An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

farmer, with an equal quantity of it, to maintain a greater

number of labourers in the same manner, whether liberal,

moderate, or scanty, than other labourers are commonly maintained

in his neighbourhood. But neither the bounty, it is evident, nor

any other human institution, can have any such effect. It is not

the real, but the nominal price of corn, which can in any

considerable degree be affected by the bounty. And though the

tax, which that institution imposes upon the whole body of the

people, may be very burdensome to those who pay it, it is of very

little advantage to those who receive it.

The real effect of the bounty is not so much to raise the real

value of corn, as to degrade the real value of silver ; or to

make an equal quantity of it exchange for a smaller quantity, not

only of corn, but of all other home made commodities; for the

money price of corn regulates that of all other home made

commodities.

It regulates the money price of labour, which must always be such

as to enable the labourer to purchase a quantity of corn

sufficient to maintain him and his family, either in the liberal,

moderate, or scanty manner, in which the advancing, stationary,

or declining, circumstances of the society, oblige his employers

to maintain him.

It regulates the money price of all the other parts of the rude

produce of land, which, in every period of improvement, must bear

a certain proportion to that of corn, though this proportion is

different in different periods. It regulates, for example, the

money price of grass and hay, of butcher’s meat, of horses, and

the maintenance of horses, of land carriage consequently, or of

the greater part of the inland commerce of the country.

By regulating the money price of all the other parts of the rude

produce of land, it regulates that of the materials of almost all

manufactures; by regulating the money price of labour, it

regulates that of manufacturing art and industry ; and by

regulating both, it regulates that of the complete manufacture.

The money price of labour, and of every thing that is the

produce, either of land or labour, must necessarily either rise

or fall in proportion to the money price of corn.

Though in consequence of the bounty, therefore, the farmer should

be enabled to sell his corn for 4s. the bushel, instead of 3s:6d.

and to pay his landlord a money rent proportionable to this rise

in the money price of his produce; yet if, in consequence of this

rise in the price of corn, 4s. will purchase no more home made

goods of any other kind than 3s. 6d. would have done before,

neither the circumstances of the farmer, nor those of the

landlord, will be much mended by this change. The farmer will not

be able to cultivate much better ; the landlord will not be able

to live much better. In the purchase of foreign commodities, this

enhancement in the price of corn may give them some little

advantage. In that of home made commodities, it can give them

none at all. And almost the whole expense of the farmer, and the

far greater part even of that of the landlord, is in home made

commodities.

That degradation in the value of silver, which is the effect of

the fertility of the mines, and which operates equally, or very

nearly equally, through the greater part of the commercial world,

is a matter of very little consequence to any particular country.

The consequent rise of all money prices, though it does not make

those who receive them really richer, does not make them really

poorer. A service of plate becomes really cheaper, and every

thing else remains precisely of the same real value as before.

But that degradation in the value of silver, which, being the

effect either of the peculiar situation or of the political

institutions of a particular country, takes place only in that

country, is a matter of very great consequence, which, far from

tending to make anybody really richer, tends to make every body

really poorer. The rise in the money price of all commodities,

which is in this case peculiar to that country, tends to

discourage more or less every sort of industry which is carried

on within it, and to enable foreign nations, by furnishing almost

all sorts of goods for a smaller quantity of silver than its own

workmen can afford to do, to undersell them, not only in the

foreign, but even in the home market.

It is the peculiar situation of Spain and Portugal, as

proprietors of the mines. to be the distributers of gold and

silver to all the other countries of Europe. Those metals ought

naturally, therefore, to be somewhat cheaper in Spain and

Portugal than in any other part of Europe. The difference, how.

ever, should be no more than the amount of the freight and

insurance ; and, on account of the great value and small bulk of

those metals, their freight is no great matter, and their

insurance is the same as that of any other goods of equal value.

Spain and Portugal, therefore, could suffer very little from

their peculiar situation, if they did not aggravate its

disadvantages by their political institutions.

