Thethirdandlastofthethreeportionsintowhichthegeneralstockofthesocietynaturallydividesitself,isthecirculatingcapital;ofwhichthecharacteristicis,thatitaffordsarevenueonlybycirculatingorchangingmasters。Itiscomposedlikewiseoffourparts:
First,ofthemoneybymeansofwhichalltheotherthreearecirculatedanddistributedtotheirproperconsumers:
Secondly,ofthestockofprovisionswhichareinthepossessionofthebutcher,thegrazier,thefarmer,thecorn—merchant,thebrewer,etc。,andfromthesaleofwhichtheyexpecttoderiveaprofit:
Thirdly,ofthematerials,whetheraltogetherrude,ormoreorlessmanufactured,ofclothes,furniture,andbuilding,whicharenotyetmadeupintoanyofthosethreeshapes,butwhichremaininthehandsofthegrowers,themanufacturers,themercersanddrapers,thetimbermerchants,thecarpentersandjoiners,thebrickmakers,etc。
Fourthly,andlastly,oftheworkwhichismadeupandcompleted,butwhichisstillinthehandsofthemerchantormanufacturer,andnotyetdisposedofordistributedtotheproperconsumers;suchasthefinishedworkwhichwefrequentlyfindready—madeintheshopsofthesmith,thecabinet—maker,thegoldsmith,thejeweller,thechina—merchant,etc。Thecirculatingcapitalconsistsinthismanner,oftheprovisions,materials,andfinishedworkofallkindsthatareinthehandsoftheirrespectivedealers,andofthemoneythatisnecessaryforcirculatinganddistributingthemtothosewhoarefinallytouseortoconsumethem。
Ofthesefourparts,three—provisions,materials,andfinishedwork—are,eitherannually,orinalongerorshorterperiod,regularlywithdrawnfromit,andplacedeitherinthefixedcapitalorinthestockreservedforimmediateconsumption。
Everyfixedcapitalisbothoriginallyderivedfrom,andrequirestobecontinuallysupportedbyacirculatingcapital。
Allusefulmachinesandinstrumentsoftradeareoriginallyderivedfromacirculatingcapital,whichfurnishesthematerialsofwhichtheyaremade,andthemaintenanceoftheworkmenwhomakethem。Theyrequire,too,acapitalofthesamekindtokeeptheminconstantrepair。
Nofixedcapitalcanyieldanyrevenuebutbymeansofacirculatingcapital。Themostusefulmachinesandinstrumentsoftradewillproducenothingwithoutthecirculatingcapitalwhichaffordsthematerialstheyareemployedupon,andthemaintenanceoftheworkmenwhoemploythem。Land,howeverimproved,willyieldnorevenuewithoutacirculatingcapital,whichmaintainsthelabourerswhocultivateandcollectitsproduce。
Tomaintainandaugmentthestockwhichmaybereservedforimmediateconsumptionisthesoleendandpurposebothofthefixedandcirculatingcapitals。Itisthisstockwhichfeeds,clothes,andlodgesthepeople。Theirrichesorpovertydependsupontheabundantorsparingsupplieswhichthosetwocapitalscanaffordtothestockreservedforimmediateconsumption。
Sogreatapartofthecirculatingcapitalbeingcontinuallywithdrawnfromit,inordertobeplacedintheothertwobranchesofthegeneralstockofthesociety;itmustinitsturnrequirecontinualsupplies,withoutwhichitwouldsoonceasetoexist。Thesesuppliesareprincipallydrawnfromthreesources,theproduceofland,ofmines,andoffisheries。Theseaffordcontinualsuppliesofprovisionsandmaterials,ofwhichpartisafterwardswroughtupintofinishedwork,andbywhicharereplacedtheprovisions,materials,andfinishedworkcontinuallywithdrawnfromthecirculatingcapital。Frommines,too,isdrawnwhatisnecessaryformaintainingandaugmentingthatpartofitwhichconsistsinmoney。Forthough,intheordinarycourseofbusiness,thispartisnot,liketheotherthree,necessarilywithdrawnfromit,inordertobeplacedintheothertwobranchesofthegeneralstockofthesociety,itmust,however,likeallotherthings,bewastedandwornoutatlast,andsometimes,too,beeitherlostorsentabroad,andmust,therefore,requirecontinual,though,nodoubt,muchsmallersupplies。
