buyer will pay in silver, and the seller, instead of receiving ten guineas, or ten pounds ten shillings, will actually get but about ten pounds two shillings. Should the contrary hap- pen, should gold be rated fifteen and a half, when its market-price is fifteen ; then the buyer will pay in gold, and the vender again will only receive about ten pounds two shillings instead of ten pounds ten shillings. This fact may appear of small importance at first sight, because individuals become alternately venders and purchasers ; and what they lose in one transac- tion, they regain in the other. But this view of thf matter is evidently erroneous and defective. Most commodities are exchanged by the interven- tion of merchants, who, when they make their pur- chases, pay in the least advantageous coin ; and when they sell, they take care to fix the prices as if they were to be paid in the least favourable coin : so that the fluctuation in the value of gold and silver coin gives the trading class, in every instance, an infallible advantage over the labouring and productive classes, The inconvenience of two metallic currencies was early observed by the best understandings, I„ock lished in Spain and Portugal, it has not been succeeded by a much better. As the low value of gold and sil- ver, therefore, is no proof of the wealth and flourish- ing state of the country where it takes place ; so nei- ther is their high value, or the low money-price, either of goods in general, or of corn in particular, any proof of its poverty and barbarism."* I have connected and brought under one point of view the scattered parts of the doctrine of Adam Smith concerning the plenty or scarcity of gold and silver, their proportion to labour and industry, and their co-operation in the progress of public and private wealth, in order to view at once all the arguments by Wealth of Nations, vol. i. pages 387, 388, 380. OF POLITICAL ECONOMY, 3H' which he supports his opinions, and to compare them with the motives that induce me to doubt the accura- cy of his doctrine. And to rivet the attention of the reader to this sub- ject, I must add, that the truth of the system of poli- tical economy of Adam Smith rests mostly upon the truth or fallacy of this particular doctrine, and that if they do not support, they necessarily destroy each other. His system indeed is this. — If the natural order of tilings had not been deranged by the combinations of governments, wealth would have been indebted for its first elements to agriculture ; the industry of the towns would have arisen from the accumulation of the •agricultural produce; the home-trade would have de- rived its first capitals from the surplus stock of the produce of agriculture and manufactures ; and after- wards foreign trade would have grown out of the superabundance of the home-trade, According to this system, gold and silver, which in countries that have no mines can only be obtained by foreign trade, are quite useless to the formation, pro-* gress, and increase of wealth ; and Adam Smith could not but consider their plenty or scarcity as indifferent in themselves, and as destitute of any influence upon the wealth of modern nations. But whereupon does this system rest ? Where are its proofs ? and how can we suppose, that a country may prosper, flourish, and grow wealthy, without the assistance of gold and silver converted into money ? Adam Smith appears perfectly convinced, that their plenty or scarcity are of no importance to wealth ; ON THE VARIOUS SYSTEMS. but he did not go so far as to say that they were of no utility, and that Nations might grow rich without their assistance. It is however difficult to separate the two ideas; and if it were clearly demonstrated, that nations cannot arrive at wealth but by means of gold and sil- ver, it could not easily be supposed that their plenty or scarcity has no influence upon wealth. Let us there- fore first inquire, whether the wealth of nations is entirely independent of gold and silver, or how far it depends upon these metals ? Before gold or silver coin is introduced in any coun- try, exchanges are made in material commodities, but not beyond the place where they are produced. The surplus of agricultural produce is carried to the next town, and the produce of the industry of the town is consumed in the neighbouring hamlets or villages. The home-trade does not go beyond each town and its district ; it has neither motives nor means to leave this narrow sphere, to look at a distance for a more advantageous sale of its commodities, and of course it never exceeds the ordinary wants of the country. In such a state of things desires are confined within wants, and to labour to satisfy them is the limit of the efforts and ambition of all.* * Three things, says Genovcsi, have led mankind to commerce ; the natural love of self-preservation, the desire of the conveniencies of life and wealth, and the pleasures of luxury. The first produces but a rave and scanty commerce, because necessaries are generally furnished by the country, and foreign countries contribute very little to the supply of wants of that kind. The second produces a little more commerce, because the number and variety of conve- niencies are great, jind cannot all be produced by the same soil. OF POLITICAL ECONOMY. 313 Should people even succeed in creating a local mo- ney of the nature of those enumerated by Adam Smith,* such money would not impart great activity to the circulation of productions, and would not ex- tend commercial relations very far. Brittle or per- ishable, of difficult or expensive conveyance, desti- tute of any particular or general attraction, it would be little sought for, and could content neither indi- vidual avarice nor national ambition. Consequently it would leave things in the state in which they were before its existence, and it is difficult to conceive how they could be mended by its assistance. This theory is fully confirmed by history. The hordes and tribes of savages discovered in the inte- rior of Africa and in some parts of Asia and America, that were destitute of gold and silver coins, though they had other money, were yet plunged into extreme indigence and misery, and all accounts of travels and voyages afford scarcely a single exception to this general fact. But no sooner are gold and silver introduced in any country, than the wish of possessing them excites the desires of the inhabitants, sets labour, industry and commerce in motion, and developes the energies, The third is the cause of an infinite commerce, because pleasures and luxury have no end. The internal trade, or circulation, (says Mengotti in his Essay on the Commerce of the Romans, which was crowned by the Academy of Sciences at Paris in 1789>) must have been slow and extremely lan- guid without the impulse of gold and silver coin, which is the soul her labour, her industry, her trade, her private income, and public revenue. There are banks in large' and small towns, in boroughs, and even in villages. In 1800, their number amounted to three-hundred and eighty-six ;* and all were in some degree ramifica- * Henry Thornton's Inquiry into the Nature and Effects of the Paper-Credit of England, page 154. — But, in 1810, there were not less than eight hundred and eighteen private or country-banks in ■Great-Britain. See an acount of the number of licences for the 46 $3® ON THE VARIOUS SYSTEMS tions of the Bank of England, and served the lattejr as channels of communication with every part of the empire. But a conjecture hazarded by Mr. Henry Thornton respecting the extent of the payments effected every day by the London banks, from sixty to seventy in number, deserves particular attention. He calculates them at the enormous sum of from four to five mil- lions sterling a day ; which, reckoning only four mil- lions for three-hundred and ten days, gives one thousand two hundred and forty millions a year. And what appears not less wonderful is, that this immense circulation is effected with twelve or thir- teen millions sterling i^'coin, or bank-notes, which supply its place.* What an astonishingly rapid circulation ! What an economy in the cost of circulation ; and what an immense benefit to the nation which created, and knew how to avail itself of this advantage ! Several distinguished writers, among whom David Hume holds the first rank, are of opinion, that such a considerable issue of paper-currency has the same issue of promissory notes payable on demand, delivered to the House of Lords by the Stamp Office, July 4th, 1811.— T. * The number of London bankers, on the first of February, 1S12, was exactly seventy; the circulation of Bank of England notes amounted, in 1810, to twenty-three millions sterling; and the total circulation of Great-Britain, including the private bankers' notes, to fifty-six millions, to which may be added about four millions in spe- cie. See the very able speech of 'Mr. G. Johnstone, delivered in the House of Commons on the 19th of July, 1811, OF POLITICAL ECONOMIC 351 effect as the introduction of a large quantity of gold and siver ; that it must necessarily depreciate, raise the price of labour and merchandize, and be detri- mental to the sale of national produce abroad and at home. Hume observes, that the high price of commodi- ties occasioned by the abundance of gold and silver is a disadvantage for an established commerce, and restricts it every- where by enabling poor nations to sell cheaper than the rich ones,* Mr. Henry Thornton observes, with as much saga- city as justness, that the issue of a paper- currency, like the introduction of a large quantity of gold and silver, does not raise the price of labour and commo- dities in one country only, but the effect, when it takes place, is general, and extends to all countries. Indeed* a paper currency drives gold and silver out of circu- lation, and causes the metallic currency to be export- ed. This exportation augments the quantity of the precious metals wheresoever they are carried, sinks their value, and of course raises the price of labour and commodities. Consequently, it is not only in the country in which a paper currency is issued, that the price of labour and its produce rises ; the rise is gen- eral, and of course detrimental to none or hurtful to all countries, t * Hume's Essays, Edinb. 1804; of the Balance of Trade, pag» 330. f But if a comparatively small island exports twenty-five millions of its coin, and increases its paper-currency to fifty-six millions, how can the effect of twenty-five millions upon a whole continent, be equal to that of thirty -millions additional currency upon a country tha£ 3*52 ON THE VARIOUS SYSTEMS. These are the considerations which have hitherto been advanced on the system of banks of circulation. I have connected the subject with that of the Bank of England, because that establishment lias been the model of such kinds of banks, and still serves them as a pattern and -an 'example. The theory of banks has never been well understood in France ; a country so enlightened, which has made so great a progress in sciences, in arts, in every kind of knowledge, and which has almost always accele- rated their improvement when it had not given them the impulse. At least, the knowledge of the banking system lias never been sufficiently diffused in France, to dissipate the gleomy fears of ignorance, to protect the country against the deceitful illusions of impro- vidence, or to help her to overcome the obstacles con- nected with every new institution, and particularly with the establishment of banks, which comes inclose contact with so many interests, and excites so many apprehensions and so much unasiness in the minds of all But the surprise ceases when we reflect on the na- ture and spirit of the ancient government of France. Instead of encouraging and favouring the study of political economy, it considered itself interested in proscribing it, or in leaving its tenets unprac- tised, and, if I may be allowed the expression, lived from day to day, and either rejected all counts no more than twelve or thirteen millions of inhabitants ? Jt is the most convincing argument that a great local depreciation in suc& a case is unavoidable. — T. OF POLITICAL ECONOMY. 353 innovations, or adopted them merely to abuse them, and to render them as fatal as they might have been useful, if they had been well directed. In 1716, a bank of circulation was established at Paris on the plan and principles of the Bank of Eng- land. France was indebted for it to Mr, Law, a foreigner, a Scotchman, whose name is but too fa- mous in the annals of finance. This bank had every success that could be expected as long as it was con- ducted according to the guardian and beneficial rules N of banks of circulation. But its nature was soon altered, and measures pe- culiar to commercial credit were applied to public and private credit. I have elsewhere explained this mistake audits dangerous results.* This mistake occasioned the ruin of the bank, and, what must appear very extraordinary, is that its ben- eficial effects, as long as it was confined to the opera- tions of a bank of circulation, were completely for- gotten. The bank was pronounced good for nothing^ no doubt, because it was not found calculated for . every use to which it had been attempted to be put. Sixty years after, a merchant, whose knowledge of political economy I have heard greatly extolled, and whose talents for that reason were little employed,! succeeded by great exertions in establishing a dis- counting bank (caisse d'escompte) for the circulation of the commercial bills of Paris. The success of this bank exceeded his most sanguine expectations : * Essai Politique sur le Revenu Public, f Mr. Panchaud. 554 ©N THE VARIOUS SYSTEMS ' indeed it could not fail to be considerable at a time when the commerce of France with foreign nations afforded every year a balance of thirty or forty mil- lions of French livres ; when Paris, the seat of a flour- ishing industry, the residence of a brilliant and mag- nificent court, of a numerous and opulent nobility, of a rich and sumptuous clergy, of an immence con- course of strangers eager in the pursuit of pleasure? and of several companies of financiers profusely lav- ishing their fortune ; when Paris, I say, obtained ? through its own private trade, as considerable a ba- lance as that of the whole French trade with foreign countries. In such a state of things, it is difficult to conceive what reverses could have befallen a bank of circulation, the operations of which were limited to extinguish the debts and demands of the private trade of Paris, But prompted by ignorance or weakness, or daz- zled by its success, the discounting bank afforded public credit an useless assistance ; and the being de- prived of its capital stock brought upon it the fate re- served to all banks which fondly imagine they may combine commercial with public credit. The dis- counting bank was obliged to dissolve itself, and to swell the list of the creditors of the state. In the sixth year of the French republic (1798 — 1799,) after the calamities of the revolution, but before order was restored to the French finances, and in the midst of the general discredit, the bankers of Paris opened a bank of running or current accounts for their private wants, to assist each other recipro- cally in their operations, and to enjoy by their asso- ©F POLITICAL ECONOMI". 355 i ciation a credit and facilities which they could not have procured by any other means. The example was soon followed. Some merchants of Paris established likewise a commercial bank to discount the bills of its share-holders. The manufacturers, impelled by the same motives of personal interest, opened a bank to procure cash in cases of need. Some speculators even established a land-bank to restore private credit, which had been entirely de- stroyed by a fatal paper-currency. These heterogeneous establishments, different in their object and views, which performed but imper- fectly the functions of banks of circulation, being founded upon a system of exclusion and limitation, restored however to circulation the active and produc- tive movement which it had been deprived of for a great length of time ; they recalled the nation to labour, industry, and those commercial speculations, whicn render modern nations flourishing and prospe- rous, establish order and peace among individuals, and ground the splendour and power of empires : though devoted to private interest only, they forwar- ded the interests of all. Each of these banks experienced a different fate. A defective administration, and the infidelity of one of its principal agents, shut up the bank of run- ning or current accounts ; no resource was left to commercial credit but in the commercial bank, and in the bank of the manufacturers, whose means were not very extensive. In the eighth year of the French republic (1800 — 356 ON THE VARIOUS. SYSTEMS 1801), a joint-stock company established, under the protection of the consular government, a bank called the Bank of France, which comprised in its specula- tions the totality of the commerce of Paris. The existence of a general bank and of two private banks guided by the same spirit and directed to< the same end, was a singular and remarkable phenomenon in me system of batiks of circulation. They first moved one by the side of the other with- out injuring and apparently without troubling each olher: hut it was not long ere the nature of things and the force of human passions triumphed oyer dis- interestedness, and the love of public good. , Each bank experienced the torments of competition ; each saw vuth sorrow that the bank-notes of its rival were substituted for its own, and that its discounts were limited by those'of its competitor ; they discounted more readily, and sent each other their notes to get them exchanged in specie. Hence, each bank was obliged to keep a more con- siderable stock of metallic currency at hand, that they might not be caught unprovided; hence originated 3113d speculations, and venturesome, or badly. devised undertakings, the bad success of which shook comr mercial credit, and kept it ina precarious state. The unbounded extension of discounts afforded also to the share-holders of these different banking establishments dividends so considerable, that it was difficult, not to say impossible, for the nation to low- er the rate oi interest and to attain a secure and last- ing prosperity. Considerations of this kind induced government to OF POLITICAL ECONOMY. 357 suppress these different banking establishments, and to erect in their stead a general bank interested in. the rise of public stocks. I shall not enter upon the examination of these various measures ; the digression would carry me too far from my object. I shall only cast a rapid glance upon the operations which the bank of France pub- lished in the public journals, anc| point out their con- formity or disagreement with the regulating and fostering principles of banks of circulation. At that time, the bank of France had two kinds of capital stock ; the one disposable, which amounted to forty-five millions of French livres, arising from the sums advanced by its share- holders ; the other, vested in the public funds, and proceeding from successive reserves of its dividends, consisted of about six millions of French livres ; consequently, the whole capital stock of the bank amounted to fifty- one millions of French livres. With this capital, the bank of France, in the thir- teenth year of the French republic (1805 — 1806), discounted commercial bills of exchange amounting to six hundred thirty-three millions <5f French livres.. As the discount was for bills drawn at sixty days, it was repeated six times a year, and consequently each occasioned the issue of bank notes to the amount of one hundred and five millions of French livres : but as, at the end of sixty days> the payment of the dis- counted bills of exchange restored its own notes or specie to the bank, it follows that the six annual discounts put nc more bank- notes into circulation, . 46 358 ON THE VARIOUS SYSTEMS than to the amount of one hundred and five millions of French livres. This proportion of the circulating notes to the ca- pital stock of the hank was not too considerable ; on the contrary, it was greatly inferior to what it might have been. But, as was justly observed by the censor of the bank in his report, the exact limits of discounts are those fixed by the wants of the place and the differ- ent public services. Consequently, the bank could neither be blamed for not having enlarged its discounts, nor applauded for not having circulated a larger amount of notes. It appears that the bank made no distinction between the private discounts of the trade of Paris, and those required for the accommodation of foreign- ers, and the merchants of the several French depart- ments or provinces ; and yet the difference between such discounts is very material, and of the utmost importance for the bank. Before I account for this difference, I shall attempt to state the extent of these various discounts. The commerce of Paris, before the revolution^ might amount to about five-hundred and sixteen mil- lions of French livres, of which two-hundred and fifty-eight millions were for its own consumption, and the same sum at least for its productions or the income of its inhabitants. It appears from the accounts of the president and the censor of the bank, that this commerce, either of consumption or of productions, and this income, did OF POLITICAL ECONOMY. 359 not at that time exceed 328,500,000 French livres j I ground my assertion on the following circumstances. The two reports state, that the daily exchange of bank-notes for specie amounted to 4 or 500,000 li- vres, the average of which sum is 450,000 li- vres a-day, and for three-hundred sixty-five days 163,250,000 livres. Now, it is certain that, in ordinary times, bank- notes are exchanged for specie merely for wants of consumption, and rarely exceed their amount Whence it may be inferred with some certainty, that the total amount of the consumption of Paris never was much above 1 63,250,000 livres : we will however rate it at 200 miliions of livres, that we may not be accused of exaggeration. Admitting the consumption of Paris at 200 mil- lions of livres, the income of its inhabitants must amount to the same sum, or else their expenditure would exceed their income, impair their capitals, and soon diminish the population of that great city. And supposing even that the expenditure had exceeded the income, and that the excess above it had been sup- plied by capitals, it would still follow that the expen- diture, and the values destined to provide for it, con- stituted a total of four hundred millions of French livres, and that this sum was or might have been the object and the result of the private trade of Paris. Supposing that the bank had discpunted the whole of this sum, which is not probable ; the totality or" its discounts relative to the private trade of Paris would not have exceeded four hundred millions of li- vres, or about sixteen millions sterling ; and eonse- $60 on the various systems quently, the surplus to make up the six hundred and thirty millions of livres discounted, and amounting to two hundred and thirty millions of livres, must have been foreign to the trade of Paris, and employ- ed merely for the benefit of foreigners, or of the mer- chants of the departments or provinces of France. The bank-directors acknowledged in their accounts, that foreign countries, and the merchants of the de- partments had really partaken of their discounts : but they did not specify the amount of either. 