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

who are maintained abroad, fewer are maintained at home. Fewer

goods are circulated there, and less money becomes necessary to

circulate them. An extraordinary quantity of paper money of some

sort or other, too, such as exchequer notes, navy bills, and bank

bills, in England, is generally issued upon such occasions, and,

by supplying the place of circulating gold and silver, gives an

opportunity of sending a greater quantity of it abroad. All this,

however, could afford but a poor resource for maintaining a

foreign war, of great expense, and several years duration.

The melting down of the plate of private families has, upon every

occasion, been found a still more insignificant one. The French,

in the beginning of the last war, did not derive so much

advantage from this expedient as to compensate the loss of the

fashion.

The accumulated treasures of the prince have in former times

afforded a much greater and more lasting resource. In the present

times, if you except the king of Prussia, to accumulate treasure

seems to be no part of the policy of European princes.

The funds which maintained the foreign wars of the present

century, the most expensive perhaps which history records, seem

to have had little dependency upon the exportation either of the

circulating money, or of the plate of private families, or of

the treasure of the prince. The last French war cost Great

Britain upwards of �90,000,000, including not only the

�75,000,000 of new debt that was contracted, but the additional

2s. in the pound land-tax, and what was annually borrowed of the

sinking fund. More than two-thirds of this expense were laid out

in distant countries; in Germany, Portugal, America, in the ports

of the Mediterranean, in the East and West Indies. The kings of

England had no accumulated treasure. We never heard of any

extraordinary quantity of plate being melted down. The

circulating gold and silver of the country had not been supposed

to exceed �18,000,000. Since the late recoinage of the gold,

however, it is believed to have been a good deal under-rated. Let

us suppose, therefore, according to the most exaggerated

computation which I remember to have either seen or heard of,

that, gold and silver together, it amounted to �30,000,000. Had

the war been carried on by means of our money, the whole of it

must, even according to this computation, have been sent out and

returned again, at least twice in a period of between six and

seven years. Should this be supposed, it would afford the most

decisive argument, to demonstrate how unnecessary it is for

government to watch over the preservation of money, since, upon

this supposition, the whole money of the country must have gone

from it, and returned to it again, two different times in so

short a period, without any body’s knowing any thing of the

matter. The channel of circulation, however, never appeared more

empty than usual during any part of this period. Few people

wanted money who had wherewithal to pay for it. The profits of

foreign trade, indeed, were greater than usual during the whole

war, but especially towards the end of it. This occasioned, what

it always occasions, a general over-trading in all the ports of

Great Britain; and this again occasioned the usual complaint of

the scarcity of money, which always follows over-trading. Many

people wanted it, who had neither wherewithal to buy it, nor

credit to borrow it ; and because the debtors found it difficult

to borrow, the creditors found it difficult to get payment. Gold

and silver, however, were generally to be had for their value, by

those who had that value to give for them.

The enormous expense of the late war, therefore, must have been

chiefly defrayed, not by the exportation of gold and silver, but

by that of British commodities of some kind or other. When the

government, or those who acted under them, contracted with a

merchant for a remittance to some foreign country, he would

naturally endeavour to pay his foreign correspondent, upon whom

he granted a bill, by sending abroad rather commodities than gold

and silver. If the commodities of Great Britain were not in

demand in that country, he would endeavour to send them to some

other country in which he could purchase a bill upon that

country. The transportation of commodities, when properly suited

to the market, is always attended with a considerable profit;

whereas that of gold and silver is scarce ever attended with any.

When those metals are sent abroad in order to purchase foreign

commodities, the merchant’s profit arises, not from the purchase,

but from the sale of the returns. But when they are sent abroad

merely to pay a debt, he gets no returns, and consequently no

profit. He naturally, therefore, exerts his invention to find out

a way of paying his foreign debts, rather by the exportation of

commodities, than by that of gold and silver. The great quantity

of British goods, exported during the course of the late war,

without bringing back any returns, is accordingly remarked by the

author of the Present State of the Nation.

