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

supposed, is employed as an annual addition, either to the plate

or to the coin of the kingdom. The rest must all be sent abroad,

and exchanged for consumable goods of some kind or other. But if

those consumable goods were purchased directly with the produce

of English industry, it would be more for the advantage of

England, than first to purchase with that produce the gold of

Portugal, and afterwards to purchase with that gold those

consumable goods. A direct foreign trade of consumption is always

more advantageous than a round-about one; and to bring the same

value of foreign goods to the home market requires a much smaller

capital in the one way than in the ether. If a smaller share of

its industry, therefore, had been enmloyed in producing goods fit

for the Portugal market, and a greater in producing those lit for

the other markets, where those consumable goods for which there

is a demand in Great Britain are to be had, it would have been

more for the advantage of England. To procure both the gold which

it wants for its own use, and the consumable goods, would, in

this way, employ a much smaller capital than at present. There

would be a spare capital, therefore, to be employed for other

purposes, in exciting an additional quantity of industry, and in

raising a greater annual produce.

Though Britain were entirely excluded from the Portugal trade, it

could find very little difficulty in procuring all the annual

supplies of gold which it wants, either for the purposes of

plate, or of coin, or of foreign trade. Gold, like every other

commodity, is always somewhere or another to be got for its value

by those who have that value to give for it. The annual surplus

of gold in Portugal, besides, would still be sent abroad, and

though not carried away by Great Britain, would be carried away

by some other nation, which would be glad to sell it again for

its price, in the same manner as Great Britain does at present.

In buying gold of Portugal, indeed, we buy it at the first hand ;

whereas, in buying it of any other nation, except Spain, we

should buy it at the second, and might pay somewhat dearer. This

difference, however, would surely be too insignificant to deserve

the public attention.

Almost all our gold, it is said, comes from Portugal. With other

nations, the balance of trade is either against as, or not much

in our favour. But we should remember, that the more gold we

import from one country, the less we must necessarily import from

all others. The effectual demand for gold, like that for every

other commodity, is in every country limited to a certain

quantity. If nine-tenths of this quantity are imported from one

country, there remains a tenth only to be imported from all

others. The more gold, besides, that is annually imported from

some particular countries, over and above what is requisite for

plate and for coin, the more must necessarily be exported to some

others: and the more that most insignificant object of modern

policy, the balance of trade, appears to be in our favour with

some particular countries, the more it must necessarily appear to

be against us with many others.

It was upon this silly notion, however, that England could not

subsist without the Portugal trade, that, towards the end of the

late war, France and Spain, without pretending either offence or

provocation, required the king of Portugal to exclude all British

ships from his ports, and, for the security of this exclusion, to

receive into them French or Spanish garrisons. Had the king of

Portugal submitted to those ignominious terms which his

brother-in-law the king of Spain proposed to him, Britain would

have been freed from a much greater inconveniency than the loss

of the Portugal trade, the burden of supporting a very weak ally,

so unprovided of every thing for his own defence, that the whole

power of England, had it been directed to that single purpose,

could scarce, perhaps, have defended him for another campaign.

The loss of the Portugal trade would, no doubt, have occasioned a

considerable embarrassment to the merchants at that time engaged

in it, who might not, perhaps, have found out, for a year or two,

any other equally advantageous method of employing their

capitals; and in this would probably have consisted all the

inconveniency which England could have suffered from this notable

piece of commercial policy.

The great annual importation of gold and silver is neither for

the purpose of plate nor of coin, but of foreign trade. A

round-about foreign trade of consumption can be carried on more

advantageously by means of these metals than of almost any other

goods. As they are the universal instruments of commerce, they

are more readily received in return for all commodities than any

other goods ; and, on account of their small bulk and great

value, it costs less to transport them backward and forward from

one place to another than almost any other sort of merchandize,

and they lose less of their value by being so transported. Of all

the commodities, therefore, which are bought in one foreign

country, for no other purpose but to be sold or exchanged again

for some other goods in another, there are none so convenient as

gold and silver. In facilitating all the different round-about

foreign trades of consumption which are carried on in Great

Britain, consists the principal advantage of the Portugal trade;

and though it is not a capital advantage, it is, no doubt, a

considerable one.

That any annual addition which, it can reasonably be supposed, is

made either to the plate or to the coin of the kingdom, could

require but a very small annual importation of gold and silver,

seems evident enough; and though we had no direct trade with

Portugal, this small quantity could always, somewhere or another,

be very easily got.