Spain by taxing, and Portugal by prohibiting, the exportation of

gold and silver, load that exportation with the expense of

smuggling, and raise the value of those metals in other countries

so much more above what it is in their own, by the whole amount

of this expense. When you dam up a stream of water, as soon as

the dam is full, as much water must run over the dam-head as if

there was no dam at all. The prohibition of exportation cannot

detain a greater quantity of gold and silver in Spain and

Portugal, than what they can afford to employ, than what the

annual produce of their land and labour will allow them to

employ, in coin, plate, gilding, and other ornaments of gold and

silver. When they have got this quantity, the dam is full, and

the whole stream which flows in afterwards must run over. The

annual exportation of gold and silver from Spain and Portugal,

accordingly, is, by all accounts, notwithstanding these

restraints, very near equal to the whole annual importation. As

the water, however, must always be deeper behind the dam-head

than before it, so the quantity of gold and silver which these

restraints detain in Spain and Portugal, must, in proportion to

the annual produce of their land and labour, be greater than what

is to be found in other countries. The higher and stronger the

dam-head, the greater must be the difference in the depth of

water behind and before it. The higher the tax, the higher the

penalties with which the prohibition is guarded, the more

vigilant and severe the police which looks after the execution of

the law, the greater must be the difference in the proportion of

gold and silver to the annual produce of the land and labour of

Spain and Portugal, and to that of other countries. It is said,

accordingly, to be very considerable, and that you frequently

find there a profusion of plate in houses, where there is nothing

else which would in other countries be thought suitable or

correspondent to this sort of magnificence. The cheapness of gold

and silver, or, what is the same thing, the dearness of all

commodities, which is the necessary effect of this redundancy of

the precious metals, discourages both the agriculture and

manufactures of Spain and Portugal, and enables foreign nations

to supply them with many sorts of rude, and with almost all sorts

of manufactured produce, for a smaller quantity of gold and

silver than what they themselves can either raise or make them

for at home. The tax and prohibition operate in two different

ways. They not only lower very much the value of the precious

metals in Spain and Portugal, but by detaining there a certain

quantity of those metals which would otherwise flow over other

countries, they keep up their value in those other countries

somewhat above what it otherwise would be, and thereby give those

countries a double advantage in their commerce with Spain and

Portugal. Open the flood-gates, and there will presently be less

water above, and more below the dam-head, and it will soon come

to a level in both places. Remove the tax and the prohibition,

and as the quantity of gold and silver will diminish considerably

in Spain and Portugal, so it will increase somewhat in other

countries ; and the value of those metals, their proportion to

the annual produce of land and labour, will soon come to a level,

or very near to a level, in all. The loss which Spain and

Portugal could sustain by this exportation of their gold and

silver, would be altogether nominal and imaginary. The nominal

value of their goods, and of the annual produce of their land and

labour, would fall, and would be expressed or represented by a

smaller quantity of silver than before; but their real value

would be the same as before, and would be sufficient to maintain,

command, and employ the same quantity of labour. As the nominaly

value of their goods would fall, the real value of what remained

of their gold and silver would rise, and a smaller quantity of

those metals would answer all the same purposes of commerce and

circulation which had employed a greater quantity before. The

gold and silver which would go abroad would not go abroad for

nothing, but would bring back an equal value of goods of some

kind or other. Those goods, too, would not be all matters of mere

luxury and expense, to be consumed by idle people, who produce

nothing in return for their consumption. As the real wealth and

revenue of idle people would not be augmented by this

extraordinary exportation of gold and silver, so neither would

their consumption be much augmented by it. Those goods would

probably, the greater part of them, and certainly some part of

them, consist in materials, tools, and provisions, for the

employment and maintenance of industrious people, who would

reproduce, with a profit, the full value of their consumption.

A part of the dead stock of the society would thus be turned into

active stock, and would put into motion a greater quantity of

industry than had been employed before. The annual produce of

their land and labour would immediately be augmented a little,

and in a few years would probably be augmented a great deal;

their industry being thus relieved from one of the most

oppressive burdens which it at present labours under.

The bounty upon the exportation of corn necessarily operates

exactly in the same way as this absurd policy of Spain and

Portugal. Whatever be the actual state of tillage, it renders our

corn somewhat dearer in the home market than it otherwise would

be in that state, and somewhat cheaper in the foreign; and as the

average money price of corn regulates, more or less, that of all

other commodities, it lowers the value of silver considerably in

the one, and tends to raise it a little in the other. It enables

foreigners, the Dutch in particular, not only to eat our corn

cheaper than they otherwise could do, but sometimes to eat it

cheaper than even our own people can do upon the same occasions;

as we are assured by an excellent authority, that of Sir Matthew

Decker. It hinders our own workmen from furnishing their goods

for so small a quantity of silver as they otherwise might do, and

enables the Dutch to furnish theirs for a smaller. It tends to

render