Land,mines,andfisheries,requireallbothafixedandacirculatingcapitaltocultivatethem;andtheirproducereplaceswithaprofit,notonlythosecapitals,butalltheothersinthesociety。Thusthefarmerannuallyreplacestothemanufacturertheprovisionswhichhehadconsumedandthematerialswhichbehadwroughtuptheyearbefore;andthemanufacturerreplacestothefarmerthefinishedworkwhichhehadwastedandwornoutinthesametime。Thisistherealexchangethatisannuallymadebetweenthosetwoordersofpeople,thoughitseldomhappensthattherudeproduceoftheoneandthemanufacturedproduceoftheother,aredirectlybarteredforoneanother;becauseitseldomhappensthatthefarmersellshiscornandhiscattle,hisflaxandhiswool,totheverysamepersonofwhomhechoosestopurchasetheclothes,furniture,andinstrumentsoftradewhichhewants。Hesells,therefore,hisrudeproduceformoney,withwhichhecanpurchase,whereveritistobehad,themanufacturedproducehehasoccasionfor。Landevenreplaces,inpartatleast,thecapitalswithwhichfisheriesandminesarecultivated。Itistheproduceoflandwhichdrawsthefishfromthewaters;anditistheproduceofthesurfaceoftheearthwhichextractsthemineralsfromitsbowels。
Theproduceofland,mines,andfisheries,whentheirnaturalfertilityisequal,isinproportiontotheextentandproperapplicationofthecapitalsemployedaboutthem。Whenthecapitalsareequalandequallywellapplied,itisinproportiontotheirnaturalfertility。
Inallcountrieswherethereistolerablesecurity,everymanofcommonunderstandingwillendeavourtoemploywhateverstockhecancommandinprocuringeitherpresentenjoymentorfutureprofit。Ifitisemployedinprocuringpresentenjoyment,itisastockreservedforimmediateconsumption。Ifitisemployedinprocuringfutureprofit,itmustprocurethisprofiteitherstayingwithhim,orbygoingfromhim。Intheonecaseitisfixed,intheotheritisacirculatingcapital。Amanmustbeperfectlycrazywho,wherethereistolerablesecurity,doesnotemployallthestockwhichhecommands,whetherbehisownorborrowedofotherpeople,insomeoneorotherofthosethreeways。
Inthoseunfortunatecountries,indeed,wheremenarecontinuallyafraidoftheviolenceoftheirsuperiors,theyfrequentlyburyandconcealagreatpartoftheirstock,inordertohaveitalwaysathandtocarrywiththemtosomeplaceofsafety,incaseoftheirbeingthreatenedwithanyofthosedisasterstowhichtheyconsiderthemselvesasatalltimesexposed。ThisissaidtobeacommonpracticeinTurkey,inIndostan,and,Ibelieve,inmostothergovernmentsofAsia。Itseemstohavebeenacommonpracticeamongourancestorsduringtheviolenceofthefeudalgovernment。Treasure—trovewasinthosetimesconsideredasnocontemptiblepartoftherevenueofthegreatestsovereignsinEurope。Itconsistedinsuchtreasureaswasfoundconcealedintheearth,andtowhichnoparticularpersoncouldproveanyright。Thiswasregardedinthosetimesassoimportantanobject,thatitwasalwaysconsideredasbelongingtothesovereign,andneithertothefindernortotheproprietoroftheland,unlesstherighttoithadbeenconveyedtothelatterbyanexpressclauseinhischarter。Itwasputuponthesamefootingwithgoldandsilvermines,which,withoutaspecialclauseinthecharter,wereneversupposedtobecomprehendedinthegeneralgrantofthelands,thoughminesoflead,copper,tin,andcoalwereasthingsofsmallerconsequence。
CHAPTERII