'i It happens," says the censor, in his report, " that distant speculators exchange in the bank, by means of their correspondents, their bills on Paris for spe- cie ; and having this specie sent to them, they em- ploy it in other bills at a lower rate, but advantageous enough to afford easy and often renewed benefits. Thus a bank so useful to Paris has also a salutary and much more valuable than valued influence upon the .greatest number of departments." But the safety and prosperity of banks, whose fate is so intimately connected with the progress of wealth, which I am now investigating, forces me to observe that this employment of the capital of the bank, held out as advantageous for the departments, was neither profitable to them nor to the bank, but on the con- trary, expensive for both. The bills of the provincial merchants discounted at the bank of France in Paris were, it is true, dis- counted in bank-notes; but these notes were imme- diately exchanged for coin, because bank-notes were not known in the provinces, where specie alone was circulated, The result of this discount was therefore OP POLITICAL ECONOMY. 36*1 a loan of the bank to the merchants of the depart- ments at the rate of half per cent a month, or six per cent a year. The loan in itself would undoubtedly have been very advantageous to the departments, had it been within the means of the bank : but as the loan exceeded the means of the bank, the direc- tors eagerly collected in the departments the metallic currency which they had lent, and at a heavy expencC returned to the coffers of the bank the funds which the provincial merchants had carried away at a great expence ; so that the whole operation consisted in conveying the coin from Paris to the departments, and back again from the departments to Paris, and to burthen the bank and the departments with the charges of a conveyance equally useless to both par- ties. This circulation was not productive of any advantage either to Paris or to the departments ; it was merely a change of place without any benefit whatever, against which banks of circulation ought constantly to guard by the most efficacious measures, if they wish to attain their end without efforts and without danger. I shall not dwell upon the still greater inconve- niency of discounting the bills of foreigners uncon- nected with the private trade of Paris, which, accord- ing to the censor of the bank himself, had "no other object than to convey the capital of the bank to our enemies and to incapacitate the bank from pur- suing its operations :" whatever I might say on this head, would merely be a tedious repetition of what 1 have stated, and could add nothing to the strength of the observations of the censor upon this subject. 86*2 ON THE VARIOUS SYSTEMS Having approximated, as much as conjecture will allow, the limits of the discounts of the bank for the private trade of Paris and for the provincial or foreign merchants, and having taken the former at four-hun- dred millions of livres, and the latter at two hundred and thirty millions, it is of great importance to shew how far the latter were detrimental to. the bank, to ascertain this detriment, and to render it so evident, that the bank-directors may be still more disposed to guard against such discounts. The six discounts of the bank at the rate of sixty days each, had each, as we observed before, put into circulation one-hundred and five millions of French livres in bank-notes ; which supposition placed the notes, compared to the metallic money stock of the bank, in. the proportion of one to two. But of these one-hundred and five millions in notes, the part destined for provincial and foreign merchants v/as immediately exchanged for specie, and consti- tuted about a third of the whole; consequently, thirty- seven millions of the specie of the bank took the place of thirty-seven millions in notes. Deducting these thirty-seven millions of specie from the forty-five mil- lions of metallic currency which constituted the capi- tal stock of the bank, there were only eight millions in coin left to take up above seventy-four millions in ivotes, which made the proportion of notes to cash as one to nine, instead of one to two; in which last pro- portion they would have continued, had all the dis- counts been for the private trade of Paris/ This approximation is sufficient to shew the dif- ferent nature of the two discounts, and to warn banks OF POLITICAL ECONOMY. 36'3 to be on their guard against those discounts which are merely covered loans, and 'which tend only to strip them of their capital, to transform them into mere lenders, and to confound commercial with pri- vate credit. When I am thus precluding the bank of France from discounting provincial and foreign bills, which are mere loans and totally unconnected with the ope- rations of the bank ; I shall, no doubt, be asked to- what use the bank could have put that part of its capital stock which was useless to the circulation of the private trade of Paris. The question is connected with the very essence of banks, and can only be re- solved by a profound knowledge of the nature and properties of banks. Banks take commercial bills and give in exchange bank-notes payable on demand in coin. Bills of ex- change and bank-notes have neither of them any intrinsic value ; but they both contain a promise to pay such a value. It is therefore a mere exchange of claims, an interchange of promises, between the banks and the merchants who receive their notes. Neither does the merchant who pays his bank-notes to his creditors, give them any thing more than the promise which they contain. His creditors pay these notes to the retail-dealers for the commodities which they want, and thus receive the intrinsic value which they had been promised by transferring to the retail-dealers the claim which they derived from the promise contain- ed in the bank-notes handed to the retail-dealer in payment for his commodities. 36*4 OTST THE VARIOUS SYSTEMS The retail-dealer, in his turn, gives the bank-notes to the bank in exchange for his accepted bill when it becomes due ; and on receiving back his bill, he ob- tains not an intrinsic value, but the engagement which he had contracted to furnish one, just as the bank, on receiving back its notes, does not receive any intrinsic value, but the promise which it had given to furnish an intrinsic value. So that, after all, this circulation of bills of exchange and bank-notes circulates but respective promises to furnish an in- trinsic value : and their being ultimately exchanged for each other effects a mere commercial liquidation.. On the other hand, other holders of bank-notes paid to the retail-dealer for his commodities, had re- ceived them for some personal service and some in- trinsic value, of which the purchased commodities were the exact equivalent; the bank-notes conse- quently effect a second liquidation between the con- sumer and the owner of the commodity consumed. The only difference between these liquidations is, that the former may be effected without the interven- tion of coin, and that the second requires a more or less considerable quantity of coin according to the nature of the consumptions, the wealth of the con- sumers, and the amount of bank-notes. Thus, to liquidate the demands and debts of com- merce and those of labour and consumption, is the characteristic property of banks, the extent and limit of their power. But the demands of commerce and consumption are of two kinds ; one resulting from the general com- OF POLITICAL ECONOMY. 36*5 merceof nations, and the other from the private trade of cities, or large assemblages of individuals compo- sing; the same society. All nations cannot share equally in the great and lucrative liquidation of general commerce. This ad- vantage is reserved to local conveniences, to parti- cular circumstances, and sometimes to happy situa- tions, which it is not in the power of human combina- tions to produce or to change. Venice, Amsterdam, Hamburgh, have had prosperous banks for the liqui- dation of general commerce ; and it is impossible to assign any other reasons for it, but considerations de- rived from their locality, their government, particu- lar circumstances, and a thousand other secondary motives, which it would be useless to inquire into and to develope. Most nations therefore must re- nounce sharing in the liquidation of general commerce. But all nations may have banks for the liquidation of their private trade, either with foreign countries, or with the different cities within their territory; and all may derive invaluable advantages from such establishments. Such banks may be established in all places, which afford much produce, and where con- sumption is considerable. England has adopted the banking system with a success that has been dispu- ted, it is true, but which is alike attested by experi- ence and demonstrated by reason. France has hitherto attempted the experiment of banks in the metropolis only, and for its private trade; but this trade is so limited, that it cannot flatter it- self with the hope of giving to its bank theextent and importance of the other banks of Europe, 47 366 ' ON THE VARIOUS SYSTEMS All possible combinations afford but two means of employing capitals in the banking system. The first and, no doubt, the most extensive and most productive of great results, would be to estab- lish successively, and in proportion as its capitals should exceed the wants of the private trade of Paris, branches of the bank of France in all large manufac- turing towns and places of great consumption. The extent of this vast empire,, the immensity of its pop- ulation, the richness of its produce, the incalculable consumption of its towns, would perhaps afford li- quidations equivalent to those of the general com- merce Ti'hich are shared by a few cities of Europe. This extension of the operations of the bank of France would increase its labours and its benefits ten- fold ; it would save the use of specie in the liquida- tion of the commercial debts, and even in a consider- able part of the liquidation of the demands of labour and consumption; and I should not be surprised if, with a capital of 200 millions of French livres, it rendered the same service which is this day perform- ed with a metallic currency of above 2,000 millions, The saving of J, 800 millions would free consump- tion of an interest of 180 millions, at the rate of 10 per cent. ; which crushes commerce, falls heavy on the consumer, restrains consumption, and consequent ly is detrimental to reproduction. On the other hand, these ], 800 millions, having become useless to commercial circulation, would flow towards agriculture and manufactures, stimulate their establishment and improvements, and. increase then OF POLITICAL ECONOMY 367 produce beyond what imagination can conceive most fortunate and most flattering. Every thing then ought to induce the bank of Fiance to turn its views towards a project of which the execution is easy, the success certain, and the ge- neral and private benefit invaluable.* Finally, the bank might, by undertaking- the pay- ments of all the great commercial establishments* either foreign or French, give a still greater extent to the issue of its notes without greatly enlarging the stock of its coin. It is the property of all commercial establishments to draw to the place where they are established the liquidation of their speculations. Their demands and their debts are extinguished in that place, and the bank would facilitate their liquidation by its notes. It might even share in the liquidation of general com- merce. Whether the establishment of banks is not originally due to great commercial establishments, is an important inquiry, into which I shall not enter at present : but it is certain that banks have arisen un- der the wings of those great commercial establish- ments. The creation of branches of the bank in all manufac- turing towns and places of great consumption, and the * This part of my work was written long before the bank of France had adopted the measure which I suggest ; and although my ©bject has been attained, I thought I ought to retain the arguments on which my opinion is founded, and which appear calculated le insure the success of my plan. 368 ON THE VARIOUS SYSTEMS keeping'the cash of great commercial establishments, whether foreign or French, are the two only means to which banks can resort, to employ their capital when it exceeds the particular wants of the commerce of the metropolis, and to assimilate themselves in some degree to banks which share in the liquidation of general commerce. There are some other banks of circulation at Vien- na, Madrid and Berlin ; but if I am rightly inform- ed, those banks are less for the wants of commercial credit than for the wants of government ; they are rather financial than commercial banks, and more connected with public than with commercial credit. I, have, therefore no occasion to enter into the detail of their operations, or to undertake the proof that they bear no relation to banks of circulation. The discussion would add nothing to the strength of my arguments, and be without avail for the science. Having thus developed the laws, proceedings, and methods of banks of deposit and circulation, and their reciprocal influence on commercial credit, it will not be thought idle or uninteresting to inquire which of the two kinds of banks is most favourable to the progress of wealth. The services of banks of deposit are limited, but free from risk, inconvenience, or any disastrous con- sequence. They accelerate the circulation of money, and multiply it by the velocity of this circulation ; they save the charges and risks of conveyance, avoid the friction, adulteration, and counterfeiting of coin ; render errors in counting impossible, and prevent the OF POLITICAL ECONOMY. 369 loss of the time taken up by payments in metallic currency. All these advantages are a clear gain, un- allayed with any loss or risk. The benefits afforded by banks of circulation are undoubtedly more extensive, more numerous, and more fascinating. They multiply the capitals neces- sary to support labour, industry, and commerce, by the facility of converting their produce into money as soon as it exists ; by giving them fresh employment, and keeping them in constant and uninterrupted acti- vity : and this invaluable service, which metallic mo- ney and deposit-banks render but imperfectly and at a considerable expense, is performed by banks of cir- culation with the greatest ease, and at a most triflino* expence. But these important benefits are attended with immi- nent and almost unavoidable risks. The velocity of the circulation of capital may be arrested by an un- favourable balance of foreign and local trade, by un- founded alarms, and by an overgrown commerce. When one of these three cases happens, circulation is shackled and frequently paralysed ; capitals are not easily converted into money ; labour is suspended, or left to languish ; and both private and pub.ic affairs experience a fatal and deplorable crisis. When the result of the two kinds of commercial banks is thus contrasted, it is difficult to decide which is preferable. David Hume did not hesitate. He assigns the preference to deposit banks, and even proposes to improve them. Adam Smith appears to incline in favour of banks of circulation ; and Mr. Henry Thornton^ who is decidedly tor the latter, 370 ON" THE VARIOUS SYSTEMS has neglected nothing to insure the triumph of his opinion. This variety of sentiments might perhaps be recon- ciled, if what is good in either mode of banking was adopted, or if both were so combined as to obtain the advantages of each and avoid their respective incon- veniencies. Nothing needs to be done but to intro- duce a bank-paper, the metallic value of which should always be kept in the coffers of tbe bank. The thing- is not impossible; but this is not the proper place to enter upon the discussion of projects which would cause me to lose sight of the principles and remove me too far from my object. Thus banks of deposit or of circulation are the per- fection and as it were the strong chest of commercial credit, and it is impossible to ascend without surprise and admiration, ever} 7 degree of the scale of commer- cial credit which transmits the productions of labour from the producer to the consumer, without any real equivalent, without the use of money, on the faith of successive and reciprocal promises returning to the coffers of the banks. It is only at the two extremities of the circulation, that is to say, at the period of pro- duction and that of consumption, that metallic money is necessary, and cannot be supplied by a substitute. The producer, be he a farmer or manufacturer, must pay his labourers in coin, just as the consumer must pay the retail-dealer in coin for what he requires for his consumption. This part of circulation cannot be effected in paper-currency without the greatest incon- veniencies, without lapsing into the system of paper- money, or conventional money, of which both the OF POLITICAL ECONOMY. 371 defects and calamitous consequences have been point- ed out, and without endangering alike commercial credit, production, and wealth. In the intermediate stages of circulation between production and consumption metallic money is per- fectly useless, and finds a convenient and useful sub-* stitutein commercial credit supported and liquidated by deposit-banks and banks of circulation. Private credit bears little analogy to commercial credit. It resembles it only in one single point. Both circulate the produce of labour; but that produce does not follow the same direction, has not the same destination, nor does it give the same results. The produce which commercial credit circulates is destined for consumption ; and when it has reached the consumer, commercial credit has finished its course, and there remains no vestige either of its deeds or of its results. The produce which private credit circulates is that which, having reached the consumer, has been eco- nomised, accumulated, and kept in reserve, through the passion of amassing, through the fear of want, of through the desire of greater comforts. These savings circulated by private credit are employed in two ways. Some, but the smallest number, serve merely to re- store the level of consumption, and degenerate there- fore into a simple expenditure ; the others are turned to undertakings, speculations, and more or less suc- cessful, but almost always beneficial, improvements. When private credit throws these savings into the hands of prodigals and spendthrifts, it augments their expences, advances their ruin ? and consequently serves 372 ON THE VARIOUS SYSTEMS merely to restore the proportion between production and consumption. It has the same effect as if there had been no saving ; as if every one had consumed his whole income, his whole share in the national pro- duce; and viewed in this light, it affords no benefit, and deserves neither consideration nor favour. But when those savings are employed in under- takings, speculations, and improvements, they in- crease the sum of labour, ameliorate the condition of the labouring class, and favour population. They are, it is true, restored to consumption, as in the former case ; but their consumption leaves an equivalent behind in an augmented population and increased produce of labour. They are of course the true source, or rather the most powerful lever of prosperity and wealth ; and private credit, which is the agent, the promoter of such beneficial results, deserves all the attention and bene" volence of governments. This twofold employment of the '■savings put into circulation by private credit ought to warn banks of circulation not to meddle with the operations of pri- vate credit. Whether the funds thrown into circu- lation by private credit go into the hands of spend- thrifts or speculators, the banks are immediately for- ced to convert them into metallic- mone}' ; because they are destined to consumption or to labour, and both, as has been observed, can only be paid in coin. As banks of circulation are chiefly established to save the use of coin, they evidently go astray from their destination when they suffer themselves to be volun- tarily or fictitiously entrapped into the operations of private credit - OF POLITICAL ECONOMY. 373 There are however some banks especially devoted to private credit. Such are the banks of Scotland, such was the land-bank (banque Hypothecaire) of Paris, and such are all lombards (monts de piStS, lum- ber offices.) But these establishments have no affini- ty whatever with banks of circulation. They can only be considered as associations of capitalists, who circulate private savings, and whose operations are limited to the lending of their own and borrowed capitals. When they issue notes their stock in spe- cie must always be nearly in, equal proportion to the amount of notes issued. They afford no other advan- tage than that of concentrating private credit, and giving it a greater influence, stability, and activity. These advantages are, no doubt, valuable, but not to be compared with those resulting from commercial credit. Though the utility of private credit is so obvious, it yet has not made the same progress as commercial credit ; and the reason lies in particular circumstances, which it is necessary to detail. Most religions have taught, some even have ordered, that private loans should be made gratuitously. They wished that, whatever one individual possesses too much, should be generously lent to him who wants it, without any equivalent, without any retribution, and on the only condition of returning the commo- dity that is lent. Undoubtedly this doctrine is wor- thy of the sentiments of humanity and charity, which all religions endeavour to awaken in the heart of man : but it must be confessed, it ill agrees with human passions, with the interest of nations, and thepros- 48 374i ON THE VARIOUS SYSTEMS perity of empires. Hence it has no other effect than to deprive mankind of the invaluable advantages of private credit, and to render useless for all what some have too much. This consequence, which the progress of knowledge renders every day more obvious, has been but feebly remedied by the laws. They have not authorized any equivalent or price of loans which re- ligion prohibited ; they have only limited that equi- valent or price, as if the contract of lending differed in its nature from other civil contracts ; as if an in- dividual could be induced to strip himself of what he has saved, without an equivalent that pleases oi* suits him; as if the price of equivalents was not al- ways proportioned to the mass of surplusses or sav- ings. But let us leave to time the care of giving to these considerations the persuasive power which is denied to reason. Let us await from the general in- terest, which is every day better feltand better known, a solid triumph over the errors or pusillanimity which still obstruct the progress of private credit, and op- pose a fatal resistance to its success. The denial or limitation of equivalents is not the only obstacle which private credit encounters ; it meets with one more serious and less easily overcome in the difficulty of re-payment, in the unpopularity which assails the creditor when he is obliged to en- force payment by a legal process, in the benevolence of the laws, and in the bias of courts of justice in fa- vour of the borrower. The preference granted to the debtor over the cre- ditor is assuredly astonishing, and its motive cannot easily be guessed ; I think however I have discovered it, and I hope 1 shall be pardoned for developing it at OF POLITICAL ECONOMY. 