Besides the three sorts of gold and silver above mentioned, there

is in all great commercial countries a good deal of bullion

alternately imported and exported, for the purposes of foreign

trade. This bullion, as it circulates among different commercial

countries, in the same manner as the national coin circulates in

every country, may be considered as the money of the great

mercantile republic. The national coin receives its movement and

direction from the commodities circulated within the precincts of

each particular country ; the money in the mercantile republic,

from those circulated between different countries. Both are

employed in facilitating exchanges, the one between different

individuals of the same, the other between those of different

nations. Part of this money of the great mercantile republic may

have been, and probably was, employed in carrying on the late

war. In time of a general war, it is natural to suppose that a

movement and direction should be impressed upon it, different

from what it usually follows in profound peace, that it should

circulate more about the seat of the war, and be more employed in

purchasing there, and in the neighbouring countries, the pay and

provisions of the different armies. But whatever part of this

money of the mercantile republic Great Britain may have annually

employed in this manner, it must have been annually purchased,

either with British commodities, or with something else that had

been purchased with them ; which still brings us back to

commodities, to the annual produce of the land and labour of the

country, as the ultimate resources which enabled us to carry on

the war. It is natural, indeed, to suppose, that so great an

annual expense must have been defrayed from a great annual

produce. The expense of 1761, for example, amounted to more than

�19,000,000. No accumulation could have supported so great an

annual profusion. There is no annual produce, even of gold and

silver, which could have supported it. The whole gold and

silver annually imported into both Spain and Portugal, according

to the best accounts, does not commonly much exceed �6,000,000

sterling, which, in some years, would scarce have paid four

months expense of the late war.

The commodities most proper for being transported to distatnt

countries, in order to purchase there either the pay and

provisions of an army, or some part of the money of the

mercantile republic to be employed in purchasing them, seem to be

the finer and more improved manufactures; such as contain a great

value in a small bulk, and can therefore be exported to a great

distance at little expense. A country whose industry produces a

great annual surplus of such manufactures, which are usually

exported to foreign countries, may carry on for many years a very

expensive foreign war, without either exporting any considerable

quantity of gold and silver, or even having any such quantity to

export. A considerable part of the annual surplus of its

manufactures must, indeed, in this case, be exported without

bringing back any returns to the country, though it does to the

merchant ; the government purchasing of the merchant his bills

upon foreign countries, in order to purchase there the pay and

provisions of an army. Some part of this surplus, however, may

still continue to bring back a return. The manufacturers during;

the war will have a double demand upon them, and be called upon

first to work up goods to be sent abroad, for paying the bills

drawn upon foreign countries for the pay and provisions of the

army: and, secondly, to work up such as are necessary for

purchasing the common returns that had usually been consumed in

the country. In the midst of the most destructive foreign war,

therefore, the greater part of manufactures may frequently

flourish greatly; and, on the contrary, they may decline on the

return of peace. They may flourish amidst the ruin of their

country, and begin to decay upon the return of its prosperity.

The different state of many different branches of the British

manufactures during the late war, and for some time after the

peace, may serve as an illustration of what has been just now

said.

No foreign war, of great expense or duration, could conveniently

be carried on by the exportation of the rude produce of the soil.

The expense of sending such a quantity of it into a foreign

country as might purchase the pay and provisions of an army would

be too great. Few countries, too, produce much more rude produce

than what is sufficient for the subsistence of their own

inhabitants. To send abroad any great quantity of it, therefore,

would be to send abroad a part of the necessary subsistence of

the people. It is otherwise with the exportation of manufactures.

The maintenance of the people employed in them is kept at home,

and only the surplus part of their work is exported. Mr Hume

frequently takes notice of the inability of the ancient kings of

England to carry on, without interruption, any foreign war of

long duration. The English in those days had nothing wherewithal

to purchase the pay and provisions of their armies in foreign

countries, but either the rude produce of the soil, of which no

considerable part could be spared from the home consumption, or a

few manufactures of the coarsest kind, of which, as well as of

the rude produce, the transportation was too expensive. This

inability did not arise from the want of money, but of the finer

and more improved manufactures. Buying and selling was transacted

by means of money in England then as well as now. The quantity of

circulating money must have borne the same proportion, to the

number and value of purchases and sales usually transacted at

that time, which it does to those transacted at present ; or,

rather, it must have borne a greater proportion, because there

was then no paper, which now occupies a great part of the

employment of gold and silver. Among nations to whom commerce and

manufactures are little known, the sovereign, upon extraordinary

occasions, can seldom draw any considerable aid from his

subjects, for reasons which shall be explained hereafter. It is

in such countries, therefore, that he generally endeavours to

accumulate a treasure, as the only resource against such

emergencies. Independent of this necessity, he is, in such a

situation, naturally disposed to the parsimony requisite for

accumulation. In that simple state, the expense even of a

sovereign is not directed by the vanity which delights in the

gaudy finery of a court, but is employed in bounty to his

tenants, and hospitality to his retainers. But bounty and

hospitality very seldom