OfMoneyconsideredasaparticularBranchofthegeneralStockoftheSociety,oroftheExpenseofmaintainingtheNationalCapitalIThasbeenshowninthefirstbook,thatthepriceofthegreaterpartofcommoditiesresolvesitselfintothreeparts,ofwhichonepaysthewagesofthelabour,anothertheprofitsofthestock,andathirdtherentofthelandwhichhadbeenemployedinproducingandbringingthemtomarket:thatthereare,indeed,somecommoditiesofwhichthepriceismadeupoftwoofthosepartsonly,thewagesoflabour,andtheprofitsofstock:andaveryfewinwhichitconsistsaltogetherinone,thewagesoflabour:butthatthepriceofeverycommoditynecessarilyresolvesitselfintosomeone,orother,orallofthesethreeparts;everypartofitwhichgoesneithertorentnortowages,beingnecessarilyprofittosomebody。
Sincethisisthecase,ithasbeenobserved,withregardtoeveryparticularcommodity,takenseparately,itmustbesowithregardtoallthecommoditieswhichcomposethewholeannualproduceofthelandandlabourofeverycountry,takencomplexly。
Thewholepriceorexchangeablevalueofthatannualproducemustresolveitselfintothesamethreeparts,andbeparcelledoutamongthedifferentinhabitantsofthecountry,eitherasthewagesoftheirlabour,theprofitsoftheirstock,ortherentoftheirland。
Butthoughthewholevalueoftheannualproduceofthelandandlabourofeverycountryisthusdividedamongandconstitutesarevenuetoitsdifferentinhabitants,yetasintherentofaprivateestatewedistinguishbetweenthegrossrentandthenetrent,somaywelikewiseintherevenueofalltheinhabitantsofagreatcountry。
Thegrossrentofaprivateestatecomprehendswhateverispaidbythefarmer;thenetrent,whatremainsfreetothelandlord,afterdeductingtheexpenseofmanagement,ofrepairs,andallothernecessarycharges;orwhat,withouthurtinghisestate,hecanaffordtoplaceinhisstockreservedforimmediateconsumption,ortospenduponhistable,equipage,theornamentsofhishouseandfurniture,hisprivateenjoymentsandamusements。Hisrealwealthisinproportion,nottohisgross,buttohisnetrent。
Thegrossrevenueofalltheinhabitantsofagreatcountrycomprehendsthewholeannualproduceoftheirlandandlabour;
thenetrevenue,whatremainsfreetothemafterdeductingtheexpenseofmaintaining—first,theirfixed,and,secondly,theircirculatingcapital;orwhat,withoutencroachingupontheircapital,theycanplaceintheirstockreservedforimmediateconsumption,orspendupontheirsubsistence,conveniencies,andamusements。Theirrealwealth,too,isinproportion,nottotheirgross,buttotheirnetrevenue。
Thewholeexpenseofmaintainingthefixedcapitalmustevidentlybeexcludedfromthenetrevenueofthesociety。
Neitherthematerialsnecessaryforsupportingtheirusefulmachinesandinstrumentsoftrade,theirprofitablebuildings,etc。,northeproduceofthelabournecessaryforfashioningthosematerialsintotheproperform,canevermakeanypartofit。Thepriceofthatlabourmayindeedmakeapartofit;astheworkmensoemployedmayplacethewholevalueoftheirwagesintheirstockreservedforimmediateconsumption。Butinothersortsoflabour,boththepriceandtheproducegotothisstock,thepricetothatoftheworkmen,theproducetothatofotherpeople,whosesubsistence,conveniences,andamusements,areaugmentedbythelabourofthoseworkmen。