37S some length ; not because it may interest curiosity, but because it will render more sensible the defects of the system, which has obtained an unaccountable ascendancy. The Romans, being confined within a very limited territory in the early stages of the republic, derived great part of their subsistence from plundering the harvest of their neighbours. The uncertainty and in- equality of the booty rendered extremely precarious the revenue of a great number of citizens, who could not escape from misery and despair but by borrowing the surplus of their fellow-citizens. The conditions of the loan were rarely generous, and yet the laws enforced its restitution with the utmost severity. These laws were even more than severe, they were atrocious ; emanated from a ferocious, covetous, and indigent people, as a necessary consequence of their economical situation, they perhaps favoured their political designs, and promoted the general interest which their character and their manners taught them to forward at any price. As debtors had no means of paying their creditors but their share in the booty taken from the enemy, the more the penalties against inexact or insolvent debtors were severe and terrible, the greater must have been their exertions in battle to insure the vic-^ tory to their country and to avoid the punishment which awaited them if their countrymen should be vanquished. Thus, in civil transactions apparently little connected with political views, we recognize that national spirit of the Romans, which from vic- tory to victory led them on to the conquest of the 376 on the various Systems world, and which has been considered by all ages as the result of the conceptions and combinations of genius, white in its principle it was but the result of dire necessity, which sometimes proves as beneficial to nations as to individuals. It must however be acknowledged, that the seve- rity of the laws against debtors frequently occasioned disasters. It fomented numerous seditions, caused strong commotions in the state, and shook it in its very foundations. In those critical moments, the Romans were forced to sacrifice the rights of the cre- ditors to public peace and to the safety of the state. But it is singular that those laws were neither abro- gated, nor modified, and underwent no alteration whatever as long as the Romans needed to conquer in order to exist. When Rome, become mistress of the world, passed under the yoke of the emperors, her laws respecting private credit experienced the changes which her new situation required. The emperors, whose interest was different from that of the republic, neglected no means to lower the power of the patricians, whom they distrusted, and to conciliate the affection of the common people, and interest them as it were in their dominion. Their views were perfectly seconded by the abrogation of the old laws respecting private cre- dit** it deprived the patricians of means which had not a little contributed to their wealth, their power and their influence over the multitude, and it restored to the common people the independence which they had been robbed of by those laws. It was then that a maxim, apparently dictated by humanity, but really OF POLITICAL ECONOMY. 377 partial, that the cause of the debtor is the most favourable, took its rise ; and it may easily be sup- posed that from that instant private credit vanished or manifested itself only with precautions aud simula- tions calculated to balance the favour shewn to the debtor. Every page of the Roman code of laws exhibits a struggle between the law and the creditor, and the efforts of the legislator to protect the debtor against the arts and devices of his creditor. When the nations of modern Europe became ac- quainted with and adopted the Roman law, or introduced its spirit into their customs, they were ex- actly in the same situation as the Romans: under the emperors. The feudal barons oppressed the people and balanced the authority of the monarch. Kings were therefore as interested in lowering the feudal barons, as the emperors in weakening the patricians; and the same interest induced the kings, as it; had done the emperors, to cultivate the affection of the people. The maxim, that the cause of the debtor is the most favourable, necessarily crept into the code of modern nations, from the same motive which had introduced it into the Roman law. Hence it is found in almost all codes of laws,' even in those which do most honour to human reason, and which by the purity of their motives are best calculated to forward the happiness of man and the improvement of the hu- man race. But a maxim excellent for times of oppression and robbery, in oligarchical governments and under the sway of a small number of wealthy individuals, is no longer suitable to a social order built upon the equality &7S ON THE VARIOUS SYSTEMS of civil and political rights, which recognizes labour as the source of comforts, the circulation of its pro- duce as the promoter of public prosperity, and general wealth as the basis of strength and power. In this system every one labours, economizes, and lends his savings merely for equivalents that please and suit him, and only as far as he is sure to be put in posses- sion of those equivalents at the time when the com- modity which he has lent is to be -restored to him. The limitation of the equivalent and the difficulty of having the loan returned areas many obstacles to pri- vate credit, to individual savings, to the undertak- ings which these savings promote or favour, to the increase of population and produce, and to the pro- gress of national wealth. Let governments remove obstacles so unworthy of the present state of knowledge, so injurious to their glory, so averse to their power. Let them allow the lender and borrower to stipulate what conditions they think fit; let them watch over the performance of their stipulations ; and, above all, let the execu- tion of the law be stripped of the delays and qosts with which it is obstructed, and which often render its execution impossible ; and private credit will take a rapid flight and be the parent of incalculable benefits. Public credit in many respects resembles private credit, and might truly be pronounced a mere branch of it. Both circulate private savings, and neither can obtain these savings but by offering an equivalent agreeable or suitable to the lender, and insuring him the restitution of his property ; but they differ in so OF POLITICAL ECONOMY. 379 far as the savings put in circulation by private credit contribute almost all to increase the mass of produc- tive labour; while those circulated by public credit contribute almost all to a mere additional expence, and of course serve only to increase consumption. A difference which has already been noticed and appre- ciated. However, it must be confessed, that whenever the necessity of additional expence is obvious, public credit affords the least burthensome resource of all those that could be devised to pay for that expence, After having attentively followed credit from its source, in its various branches, and up to its most minute ramifications ; after having seen it, like a bountiful river, carrying every-where activity, fer- tility, and abundance, freeing circulation from the costly use of coin, and reserving it for the undertak- ings of industry ; after having witnessed the extensive means of power and grandeur, not over-burthensome to the people, and perhaps connected with their pros- perity, which credit affords to government ; we ask, with a sort of inquietude, why so many advantages have been so ill appreciated by recommendable wri- ters ; how enlightened governments could ever endan- ger them by frequent and multiplied failures ; why- some able men persist in seeing nothing in those fail-* ures but private interests injured and private fortunes deranged, and think such misfortunes unconnected with public interest ? Am I deviating from truth, when I suppose this fatal error to proceed from the hatred which was always manifested in France towards capitalists and those who were called moaied men ? 380 ON THE VARIOUS SYSTEMS When they were indebted for their wealth to the pro- fitable contracts which they entered into with govern- ment, and to their grinding the people; there might have been some colour of justice in considering a national bankruptcy as a sort of reprisals, as a kind of retaliation which they had deserved. Their mis- fortune was applauded by the same motives which induce the stupid Mussulmen to bless the grand-sig- nor, when he confiscates the treasures of the pasha by whom they have been stripped and ruined. Had the results of such unjust proceedings been attended to, it would undoubtedly have been seen that the conse- quences of the bankruptcy which ruined French„ca- pitalists, and of the confiscation which ruined the Turkish pashas, fall upon all classes of the people* aud are tantamount to the most burthensome taxes. But passion does not reflect ; it only seeks to satisfy itself, without considering the good or ill that is to result from it. Passion does not perceive that na- tional bankruptcies impede private savings ; that they arrest or suspend their circulation, and deprive labour of the capitals through which it prospers ; that they obstruct the circulation of produce, or burthen it with the enormous cost of the use of coin, and aug- ment by as much the price of consumptions ; which augmentation is equivalent to a tax ; and finally, that they reduce governments to the necessity of raising contributions beyond the faculties of the contributors, which is the utmost degree of public misery. It is under the impression of these obvious and manifest consequences that I am warranted in observ- ingj that bankruptcies are, in the present state of social OF POLITICAL ECONOMY. 331 mechanism, a calamity more disastrous than wars and bad seasons. These last misfortunes at least may be repaired, and quickly disappear where credit has not been impaired, and when nations enjoy all their fa- culties, their means, and their power But the loss of credit is irreparable, and destroys even the consola- tions of hope. May the picture of these dreadful re- sults protect credit against fresh attacks, consolidate it by new measures, keep it unshaken among the na- tions that have known how to preserve it, restore it to those that had lost it, and establish it among those by whom it never was enjoyed ! May credit, by its vast combinations, accelerate their private prosperi- ty, and cause them all to share in the benefits of gen- eral wealth ! CHAP. V. Which Trade is the most beneficial to National Wealth ? VV HETHER the home or the foreign trade is most beneficial to national wealth, is one of the most im- portant, most difficult, and most controverted ques- tions of political economy. At first sight the problem appears to offer no diffi- culties. The most advantageous trade to nations, as to individuals, must be that which causes the produce of a country to be sold at the highest, and foreign produce to be purchased at the lowest possible price. It seems that it is to this twofold end, that every 49 312 ON "ME VAUIODS SYSTEMS. trade must tend ; and that a -country has attained its object when that end is accomplished. It is even dif- ficult to conceive that the smallest doubt can be rais- ed on this point, and the question viewed in any other light. Indeed, it was long considered in that light only by the most esteemed writers on political economy, " Prudence, 5 ' says D'Avenant, "is generally wrong when it pretends to guide nature. The various pro- ducts of different soils and countries is an indication that Providence intended they should be helpful to each other, and mutually supply the necessities of one another"* The benefit of trade does not consist in the profit of the home-merchant, but in the clear gain the na- tion acquires through the exchange of its raw and ma- nufactured produce for the produce of other countries^ Elsewhere he remarks, " that the foreign trade is the basis of the home-trade, that it causes consump- tion, and increases population in all countries where, it flourishes and is encouraged, "f A great part of our domestic trade depends upon our foreign commerce ; and we must sink in one, as the other decreases, Finally, he says, in another place, " it is an unde- niable truth, that a rise iu the value of a commodity of a penny per pound, proceeding from foreign ex- pence, does more enrich the body of the nation than a vise of three-pence per pound occasioned only by our own consumption. "J Sir James Stuart observes, that " when foreign * Vol. i. page 104. f Ibidem, page 385, } Vol. ii. page 150, OF POLITICAL ECONOMY. trade ceases, the internal mass of wealth cannot be augmented"* " A nation," says Forbonnais, "gains the amount of its sales to foreigners, and loses the amount of the purchases it makes abroad.' "f Lastly, Montesquieu adds to these opinions a re- flexion which is entitled to notice. " The nations of the same climate," says he, "hav- ing nearly the same productions, do not stand so much in need of trading with each other as those of a different climate. Hence the trade of Europe was formerly less extensive than it is at present. " " As foreign trade is carried on with benefit," ob- serves Beccaria, '*' that is, as it receives a greater quantity of values, it serves as a more powerful in- centive, and is more efficacious to increase the sum-of productions. Besides, it burthens the subjects of other countries with a considerable part of the taxes paid to the state. "J Were I to collect the opinions of all the writers who have sanctioned, supported, or adopted the sys- * Inquiry into the Principles of Political Economy, book ii. chap. 2o\ But I have not been able to trace this passage in the quoted chapter. In the 24th chapter of the same book, of the edition 0/ 1805, it is said: " When foreign trade is at an end, the number of inhabitants must be reduced to the proportion of home subsist- ence."— T. t Element du Commerce, chap. i. — I do not quote this opinion as correct, but as a proof of the system of the best writers on com- merce. X Element. di Econonu Publ.-. — Genovesi, Carli, Verri, Palmier} and Corniani, speak nearly in the same terms respecting foreign trade. 384 ON THE VARIOUS SYSTEMS tern favourable to foreign trade, I should never have done. Dr. Quesnay is the first who attempted to combat that system. " In a free concurrence of foreign trade," says he, " there is but an exchange of equal value for equal value, without either-loss or gain on either side, and a nation cannot have a more advantageous com- merce than its home-trade.'"* Elsewhere he adds, " it would be necessary first to enrich the foreign purchasers, to extend the sale of your manufactured produce abroad, and to enrich yourselves in your turn by this trade at theexpence of foreigners, &c. Foreign trade is but a last resource to nations, for which their home-trade is not sufficient profitably to dispose of the productions of their country, "t Adam Smith has, like Dr. Quesnay, combated the system favourable to foreign trade, and extolled the home-trade as the most beneficial to national wealth : but his opinion has been influenced by motives not only different, but even opposed to those of Dr. Quesnay. " That trade, "observes Adam Smith, " which, with- out force or constraint, is naturally and regularly carri- ed on between any two places, is always advantage- ous, though not always equally so to both. By advan- tage or gain," he adds, "I understand, not the increase of the quantity of gold and silver, but that of the ex- changeable value of the annual produce of the land and Pkysiocratie, Observation 5. t Physiocratie, page 345. OF POLITICAL ECONOMY. " 385 labour of the country, or the increase of the annual revenue of its inhabitants. "* Thus Adam Smith is of an opinion directly oppo- site to that of Dr. Quesnay concerning the nature and effects of foreign trade. He acknowledges that this trade is useful, and yields profits to the nations that devote themselves to it : but he pretends that these profits are in no proportion with those resulting from the home-trade ; and he grounds his opinion on the following argument : * The capital which is employed in purchasing, in one part of the country, iu order to sell in another, the produce of the industry of that country, generally replaces, by every such operation, two distinct capi- tals that had both been employed in the agriculture or manufactures of that country; and thereby enables them to continue that employment. When it sends out from the residence of the merchant a certain va- lue of commodities, it generally brings back in return at least an equal value of other commodities. When both are the produce of domestic industry, it neces- sarily replaces, by every such operation, two distinct capitals which had both been employed in supporting productive labour, and thereby enables them to con- tinue that support. — The capital employed in pur- chasing foreign goods for home-consumption, when this purchase is made Avith the produce of domestic industry, replaces too, by every such operation, two distinct capitals : but one of them only is employed in supporting domestic industry. The capital which * Wealth of Nations, London, 1805, vol. ii. page 244. 386 ON THE VARIOUS SYSTEMS sends British goods to Portugal, and brings back Portuguese goods to Great-Britain, replaces, by eve- ry such operation, only one British capital. The other is a Portuguese capital. Though, therefore, the re- turns of the foreign trade of consumption should be as quick as those of the home-trade, the capital em- ployed in it will give but one half of the encourage- ment to the industry or productive labour of the country. " But the returns of the foreign trade of consump- tion are very seldom so quick as those of the home- trade. The returns of the home-trade generally come in before the end of the year, and sometimes three or four times in the year. The returns of the foreign trade of consumption seldom come in before the end of the year, and sometimes not till after two or three years. A capital therefore employed in the home- trade will sometimes make twelve operations, or be sent out and returned twelve times, before a capital emp'oyed in the foreign trade of consumption has made one. If therefore the capitals are equal, the one will give four-and-twenty times more encouragement and support to the industry of the country than the other. "* This doctrine of Adam Smith is, no doubt, very plausible, and discovers much sagacity; hence it has sednced all who have written after him on subjects connected with political economy. All have adopted it unreservedly and indiscriminately, and I must con- fess that the unanimous approbation with which this doctrine has been crowned, has made me carefully * Wealth of Naticms, vol. ii. pages 63, 64. OF POLITICAL ECONOMY. 387 weigh the motives that induced me to doubt its cor- rectness : but after having seriously meditated on the subject, I thought that private considerations ought not to prevent my stating my doubts on this impor- tant point of political economy, and I flatter myself that, were I even mistaken, my error will find grace before the most enthusiastic adherents of Adam Smith, because they will be convinced that I have only- yielded to the love of truth and to the interests of the science. In order to be certain whether, as is asserted by Adam Smith, the capital employed in circulating the raw and manufactured produce of a country supports four-and- twenty times more national labour when that circulation takes place at home than when the productions are sent abroad, we must fix the amount of that capital, follow its operations, and endeavour to ascertain its results. Let us suppose that the capital of the trade which replaces the capital destined to support the labour of a country, amounts to one-thousand millions of French livres, and that the stock which commerce devotes to circulate this one-thousand millions a~ mounts to two hundred millions ; the whole capital which supports the labour of the country, will, in this hypothesis, amount to twelve-hundred millions. As soon as commerce circulates the produce of the soil and industry of a country, the labour of the country has been performed ; and it matters very little to that labour, whether its produce be consumed abroad or at home ; both consumptions restore to the labour of the nation the one-thousand millions destined for 388 0N THE VARIOUS SYSTEMS its support. Under the supposition that this one- thousand millions is consumed at home, it is re-im- bursed by the national income ; when it is consumed abroad it is re-imbursed by the income of the foreign country : for, abroad, as at home, consumption can take place only by means of an equivalent especially reserved for the labour, the produce of which has been consumed. In both cases, therefore,- no part of the one-thousand millions destined for the support of na- tional labour undergoes the smallest diminution. As for the two-hundred millions employed in the labour of circulating the produce, it matters not whe- ther it is paid for the circulation abroad or at home; in both cases, the amount is repaid by the national or foreign consumers, and consequently it always re- mains entire with regard to the labour of the country. It therefore appears quite clear, that the capital destined to support the labour of a country cannot be impaired whether its produce be consumed at home or abroad ; and in this sense Dr. Quesnay was right, when he said that in the foreign, trade there is neither loss nor gain on either side. But if the matter be considered in another point of view ; if we ask whether the consumption of the pro- duce of the soil and industry of a country be most advantageous to public and private wealth, when it takes place at home, or when it takes place abroad; the nature of the question is altered; it then becomes of the greatest interest, and affords results much more useful and much more productive for the science. When the produce of national labour is consumed in the country, its consumption is not very active 3 OF POLITICAL ECONOMY. 389 because, as ]\lontesquieu observes, people of the same climate have neatly the same productions, and find in them none but common and ordinary enjoyments : consumption never goes beyond their wants, because the productions are not capable of exciting their de- sires, gratifying their sensuality, or flattering their vanity. All that can be wished for of such a con- sumption is, that it shall regularly absorb the produce of national labour. In such a state of things, it is ve- ry fortunate for the nation if its wealth continue stationary, as it is more likely to be retrograding than progressive. When, on the contrary, the produce of national labour is consumed abroad, the returns, which consist of new, various, and more abundant productions, are generally sought after, their consumption is rapid, labour and industry redouble their efforts to procure them, and both private and public wealth make an astonishing progress. Moreover, the returns for the exported produce are always more considerable than that produce ; that is, the foreign country gives a greater quantity of pro- duce than it receives, and this surplus Consequently increases the capital destined for the support of na- tional Wealth. The characteristic of foreign com- merce is to offer to all nations the produce which suits them best, and consequently to make them pay dear- er for it than what it is worth in the place where it is produced. Hence it follows, that foreign commerce affords every nation sure means of selling dear the produce of its own labour, and purchasing cheap the produce of foreign labour. This phenomenon has been 50 390 ON THE VARIOUS SYSTEMS discovered by Adam Smith, and he explains it thus. u Between whatever places foreign trade is carried on, they all ojf them derive two distinct benefits from it. It carries out that surplus part of the produce of their land and labour for which there is no demand among them, and brings back in return for it some- thing else for which there is a demand. It gives a value to their superfluities, by exchanging them for something else, which may satisfy a part of their wants and increase their enjoyments. By means of it, the narrowness of the home market does rtofe-hinder the division of labour, in any particular branch of art or manufacture, from being carried to the highest per- fection. By opening a more extensive market for whatever part of the produce of their labour may ex- ceed the home-consumption, it encourages them to improve its productive powers, and to augment its - animal produce to the utmost, and thereby to in- crease the real revenue and wealth of the society/'* It is not only by procuring a sale to the surplus produce of the labour of a country that foreign trade succeeds in selling dear the home-productions, and purchasing the foreign produce cheap. The same ef- fect would take place, if it were possible for nations to trade with the whole produce of their labour. The produce sold abroad is always higher in price than in the place of its production, and consequently foreign trade always sells dear and buys cheap. ; Lastly, another advantage resulting from foreign trade, which has not been noticed by Adam Smith, is this. It invites all nations to share in the fertility of * Wealth of Nations, vol. ii. page 175. OF POLITICAL ECONOMY. 