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

raise or lower at once, sensibly and remarkably, the money price

of all other commodities, requires such a revolution in commerce

as that occasioned by the discovery of America.

If, not withstanding all this, gold and silver should at any time

fall short in a country which has wherewithal to purchase them,

there are more expedients for supplying their place, than that of

almost any other commodity. If the materials of manufacture are

wanted, industry must stop. If provisions are wanted, the people

must starve. But if money is wanted, barter will supply its

place, though with a good deal of inconveniency. Buying and

selling upon credit, and the different dealers compensating their

credits with one another, once a-month, or once a-year, will

supply it with less inconveniency. A well-regulated paper-money

will supply it not only without any inconveniency, but, in some

cases, with some advantages. Upon every account, therefore, the

attention of government never was so unnecessarily employed, as

when directed to watch over the preservation or increase of the

quantity of money in any country.

No complaint, however, is more common than that of a scarcity of

money. Money, like wine, must always be scarce with those who

have neither wherewithal to buy it, nor credit to borrow it.

Those who have either, will seldom be in want either of the

money, or of the wine which they have occasion for. This

complaint, however, of the scarcity of money, is not always

confined to improvident spendthrifts. It is sometimes general

through a whole mercantile town and the country in its

neighbourhood. Over-trading is the common cause of it. Sober men,

whose projects have been disproportioned to their capitals, are

as likely to have neither wherewithal to buy money, nor credit to

borrow it, as prodigals, whose expense has been disproportioned

to their revenue. Before their projects can be brought to bear,

their stock is gone, and their credit with it. They run about

everywhere to borrow money, and everybody tells them that they

have none to lend. Even such general complaints of the scarcity

of money do not always prove that the usual number of gold and

silver pieces are not circulating in the country, but that many

people want those pieces who have nothing to give for them. When

the profits of trade happen to be greater than ordinary

over-trading becomes a general error, both among great and small

dealers. They do not always send more money abroad than usual,

but they buy upon credit, both at home and abroad, an unusual

quantity of goods, which they send to some distant market, in

hopes that the returns will come in before the demand for

payment. The demand comes before the returns, and they have

nothing at hand with which they can either purchase money or give

solid security for borrowing. It is not any scarcity of gold and

silver, but the difficulty which such people find in borrowing,

and which their creditor find in getting payment, that occasions

the general complaint of the scarcity of money.

It would be too ridiculous to go about seriously to prove, that

wealth does not consist in money, or in gold and silver ; but in

what money purchases, and is valuable only for purchasing. Money,

no doubt, makes always a part of the national capital ; but it

has already been shown that it generally makes but a small part,

and always the most unprofitable part of it.

It is not because wealth consists more essentially in money than

in goods, that the merchant finds it generally more easy to buy

goods with money, than to buy money with goods ; but because

money is the known and established instrument of commerce, for

which every thing is readily given in exchange, but which is not

always with equal readiness to be got in exchange for every

thing. The greater part of goods, besides, are more perishable

than money, and he may frequently sustain a much greater loss by

keeping them. When his goods are upon hand, too, he is more

liable to such demands for money as he may not be able to answer,

than when he has got their price in his coffers. Over and above

all this, his profit arises more directly from selling than from

buying; and he is, upon all these accounts, generally much more

anxious to exchange his goods for money than his money for goods.

But though a particular merchant, with abundance of goods in his

warehouse, may sometimes be ruined by not being able to sell them

in time, a nation or country is not liable to the same accident,

The whole capital of a merchant frequently consists in perishable

goods destined for purchasing money. But it is but a very small

part of the annual produce of the land and lahour of a country,

which can ever be destined for purchasing gold and silver from

their neighbours. The far greater part is circulated and consumed

among themselves; and even of the surplus which is sent abroad,

the greater part is generally destined for the purchase of other

foreign goods. Though gold and silver, therefore, could not be

had in exchange for the goods destined to purchase them, the

nation would not be ruined. It might, indeed, suffer some loss

and inconveniency, and be forced upon some of those expedients

which are necessary for supplying the place of money. The annual

produce of its land and labour, however, would be the same, or

very nearly the same as usual ; because the same, or very nearly

the same consumable capital would be employed in maintaining it.