Theintentionofthefixedcapitalistoincreasetheproductivepowersoflabour,ortoenablethesamenumberoflabourerstoperformamuchgreaterquantityofwork。Inafarmwhereallthenecessarybuildings,fences,drains,communications,etc。,areinthemostperfectgoodorder,thesamenumberoflabourersandlabouringcattlewillraiseamuchgreaterproducethaninoneofequalextentandequallygoodground,butnotfurnishedwithequalconveniencies。Inmanufacturesthesamenumberofhands,assistedwiththebestmachinery,willworkupamuchgreaterquantityofgoodsthanwithmoreimperfectinstrumentsoftrade。Theexpensewhichisproperlylaidoutuponafixedcapitalofanykind,isalwaysrepaidwithgreatprofit,andincreasestheannualproducebyamuchgreatervaluethanthatofthesupportwhichsuchimprovementsrequire。Thissupport,however,stillrequiresacertainportionofthatproduce。Acertainquantityofmaterials,andthelabourofacertainnumberofworkmen,bothofwhichmighthavebeenimmediatelyemployedtoaugmentthefood,clothingandlodging,thesubsistenceandconvenienciesofthesociety,arethusdivertedtoanotheremployment,highlyadvantageousindeed,butstilldifferentfromthisone。Itisuponthisaccountthatallsuchimprovementsinmechanics,asenablethesamenumberofworkmentoperformanequalquantityofwork,withcheaperandsimplermachinerythanhadbeenusualbefore,arealwaysregardedasadvantageoustoeverysociety。A
certainquantityofmaterials,andthelabourofacertainnumberofworkmen,whichhadbeforebeenemployedinsupportingamorecomplexandexpensivemachinery,canafterwardsbeappliedtoaugmentthequantityofworkwhichthatoranyothermachineryisusefulonlyforperforming。Theundertakerofsomegreatmanufactorywhoemploysathousandayearinthemaintenanceofhismachinery,ifhecanreducethisexpensetofivehundredwillnaturallyemploytheotherfivehundredinpurchasinganadditionalquantityofmaterialstobewroughtupbyanadditionalnumberofworkmen。Thequantityofthatwork,therefore,whichhismachinerywasusefulonlyforperforming,willnaturallybeaugmented,andwithitalltheadvantageandconveniencywhichthesocietycanderivefromthatwork。
Theexpenseofmaintainingthefixedcapitalinagreatcountrymayveryproperlybecomparedtothatofrepairsinaprivateestate。Theexpenseofrepairsmayfrequentlybenecessaryforsupportingtheproduceoftheestate,andconsequentlyboththegrossandthenetrentofthelandlord。
Whenbyamoreproperdirection,however,itcanbediminishedwithoutoccasioninganydiminutionofproduce,thegrossrentremainsatleastthesameasbefore,andthenetrentisnecessarilyaugmented。
Butthoughthewholeexpenseofmaintainingthefixedcapitalisthusnecessarilyexcludedfromthenetrevenueofthesociety,itisnotthesamecasewiththatofmaintainingthecirculatingcapital。Ofthefourpartsofwhichthislattercapitaliscomposed—money,provisions,materials,andfinishedwork—thethreelast,ithasalreadybeenobserved,areregularlywithdrawnfromit,andplacedeitherinthefixedcapitalofthesociety,orintheirstockreservedforimmediateconsumption。
Whateverportionofthoseconsumablegoodsisemployedinmaintainingtheformer,goesalltothelatter,andmakesapartofthenetrevenueofthesociety。Themaintenanceofthosethreepartsofthecirculatingcapital,therefore,withdrawsnoportionoftheannualproducefromthenetrevenueofthesociety,besideswhatisnecessaryformaintainingthefixedcapital。
Thecirculatingcapitalofasocietyisinthisrespectdifferentfromthatofanindividual。Thatofanindividualistotallyexcludedfrommakinganypartofhisnetrevenue,whichmustconsistaltogetherinhisprofits。Butthoughthecirculatingcapitalofeveryindividualmakesapartofthatofthesocietytowhichhebelongs,itisnotuponthataccounttotallyexcludedfrommakingapartlikewiseoftheirnetrevenue。Thoughthewholegoodsinamerchant’sshopmustbynomeansbeplacedinhisownstockreservedforimmediateconsumption,theymayinthatofotherpeople,who,fromarevenuederivedfromotherfunds,mayregularlyreplacetheirvaluetohim,togetherwithitsprofits,withoutoccasioninganydiminutioneitherofhiscapitaloroftheirs。