391 all soils, in the improvement of every branch of industry, and in the progress of general civilization. The enjoyments of any particular people are no longer limited by the sterility of its climate, by the auk ward- ness or inexperience of its labourers, nor even by the defects of its political institutions. The fertility of ' any soil, the improvement of any branch of industry, the goodness of any political institution, become as it were common to all individuals, to all nations, to the whole family of the human race. This sharing in the general abundance banishes poverty from all coun- tries, or at least no nations are left in poverty but those which do not know how to avail themselves of the soil on which they are placed, or whose industry is checked by the carelessness or ignorance of their government. That Adam Smith- should have thought it more advantageous for a country to consume the produce of its labour than to sell it abroad, is so much the more surprizing, as he teaches the direct contrary when the question is of purchasing abroad. " It is," he says, *'the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy,. The tailor does not attempt to make his own shoes, but buys them of the shoe-maker. The shoe-maker does not attempt to make his own clothes, but employs a tailor. All of them find it for their interest to em- ploy their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part- of its prodnce whatever else they have "Occasion for. 392 ON THE VARIOUS SYSTEMS " What is prudence in the conduct of every pri- vate family, can scarcely be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of ©ur own industry."* If it be the interest of a nation to purchase from a foreign country when that country sells cheaper; how can its interest be injured by selling to the foreign country when it purchases dearer ? What difference is there between purchasing cheap from a foreign country and selling dear to that country ? It is not easy to discover any difference. Does not the capital which purchases the produce of foreign industry, replace a foreign capital as well as in the case of selling national produce to a foreign country ? Is not. the labour of the foreign country supported by national capital in one case as in the other ? If, in the case of selling to a foreign coun- try, the capital of the merchant replaces a foreign capital, his capital also replaces a foreign capital when he purchases the produce Of the foreign country. If, by selling to the amount of- twenty millions of the produce of home-industry, the capital of the mer : chants who import in return foreign commodities to the amount of twenty millions, exchanges twenty millions of national capital for twenty millions of foreign capital, the same merchants, when they pur- chase the produce of foreign industry to the amout of twenty millions, exchange alike twenty millions of * Wealtk of Nations, vol. ii. pages 191, ] 92. OF POLITICAL ECONOMY. 393 national capital for twenty millions of foreign capital. The two cases are perfectly parallel ; and it is only through an inconceivable inattention that Adam Smith has applied to each a different doctrine.* If he supposed that, in the case of purchasing foreign commodities, the returns of the national ca- l pital are quicker than in the case of selling the pro- duce of national labour to foreign countries, he still laboured under a manifest error. Whether foreign countries bring the produce of their industry, or national merchants go to fetch it from the spot where , it is produced, the result is always the same ; and in both cases the returns are as slow as in the case of selling to a foreign country. If national merchants fetch the produce of foreign industry, they export the produce of national inous- try to pay for it ; and the length of the voyage out and home is the same as when the foreign trade im- ports the produce of foreign industry, and exports the produce of national industry ; consequently, sel- ling to a foreign country and purchasing in a foreign country are both alike subject to the inconveniency of a slow return of capital. But does that inconveniency really exist, or is it not rather delusive and imaginary. * The capitals employed in the home-trade may, it is true sti- mulate national industry in a double degree to what those employed in foreign trade do : but they cannot set so great a quantity of la- bour in motion, because the home-consumption is limited whilst that of the foreign markets is unbounded. This reflection of an Italian author is, I think, as true as. sagacious. See Palmieri's ex- cellent work, Delia Publico Felirtfa. 3$4< ON THE VARIOUS SYSTEMS The general labour of a country does not depend on the celerity or slowness of the returns of commer- cial capitals ; credit supplies their absence ; and, pro- vided they bring back a more abundant foreign produce than the national produce exported, national labour loses nothing of its activity and productive- ness. Labour is not interested in the quickness of the returns^but in the consumption of its produce ; and whenever that consumption experiences no delay, la- bour preserves all its activity. Commerce always ea- sily replaces the capitals of labour, when it finds a sale for its produce. The credit which it gives to the con- sumers, affords safe resources to replace the capital of labour. It can negociate the documents of the credit it has given in a thousand ways, and, by discounting its bills, accelerate the return of its capital according to the wants or exigencies of labour.* National labour therefore is never a sufferer from the slowness of the returns of the capitaldestined fol- ks support ; it only suffers from the slowness, diffi- culty, or insufficiency of the consumption of its pro- duce, and from its reduced price or depreciation. When the produce of labour is depreciated, or sold very cheap, the wages of labour afford but a scanty pittance to the labourers, the profit of stock is incon- * The Italian author whom I quoted in the preceding note, ob- serves again on this head, that if the home-trade, by the rapidity of Yts returns, allows the same capital to be employed several times which foreign trade allows to be employed only once, foreign trade employs a greater quantity ; and this greater quantity of capital em- ployed compensates for the slowness of its returns, and yields pro!'?: much more considerable, OF POLITICAL ECONOMY. 3^6 siderable; land yields a poor rent, or even none at all; labour languishes, industry pines, and national wealth decays. That the produce of national labour is con- sumed at home, and that the capital of the home- trade always replaces two national capitals, is of little importance ; najtional wealth is not improved, nor is the condition of the people rendered less miserable by the circumstance. But when the produce of national labour is sold at a high price, the labourer than receives ample wages, the profit of stock is great, the rent of land consider- able, national industry flourishes, opulence is pro- gressive, and the wealth of the state becomes the immoveable basis of its power : whether this high price of the produce of national labour be paid by foreign countries, is of no moment ; its effects are not less certain nor less prosperous. The question reduces itself simply to this : does the foreign or the home-trade procure the most ad- vantageous price to the produce of national labour ? And I think it has been sufficiently answered in fa- vour of foreign trade. Consequently, ail nations are ? in my opinion, powerfully interested in giving to fo- reign the preference over the home trade. Consistently with his principles, Adam Smith assigns the last, place to the carrying trade, the capital of which is merely employed in replacing the capitals which support the labour of foreign countries. But his opinion is directly opposite to that of D'Avenant, whose knowledge and information on 3Q6 ON THE VARIOUS SYSTEMS subjects connected with political economy are enti- tled to the highest consideration. " Freight," says D'Avenant, " is not only the most politic, but the most national and most certain profit a country can possibly make by trade."* Such a difference between twojustly esteemed wri- ters deserves to be investigated. And first it ought to be observed, that the assertion that the capital employed in the carrying trade re- places only foreign capitals destined to support the labour of a foreign country, is not correct. This capital supports also the labour which builds and fits vessels out ; it pays the wages of the sailors,! the commission for warehouses; and all the advances to which it gives rise. It is the origin and principle of the transit trade, which is so profitable in all its bran- ches, because it pays considerable wages, and main- tains a great number of individuals at the expence of the industry of other nations. Notwithstanding these numerous advantages, I do not think that the carrying trade is the most benefi- * Vol. ii. page 275. f The author forgets that Adam Smith himself observed, that, " when the carrying trade of any particular country is carried on with the ships and sailers of that country, that part of the capital employed in it which pays the freight is distributed among and puts into motion a certain number of productive labourers of that coun- try." Wealth of Nations, ^vol. ii. page 68.) But Adam Smith did not enter much into the subject, because Great Britain had no car- rying trade at the time he wrote, and this is also the probable rea- son why he neglected mentioning the transit tmde,~r-T, OF POLITICAL ECONOMY. ' 397 cial, or that it ought to he favoured at the expence of the foreign trade of consumption. Why does a nation employ its capitals in one labour preferably to another ? Because it has a decided su- periority in this labour ; and this superiority balances the advantages which other nations have in other branches of industry. The benefits of the carrying trade are therefore relative. They depend on the situation of the country, on the manners of the peo- ple, and on their taste and knowledge. Such circum- stances are local, and cannot easily be transferred from one country to the other. Every nation has advantages in some kind of in- dustry. It ought to study to improve them without envying those advantages which other nations enjoy in other branches of industry, and without neglect- ing those which it may attain without inconvenience, and in which it may keep up the competition. In short, we ought to recollect what D'Avenant says, with as much sagacity as judgment : "The va- rious produce of different soils and countries is an in- dication that Providence intended that they should be helpful to each bther^and mutually supply the necessities of one another." Thus it appears certain, that foreign trade is more favourable to private and public wealth than the home-trade. Nations ought therefore studiously to exert themselves to place foreign trade on a solid and immoveable basis, and eagerly seek for the means best calculated to raise it to the highest pitch of per- fection. ■ ■ -51 398 ON THE VARIOUS SYSTEMS The means hitherto employed consist in privileged companies, colonies, and treaties of commerce with foreign powers. The efficacy of these different means is disputed by our best writers, and forms a problem which is not easily solved. I shall endeavour to give it a full investigation and to reduce it to a proposition so plain that the advantages and inconveniencies of the different theories on this important point of poli- tical economy may at least be appreciated. chap. yi. Of Corporations and privileged Companies. COMMERCE, or the general circulation of the pro duce of labour, in which wealth is so strongly interested, has not escaped the attention of modern governments ; and what must appear very extraordinary is, that the mode of conducting it has been nearly the same at first in all countries. -Every-where the home-trade was at; first entrusted toprivileged individuals, and afterwards to corporations regulated by statutes and general and private laws. . Every-where privileged companies have been exclusively allowed to pursue the most produc- tive branches of foreign trade: but it must be ac- knowledged, that the uniformity of a method estab- lishes neither its necessity, nor its utility and advan- tages. The interests of princes, temporary wants and personal considerations, were generally the motive or the pretence of such concessions. OF POLITICAL ECONOMY. ?>99 Experience and reason have long ago pointed out the defects, inconvcniencies, and calamities of a re- stricted commerce. It has been equally reprobated by all writers, without exception ; and if it be still found among some enlightened nations, it is because it is in some degree become a part of the political system, and is identified and confounded with the right of property. But it is every day modified, every day it is forced to capitulate with public opinion, by which it is hooted, and governments themselves pro- long its existence merely because they are obliged to yield to the circumstances of the times, which ex- cuse any thing and oppose the best intentions. It is not therefore with the view to ascertain the truth of the principles, that I shall inquire into the influence of corporations and privileged companies upon the circulation of the produce of general labour; but I think it will not be useless rapidly to state the powerful considerations which imperiously demand rhe suppression of a method of commerce so fatal to general wealth. Corporations and exclusive companies, as their proceedings arc similar, afford also the same results. They give to a certain number of privileged indivi- duals the right of purchasing of the producer to sell to the consumer. They consequently limit the number of buyers and of sellers; which circumstance gives to the privileged buyers ancj sellers the faculty of selling dear and purchasing cheap. But to purchase cheap of the producer is to discourage production, and to sell dear to the consumer is to discourage consumption, 400 ON THL VARIOUS SYSTEMS Thus it is hardly possible to conceive a method of commerce more prejudicial to wealth. Besides, corporations and privileged companies give to circulation a constant and uniform motion, which is not easily changed and improved, They oppose an insuperable obstacle to the progress of knowledge, to the reflexions of experience, and to the discoveries of genius. Every individual is con- demned to perform the task which he has learnt ; and it is only with great difficulty that he can quit the sphere of the knowledge he has acquired. Science becomes an obstacle to science, and arts advance to old age without emerging from infancy* Finally, the profits which the right of selling dear and purchasing cheap insures to corporations and privileged companies, attract, to that kind of labour larger capitals than what would have gone to them of their own accord, and reduce the quantity of those which would have been employed in other branches of labour. The excess of capitals in privileged em- ployments, and their scarcity fri other labours, neces- sarily raises their profits, and the high rate of profit of stock is fatal to the progress of industry and wealth "Besides all these bad effects," says Adam Smith, i ' necessarily resulting, from" a high rate of profit, there is one more fatal, perhaps, than all these put together. The high rate of profit seems every-where to destroy that parsimony which in other circum- stances is natural to the character of the merchant. "When profits are high, that sober virtue seems to be superfluous, and expensive luxury to suit better the OF POLITICAL ECONOMY. 401 affluence of his situation. The owners of the great mercantile capitals are necessarily the leaders and conductors of the whole industry of every nation; and their example lias a much greater influence upon the manners of the whole industrious part, of it, than that of any other order of men."* Thus everything contributes to demonstrate, that the circulation of the produce of general labour is defective when it is effected by corporations and pri- vileged companies. A modern French writer thinks, that the privilege of a company is justifiable when it is the means of open- ing a new trade with distant or barbarous nations. It then becomes a sort of patent, the advantage of which covers all the risks of a hazardous undertaking and the costs of a first experiment. The consumers cannot complain of the dearness of the produce of those dis- tant countries ; were it not for the monopoly, it would be much dearer, or it could not be had at all. But, like patents, the privilege ought to last only for the time required completely to indemnify the underta- kers for their advances and risks. This time once elapsed, such a privilege would be nothing but a wan- ton gift made to the privileged individuals at the expence of their fellow-citizens, who hold from na- ture the right of providing themselves with commo- dities wherever they can, and a't the lowest price pos- sible, "f This exception appears at first sight plausible, ad- vantageous, and no-wise inimical to the principles of * Wealth of Nations, vol. ii. page 482. f Traitts d'Economie Po!itique,par Say, livre i, chap, 2. 402 ON THE VARIOUS SYSTEMS commerce. But when examined more closely, it will be seen that there is not any branch of foreign trade that, if this doctrine were admitted, would be secure against a monopoly, and the privilege of which might not easily be justified. Indeed this kind of privileges is almost always founded upon the advantage of open- ing a new trade with distant nations, upon the risks of a hazardous undertaking, or upon the necessity of an indemnity. All privileges therefore would be just and necessary : but in such cases, it is not the interest of the privileged individuals that ought to be consider- ed ; it is the interest of the circulation of the produce of labour. But this circulation is essentially endan- gered by any kind of privilege. It is checked alike by the low price of the produce and the dearness of the consumption, by the higher rate of profit, and every obstacle by which it may be obstructed. Should it however happen, that one or several in- dividuals had opened, at their own risk, a road un- known to commerce and of evident utility ; it would, be proper for government to grant them not only an indemnity, but a reward proportioned to their services. This measure, conformable to justice and to the spi- rit of civilized societies, would afford useful encou- ragements, turn to the advantage of commerce, and be free from the inconvenience of exclusive privileges. Before the guardian principles of commerce were ascertained, the immense extent of capital required for certain commercial enterprizes, the necessity of harmonizing their various branches, the permanent establishments which they demanded, the risks to which they were exposed, and the slowness of the OF POLITICAL ECONOMY. 403 leturns, served as pretences for the creation of a num- ber of privileges, and have since protected them against the blows which have been aimed at them. It is on such a foundation that almost all European nations have created monopolies or exclusive compa- nies for the trade of the East Indies, of Africa, Ame- rica, and of the East and North of Europe. But experience has long since manifested the inu- tility of these privileges ; and it is now generally known, that any trade carried on by a company may be carried on much more advantageously by private individuals. It is particularly with regard to the trade with the East Indies that this truth has been made most evident. The proofs have been accumulated in a vast number of separate tracts ; and among all those which I could quote, I shall appeal to the evidence of a member of the French board of trade, a man deeply learned on those subjects. " It is notorious," said Mr. De Gomnai, "that," the direction of a company being very costly and burthened with many expences foreign to trade, a company can only engage in trades that yield high profits, such as cent, per cent, or eighty per cent. All trades whose profits are less, are neglected by trading companies ; they cannot undertake them. But as nothing restricts commerce more than a high rate of profit, it is not surprizing that countries so exten- sive as China and the East Indies, do scarcely employ annually twenty vessels of the East India Company."* * Ntmoires de V Abbe Morelld sur la Compaignie dea Indies es 1769. ON THE VARIOUS SYSTEMS Let us therefore conclude, that privileges for the circulation of any branch of national and foreign produce, is contrary both to the true principles of political economy and to the progress of wealth. CHAR VIL \ Of Modern Colonies, .MODERN colonies, in whatever light they may be viewed, have nothing common with the colonies of the ancients but the name. The Greeks and Romans had no other object in establishing colonies, than to open a vent to an over- increased population, the wants of which exceeded the means of the society, and which, soured by misery, might become an instrument of disorder, favour civil commotions, and endanger the tranquillity and safety of the state. The object of these colonies was there- fore to avoid poverty, which is always fatal to the tranquillity and power of states. Modern colonies have a totally different object, They are an extension of the territory of the mother- country, the means of increasing its population, wealth, and power; and they accomplish this impor- tant end by the fertility of their soil, and the variety and novelty of their productions, which render them universally desirable, and above all, by their abun- dance and cheapness, which place them within the reach o( every one. OF POLITICAL ECONOMY. 