Though the goldsmiths trade be very considerable in Great

Britain, the far greater part of the new plate which they

annually sell, is made from other old plate melted down ; so that

the addition annually made to the whole plate of the kingdom

cannot be very great, and could require but a very small annual

importation.

It is the same case with the coin. Nobody imagines, I beileve,

that even the greater part of the annual coinage, amounting, for

ten years together, before the late reformation of the gold coin,

to upwards of �800,000 a-year in gold, was an annual addition to

the money before current in the kingdom. In a country where the

expense of the coinage is defrayed by the government, the value

of the coin, even when it contains its full standard weight of

gold and silver, can never be much greater than that of an equal

quantity of those metals uncoined, because it requires only the

trouble of going to the mint, and the delay, perhaps, of a few

weeks, to procure for any quantity of uncoined gold and silver an

equal quantity of those metals in coin; but in every country the

greater part of the current coin is almost always more or less

worn, or otherwise degenerated from its standard. In Great

Britain it was, before the late reformation, a good deal so, the

gold being more than two per cent., and the silver more than

eight per cent. below its standard weight. But if fortyfour

guineas and a-half, containing their full standard weight, a

pound weight of gold, could purchase very little more than a

pound weight of uncoined gold; fortyfour guineas and a-half,

wanting a part of their weight, could not purchase a pound

weight, and something was to be added, in order to make up the

deficiency. The current price of gold bullion at market,

therefore, instead of being the same with the mint price, or

�46:14:6, was then about �47:14s., and sometimes about �48. When

the greater part of the coin, however, was in this degenerate

condition, forty four guineas and a-half, fresh from the mint,

would purchase no more goods in the market than any other

ordinary guineas; because, when they came into the coffers of the

merchant, being confounded with other money, they could not

afterwards be distinguished without more trouble than the

difference was worth. Like other guineas, they were worth no more

than �46:14:6. If thrown into the melting pot, however, they

produced, without any sensible loss, a pound weight of standard

gold, which could be sold at any time for between �47:14s. and

�48, either in gold or silver, as fit for all the purposes of

coin as that which had been melted down. There was an evident

profit, therefore, in melting down new-coined money; and it was

done so instantaneously, that no precaution of government could

prevent it. The operations of the mint were, upon this account,

somewhat like the web of Penelope; the work that was done in the

day was undone in the night. The mint was employed, not so much

in making daily additions to the coin, as in replacing the very

best part of it, which was daily melted down.

Were the private people who carry their gold and silver to the

mint to pay themselves for the coinage, it would add to the value

of those metals, in the same manner as the fashion does to that

of plate. Coined gold and silver would be more valuable than

uncoined. The seignorage, if it was not exorbitant, would add to

the bullion the whole value of the duty; because, the government

having everywhere the exclusive privilege of coining, no coin can

come to market cheaper than they think proper to afford it. If

the duty was exorbitant, indeed, that is, if it was very much

above the real value of the labour and expense requisite for

coinage, false coiners, both at home and abroad, might be

encouraged, by the great difference between the value of bullion

and that of coin, to pour in so great a quantity of counterfeit

money as might reduce the value of the government money. In

France, however, though the seignorage is eight per cent., no

sensible inconveniency of this kind is found to arise from it.

The dangers to which a false coiner is everywhere exposed, if he

lives in the country of which he counterfeits the coin, and to

which his agents or correspondents are exposed, if he lives in a

foreign country, are by far too great to be incurred for the sake

of a profit of six or seven per cent.

The seignorage in France raises the value of the coin higher than

in proportion to the quantity of pure gold which it contains.

Thus, by the edict of January 1726, the mint price of fine gold

of twentyfour carats was fixed at seven hundred and forty livres

nine sous and one denier one-eleventh the mark of eight Paris

ounces. {See Dictionnaire des Monnoies, tom. ii. article

Seigneurage, p. 439, par 81. Abbot de Bazinghen,

Conseiller-Commissaire en la Cour des Monnoies � Paris.} The gold

coin of France, making an allowance for the remedy of the mint,

contains twenty-one carats and three-fourths of fine gold, and

two carats one-fourth of alloy. The mark of standard gold,

therefore, is worth no more than about six hundred and

seventy-one livres ten deniers. But in France this mark of

standard gold is coined into thirty louis d’ors of twentyfour

livres each, or into seven hundred and twenty livres. The coin.

age, therefore, increases the value of a mark of standard gold

bullion, by the difference between six hundred and seventy-one

livres ten deniers and seven hundred and twenty livres, or by

fortyeight livres nineteen sous and two deniers.

A seignorage will, in many