Money,therefore,istheonlypartofthecirculatingcapitalofasociety,ofwhichthemaintenancecanoccasionanydiminutionintheirnetrevenue。
Thefixedcapital,andthatpartofthecirculatingcapitalwhichconsistsinmoney,sofarastheyaffecttherevenueofthesociety,bearaverygreatresemblancetooneanother。
First,asthosemachinesandinstrumentsoftrade,etc。,requireacertainexpense,firsttoerectthem,andafterwardstosupportthem,bothwhichexpenses,thoughtheymakeapartofthegross,aredeductionsfromthenetrevenueofthesociety;sothestockofmoneywhichcirculatesinanycountrymustrequireacertainexpense,firsttocollectit,andafterwardstosupportit,bothwhichexpenses,thoughtheymakeapartofthegross,are,inthesamemanner,deductionsfromthenetrevenueofthesociety。Acertainquantityofveryvaluablematerials,goldandsilver,andofverycuriouslabour,insteadofaugmentingthestockreservedforimmediateconsumption,thesubsistence,conveniencies,andamusementsofindividuals,isemployedinsupportingthatgreatbutexpensiveinstrumentofcommerce,bymeansofwhicheveryindividualinthesocietyhashissubsistence,conveniencies,andamusementsregularlydistributedtohimintheirproperproportions。
Secondly,asthemachinesandinstrumentsofatrade,etc。,whichcomposethefixedcapitaleitherofanindividualorofasociety,makenoparteitherofthegrossorofthenetrevenueofeither;somoney,bymeansofwhichthewholerevenueofthesocietyisregularlydistributedamongallitsdifferentmembers,makesitselfnopartofthatrevenue。Thegreatwheelofcirculationisaltogetherdifferentfromthegoodswhicharecirculatedbymeansofit。Therevenueofthesocietyconsistsaltogetherinthosegoods,andnotinthewheelwhichcirculatesthem。Incomputingeitherthegrossorthenetrevenueofanysociety,wemustalways,fromtheirwholeannualcirculationofmoneyandgoods,deductthewholevalueofthemoney,ofwhichnotasinglefarthingcanevermakeanypartofeither。
Itistheambiguityoflanguageonlywhichcanmakethispropositionappeareitherdoubtfulorparadoxical。Whenproperlyexplainedandunderstood,itisalmostself—evident。
Whenwetalkofanyparticularsumofmoney,wesometimesmeannothingbutthemetalpiecesofwhichitiscomposed;andsometimesweincludeinourmeaningsomeobscurereferencetothegoodswhichcanbehadinexchangeforit,ortothepowerofpurchasingwhichthepossessionofitconveys。ThuswhenwesaythatthecirculatingmoneyofEnglandhasbeencomputedateighteenmillions,wemeanonlytoexpresstheamountofthemetalpieces,whichsomewritershavecomputed,orratherhavesupposedtocirculateinthatcountry。Butwhenwesaythatamanisworthfiftyorahundredpoundsayear,wemeancommonlytoexpressnotonlytheamountofthemetalpieceswhichareannuallypaidtohim,butthevalueofthegoodswhichhecanannuallypurchaseorconsume。Wemeancommonlytoascertainwhatisoroughttobehiswayofliving,orthequantityandqualityofthenecessariesandconvenienciesoflifeinwhichhecanwithproprietyindulgehimself。
When,byanyparticularsumofmoney,wemeannotonlytoexpresstheamountofthemetalpiecesofwhichitiscomposed,buttoincludeinitssignificationsomeobscurereferencetothegoodswhichcanbehadinexchangeforthem,thewealthorrevenuewhichitinthiscasedenotes,isequalonlytooneofthetwovalueswhicharethusintimatedsomewhatambiguouslybythesameword,andtothelattermoreproperlythantotheformer,tothemoney’sworthmoreproperlythantothemoney。
Thusifaguineabetheweeklypensionofaparticularperson,hecaninthecourseoftheweekpurchasewithitacertainquantityofsubsistence,conveniencies,andamusements。