40£ Brought into the market of Europe, these produc- tions afforded a new equivalent to the produce of its soil and industry, raised its price, and necessarily augmented its production. They therefore increased the wealth of Europe, not only with their own value, but also with the value of all the commodities which they caused to be produced to serve as their equiva- lent The results of this double improvement are incalculable. It is true, that the population of Europe has almost entirely created the population of the New World : that its capitals have paid for the clearing and .culti- vating of its valuable soil ; but how advantageous and profitable has this employment of capital proved to Europe ! It is, no doubt, impossible to ascertain the precise amount of these advantages ; but the most superficial estimation enables us to judge of their extent and importance. The number of Europeans who have peopled the New World, cannot be estimated higher than one million. This population, according to the most en- lightened political arithmeticians, would have been doubled in Europe in five hundred years, and eonse- quently would have multiplied only at the rate of two thousand individuals a year, which, in the space of • two centuries, would have augmented the population of Europe by four hundred thousand individuals. The population of the New World, which is of European origin, amounts at least to twelve millions; which supposes that the one million of individuals who passed from Europe into the New World have 52 406 OSJ THE VARIOUS SYSTEMS multiplied at the rate of fifty-three thousand three hundred individuals a year, consequently in a pro- portion twenty-six times superior to that which would have taken place, if that one million of individuals had remained in Europe. The progression of the capitals which Europe ^ent to the New World has not been less rapid, nor less extraordinary. Supposing that every European who went over to the New World carried with him a capital of three- hundred French livres (about 12/. 10 CONSUMPTION. CHAP. I. Of the National Income. A LL systems of political economy agree in making h*&4* the national income consist in the produce of annual >w ^^ labour. The spontaneous productions of the soil, of <^X>A mines, and of the waters, are not very considerable, ^f,^^ and require besides a certain portion of labour to be k ■£&$& gathered and brought to market ; they must, of course, be ranked among the produce of labour. Income is either private or public. But these two denominations are merely two different manners of u.^ #*! viewing income ; they neither alter its nature norits^^/^ quantity. All authors on subjects connected with po-'**"**'- f litical economy, unanimously teach, that the nation- , - ^ al income is composed of the private income of the members of the nation.* * Sir William Petty — George King — Mr. Hooke — Sir William Pulteney — Adam Smith — Dr. Beekc — Physiocratie, page 113. — Philosophic Ruraie v page 150. yuj/vttfx. 43£ ON THE VARIOUS SYSTEMS One noble author alone thinks that this opinion,, fu£#- u though universally prevalent, must be deemed false i^i£ and unfounded by every man who considers the sub- '^hcLl- ject, after having formed and familiarized himself to (ro./ajj a n accurate and distinct opinion of the nature of w ^ value." "Z2^- " It must appear,'* says the Earl of Lauderdale, ,^s-/ " that a commodity being useful or delightful to man, 'M Id cannot alone give it value ; that to obtain value, or ta^t *f to be qualified to constitute a portion of private riches, v J** it must combine with that quality the circumstance of »»™-^ existing; in a certain degree of scarcity. Yet the ■ ' tf c common sense of mankind would revolt at a proposal '^iL^for augmenting the wealth of a nation by creating a 4? /c t*$scarcity of any commodity generally useful and ne- cessary to man. ^ **£*& "Let us for a moment suppose it possible to create !/4 X«^as great an abundance of any species of food as there ^*£ exists of water ; what would bethought of the advice ^ **"• of a man who should cautiously recommend, even at , ^^tfte moment of the pressure of scarcity, to beware of V^ creating this boasted abundance ?• For, however flat- fcto"^" tering it might appear as a remedy for the immediate ^^^evil, it would, inevitably diminish the wealth of the / ^ m / ^nation. Yet, ridiculous as this opinion might appear, ^ as every thing which partakes of the abundance of ^? Great Britain amounts nearly to five hundred millions^7iIl*u, sterling. We have seen, and know, that war, even iw**^*&* the course of the first year, may sink the value of this^^'f^ capital twenty per cent. ; that is, that it may diminish/^ **■ a ^ the mass of individual fortunes one hundred millions; % ^23 and thus impose upon any man, who made up the^.^«^ account of public wealth on the principle that an ***&*- accurate statement of it was to be derived from ad- ding together the fortunes of individuals, the neces r . sity of saying that one hundred millions of our wealth had vanished. " But this is not all. The value of many things sinks at the same time. In the value of land in par- ticular, "wehaveseenaconsiderablediminution, which would create the necessity of a further reduction in this statement of public wealth. Yet the surface of the national territory remains unaltered ; the landlord receives the same rent ; the stock-holder is paid the same interest ; and there is no one thing on which a man can lay his hand as an article of national wealth, which does not appear to retain the same qualities that rendered it either useful or desirable. "If we could- further suppose nature to bestow on any community, or art to procure for them, such an abundance, that every individual should find himself m possession of whatever his appetites could want, or • his imagination wish or desire, they would possess the greatest degree of national wealth ; though under such circumstances it is impossible that any commo- dity could obtain the attribute of value : for, like water and air, all commodities that partake of their aburj- 434 ON THE VARIOUS SYSTEMS dance, must at once be divested of value, or of the pos- sibility of constituting any part of individual riches."* I shall not follow the noble Earl in the very exten- ^^p sive developements which he has given to his opinion ; is sufficient to resolve it. W£-«*>«e The produce of general labour,* whether in the J^H.I^hands of individuals, where it forms private income, feUip'.or diffused all over the country in the shape of nation- ■.■mJz*£^ a i i ncorne} i s partly consumed by the producers, and '^-W' partly exchanged, with the view of the objects ob- ^J^^tainedin exchange being consumed either by tht ;^A^^««P^ ocmcers or other classes of consumers. *2f%M*$ If the produce consumed in the place of its pro- £uZdf duction be abundant, its plenty contributes alike to public and private wealth, and establishes no differ- ence between those two sorts of wealth. ji If, on the contrary, that produce be rare, its scar- -y/M^^cijty impoverishes alike the individual and the public, f^^^tnd public and private wealth is equally a sufferer. V Q %~tvt>*-i*y ' With regard to the produce exchanged by thepro- ^J^ducers, if the exchange takes place with a foreign '^t, V* country, its abundance turns to the benefit of the f^/W*$foreigners, who purchase it with the same values -^^?Jvhich they used to give for it, unless the foreign * An Inquiry into the_Nature and Origin of Public Wealth, and into the Means and Causes of its Increase, by the Earl of Lander- uele s chap. ii. pages 43, 45, 48. OP POLITICAL ECONOMY. 435 country should have been favoured with a like abun- dance in its own produce; because, in that case, plenty is equally beneficial to the foreigners and the natives, and in both cases private and public wealth .remains the same. If, on the contrary, the produce exchanged with ^Vw the foreign country is scarce, the foreigners are suf- ^ o* ie/vet ferers by this scarcity. They give the same quanity^wys*. of produce in return as in the times of plenty, because^upfc/4 their produce could not find any other employment ;X/^*^« and if the harvest has been as bad abroad as at home,^^; ,„ then the two countries suffer alike by this common^ ^"^ scarcity ; and in both cases public and private wealth \ either continues in the same situation or undergoes the same alteration. Finally, if the exchange of national produce take yY^ place at home, its plenty becomes beneficial to the.c/^^? >-<*/ consumers without any loss to the producers, because ^f*7 * the latter always receive the same value which iheyf"*&«Uj° usually received from the consumers. But, in a case £%Zf/^ of.scarcity, the loss is to the consumer, yet without^J"^ 3 ^ any benefit to the producer , because the consumer tL ?*»**** can only give him the usual value; consequently, Hu^ <^*a there is, in both cases, neither loss nor profit for pri-.^/ vate and public wealth. It must, however, be acknowledged, that when -A- «*»«• ' either abundance or scarcity is excessive and extraor-^f^^ /u dinary, it is more or less fatal to the producer or X.oUJl»tH>* the consumer ; but in no instance does such an event t/*/^ produce any difference between public and private^/^. wealth. If, in the case of excessive plenty, the^^^.. wealth of the producer be diminished, that of the '^fr**?? 436 ON THE YARIOUS SYSTEMS ' consumer is augmented ; the one gains what the other loses ; and public wealth, which consists of individu- al riches, experiences no change from the loss of the producers and the gain of the consumers. The case is the same when the latter are losers, and the produ- cers gainers ; the loss and the gain, with respect to general wealth, is compensated, and the situation is the same as if there had been neither loss nor gain in all private exchanges. If, therefore, we regard merely the merit of the difficulty started by lord Lauderdale, I have perhaps, assigned too much importance to the solution of the &*^f difficulty : but if it-be viewed in all its consequences, /^^it will be seen that it was my duty to neglect no r ^£^ x fiieans to prevent the noble Earl's opinion gaining any Q«*yt<. <£credit. Though the identity of public and private ^^//wealth be undoubted, and the danger of drying up ' iiUf the source of the former by bearing too hard upon ^ iWMhe latter be imminent, yet private wealth has not W% always met with the regard to which it is entitled ; ^^/what, then, would be the consequence, if any, even ■U the smallest doubt, were ever entertained concerning; &-U>lt'Vr P*. w ". that identity ; ifa source could be assigned to public I "7 wealth, different from that of private riches ; and if ^ t^eo vera men ts should persuade themselves that the i? J decay of public wealth is no-wise injurious to private ^/riches, or that private riches may be impaired with- v ,, out injuring national wealth? Apprehensions of this % fc-o^kind can never be realized", when governments are ful- ly convinced of the identity of public and private wealth; and there is something extremely consolato- ry and beneficial in this opinion, which must not be OF POLITICAL ECONOMY. 437 suffered to be shaken, and must be vigorously defen- ded, because it is on this truth that the maintenance of social order, the progress of public wealth, and the amelioration of the condition of mankind, are, in some degree, depending. The produce of annual labour, whether it be view- ^j^^, ed as private or national income, is distributed in the a*™^ ** shape of wage s of labour, p rofit of stock, or rent of ^ land. The French economists were well aware that this distribution ought to take place according to regular and general laws ; but instead of seeking for these laws, they created them conformably to the system which they had adopted.* Adam Smith was better informed, or more fortu- 'faytft'A nate. . He discovered these laws in the very nature rf^ " Of things. " A^nyU He states that the distribution of the national ^^^^v income is naturally regulated by the progressive* /^/^/^ stationary, or retrograde state of national wealth. ^L^jt^.. When wealth is progressive, more produce of -the-^ 1 *^**^ annual labour is distributed in wages of labour, profit of stock, and rent of land. When wealth is station- *^- J ^- ary, a smaller quantity of that produce goes to the^Su/^V' labourers as wages, and to the land-holders as rent ; ***+■ <>&"**" and Ihe profit of stock remains as before. When ^/^ /U/ ^ i wealth is retrograde, the wages of labour sink so low byi **?■* that they are scarcely adequate to supply the most ^/^^i urgent wants of the labourers; rents also suffer a con- i^-k^pff siderable diminution; but the profits of stock expe- ^^//^^y * Fhysiocratie ; Tableau Economique. $6 ■ ' ' +38 ON THE VARIOUS SYSTEMS rience, on the contrary, a rise corresponding with the ^decline of national wealth. Not to be struck with. the justness, and truth of these laws, and to withhold a tribute of praise and admiration from the mind that discovered them, is equally impossible. To these general and fundamental rules of the dis- tribution of the produce of annual labour, Adam Smith has added some particular ones for the wages of different labours, the profit of different capitals, and the rents of every different kind of soil. I have already explained his doctrine concerning the wages of different labours, (book ii. chap. 7,) and the profit of different capitals, (book in\ chap. 5.) I shall therefore confine myself to a few observations on that parkof his doctrine which relates to the rents of land, of which I have not hitherto had an oppor- tunity to speak. ^ ut/uttf The writers on political economy are not agreed /^^-"upon the causes which establish the rent of lands. / The French economists derive it from the orig in- al ad vances_ flf_the_ land-owner in^leariqg_the land and putting it into a state of cultivation. ,/ Adam Smith has combated this opinion with ar- *--.- guments drawn from the circumstance that land-own- ers demand a rent even for unimproved land ; that those improvements are sometimes made by the stock of the tenant ; and that land-owners sometimes demand rent for what is altogether incapable of hu- man improvement. ^h '/****■ He therefore regards the rent of land, considered ^,yf- as the price paid for the use of the land, as a mo- tifcy nopoly-price, which is always determined by what OF POLITICAL ECONOMY- 439 is left to the farmer after he has paid the wages of la- fjfcw- bourand deducted the customary profit of stock.* This first point being once established, i\dam Smith displays all the sagacity of his mind to class, according to general rules, the lands which always afford a rent, those which sometimes may and some- times ma}' not afford rent, and those which do not^/^^ afford any rent. He has even endeavoured to class -i^,, tfn the different kinds of cultivation, according as they ^r^VL produce food, clothing, materials for dwellings, or^ articles that satisfy fancies and caprices : but his rules ^^a are overloaded with so many exceptions, they depend/***/"** on so great a number of circumstances, and may be so easily criticized, that the impotence and inability of his efforts are felt at every page, at every line. We see that he is struggling in vain against the force of things, and that he cannot establish generalities where nature has dealt in individualities. Thus, after having laid it down as a principle that the rent of wheat-lands regulates in Europe the rent of all other cultivated lands, he is forced to acknowledge that, in many cases, meadows, vineyards, olive-grounds, mines, quarries, and even forests, yield a higher rent than wheat- lands. It is true that he has again attempted to generalize the particular cases. But these uncertain classifications were hardly worth the trouble which they cost him, since t he rent of aljlands, whatever b e the mode of cultivating the m, is a lwa ys limited to that portiojijof^rjoduce which remains after deduction qf_ the wages of labo ur and pro fit of s t ock ; and since Wealth of Nations, vol. i. pages 250, 251. ON THE VARIOUS SYSTEMS this portion is more or less considerable according as the state of wealth is progressive, stationary, or re- trograde. Beyond these rules there is nothing but doubt, obscurity, and uncertainty. These are the bounds of the science. The laws then which regulate the distribution of the annual produce of labour in the shape of wages of labour, profit of stock, and rent of land, are plain and positive, and can no longer be mistaken. Of all the authors that have recommended a strict ^^attention to those laws and developed their advanta- r Q ges, none, I think, have done it more successfully ' than the Earl of Lauderdale and Count Vern\ " Commerce," says the latter,' " is so much the i, U/l more active, as wealth is more equally distributed and *f^; diffused among a greater number of individuals. We , i see indeed, that in countries where wealth is badly ^4 ^^distributed, where a naked and famished multitude /^^^TatTord a striking contrast with a small number of in- v fE&: dividuals overflowing with riches, the dealers in fo- ^ /^reign and national commodities are few, and the pri- .0**1* ces of goods so high that little is exported. The , % annual re-production is reduced exactly to the abso- ^^^r^lute necessary. The soil where generations of oppres- ^^"'sors and oppressed succeed each other, is barren or ^' uncultivated ; every thing withers, every thing is j dead until an enlightened legislator has the inclina- / ^ tion and the power to point out the true road, and to cause it to be followed. * * Delia Ecorum, Poiit. h 6. ©F POLITICAL ECONOMY. 441 The Earl of Lauderdale presents the same opinion /£- **<•' in a stronger and still more striking light. "f /^ " The distribution of wealth," says the noble Earl,^"~X^ " not only regulates and decides the channels in v^^-y* which the industry of every country is embarked^ / *"f 5 . and or course the articles in the production or wnich^^/J* t it excels : but a proper distribution of wealth insures j.*"*""* ' the increase of opulence by sustaining a regular prq-,_^ t<* gressive demand in the home-market, and still more^ *• * effectually by affording to those whose habits are yH >*^/~. likely to create a desire Of supplanting labour, the dti, power of executing it." To support this opinion, lord n Laudeldale quotes a passage of Bacon, which proves . , that tins vast and profound genius had a glimpse or every useful truth. " Above all things," said Bacon, " good policy is '}L >' ^ to be used, that the treasures and monies in a state Be J ' ' , '. £C~> /-l&* Is* y^CSi not gathered into few hands. For, otherwise, a state /?„> A may have a great stock, and yet starve. And money is hkejnuck, not goocLzgcept it be spread. '** Lord Lauderdale has not contented himself with rendering sensible the advantages of the distribution tfc'f- * of wealth and of its circulation through all classes o£m>a*2&j civilized society ; he has carried his view's farther, ^v^ and inferred from the present tendency of all nations At/ ^^ to favour this circulation, that the industry which UonuMzL employed in supplying the wants of the multitude,**^-/?*; must always prosper more and more, whilst that which ^2 -fe labours only for the luxury, pomp, and vanity of tnvfap/"* higher and opulent classes, must insensibly decline. ^T^ This consequence, which affords to his Lordship e&J&,S'> -i — _____ . ■ _, . filcclci**S * Lord Lauderdale's [pquiry, chap, 5, page 3*9, 353. 442 ON THE VARIOUS SYSTEMS an opportunity of congratulating his country for the useful direction it has given to its industry, points out to other nations the conduct which they ought to pursue to increase or preserve their wealth. Thus the public and private income consist of the annual produce which is distributed in the shape of wages of labour, profits of stock, and rents of land ; and this distribution is regulated by the progressive, stationary, or retrograde state of national wealth. The observation of these laws is of the utmost impor- tance to the progress of wealth, and forms one of the fundamental principles of political economy. CHAP. II. Of Consumption. W^//- CONSUMPTION bears a necessary and indispen- sable proportion to the national income ; but that pro- ■ru^ ^&/L portion has not yet been invariably fixed. iS&i' The French economists think that consumption \/»u. ought to be equal to the income, and allow no eco- nomy but in that part of the annual income reserved y? for the land-owners as the net produce of their lands. * ? , ► / - Adam Smith, on the contrary, teaches that con- 'j, dr sumption ought to be inferior to income; it is on the */>/ .surplus of income that he chiefly founds the progress *^f*a °f national wealth. He even goes so far as to say, * Physiocratic. Tableau Economique, OF POLITICAL ECONOMY. 443 that " parsimony, and_not industry, is the jmmediate cause of thejncrease of capital."* . Finally, some authors condemn economy, regard *?^ {* consumption as the measure of re-production, insin-^^^L uate that income proportions itself to expenditure, ^^"""^ and that people are the richer the more they spend. Whence it follows, that luxury, that superlatively extravagant consumer, is the most powerful spring of wealth ; a consequence this, which renders the theory a little suspicious, and obliges us to investigate it with careful attention. When an individual consumes more than his in- come, the surplus must be taken from his capital, which is gradually diminishing, and tbe diminutioa of which diminishes his income in the same propor- tion. If his expence exceed his income every year, a time must come when that individual, having nei- ther income nor capital left, is obliged to labour for his subsistence, or to be indebted for his maintenance to public charity. What is true of one individual, is equally so of several individuals, and even of a whole nation. If, which is impossible, all the individuals composing a nation should spend every year more than their in- come, the period might be foretold when they would be absolutely ruined ; or when the population would be so much diminished, that, on the same soil oh which there stood formerly great cities, numerous towns, and numberless boroughs and villages, there would scarcely be seen a few scattered villages and some wretched hamlets. Wealth of Nations, vol. ii. page 14. 444 ON THE VARIOUS- SYSTEMS Those who are unacquainted with the progress of wealth, and do not understand how it is formed or how it is destroyed, find some difficulty in conceive ing this result of expenditure above income : but it may easily be rendered obvious and evident even to the most ignorant. „/M, The surplus consumed beyond the individual in- "^ r/ come is taken from that portion of the annual pro- gyi^duce reserved for the advances of labour, or, in other- f^ , words, from the fixed and the. circulating capital. t v ///^Deprived of this portion of capital, the merchant suf- % u fers his vessels, his waggons, his warehouses to decay, ^'^and no longer circulates the same quantity of mer- ^^^chandize; the manufacturer does not keep his ma- J^ chines, his tools, his work-shops in repair, he no lon- ■Za^ ger selects his raw materials with the same care, and *y - employs no longer the same number of hands ; the j 'fc,uJ f arrner witnesses the decrease of his cattle, the decay v *T7ft his farm buildings, of his plantations, of his \2 ploughs, of his implements and instruments of hus- J^ bandry, and can no longer bestow the same manure ^yTand the same labour upon his fields ; lastly, govern- anient suffers national monuments, high roads, canals, ;^^harbouis, and public establishments, to go to ruin. ■rf$ The communications are interrupted, the various , y u«-~ districts of the country are isolated and impoverished ^through this isolated state; the annual produce is ^_£ Successively diminished, so that, at no very distant and much less remote period than is generally sup- posed, the cattle destined for agriculture and the conveyance of commodities disappear, public and private buildings tumble in ruins, the soil is left OF POLITICAL ECONOMY, 44-5 uncultivated, the population has perished or emigra- ted, and the traveller who had seen that country in a high state of cultivation, well peopled and rich, and. beholds it again poor, uncultivated, and as it were uninhabited, is afraid of having lost himself, and does not know to whom to apply to calm his fears and his uneasiness. Numerous are the examples which the ^?