And though goods do not always draw money so readily as money

draws goods, in the long-run they draw it more necessarily than

even it draws them. Goods can serve many other purposes besides

purchasing money, but money can serve no other purpose besides

purchasing goods. Money, therefore, necessarily runs after goods,

but goods do not always or necessarily run after money. The man

who buys, does not always mean to sell again, but frequently to

use or to consume ; whereas he who sells always means to buy

again. The one may frequently have done the whole, but the other

can never have done more than the one half of his business. It is

not for its own sake that men desire money, but for the sake of

what they can purchase with it.

Consumable commodities, it is said, are soon destroyed; whereas

gold and silver are of a more durable nature, and were it not for

this continual exportation, might be accumulated for ages

together, to the incredible augmentation of the real wealth of

the country. Nothing, therefore, it is pretended, can be more

disadvantageous to any country, than the trade which consists in

the exchange of such lasting for such perishable commodities. We

do not, however, reckon that trade disadvatageous, which consists

in the exchange of the hardware of England for the wines of

France, and yet hardware is a very durable commodity, and were it

not for this continual exportation, might too be accumulated for

ages together, to the incredible augmentation of the pots and

pans of the country. But it readily occurs, that the number of

such utensils is in every country necessarily limited by the use

which there is for them ; that it would be absurd to have more

pots and pans than were necessary for cooking the victuals

usually consumed there; and that, if the quantity of victuals

were to increase, the number of pots and pans would readily

increase along with it ; a part of the increased quantity of

victuals being employed in purchasing them, or in maintaining an

additional number of workmen whose business it was to make them.

It should as readily occur, that the quantity of gold and silver

is, in every country, limited by the use which there is for those

metals ; that their use consists in circulating commodities, as

coin, and in affording a species of household furniture, as

plate; that the quantity of coin in every country is regulated by

the value of the commodities which are to be circulated by it;

increase that value, and immediately a part of it will be sent

abroad to purchase, wherever it is to be had, the additional

quantity of coin requisite for circulating them : that the

quantity of plate is regulated by the number and wealth of those

private families who choose to indulge themselves in that sort of

magnificence; increase the number and wealth of such families,

and a part of this increased wealth will most probably be

employed in purchasing, wherever it is to be found, an additional

quantity of plate ; that to attempt to increase the wealth of any

country, either by introducing or by detaining in it an

unnecessary quantity of gold and silver, is as absurd as it would

be to attempt to increase the good cheer of private families, by

obliging them to keep an unnecessary number of kitchen utensils.

As the expense of purchasing those unnecessary utensils would

diminish, instead of increasing, either the quantity or goodness

of the family provisions; so the expense of purchasing an

unnecessary quantity of gold and silver must, in every country,

as necessarily diminish the wealth which feeds, clothes, and

lodges, which maintains and employs the people. Gold and silver,

whether in the shape of coin or of plate, are utensils, it must

he remembered, as much as the furniture of the kitchen. Increase

the use of them, increase the consumable commodities which are to

be circulated, managed, and prepared by means of them, and you

will infallibly increase the quantity ; but if you attempt by

extraordinary means to increase the quantity, you will as

infallibly diminish the use, and even the quantity too, which in

those metals can never be greater than what the use requires.

Were they ever to be accumulated beyond this quantity, their

transportation is so easy, and the loss which attends their lying

idle and unemployed so great, that no law could prevent their

being immediately sent out of the country.

It is not always necessary to accumulate gold and silver, in

order to enable a country to carry on foreign wars, and to

maintain fleets and armies in distant countries. Fleets and

armies are maintained, not with gold and silver, but with

consumable goods. The nation which, from the annual produce of

its domestic industry, from the annual revenue arising out of its

lands, and labour, and consumable stock, has wherewithal to

purchase those consumable goods in distant countries, can

maintain foreign wars there.

A nation may purchase the pay and provisions of an army in a

distant country three different ways ; by sending abroad either,

first, some part of its accumulated gold and silver ; or,

secondly, some part of the annual produce of its manufactures ;

or, last of all, some part of its annual rude produce.

The gold and silver which can properly be considered as

accumulated, or stored up in any country, may be distinguished

into three parts ; first, the circulating money; secondly, the

plate of private families; and, last of all, the money which may

have been collected by many years parsimony, and laid up in the

treasury of the prince.

It can seldom happen that much can be spared from the circulating

money of the country ; because in that there can seldom be much

redundancy. The value of goods annually bought and sold in any

country requires a certain quantity of money to circulate and

distribute them to their proper consumers, and can give

employment to no more. The channel of circulation necessarily

draws to itself a sum sufficient to fill it, and never admits any

more. Something, however, is generally withdrawn from this

channel