Inproportionasthisquantityisgreatorsmall,soarehisrealriches,hisrealweeklyrevenue。Hisweeklyrevenueiscertainlynotequalbothtotheguinea,andtowhatcanbepurchasedwithit,butonlytooneorotherofthosetwoequalvalues;andtothelattermoreproperlythantotheformer,totheguinea’sworthratherthantotheguinea。
Ifthepensionofsuchapersonwaspaidtohim,notingold,butinaweeklybillforaguinea,hisrevenuesurelywouldnotsoproperlyconsistinthepieceofpaper,asinwhathecouldgetforit。Aguineamaybeconsideredasabillforacertainquantityofnecessariesandconvenienciesuponallthetradesmenintheneighbourhood。Therevenueofthepersontowhomitispaid,doesnotsoproperlyconsistinthepieceofgold,asinwhathecangetforit,orinwhathecanexchangeitfor。Ifitcouldbeexchangedfornothing,itwould,likeabilluponabankrupt,beofnomorevaluethanthemostuselesspieceofpaper。
Thoughtheweeklyoryearlyrevenueofallthedifferentinhabitantsofanycountry,inthesamemanner,maybe,andinrealityfrequentlyispaidtotheminmoney,theirrealriches,however,therealweeklyoryearlyrevenueofallofthemtakentogether,mustalwaysbegreatorsmallinproportiontothequantityofconsumablegoodswhichtheycanallofthempurchasewiththismoney。Thewholerevenueofallofthemtakentogetherisevidentlynotequaltoboththemoneyandtheconsumablegoods;butonlytooneorotherofthosetwovalues,andtothelattermoreproperlythantotheformer。
Thoughwefrequently,therefore,expressaperson’srevenuebythemetalpieceswhichareannuallypaidtohim,itisbecausetheamountofthosepiecesregulatestheextentofhispowerofpurchasing,orthevalueofthegoodswhichhecanannuallyaffordtoconsume。Westillconsiderhisrevenueasconsistinginthispowerofpurchasingorconsuming,andnotinthepieceswhichconveyit。
Butifthisissufficientlyevidentevenwithregardtoanindividual,itisstillmoresowithregardtoasociety。Theamountofthemetalpieceswhichareannuallypaidtoanindividual,isoftenpreciselyequaltohisrevenue,andisuponthataccounttheshortestandbestexpressionofitsvalue。Buttheamountofthemetalpieceswhichcirculateinasocietycanneverbeequaltotherevenueofallitsmembers。Asthesameguineawhichpaystheweeklypensionofonemanto—day,maypaythatofanotherto—morrow,andthatofathirdthedaythereafter,theamountofthemetalpieceswhichannuallycirculateinanycountrymustalwaysbeofmuchlessvaluethanthewholemoneypensionsannuallypaidwiththem。Butthepowerofpurchasing,orthegoodswhichcansuccessivelybeboughtwiththewholeofthosemoneypensionsastheyaresuccessivelypaid,mustalwaysbepreciselyofthesamevaluewiththosepensions;
asmustlikewisebetherevenueofthedifferentpersonstowhomtheyarepaid。Thatrevenue,therefore,cannotconsistinthosemetalpieces,ofwhichtheamountissomuchinferiortoitsvalue,butinthepowerofpurchasing,inthegoodswhichcansuccessivelybeboughtwiththemastheycirculatefromhandtohand。
Money,therefore,thegreatwheelofcirculation,thegreatinstrumentofcommerce,likeallotherinstrumentsoftrade,thoughitmakesapartandaveryvaluablepartofthecapital,makesnopartoftherevenueofthesocietytowhichitbelongs;
andthoughthemetalpiecesofwhichitiscomposed,inthecourseoftheirannualcirculation,distributetoeverymantherevenuewhichproperlybelongstohim,theymakethemselvesnopartofthatrevenue。
Thirdly,andlastly,themachinesandinstrumentsoftrade,etc。,whichcomposethefixedcapital,bearthisfurtherresemblancetothatpartofthecirculatingcapitalwhichconsistsinmoney;thataseverysavingintheexpenseoferectingandsupportingthosemachines,whichdoesnotdiminishtheproductivepowersoflabour,isanimprovementofthenetrevenueofthesociety,soeverysavingintheexpenseofcollectingandsupportingthatpartofthecirculatingcapitalwhichconsistsinmoney,isanimprovementofexactlythesamekind。