~*^ history of antiquity and the middle age affords of such t/^ jj? dreadful catastrophes. What has become of the pow- , * , . "*■ ful empires of Asia ; of that wealthy and populous /y Ai /^ Egypt, still famous for its monuments and its ruins ; tU^i*^ of the innumerable republics of Greece ; of the Opu- lent cities of Asia Minor? There is no vestige remain-.. /. » / ing of their wealth, of their power, and of their gran- ;M / A #^i deur. Their destruction and ruin are generally at-=4^ ^*r tributed to the evils of war, the ravages of time, na- ' ' tional calamities, and a number of political and moral l 'sh ^^^ causes; but it would be easy to shew that all these fa^^t causes would have been transitory, of short duration, #'4£'A»J1 and rapidly remedied, if the burthens laid upon the^"*^*" people by their lawful governments, or by blind or' 1 *^^ improvident conquerors, beyond their annual mcome t U^^J had not deprived them of the means of repairing by^*^ t^ their industry the evils inflicted by the ravages of - ' war and the imbecility of their governors. The excess of consumption above income may therefore occasion the ruin of nations, as it does the . misery or individuals. ^ ' It is true that, in the mercantile system, when the ^ >™*,pt generality of the people obliged to labour experience • - h^ every day the difficulty of providing for their subsis-.^/ -■ a r tence, and know how to appreciate the advantages of^-^^C^ 57 44$ OK th£ various systems ut^ economy and capital, there is no danger that great *,% numbers willaddict themselves to a fatal dissipation, ^V^rush into misery, and dig the precipice which is to *4??£ cngulph public and private prosperity. All wish to *??;< turn to advantage what they have economized, and • A&utvgffiAtn is formed, maintained, preserved by the labour^ *u*^»^fand increased, extended, and consolidated by the ^^^economy of all. The dilapidation of private i ndivid- .Jtcr-i^zJ uals is as little injurious to national wealth, as the f^**? penurious avarice of a few is detrimental to its pro- * P r °f us i°n, dissipation, and luxury, were equal- **^ !l Hy prejudicial in a moral and economical respect, k^*, Luxury, by destroying the fortunes of the first ^i^ ^families of the state, ruined the patricians, and con- vOL9-Ht*> verted aristocratical governments into oligarchical r^Vw anf ^ monarchical governments into despotical ones ; W **- or if it gave birth to new fortunes besides those of ifu^ti tne P at " c ians, aristocracy degenerated into democra- (UvJf^ eracy, or monarchy into aristocracy; so that the di- ^^,£?vision of large fortunes essentially altered the politi- cal system of the state. :/<**,-. >luvt On the other hand, luxury, by scattering the for- OF POLITICAL ECONOMV. 447 tunes of the first families of the empire, afflicted the^- /V '^~* people with the lamentable sight of decayed patricians a^k/f^ stripped of wealth and credit, it vitiated public roo-^T^J*/^ rals, broke the bonds of civil and political idepen-*^%T. dence, caused the inequality of conditions to disap- 'J***; *?*■ pear, corrupted private manners, and destroyed every notion- of order, consideration and respect. Finally, by absorbing the capitals of a great num ber of families, luxury diminished the quantity of labour which they would have supported, weakened t*c<^S£i the national income, and impoverished the state. ^^ y - Such capitals, by being scattered among a number of ^^a* individuals, instead of encouraging them to laboui ^^w"^ frequently incited them to a greater consumption, t^u^jf.A and consequently contributed to increase the general misery. It is therefore, very justly that all the authors of/^^'^ antiquity recommended economy, nay, honoured psfr^&^pjSf simony ; and imputed to luxury the decay of morals/ '''^v^*' the ruin of private fortunes, and the loss of the state. ^ ££T* In such an order of things, avarice was a virtue, and luxury a sort of public crime. , / • In the middle age, under the feudal system, at a 'Tt?^ time when the state was divided amono- £ieat and / 'T petty land-owners and bondmen, and when the poli- ^^/^ ^ tical constitution was purely aristocratical, it was^A~^' thought necessary to guard against, the dissipation off*y ' large fortunes, which were justly considered as the \f/ basis of the state. This gave rise to the laws of pri-//^^^, mogeniture and entail, and others which it is useless ta^***, <* to enumerate here. But these political laws, by,pre- ^ia*m^ serving fortunes in families, impoverished all tke '^p***^ 448 ON THE VARIOUS SYSTEMS "Mfru,^ individuals of the nation. They enriched a few at the **%yK expence of all, and created general misery to establish ^T J fc few private fortunes. What luxury could ever v?Z^*«have been pregnant with greater calamities I f 4- However, every enlightened individual who was *"**^ initiated in the mystery of that legislation, justly lift- ''^ ed his voice against luxury, and condemned it with ,, as much severity as the nations of antiquity. , ' '" Inheritors of their doctrine, our political, moral and ^J economical writers have almost all re-produced it in P^fc- their writings ; and though this doctrine be no Ion- \Jl ger applicable to our manners, to our interests, to our / politics ; though it be as fatal to us as it was benefit lh/Vry ^ cial to the people for whom it was designed, it sti,ll f ^ predominates in our books ; and all that the boldest y u£ ™*' innovators have dared to advance is, that luxury !!!L_1 becomes prejudicial only when it deprives the prodigal t*^*^ d£ the means of performing his individual, domestic, *u> and social duties-. Will men then never cease to judge a- of the present by the past, and of the future by their (jLc*^ fears ; will they not at length perceive that, whatever % ~ Au^fo&y be the circumstances that have led modern £^£^nations to the mercantile system, their political, moral, and economical condition has no conformity with and bears no relation to that of the nations of -b.*&e'*yUj The revenue of governments srenerallv consists of ~. contributions levied upon individuals. If, either. \jy^- from a love of luxury and magnificence, or from.the^ , /^ passion of conquest, or from a bad economical sys-^^V, tern, or from a vicious administration, these contri- j^^S butions are raised to an excessive height, the efforts ^fa^i of the individual members of the nation, to repair by t+fex, their labour and economy the evil of an excessive ex- y-fifegt penditure of government, must prove abortive. \i~yfc>c~A this expenditure, coupled with that of the individual t^CIk* members of the nation, exceeds the annual produce vg/uw*. of the national labour, the aggregate of the nation is l^utl* * placed in the same predicament as an individual who a****-*^ spends more than his income; Capitals are swallowed^-J**' up, labour is left to pine, its produce is diminished, . r population reduced, and the impoverished nation fo***#i% declines, and is perhaps exhausted to such a degree #k^* that it is no longer ranked among free and indepen- ttm**** dent powers. zS"^ Though it be therefore of little importance in the^*-^ mercantile system, whether some individuals consume*^ <^ above their income or not, both the prosperity and 7 ^ 7 ^*^ the safety of the state require that the totality of the p ^ ^ nation should not consume more than the portion of^^/^ the annual produce reserved for oreneral consumption, yf^trj rr- 11 , • V , a****?- fa lo suppose that, the more there is consumed, the /^^ more is produced, is, as has been well observed by a o***** 450 ©N THE VARIOUS SYSTEMS modern writer, to suppose "that it is as easy to pro- f***5$£ldiice as to consume;" that the powers of labour are $$£*)& inexhaustible, and its, produce unlimited. Such a \trc», monstrous doctrine could proceed only from absolute ■X fit ignorance of the causes of the formation and preser- t? #L. vation of wealth ; which ignorance ought to be com- % pletely dispelled by the progress of political econo- - / my, and the propagation of its salutary and conser- j^Jfr^ vatojy tenets. j^r^t Individuals and nations cannot possibly consume ut+K more than their income without exposing them- **> **^ selves to certain ruin ; they ought not even to cou- •T"^ sume as much as their income. Whenever they ».' < ■ y of life, national calamities, and all the evils which j\fc do so, their condition becomes precarious, and na- f ■*' g tional wealth is endangered by the many accidents ' are continually assailing the human race. Every ^^ national calamity inflicts an injury upon capital, yy^jf- affects labour, diminishes its produce, impoverishes jj$/r&4fihe nation, and, in proportion as it is serious and last- ■//&n ing, influences its power and the grandeur of its destinies. \J^vx£*~ A distinction ought however again to be made tJ^fc between individuals and the state. /£?*/- Although the expenditure of Individuals should £u^? fully absorb their income, it not only is not prejudi- (4t tin/ cial to national wealth, but may even contribute to "^^^Jts increase. The desire of comforts, the relish of r^jffi enjoyments, and the love of pleasure, are powerful ^ h^. incitements to labour, and induce the labourer to mul- fy/u**- tiply the produce of his labour ; and in that case it f^-j"- may truly be affirmed, that he labours more in pro- OF POLITICAL ECONOMY. 45\ portion as he consumes more, and that he is so much ™h f/ 1 the richer, as his expenses are more considerable. \\\M*^^ this instance, those few economical and moral writers'! are perfectly right, who praise luxury, and attribute to it a large share in the increase of modern wealth, and even in the civilization of individuals and nations A modern French writer opposes this system, and ^r^^ asserts that consumption is not a cause, but an effect:, *£ that, in order to consume, it is necessary to purchase; -\u- / and that people purchase but with what they have«T^^ produced.* "/Ltlut-fc, This opinion, if it were correct, would completely overthrow the mercantile system, which this author has however praised and extolled throughout his work. We must therefore regard it as a mere mis- take proceeding from inattention. Yet it must be refuted, because it attacks the fundamental principles of the science. * /-■• The mercantile system rests on the interchange of ?>u^c*uZ the produce of general labour ; but the progress of ^^^ * this interchange would have been slow and perhaps v' u ) even uncertain, if it had alwavs been considered as // , necessary that the exchanged produce should really (, / exist at the time of the exchange, and if people could /_'/*♦ have procured what they had not, merely with what a^a*^ they had. But through a combination peculiar to the ^A ^^ mercantile system, people obtain what they have not, with the mere promise of furnishing another produce w - / not yet existing. The simple promise of giving a commodity at some future time is equivalent to the Jean Baptists <&> San : TraitSe d'Kcon. Po!. Paris. 1S03. 45Q ON THE VARIOUS SYSTEMS '^ftfiji actual delivery; hope is inVested with all the prero- ^W^gatives of reality ; and, what is not one of the least remarkable phenomenons of this system, hope is not deceived, and the promised commodity is generally k/^c produced, because it has been promised. Strip the /*tU<^ mercantile system of credit, enforce the actual reali- m^u^ zation of every purchase and sale, and, from that in- stant, more than half of the produce of labour will remain on hands without 'finding a consumer ; from that instant, more than half"*of the labourers will starve, and the annual produce will be diminished by half. The same author adds, in support of his opinion, that the best way of opening markets to the existing produce is to multiply and not to destroy them. This pompous paradox gires to political economy a mysterious and transcendent appearance little cal- culated to gain it friends among men of intellect, or to place it within the reach of attentive and studious inquirers. He who wants toconsume the commodity produced by another, must undoubtedly give an equivalent for it ; he does not obtain it for nothing. But must he ... „ have that equivalent ready, when he demands or gets the commodity of another; or, to use the very words of the author -whom I am refuting, " is the quantity of the commodities demanded, determined by the quantity of commodities in existence?" Undoubted- ly not. The quantity of the produce in request may , just as well be determined by the quantity of commo- dities which are expected and intended to be produ- ced ; and provided their production takes place at OF POLITICAL ECONOMY, 433 the appointed time, the interchange is as perfect as if the objects produced after the exchange had existed at the instant when the exchange took place. When a manufacturer employs one thousand pounds in the establishment of his manufacture ; when a merchant purchases goods to the amount often thou- sand pounds ; when a ship-owner loads his vessel with merchandize amounting to twenty thousand pounds in value ; every one of them perhaps has not effects amounting to the tenth part of the commodities en- trusted to him, and which he may consume or diss!-, pate at his pleasure ; and yet, if the proceeds of the manufacture,, of the trade, and of the venture, pro- duce the equivalent of the values consumed, the result is precisely the same as if the commodities produced after the exchange had existed at the time of the exchange. Should it -be objected that the manufacturer, the merchant, and the ship-owner, are not consumers, but mediators between the producer and the con- sumer, and that the interchange of which they are the agents is only completed by the return of the equivalents of the commodities exchanged; I observe that frequently these equivalents arrive jbut six months, twelve months, or two and sometimes three years, after the consumption ; often even the commodities consumed have served to produce their equivalent, ." and had they not been advanced, the equivalent would never have existed. There is therefore no necessity that the quantity of commodities in request be equal to the quantity of commodities actually pro- 58 4-54 e"W THE VARIOUS SYSTEMS duced. It is almost always proportioned to the quantity of produce expected, and provided this ex- pectation be not disappointed, (and in general it is not disappointed,) wealth proceeds as rapidly and as safely in its growth, as if the quantity of commodi- ties in request were equal to the quantity of eommo- . - dities in existence ^wu* But if individuals may consume not only up to ^"v^their actual income, but even up to that which they ^ /w ^may obtain through additional labour, the case is not &/**% the same with government. When its expenditure;, ^ tf~ collectively with that of the nation, equals or exceeds ^^r the produce of general labour, all the calamities may i, ff>^> be dreaded which result from the equality of con- ^^\* sumption with production, and above all, from the ^^^^isxcess of consumption above production. Whatever /i^Uii be the authority of government, whatever be the j^^- attachment of the nation to its government, and ? /^- whatever plans may be devised, it is not absolutely K^** certain that the contributors to the public expences ctu^c, will proportion their efforts to the magnitude of the is*>-^ and that they will labour less in proportion as they have more to pay. In short, wealth in this critical situation runs so much greater risks, as the evil is certain and the remedy unknown. OF POLITICAL ECONOMY- 455 It is therefore the interest and duty of governments ^ r Tr- not to suffer the public expenditure to exceed that J^ J^ portion of general produce which is over and above^A^f individual and private consumption. On their mode--'?" T"" ration depends the wealth of modern nations. Gov*/ffi£ *** ernments alone can paralyse it, or give it an unlimit * /A 1<*ZJ ed impluse. Let them beware of checking the private ^^ and general efforts of labour, the universal tendency of all individuals to produce, to preserve, andtoamass; and wealth will be unbounded, and their power will increase abroad and at home in the proportion of na- tional wealth. fa ***- A nation cannot be styled rich and flourishing 1 , *'~ v unless its private and public expences be inferior to^A*^] the produce of general labour, or unless it have every ibytyf* year a surplus left ; and its wealth is so much the'y' /. ^ larger, as this surplus is more considerable. /wi^ Wherieverthe private and public consumption of a y ' ^^ nation is inferior to the annual produce of general la-f n " ut bour, the surplus is employed by every class of la- ilU^v\ bourers in extending their labour, and in increasing ^A^ and improving its produce. The farmer devotes his surplus to augment his stock of cattle, to bestow more manure and more la- bour upon his lands, to inclose and to fence his fields, to keep in good repairs the buildings destined to store his produce, and to improve the engines, tools, and implements of husbandry. <^£, The manufacturer gives a greater perfection to his ma*^ machines, bestows more care upon the selection of raw materials, and, by giving higher wages to his 456 ON THE VARIOUS SYSTEMS labourers, he makes them work more, and obtains a larger and a better produce. niaAtuM. The merchant enlarges his speculations, extends tneJuvfhis correspondence, explores new markets, and sells ^J£^*;more. "jtw&f 'AH these ameliorations can only be effected by ad- ijtutjfditioial labour. But this surplus of simultaneous /^."labour must be acquired in the first instance through ''J'rf^me existing labourers, and it cannot be obtained but ^^^w^by offering them higher wages. The first effect of w^ the annual surplus of income above consumption, or Mt- .of the growing wealth of a country, is therefore a *** • forts with a wife, and their union is blessed with chil- "^/^ctren in proportion to their comforts. Thus the dis- ^ , proportion of the number of labourers to the demand occasions high wages, and these high wages, in their fc-*^* turn, restore the proportion between the labourers */^ / -. and labour ; and at the end of a certain time, increa- sing wealth has no other effect than to increase popu- lation, (lcv& If such be the inevitable effect of an annual surplus ''"tf^- left to itself, if it have the double property of raising ^ ^ the wages of labour and increasing the population, ^i^y-two inexhaustible sources of wealth and power; ©F POLITICAL ECONOMY. 457 it is much to be deplored, that such salutary effects are so frequently disturbed, obstructed, or impeded, by numberless political, economical, and administra- Cskim^ tive regulations. Ai*>5/ There are then fixed and positive laws which *Jlu? prosperity only when private and public consumption "V^T does not absorb the general income; when the surplus ^^^ produce, that is annually accumulated, is not diverted ^v^y^from its destination by the political constitution of r ^*^r^he country, or the economical and administrative ^^^measures of government, nor concentrated in soTne fa- *.£uj voured classes, or among a few privileged men ; when, ^ 'jf- M being: left to the individual by whom it has been saved, ' it augments the sum of labour, raises the wages of «**w^£labourers, increases population, developes industry, multiplies wealth, and places public power on the immoveable basis of population and wealth. .'. . ^M^ Adam Smith has inquired whether there be one ^/™~Jdnd of consumption more proper, more profitable, 5^ IZ/and more favourable to the wealth and power of ^J? 7 nations ; and he demonstratively shews, that properr jL ty, expended in durable commodities, or in accumu- lating goods that have a lasting value, is more benefi- cial to private economy, and of course to the increase of public capital, than that which is expended in commodities as frivolous as trinkets and all the tri- J i£ fling ornaments of our garments and furniture. h, *&■**-■> ^ ought, however, to be remembered, that though h, 6f it may be advantageous to wealth that the expences of '^t . individuals and nations should preferably be directed *?%£ to solid and lasting commodities, it may yet not be indifferent to the individual character and manners of OF POLITICAL ECONOMY. 459 nations, and perhaps to the general prosperity of the ^^ world, that the tastes of nations be various, that their y ^ *> enjoyments be multiplied, and that they be anxious /, ***^i to partake of the treasures of all soils, and of the pro- J ^J/ * duceof all labour, industry, and commerce. Though }f- i^^ riches are means of prosperity and power, they yet i M^A* antiquity and the middle age, was wrested rrom weak- ^>/^ ness by force, from slaves by their masters, from the^A^ <**■ vanquished by their conquerors, from a large number '^ ?^ of subjugated nations by a domineering people; as it^^^, was concentrated in one metropolis, and became the ^fc/jjj&r exclusive patrimony of some privileged families, it 2^ ^ proved the direct aud immediate cause of the troubles C^^^u and disorders which successively agitated the domi- tint- acta neering people, of the revolutions which shook their 7 ^^ ~*> empire, and of the convulsions which occasioned^- ^j£ their decline and fall. The innumerable calamities/! <<*w& with which wealth was pregnant, have not escaped * r »i^ t ^ u i • r -11 1- rf/O* Sutton the attention or ancient and modern moralists and^^^^, politicians, and inspired them with violent preposses- 4*U<% sions against it. They imputed to wealth every vice,^*^?' * every evil, every crime, in which it had shared ; and^^T*? even went so far as to suppose it incompatible with j^ good morals, with the stability of empires and the,/,^^ prosperity of nations. &■ ji**% But the history of modern wealth, far from con-4^-/^ firming this severe judgment, has refuted its errors -^^^ and dissipated its illusions. Created by general la-/*<*W-£^ bour, modern wealth has been as productive of pros- J******- A perity as that of antiquity and the middle age had^y^/j? been productive of misfortunes, crimes, and misery. /jca*u%? Modern empires are all indebted to wealth for their j^v^t^h independence ; for the security of their governments ; /s^A^f l for the stability of the civil power, that guardian an- '^^^ gel of individual safety, private prosperity, andpubiic/****^' 462 Ofr THE VARIOUS SYSTEMS ^^/J liberty ; for trie progress of sciences and literature ; y^ for the improvement of the arts, the diffusion of fcccHt^ knowledge, and the immense advantages of general ^tfufa civilization. ^ «, V ~?fc> * Undoubtedly, such benefits have not been obtained 'j. -^ Uf j£° x continued for the space of three centuries without it&lfks some inconveniency, and without a mixture of errors, w^P^^abuses, and excesses. Every thing is abused ; but if fiZj such be the condition of the human race, that they ''Aifliay only pretend to the least unfortunate existence, ^^^itmust be confessed that the economical system, u-k^J- wfi ich derives wealth from general labour ; which, ■ g^ , through private and individual labour, circulates that :>y ^/.wealth among all the individuals and classes of the ,*^e community; which, through commerce, extends its ^^w^'circulation to all nations, and makes it the basis of Ktf M~ ( their mutual prosperity and relative power, is much 7y^ more favourable to the developement of all faculties, ^/*^all talents, all virtues, all social combinations, and t/u 3 / -foreign relations, than that which sought for wealth ""* in violence and oppression, and in the misery of man- kind ; and it is through an obvious mistake that the two sorts of wealth are assimilated, and accused of '^rtf&Z t ^ e same effects- and the same calamities. ^jj^LSiu^ According to the economical system of modern ^ ^^W nations, wealth consists in the surplus of the produce *^^"**Tof the -annual labour above the annual consumption; !^5^ 'and nations cannot grow wealthy but by a great ap= le»6- plication to labour and an extreme attention to econ- omy in consumption. Labour and economy are the true supports of modern wealth. Labour creates the elements of wealth, and every OF POLITICAL ECONOMY. 4$8 s-pecics^f labour is eminently possessed of this facul- D'-fj-uc* ty : but productiveness is neither the same nor alike ; A^ * in every kind of labour, and does not always proceed alike in its developements. \Y , u < Sometimes it requires but the efforts of a single * species of labour ; sometimes it employs the concur- J- ft rence of several kinds ; at others, it acts only through .J^j the moral influence of one sort of labour upon the ^ J-* other. Sometimes the produce of labour exceeds the ~t£nJ~ wants of the labourers, and sometimes it is only Aj/J^ equivalent to the wages necessary for their supporty -^ *- Amidst that variety of forms and proceedings undei ' (^^J^l which the productive faculty of labour displays and=/£^*_ - conceals itself, it has not always been distinctly per- ( w g, c ceived. Its tract has sometimes been lost, and it has j/ktofru been excluded from certain labours, or attributed to en,i»f* others under certain restrictions. The doctrine of-^Uey ' productive and unproductive labour has made much^^jT ! noise, fills a large space in the history of political f\***? economy, and counts still some partisans; but the A/ y^ progress of the science has stripped it of all its im- s*^ /> portance *4X*-*»a Any labour, whatever it may be, contributes phy-r*S&/ sically or morally to production; it produces, or causes di»Z(c other labours to produce, more than they would have ***^. • done without its concurrence, or without its influence, ^J^f and in either of these respects it co-operates alike in /wz£ general production. An unproductive labour could yns ^ **? not exist, or could only enjoy a precarious existence. c»*>&J* Every one would be eager to shake off a hurt hen borne t * e " with reluctance. But labours that are not irame- 464; ©tf THE VARIOUS SYSTEMS diately and directly productive, must not ! ee con •y «**,* founded with barren and unproductive labours. ( ^^~V Labours that are not productive in themselves, but »/ i*. through their concurrence with another labour, are as <*«*^^productive as the labour with whieh they concur. It would, indeed, be difficult to deny productiveness to thelabour of the inventor and constructor of a plough, which procures to the husbandman a harvest tenfold of what he would have obtained through his sole manual labour. ^ «4e- The case is the same with labours calculated for r&* our entertainrrieilt > which, by the enjoyments they ^Ssawf an °ord to the different classes of labourers, induce them to bestow more attention, application, and care, on fa^^ their labours, in order to obtain a more considerable fotd. produce. m, !*»*£'. Surely the surplus of produce due to the two men- ^# /£" tioned kinds of labour, that are reputed barren and *" jf^jtinproductive, is their work, their property, and con- '/J2P stitutes them as productive as the labours to which \ ^-^productiveness is exclusively ascribed. Wealth is ^ **^only interested in the totality of produce, and not t% in the manner of producing it , and with regard to ^- wealth, any labour that increase* the sum of produce is necessarily productive. .; J- The erroneous doctrine of unproductive labour owes its rise to the fear of impoverishing the produc- '£». ^ tive labours, by their paying wages to other labours. '4s9w£J& nas ueen supposed that such wages being taken from the funds destined for their support, might prove prejudicial to the developement of their facul- OF POLITICAL ECONOMY* 465 ties, and perhaps impair their strength ; but this fear is imaginary. w&j h All salaries, when paid freely and voluntarily, are ^w^ the price of a service requested and received by him V^J who pays for that service ; whether the service be ne- /^ A ^ cessary, useful, or agreeable, is of little consequence \Jn~tyj so lona- as it is demanded, its price is re-produced by ^fJ • tt i / l/ *V;W more labour, and a greater re-production. Unless a^^^^ nation ruin itself by its diversions (which is impro ?**..pf£ bable,) it necessarily creates all the produce, that Wgufa to pay for the pleasures which it voluntarily provides^^;^ for itself. It is even to the necessity of raising its4^ * produce to the level of such salaries that general fe^^fe bour is indebted for its progress, society for its pros-Ay?^*; perity, and private and public wealth for its indefinite^ a~ extension. f *^l Far from restraining the developement of the., ** labours calculated for amusement, they ought #0/W£ -j be favoured, encouraged, rewarded; because this is *^**j the only way of giving them the greatest intensity f?j£Z of increasing the population of the country, carrying <*£•**, wealth to the highest pitch, and attaining the highest*^ J M degree of power to which civilized societies can arrive. ^J^^ It is a delusion to suppose that labours, calculated to^4£ amuse, ought only to be maintained by the surplus of^-f^ other labours; they would not exist, if they were tOftj M ./J. wait for that tardy and uncertain event ; they ought^j^ to precede, to produce this surplus, and use it to re-pro-y^X., duce it and increase its force. Useful labours would-^ 7 ^ stop at the produce necessary for their support, if /^J^ they were not stimulated by amusements; and it is^v*, only by striving to obtain that surplus of labour to*"""" 466 ®N THtt VARIOUS SYSTEMS p£j**> which amusements give birth, that nations can ar- rive at opulence. 2. Let it not be supposed, however, that all amuse* ..«**., men t s indiscriminately have the effect of stimulating: ' rfa, productive labours and obtaining a larger produce. *&:*/% They have this effect only when they are paid freely z*--^ and voluntarily ; the re production of its price is the 22? absolute condition of the free and voluntary request JTpv of the service. When labours are paid by constraint, t£c> tr it is to be apprehended that their forced wages will %fc not be re-produced ; that they are taken from the *_ / produce necessary for the support of the labours by ~^" which they are paid ; that these labours will suffer from a limited supply of their wants; that production is diminished in proportion to their privations ; and that wealth attacked in its source will be rapidly exhausted. Except this case, which deserves a peculiar atten- tion, the price paid for amusements by productive '$**& labour, is the creator of wealth, and can alone insure *y*£ . its indefinite progression. ,*L i& The French economists were evidently mistaken. J&-64pt/hen they thought that agricultural labours ought to tT^ be encouraged and amusements restricted : and that £ a ^gations are more or less provided with the conve- *:uJw niencies and necessaries of life according as the num- J£V* ber of those who are employed in useful labour is £y? proportioned to that of those who are not so em- y/^ ployed. The labours calculated to amuse are pro- ■yU- ductive like useful labours, ancrthe produce of gene- ^^"ral labour is always in the compound ratio of both. " '^ None therefore ought to "be excluded or preferred ; they ought all to be encouraged. ^P POLITICAL ECONOMY, 46*7 A much more serious difficulty, and the solution^ ***; or' which is much more important to the progress of^* / ^ / political economy, is to know which kind of labour^^ is the most productive. All labours are undoubtedly ?rt*^i productive, but they are not all productive in the sam.e^ "-*** decree. It is therefore useful to determine which is^ * the most productive. There is no doubt that the most productive labour ^T'* is always that labour, the produce of which is most '**^f~<4 abundant, cheapest, and most easily and most gene-^|^ rally sold. Is there any produce eminently possessed/^, ji of that quality, and can it be had any where at pleas- *f't*6n ure ? I think not. Every country has its peculiar^ ^W- advantages, which other countries may envy, but of^T^l -which it cannot be dispossessed. Were nations rea-^ws^ sonable and alive to their true interests, they would PUtZh, all direct their labour exclusively to the. produce 7 ^^- which they can obtain in greatest plenty, at the low-^** ^ est price, and which is sure to find a ready sale every / T ? v where, because all other countries are deprived of it, ^vLv or cannot raise it but at a greater expence and of an «?**# J inferior quality. Were the general labour to follow this direction, wealth would rapidly attain the grea.t-/^^ est possible expansion ; all nations would share in \t */***) in proportion to their natural or acquired advantages, *u*Wze and none would have any reason to complain of its ^^ '' share when conformable to the nature of things and founded upon the eternal laws of necessity. ^ i But nations are very far from giving to their la- *iw5 bours a direction which would be useful and profita-^!^ ble to all. Strongly attached to the system of mono-^^ polies, of reciprocal exclusions, high duties, and pri^-?^" 468 *N THE VARIOUS SYSTEMS ^/^^v lieges, they impede the circulation of the produce of ^£^y foreign labour, even when it is most advantageous ; ,. , they condemn themselves to consume none but the ^^^'|)loduce of national labour, though the jnost expen- *,u~ .i.Lsive, the lea st fav oured by_nature, orjeast improved w£~f by industry ; and they deny themselves the incalcu- 'i.*j£9 lable advantages which each would find in the ex- ?p¥~ change of its produce for the universality of the pro- ?jf\ ciuce of other nations. Buteven when nations persist in this wrong path into which they have been betrayed r^^^- by error, they ought to prefer the labours of manu- /^ factures and commerce to those of agriculture : be- u ^/A^ause manufactures and commerce are less exposed "^fy t0 chance and more susceptible of improvement ; by JHft*£«*yarying and multiplying enjoyments, they offeragra- -^"""dual encouragement to agriculture, and have a salu- tary influence upon general labour. In investigating ^ . -the causes of the wealth of nations, men have been fA TO ymore anxious to determine the proper and particular fc <£■ ' effect of each labour taken separately, than to disco- ^^ver its co-operation with general labour. Calcula- ■ Zto^tiom extremely ingenious have been resorted to for 2L/^ the purpose of ascertaining the quantity of the pro- duceof each separate labour, as if it did determine ^ / -. the sum of wealth : and the circumstance has been ^tC overlooked, that it influences wealth only up tp its 'f**-**Value, which is determined by the competition of all other productions, by the want which the commodi- fiT'ty supplies, and demand there is for it. No atten- tion has been paid to tl\Q .true promoter of all la-' iletf bours, to the enjoyments which all men desire, lv<{ffio and to the influence which these enjoyments have aJZa*. upon labour in general: on the contrary s amuse- ■tot-fa, OF POLITICAL ECONOMY. 469 ments, to which we are indebted for those enjoyments, If c*y. have been stigmatized as unproductive. Men have./j^* flattered themselves with arriving at wealth by priva- ^^ , tions sooner than by enjoyments ; and the necessaries ^ ^ of life have been supposed a safer guide than super- ,tL. . fluities. To commit a greater mistake is impossible, and how the genius that has carried the torch of light into the dark recesses of political economy could be betrayed into this mistake, is inconceivable : but there are truths which are not perceived before all errors are dissipated, and which derive the brilliancy of their evidence from the truths by which they are preceded and surrounded. Had it not been for the discoveries derived from particular inquiries into the labours of agriculture, manufactures, and commerce, and into useful labours and those that are not so, we should feel little disposed to believe in their reciprocal influ- ence upon general labour, and we should reject the consequence were not its premises' demonstrated. Let us, therefore, beware of arraigning the founders of the science for not having reached the goal ; let us not forget, that it was they who pointed it out to us, and that it is only through their assistance that we attain it; and whilst we reap the fruits of their efforts, let us pay them that tribute of admiration and gratitude to which they are mtitled. ^f^ * Though all private labours are contributing to pro-^i^g duction and wealth, they are yet subject to the influ-^'iz^,^ enceof several causes' which accelerate or etard their 4-^^ progress, and favour or endanger their success. In agricultural labours, concentration oi iauour, or ^~ y™ large farms, increase the power of the farmer, econo- ^"7* v r* 60 470 ON THE VARIOUS SYSTEMS t^y^u, mize the expenees of cultivation, and multiply its *^^ produce; in manufactures, on the contrary, the divi- sion of labour abridges, facilitates, and improves la- gjW^bour. But in all kinds of labour, the slavery or bond- ^g^/'age of the labourers, apprenticeships, and corporations, L^^y which restrain the choice of labour, and the keeping {/W-> of wages below the natural rate, discourage the la- ^JJ/ bourer, cause labour to languish, and oppose an in- f fy*" surmountable obstacle to 1*he devel'opement of its fa- culties, to its prosperity and power; in short, it is on the liberty of the labourer, on the freedom of select- ing his labour, and on the wages of labour being fix- ed by competition alone, that the progress and suc- cess of general labour are depending. When labour has produced the elements of wealth, economy superintends their consumption, saves the surplus of the non-consumed produce, accumulates it, forms it into capital stock, and seeks the mostadvan- t^ Z tageous employment for this capital. It devotes one > ^ j part to procure the raw materials of all labours and ^^ the advances necessary to the labourer, before the ;5t/W- produce of their labour is put up to sale. The funds f ££> applied for these purposes form the circulating capital. Another part is employed in the amelioration and enlargement of the existing labours, and in new undertakings, and the funds thus directed to the increase of labour form the fixed capital. A third and last part is reserved for extraordinary consump- tions^ occasioned by the unforeseen necessities of private individuals and governments, and these funds form the reserved capital stock which is absorbed by private or public loans ; so that all the produce which *z OF POLITICAL IXONOMY, 471 economy saves from ordinary consumption, returns into circulation by extraordinary consumption, which restores the eqQilibrium between consumption and production. Some, philosophical inquirers are afraid of the share which economy necessarily has in the formation of wealth. The term economy, which the vulgar con- found with avarice, and constantly connect with notions of privation, makes them suppose that wealth is obtained only by privations ; and hence they dis- dain riches as too painful and difficult to acquire : hx&Ju+fa* their error arises from the wrong idea they attach to '**•**?'» the word economy. In its proper signification,, it merely means order, moderation, and the proper direction of necessary, useful, and even agreeable expences ; a vigilant severity against profusion and prodigality, and a just proportion between the ordi- nary expenditure and the ordinary income. The dif- ^#^' ference between avarice and economy is striking : the fe" 4 ^*- miser, like the economist, saves the surplus of hisj produce above his consumption : but the miser con- verts that produce into precious metals, which he buries under ground, and which from that instant, become useless to him and to all others ; the econo- mist, on the contrary, employs that surplus in more extended labour, the produce of which he shares with the labourers. The economist is, therefore, as useful to his fellow- creatures as the miser is useless and detrimental to them ; and wealth h as much indebted to the wise moderation of the former, as it suffers bv the mise- 47S ON. THE VARIOUS SYSTEMS rable parsimony of the latter. It is certain that, with- out economy, there is no capital stock ; and without capital there is no improvement or increase of labour,, and no. resource for the unforeseen necessities of indi- viduals and nations. / ^ Some very enlighted philosophers think that ^TVjim unforeseen necessities of individuals and nations Z*Z~y ought to be preferably supplied out of the produce 5*J / ^ es ^ nec ^ ^ or ordinary consumption : but experience ^2^4 ^ as shewn that it is much wiser to supply them at first ^TyferJsti the stock accumulated bv economy and reserv- ,i jr£^ ed for extraordinary expences; and barely to levy upon %/itjfc/the stock destined for ordinary consumption a slight •A-^v tax, which, being continued for a long space of time, ^^^U^suffices to pay the interest due to the capitalist, and kp /W*~to extinguish the capital by means of a sinking fund, ^*^ JThis way of providing for extraordinary exigencies ^^J^leaves to labour all its resources, all its faculties, all r^/stu^. its power ; the produce of which the labourer is ** Lau *^c stripped by the tax, is probably recovered by greater ^^ efforts, attention, and activity ; and the tax thus ^£4^' proves a clear a*ain to the state ; or if the times be so *,^L.£r hard, that the tax cannot be recovered by more ** labour and a greater economy, its burthen will be lighter for being laid on for a greater number of years and for absorbing a smaller quantity of the funds necessary to re-production. In short, the system founded upon the extinction of public debts by means of a sinking fund, has generally prevailed, and pro- mises still greater success, should governments apply it to all extraordinary expences beyond the regular or POLITICAL ECONOMY. 473 expenditure of the public service. The utility and ad- vantages of such a plan shall be developed some-^^^. where else. ./;**<£#*.'. Finally, theorists are not yet agreed concerning the^/yA most useful employment of capital. The most gene- "'^ '' ral doctrine is that it ought to be preferably applied,,, '/ in agricultural labour : but I do not think this theo-^WU ry well founded. The prosperity of agriculture is nt-vW^ cessarily subordinate and dependent on the progress l :** of manufactures and commerce ; to begin by creating^ an abundant agricultural produce before the exist- ence of the industrious classes, by whom it is to be consumed, is to invert the natural order of things. ^ The most usefully employed capitals, and the most yw&y profitable labours, are those which are devoted to ^222 manufactures and commerce. In the very dawn of political econonty, the influ- ence of commerce upon wealth was better felt than fan*/- known, more praised than studied, more admired ~^*Jk than investigated. It was supposed that a country %„#&. grows rich in proportion to the quantity of gold and ^>^» silver accumulated by a favourable balance of foreign trade. This system is at present so discredited, that ^^ . " it must be regarded as an antiquated error, barely worthy of being mentioned in the history of the science. /fa. ru The French economists, who first discovered \\\\s^ eUf ^ z ^- fallacy and successfully attacked it, had not, howev-^f ^ er, any much more correct notions of commerce. They l*>*»u limited its power to the conveyance of the produce ^% &* of labour from the producer to the consumer, and to '^^^ r he fixADg of its value by general competition. To 6lu "f* 474 ' ON THE VARIOUS' SYSTEMS reduce commerce to a material, and, as it were, mecha- nical conveyance of goods, is stating only part of its functions, undervaluing its services, confining its in- fluence, and misunderstanding its true property. This depreciating system has met with but an ephemeral success, and can only mislead those who embraced their doctrine with too much credulity or too much /Cl/^?^ am Smith- has rendered an imported service to w^4 that part of the science, not only by refuting the er- <2* tfr4i i s . w jth which it was obstructed, but particularly ' ,, , £ by ascertaining the fundamental principles of com- ^^s/.merce, it's direction, its efforts, and its results. In most bountiful source of public and private wealth. ~rtsZ& M&i matters little whether the interchange be more e*$*ty favourable to one of the parties than to the other; UC ^7r^ tne y both recover, in the equivalent which they re- ?/■*** ceive, whatever the equivalent they give cost them. V * , Were it not for this condition, the interchange would > / * CD ^nottake place at all, or would soon cease. The inter- change between fellow-subjects, as well as between ^t<^^natives and foreigners, can never be -detrimental to ■>)^u4& an}^ one ; and the least favourable exchange still yields ^^yr^an agreeable commodity for one that is not so : it is ^^ytherefore the interest of all nations to protect, to en* -j^d- courage, to favour commerce. It keeps the mass of ^p^wealth up even when it does not augment it ; and it 5^5 and prohibitions, to which commerce has almost al- (rUu*j ways been exposed, with the view to save it from the ^^ losses that were apprehended, or to obtain greater - ^ benefits from it, are false measures, fatulalike to pub- •*•■«*< -lie and private wealth. prevents the decline of national wealth, even when it "^ cannot effect its increase. The obstructions, restraints OF POLITICAL ECONOMY. 477 Ceo^uf>u- Commerce, however, cannot pervade the whole , range of exchanges but by means of an equivalents/^ which suits every one, and which every one prefers to 3,^^/7 the produce he wishes to exchange. A gold and sil- ver currency is eminently possessed of this preroga- y ,g_ tive, and it owes it neither to the conventional agree- jH^ ment of mankind nor to the authority of governments, but simply to the valuable qualities of the metals of which it is composed : no other value can supply the place of a metallic currency, because no other com- modity possesses the properties which money requires. When the monetary equivalent is of gold and sil- ver, when its numeric or nominal value approximates as near as possible its commercial value, and when its divisions are in an exact proportion, all the opera tions of commercial interchange are easy and safe., and commerce may securely indulge in its combina- tions, speculations, and enterprises. Hu&u It is not even necessary that the metallic money ^y 1 ^ should be the actual instrument of the commercial ^ ""• interchange; it is faithfully represented, and its place ^ is frequently successfully supplied by credit. This is i^cua the reason why banks, which, after all, do nothing ^/^ but liquidate and extinguish by compensation the Utk/Ule, demands of commercial credit, employ so little money ^.^ in proportion to the vast extent of their operations. The case is not the same with public and private °pc*Uc credit. Both terminate almost all their operations., fvui*u and cannot extinguish their engagements but with ^A^ the help of money. Great care ought -to be taken tfJb not to apply to these two kinds of credit measures which are so beneficial and so well appropriated to commercial credit-. 61 478 ON THE VARIOUS SYSTEMS ^t- The success of every kind of credit depends also *fy Whatever injures either commercial or public and , private credit, stops the circulation of capital, causes , money to be hoarded, paralyzes the interchange of j^^ the produce of labour, restrains production, and leaves labourers without work. Credit ought not to be placed under the protection of justice or loyalty ; it j-^- is the interest of public and private wealth which U^ .ought to be its safeguard. J^'a- ~ Assisted by a gold and silver currency, by credit hstL and banks, commerce encounters no obstruction but 2^"/ "the difficulty of taking the direction most beneficial ^ / and most favourable to the progress of wealth. Is the j& preference to be given to the home-trade before the ^y^Cforeign trade of consumption ? This is one of the most controverted, and, no doubt, one of the most important questions of political economy. ^^ Reason seems to counsel that interchange of pro- pf^^'duce which affords most enjoyment to all parties and ^*^f insures them the most profitable equivalents. The , ^wf ore jg n t ra de of consumption combines these two ad- / /***3 vantages in a greater degree than the home trade. vo tTxss rpj^ j lome t ra j e affords to the natives none but v^«*5 ordinary, common, and almost identical productions, ^^^jLittle calculated of course to excite desire, to flatter j^^ # taste, and to gratify fancy. It does not go beyond OF POLITICAL ECONOMY. 