Itissufficientlyobvious,andithaspartly,too,beenexplainedalready,inwhatmannereverysavingintheexpenseofsupportingthefixedcapitalisanimprovementofthenetrevenueofthesociety。Thewholecapitaloftheundertakerofeveryworkisnecessarilydividedbetweenhisfixedandhiscirculatingcapital。Whilehiswholecapitalremainsthesame,thesmallertheonepart,thegreatermustnecessarilybetheother。Itisthecirculatingcapitalwhichfurnishesthematerialsandwagesoflabour,andputsindustryintomotion。Everysaving,therefore,intheexpenseofmaintainingthefixedcapital,whichdoesnotdiminishtheproductivepowersoflabour,mustincreasethefundwhichputsindustryintomotion,andconsequentlytheannualproduceoflandandlabour,therealrevenueofeverysociety。
Thesubstitutionofpaperintheroomofgoldandsilvermoney,replacesaveryexpensiveinstrumentofcommercewithonemuchlesscostly,andsometimesequallyconvenient。Circulationcomestobecarriedonbyanewwheel,whichitcostslessbothtoerectandtomaintainthantheoldone。Butinwhatmannerthisoperationisperformed,andinwhatmannerittendstoincreaseeitherthegrossorthenetrevenueofthesociety,isnotaltogethersoobvious,andmaythereforerequiresomefurtherexplication。
Thereareseveraldifferentsortsofpapermoney;butthecirculatingnotesofbanksandbankersarethespecieswhichisbestknown,andwhichseemsbestadaptedforthispurpose。
Whenthepeopleofanyparticularcountryhavesuchconfidenceinthefortune,probity,andprudenceofaparticularbanker,astobelievethatheisalwaysreadytopayupondemandsuchofhispromissorynotesasarelikelytobeatanytimepresentedtohim;thosenotescometohavethesamecurrencyasgoldandsilvermoney,fromtheconfidencethatsuchmoneycanatanytimebehadforthem。
Aparticularbankerlendsamonghiscustomershisownpromissorynotes,totheextent,weshallsuppose,ofahundredthousandpounds。Asthosenotesserveallthepurposesofmoney,hisdebtorspayhimthesameinterestasifhehadlentthemsomuchmoney。Thisinterestisthesourceofhisgain。Thoughsomeofthosenotesarecontinuallycomingbackuponhimforpayment,partofthemcontinuetocirculateformonthsandyearstogether。
Thoughhehasgenerallyincirculation,therefore,notestotheextentofahundredthousandpounds,twentythousandpoundsingoldandsilvermayfrequentlybeasufficientprovisionforansweringoccasionaldemands。Bythisoperation,therefore,twentythousandpoundsingoldandsilverperformallthefunctionswhichahundredthousandcouldotherwisehaveperformed。Thesameexchangesmaybemade,thesamequantityofconsumablegoodsmaybecirculatedanddistributedtotheirproperconsumers,bymeansofhispromissorynotes,tothevalueofahundredthousandpounds,asbyanequalvalueofgoldandsilvermoney。Eightythousandpoundsofgoldandsilver,therefore,can,inthismanner,besparedfromthecirculationofthecountry;andifdifferentoperationsofthesamekindshould,atthesametime,becarriedonbymanydifferentbanksandbankers,thewholecirculationmaythusbeconductedwithafifthpartonlyofthegoldandsilverwhichwouldotherwisehavebeenrequisite。
Letussuppose,forexample,thatthewholecirculatingmoneyofsomeparticularcountryamounted,ataparticulartime,toonemillionsterling,thatsumbeingthensufficientforcirculatingthewholeannualproduceoftheirlandandlabour。
Letussuppose,too,thatsometimethereafter,differentbanksandbankersissuedpromissorynotes,payabletothebearer,totheextentofonemillion,reservingintheirdifferentcofferstwohundredthousandpoundsforansweringoccasionaldemands。