479 those wants, the extent of which is extremely limited, y*fi*fi and consequently never can produce wealth, which /J J^, consists in what is superfluous. The foreign trade deals less with what is wanted, 'f^f* than with what is superfluous. In exchange for Xhe, J /j u j£ home-produce, it affords the productions of all coun-w^w tries, which from their variety, their novelty, and A^- * their quantity, prove more attractive, lay stronger™^ hold of the imagination, and promise greater en j°y-V2^ ments; and it is by the continual offer of these enti-^^^ cing commodities that foreign trade keeps all labours ^^^ inconstant activity, favours their progress, obtains a ?2Sv larger produce, increases its surplus, and continually ^w£ augments theinass of wealth. 7L i./>* The home-trade imparts to the national produce^ *' a value but nearly equal to what its production has^^ cost; and as, in all countries, the faculties of labour )vt*h<« are almost uniform, because they are limited by the \f / climate, the state of industry, the wisdom of the /ws^ laws, and the knowledge of government, they give tJ^U few advantages to certain labours over others. Thus **»/•«« it is not easy for individuals to grow rich, and almost TjJ^fc impossible for the state to rise to opulence. n^-h-^ The case is not the same with regard to foreign 'faf-J* trade. The national oroduce is always sold at the high- v 1 ^, est price, and the foreign produce purchased at the ^j^/j' lowest, for this simple reason ; the produce of thela-^ 7 ^ hour of one country is exported to another, only be-w.,^ cause it fetches a higher price in the country into <''?&*/- which it is imported, than in the country from which ^^* it is exported. The foreign trade therefore constantly y M*^ imparts the greatest possible value to the home-pro- 480 • ON THE VARIOUS SYSTEMS ^^duce. For an opposite reason, the foreign produce is ^//- always bought at a low price, since it is its cheapness -A^that induces it to be imported. From this continual {tfa vibration of the balance of foreigu trade, private in- itpav dividuals must of coursederive great opportunities of jti/ ma ^ m g their fortune, and it becomes an inexhausti- ble source of wealth for the state. _ oi~- But perhaps I shall be asked, how it happens that 0^ the foreign trade sells dear and purchases cheap with jrfuAovX any loss accruing to either country ? This phe- ***y nomenonis explained by the nature of things, by the J^ greater or smaller fertility of different climates, by a \ ^Imiore or less advanced state of industry, arts, and .knowledge, and by the predominant or inferior wis- ,y ^ om f } aws an( j governments, in short, by the con- Z^A, currence of all the causes which accelerate or retard ^* ^the progress of civilization in any country. The pro- ^\* duce exported from a country, because it is cheap in y^ that country, owes that advantage merely to the cir- ^'^cumstance that the climate is more favourable to its Jq~T production, that industry has made a greater progress, tuujo that capitals are cheaper, that the laws are better £*^ adapted to the faculties of labour, or that government iWUvj^g a( jopted better measures for the circulation of its ** > J~ produce abroad and at home. It is to all or to some "*-t~ f these advantages that any country is indebted for ^**3the superiority of its produce over that of other coun- 3, jU^ tr j eSj an d ' lt j s t0 ^g attention of commerce to pur- p ^ chase only the favoured produce of a country, thatall no^- countries are indebted for the advantage of selling dear ■^y^and purchasing cheap, without any loss accruing to ^^ airy country. All, on the contrary, are gainers of the OF POLITICAL ECONOMY. 481 difference between high and low prices, or rather all c ^- share in the favours which nature has showered upon/'*"*** various climates, and in the advantages which industry ^ ,/ has procured to certain countries ; and it is from the ^ ^ very inequality of this share, that all countries derive fa*e^ the most powerful means of wealth and opulence, ^a* The calculations of Adam Smith to give the preference ^^ to the home before the foreign trade, though ever so du*l ingenious, cannot overturn a theory founded on the ^^^ nature of things, on the experience of ages, and on the general opinion of all nations and all governments. But how and by what method ought the foreign "/&/* trade of consumption to be conducted ? bv privileged^t companies, by a colonial monopoly, or by commercial^./,, treaties stipulating exclusion, or more or less favour ? U&6*. All these methods, which time and custom have^*^ recommended, are not more commendable for it : and ^y it will constantly be true, that the trade which is not ^^54 carried on upon principles of liberty and equality is bulb the least profitable, and that a nation loses, in the branches which it is forced to abandon, whatever is gained in those that are preferably or exclusively cul~ ^ r tivated. The balance of profits is always tending jto ^ an equilibrium, or at least it vibrates only in favour of ^^^ the best and cheapest produce. What pains mankind ^/^ might have spared themselves, had they known that /% ' the freest trade ; s always the most useful, and that its profits are certain and permanent only as far as they are not a loss to any one ! Such is ultimately the true object of the commercial system. After the produce of the annual labour of every country has been reduced to its true value by its inter- 48£ ON THE VARIOUS SYSTEMS change with the produce of all countries, it has no longer any influence upon wealth but with regard to hvfc ifcs distribution and consumption. **~f" The national produce is distributed to the land- y^wners in the shape of rents, to the capitalits as jS\ profits of stock, and to all those who participate di- <^rectly or indirectly in labour in the shape of wages. ■a^mM This distribution is more or less favourable to the "^ progress of public and private wealth, according as ^stipulations in all private contracts are more or less ^jVfree, and more or less faithfully performed. All mea- '^J sures that alter the direction of this distribution, that ^^infringe upon its natural proportions, that, either ^V^directlv or indirectly, raise or lower the rent of land. ^Jhe profits of stock, and the wages of labour, oppose more or less obstacles to wealth, and may even prove absolutely fatal to its existence. I*****' Independently of the distribution of the produce of labour to the land-owners, the capitalists, and the ^/labourers, a certain portion must be taken from this - produce for government and the servants of the state ; which portion also has a great influence upon wealth. I have developed its principles, its effects, and its re- sults, in my work on the Public Revenue.* fc„l The consumption of the produce allotted to each 3fc* individual by the rents of land, the profits of stock, ?^and the wages of labour, is subject tutwo laws, which * Should the present work. on the various systems of political eco- nomy be favourably received in its English dress, up exertion shall be spared to procure the Essayon the Public Revenue which is her* alluded' to, and to give a faithful translation of it. — T..- OF POLITICAL ECONOMY. . 483 are still controverted, but the wisdom and utility ofy^^ which are obvious. £*^~ 1. The consumption of the annual produce must be^\*** inferior to the total quantity of that produce. Leo- /»»*■. nomy ought to save part of it for the support and increase of capital stock, for unforeseen wants, for a progressive population. This saving acts as a safe- guard against the blasts of fortune, and is a certain ^^ pledge of grandeur and prosperty. A***- To suppose, with some authors, that consumption 7 ^^ is the measure of production, is a fallacy. Undoubt- %'. edly, whatever is not consumed, is not re-produ- ^ ced : but all that is consumed, is not always re -pro- duced. If to produce, it were enough to consume; wealth would be the lot of all men and of all nations ; for all have the power, and, most assuredly, the will to consume : but as no one can consume any commodity without giving an equivalent for it to the producer, it follows evidently that consumption is re-produced only up to the equivalent which it leaves behind ; it therefore is not the necessary and absolute law of production, it is only its uncertain and indetermin- ate cause, against which there is no possibility of guarding but by limiting and restricting it below production. iLw This restriction is not so difficult as is commonly^, ^ supposed ; it takes place of itself, and by the sole /t/**. force of things. Hence luxury that subject of so y "^ many moral, political, and economical contentions, */&> has so little importance in the economical system of ^J', modern nations. In this system, the laborious classes cannot main- 484 oar the various systems ^^.tain themselves without re-producing the equivalent •#- ^of their consumption ; they consequently cannot igddict themselves to luxury without endangering ;/&*. their existence; and the magnitude of the danger *M* prevents their exposing themselves to it. '■&&, juJ^ classes that live upon the rents of land and «^/profits of stock cannot easily be ruined by luxury ; *^5* s greatest excesses attack only a few private fortunes, .. an( * b e s ^ a ken by it : of this, modern £w history affords more than one instance ; but wealth t^o is no sufferer by it, on the contrary, it may even ^ ^ derive great advantages from such a mixture. It would be interesting to investigate, whether aristo- cratical and certain monarchical states can do without wealth, resist its influence, or turn it to their safety t but it would require a volume to do justice to the inquiry ; and 1 have but a few lines to add to my ob- . Preservations on the theory of wealth. '«w«..^But although the consumption of the produce al- eJ~ lotted to private individuals is of little consequence to ; ^.wealth, the case is not the same with regard to that ***^ portion of produce which constitutes the public reve- OF POLITICAL ECONOMY. 485 nue. As it is taken from private income, and almost ^^ entirely consumed without leaving any equivalent at-^^^ ter its consumption, it must be proportioned to thejj ■ ^ surplus of produce left to individuals after their ne-^^ cessary and indispensable consumption; otherwise it ^^^ would exhaust private savings, arrest the progressive increase of capitals, render wealth stationary, and per- haps occasion its decline and ruin. As long as the consumption of public and priv revenue does not absorb the totality of the prodr of general labour, wealth is progressive, nations pn per, and empires are advancing to the highest degu e of power and splendour. CM"** 2. Consumption is more or less useful to the pro-J^^ gress of wealth, according as it is directed to solid ^Zld_ and lasting enjoyments, or to caprices and fancies, <&***& which leave no value behind. When, in seeking for\ T? the pleasures of life, men have a taste for convenien-/^*^ cies and comforts, consumption conveys even to the * j3 abodes of mediocrity the advantages and enjoyments; £<£%*>, of opulence; the garments and household furniture f^jrj! Avhich have served the rich, serve again the less for^i^,,t- tunate classes ; and the enjoyments of wealth are, as"^£T it were, communicated to the whole nation. How/-U^ far it is possible to inspire a nation with that desira- A****, ble disposition, is not easily ascertained ; but nothing l&^-t can more powerfully contribute to it, than the en- ^"A^ couragement given to manufactures more useful thaikfaj^r elegant, more within the reach of the multitude tha^i reserved for the opulent classes, more calculated for j&uj <* the wants of all than for the fancy of a few. As * *"*^ wealth is created through the labour of the multitude ' ( 62 ON THE VARIOUS SYSTEMS, &C. U/e ^Jt also derives its greatest means of increase from th© ^^conveniencies, from the pleasures, and even from the «*^ ^enjoyments of the multitude. '"5"*- In the economical system of modern nations, gene- Utv^ ral labour is the spring of wealth, and general economy ^^is^theonly way of increasing the funds and the re- ^ tU^ sources of labour, of developing its powers, its facul- '^^w es ' anc * lts g emus > anc l of giving it a constant' and ^^^unlimited progression. The general interchange of , 1*4 the produce of labour, by affording to the labouring 'i/'fr^T classes new, varied, and inexhaustible enjoyments, frf stimulates their activity, excites their industry, en- »a^- coura g^s their efforts, and raises their efforts to the TtA^highest degree of energy and intensity ; and the ex- 7jr$eht of a more or less beneficial consumption of the %vd0> totality of productions extends or narrows the bounds fip^f wealth and- opulence. ^Xxlcfc- Wealth, in the modern system of political econd- % <*r^vhy, is the work of all men, of all nations, and, as it ^Jviwere, of the whole human race; the reward of all ,^4/mdividual efforts, and the end of private and genera! ^ u ^ambition. When ail are rushing to the same end, the ': /f rights of all are respected, the interests of all attend- y. ed to, and thlTconveniencies of all consulted. All ad vancejjy thejidejifjej^^ ng, without rnjuring^ without_crushing each other. All are benefited by their reciprocal efforts, and all owe their successes to th eh- general cooperation. To^his admirable system civilization is indebted for its pro- gress ; and when better understood, it will prove it? most vigilant Safeguard and its firmest support. ANALYTICAL INDEX CONTENTS. PLAN OF THE WORK. Various definitions of Wealth, 2 ; Sources of Wealth, 4 ; Weans of contributing to the increase of Wealth, 5. The variety of Systems has produced Incredulity and Superstition, 6. Affinity of Political Economy with the science of Government and Legis- lation, 8. Civilization connected with the study of Political Economy, 12, Division of the Work, 13. Introduction : on the nature of Wealth, 15 ; the passion for Wealth is universal, 18 ; it is the promoter of Industry, 19 ; it originally caused Domestic Servitude and Civil and Foreign Wars, 21 ; among the Per- sians, 23 ; Spartans, 24 ; Athenians, 25 ; Carthaginians, 26 ; Romans, 27 ; nations of the Middle Age, 30 ; Arabs, 32 ; A- mong the Moderns the passion for Wealth has been directed to- wards Labour, Industry, and Commerce, 34 ; at Venice, Genoa, Pisa, Florence, in the Hanseatic Towns,- the Cities of Spain, France, and Germany, 35 ; among the Portuguese and Spaniards, in Hindostan and America, 36. Different influence of modern and ancient Wealth, 38. Conclusion of the Introduction, 50. BOOK I. VARIOUS SYSTEMS CONCERNING THE SOURCES OF WEALTH. The Mercantile System, 52, ; the Monetary System, 58 ; the System of lowering the rate of Interest, 6'0 ; the Agricultural System, 63 ; the System of Labour that fixes and realizes itself in a permanent object, 67 ; the System of the permanent and necessary equi- librium of Wealth and Poverty, 68 ; these various Systems recoc- ciled, 70. ANALYTICAL INDEX. BOOK II. OF THE VARIOUS SYSTEMS CONCERNING LABOUR, Introduction, 73. CHAP. I. The productiveness of Wealth is not exclusively reserved to one sort of Labour, 74 ; CHAP. II. Nor peculiar to some Labours, but common to all, 87. CHAP. III. Agricultural Labour is not the most productive of labours, 92 ; it limits Accumulation, 94 ; the distribution of its produce holds out few encouragements to Industry, Sciences, Arts, and Com- merce, ()5 ; its produce is insufficient to supply the wants of a great political power, 96. The Labours of Industry and Commerce aje preferable, because they are susceptible of great subdivision, give a considerable impulse to general Labour, and favour Accu- mulation, 103. ' The resources of Agriculture compared to those of Manufactures and Commerce, 108 : the superiority of the latter proved by History, 109 ; by the authority of Adam Smith, 110 ; by their mutual advantages and inconveniences, 112. Man- ufacturing and trading nations have nothing to fear from the pro- gress of Industry and Commerce among agricultural nations, 117: their manufactures and trade are rather extended by it, 120. Manufactures and trade can alone confer great political power, 126. CHAP. IV. The causes which invigorate Labour, are: 1, the division of Labour in Manufactures, 130; 2, its concentration in Agriculture, or large farms, 137 ; 3, and the introduction of Machines, 139- CHAP. V. Obstacles to the progress of Labour, are : 1, the slavery of the La- bourer, 145-6. CHAP. VI. 2. Apprenticeships and Corporations, 154. CHAP. VII. 3. And Combinations, which lower the wages of Labour below their natural rate, 158. Conclusion of the Second Book, \6\. ANALYTICAL INDEX. 489 BOOK III. OF THE VARIOUS SYSTEMS RESPECTING CAPITAL. CHAP. I. Wherein do Capitals consist? 162 ; in Metallic Currency, in the advancement of Agriculture, or in the first materials of all Labour, Improvements of the soil, &c. ibid ; in the Instruments and Ma- chines proper to shorten and facilitate Labour, or in the accumu- lation of the produce of Labour ? 1(53. CHAP. II. How are Capitals formed ? 165 ; by economy in the costs of Agri- cultural labour, and by the increased price of commodities through Foreign Trade, ibid ; or by the proportion of productive to unproductive labour, 167 ; or by economy in consumption ? l6s. CHAP. III. How are Capitals employed ? 182 : to what kind of Capital does the Metallic Currency belong ? 186 : is Paper Credit a part of cap- ital ? 194. Of the hoarding of Money, 196. Of Capital lent out at interest, 199- Does the rate of Interest depend upon the plen- ty or scarcity of Metallic Currency? 202 : is it to be fixed by Law ? 203 : is the lending of Capital at Interest profitable or de- trimental to National Wealth ? 208. Of Public loans, or Na- tional Debts, ibid : Of a Sinking Fund, 214. CHAP. IV. Of the influence of Capitals on the progress of Public Wealth, 230; it is greater or smaller accdrding as Capitals are employed, 231 . Which mode of employing of capital is most favourable to the pro- gress of Wealth? 233. 1 Chap. v. - Of the Profit of Stock, 244 : of the causes which regulate that Pro- fit, 245. CHAP. VI. Conclusion of the Third Book, 247, 490 ANALYTICAL INDEX. BOOK IV. OF THE VARIOUS SYSTEMS RELATING TO THE CIR- CULATION OF THE PRODUCE OF LABOUR BY MEANS OF COMMERCE.. Introduction, on the importance of Commerce, 249. CHAP. r. Of the causes of the circulation of the produce of Labour, 253. CHAP. II. Of the Value of the Produce of Labour, 255 :. this Value is regula- ted, 1st, by the wants of the Consumers, and their means of sup- plying them, 256; 2dly, by the demand for Commodities, and their abundance or scarcity, 257 ; "3dly, by Labour, 258 ; 4thly, by Land and Labour, 259 I 5thly, by the value of Man, 260. There is no invariable Standard of Value, 264. Money and Corn, are not better calculated than Labour tn fix the Value of things for distant times, 268; there is no fixed Value of things but up to what their production has cost, 270; beyond this the Profits on Productions of Labour' are unequal, 271 ; this inequali- ty of Profits is indifferent with regard to the Home-Trade, 272 ; it x is not injurious in the exchange of Home for Foreign produce, 273 ; except in one particular case, 278. CHAP. III. Of the influence of Money and credit upon the circulation of the Produce of labour, 2S6. Different kinds of Money, 287 : ob- jects of every Monetary System, 288 ; obstacles which it en- counters : 1, in the nature of things, 289; 2, in the confused notions of its own nature, 290. What is Money ? 295. Is a Seignorage on Coin advantageous ? 297. Is either Gold or Silver alone to be admitted as Money i 300. Is there a known and fixed proportion between Money and the Produce which it is to circulate ? „303i Is the abundance of "Money favourable or in- different to the progress of Wealth ? 306. Is a Gold and Silver Currency necessary to the formation of Wealth? 3l2. Doesits Plenty contribute to the progress of Wealth ? 314. CHAP. IV. Of Credit and Banks, 319: what is Credit ? ibid: three sorts ot Credit, 322 : 1, Commercial Credit, ibid. Of the liquidation of ANALYTICAL INDEX. 4#I Commercial Credit by setting off or compensating one debt against the other, 326. Of Deposit Banks, 329 5 Bank of Venice, ibid; Bank of Genoa, or Bank of St. George, 332 ; Bank of Amster- dam, 334 ; Bank of Rotterdam, 337 ; Bank of Hamburgh, ibid. Of Banks of Circulation, 338 : Bank of England, ibid ; its nature, 340 ; its extent, 342 ; its advantages and inconveni- encies, 346. Number of Banks of that kind in England, 349, The amount of Commercial Debts liquidated with Bank-notes, 350. Is an abundant Paper Currency favourable to the progress of Wealth ? 351. Of the Banks 'of Circulation that have existed hi France, 352: Mr. Law's Bank, 353 ; Discounting Bank (Caisse d' Escompte), ibid ; Bank of Current Accounts, 354; Commercial Bank, 355 ; Manufacturers' Bank, ibid; Land Bank, ibid : Bank of France, 356. Which of the two kinds of Banks is most favourable to the progress of Wealth, 368. 2. Pri- vate Credit, 371 : Banks of Circulation of no use to it, 372. Pri- vate Credit has mado little progress, becraise it is opposed by most Religions, 373. The law fixes the rate of Interest, and- favours the Debtor, 374. 3. Public Credit, and wherein it resembles Commercial and Private Credit, 378. CHAP. V. Which Trade is the most beneficial to National Wealth ? 381, Opinions in favour of Foreign Trade, 382 ; in favour of the Home Trade, 384 : Foreign Trade is the most conducive to National Wealth, 336. Of the different methods of carrying- on the Foreign Trade of a Country, 398. CHAP. VI. 1. of Corporations and privileged Companies, 39S ; this method of "rading is prejudicial to Wealth, 39$. CHAP. VII. 2. Of Modern Colonies, 404.: their difference from the Colonies of the Ancients, ibid. This mode of trading is beneficial, and has been of great service, with regard to population, 405 ; to capitals, 406; and to Public and Private Wealth, 410. Have Nations with Colonies shared more largely in these advantages than Na- tions that have no Colonies ? 41 1. Of Colonial Monopoly, 413 : it is of ho advantage to monopolizing Nations, 417. 492 ANALYTICAL INDEX. CHAP. VIII. 3. Of Treaties of Commerce, 417 ; when are they beneficial ? 418= CHAP. IX. Of Exchanges, and the Balance of Trade, 419 : Balance of Ex- ports and Imports are neither certain nor positive, 420. The subject of Exchanges is involved in still more inaccuracy and ob- scurity, 421. Difference between the Balance of Foreign Com- merce and that of the Home-Trade, 423* Is there any certain way to know the State of the Home Trade? 426. CHAP. X. Conclusion of the Fourth Book, 428. BOOK V. OF THE VARIOUS SYSTEMS CONCERNING THE NA- TIONAL INCOME AND CONSUMPTION. CHAP. T Of the National Income, 431. Is there any difference between Na- tional 'and Private Income? 432: they are one and the same thing, 434. Of the distribution of National Income, 437. - CHAP. II. Of Consumption, 442 : "ought it to be equal to the Income ? ibid. Of Luxury, 446; among the Ancients, ibid; in the Middle Age, 447 ; in Modern tim.s, 448. Is Consumption the cause or the effect of Wealth ? 451. Are some kinds of Consumption more or less favourable to Wealth ? 458. BOOK VI Conclusion of the Work, 460. THE END. dj&ceek** /^a^- / /^^s- e-SHw&C*^ /L>7*£~^f ' *ty &*- <$ ^-vi^WW 1 fa-'. Asu*^ &-&7V /^7^£^>t^ <£t>?ru&&~'; fas 4. & #&^ ltd£j&r*~& 4o%. A ^s^^frt^t^fy $-* '£&«% A^4 * *•***• ^~^ "^2 Pfc ^ks/JccU^ ^^£ At^f atlfie*' d^^fc S/i*n£~<2 •A fife ??*^-£**^,4sv *fs*2 ^■/ pc ^ ! ^. i?H.As£#p *rf&, ^C4&t£*rix #K LRBAp'28