Therewouldremain,therefore,incirculation,eighthundredthousandpoundsingoldandsilver,andamillionofbanknotes,oreighteenhundredthousandpoundsofpaperandmoneytogether。
Buttheannualproduceofthelandandlabourofthecountryhadbeforerequiredonlyonemilliontocirculateanddistributeittoitsproperconsumers,andthatannualproducecannotbeimmediatelyaugmentedbythoseoperationsofbanking。Onemillion,therefore,willbesufficienttocirculateitafterthem。Thegoodstobeboughtandsoldbeingpreciselythesameasbefore,thesamequantityofmoneywillbesufficientforbuyingandsellingthem。Thechannelofcirculation,ifImaybeallowedsuchanexpression,willremainpreciselythesameasbefore。Onemillionwehavesupposedsufficienttofillthatchannel。
Whatever,therefore,ispouredintoitbeyondthissumcannotruninit,butmustoverflow。Onemillioneighthundredthousandpoundsarepouredintoit。Eighthundredthousandpounds,therefore,mustoverflow,thatsumbeingoverandabovewhatcanbeemployedinthecirculationofthecountry。Butthoughthissumcannotbeemployedathome,itistoovaluabletobeallowedtolieidle。Itwill,therefore,besentabroad,inordertoseekthatprofitableemploymentwhichitcannotfindathome。Butthepapercannotgoabroad;becauseatadistancefromthebankswhichissueit,andfromthecountryinwhichpaymentofitcanbeexactedbylaw,itwillnotbereceivedincommonpayments。
Goldandsilver,therefore,totheamountofeighthundredthousandpoundswillbesentabroad,andthechannelofhomecirculationwillremainfilledwithamillionofpaper,insteadofthemillionofthosemetalswhichfilleditbefore。
Butthoughsogreataquantityofgoldandsilveristhussentabroad,wemustnotimaginethatitissentabroadfornothing,orthatitsproprietorsmakeapresentofittoforeignnations。Theywillexchangeitforforeigngoodsofsomekindoranother,inordertosupplytheconsumptioneitherofsomeotherforeigncountryoroftheirown。
Iftheyemployitinpurchasinggoodsinoneforeigncountryinordertosupplytheconsumptionofanother,orinwhatiscalledthecarryingtrade,whateverprofittheymakewillbeanadditiontothenetrevenueoftheirowncountry。Itislikeanewfund,createdforcarryingonanewtrade;domesticbusinessbeingnowtransactedbypaper,andthegoldandsilverbeingconvertedintoafundforthisnewtrade。
Iftheyemployitinpurchasingforeigngoodsforhomeconsumption,theymayeither,first,purchasesuchgoodsasarelikelytobeconsumedbyidlepeoplewhoproducenothing,suchasforeignwines,foreignsilks,etc。;or,secondly,theymaypurchaseanadditionalstockofmaterials,tools,andprovisions,inordertomaintainandemployanadditionalnumberofindustriouspeople,whoreproduce,withaprofit,thevalueoftheirannualconsumption。
Sofarasitisemployedinthefirstway,itpromotesprodigality,increasesexpenseandconsumptionwithoutincreasingproduction,orestablishinganypermanentfundforsupportingthatexpense,andisineveryrespecthurtfultothesociety。
Sofarasitisemployedinthesecondway,itpromotesindustry;andthoughitincreasestheconsumptionofthesociety,itprovidesapermanentfundforsupportingthatconsumption,thepeoplewhoconsumereproducing,withaprofit,thewholevalueoftheirannualconsumption。Thegrossrevenueofthesociety,theannualproduceoftheirlandandlabour,isincreasedbythewholevaluewhichthelabourofthoseworkmenaddstothematerialsuponwhichtheyareemployed;andtheirnetrevenuebywhatremainsofthisvalue,afterdeductingwhatisnecessaryforsupportingthetoolsandinstrumentsoftheirtrade。
Thatthegreaterpartofthegoldandsilverwhich,beingforcedabroadbythoseoperationsofbanking,isemployedinpurchasingforeigngoodsforhomeconsumption,isandmustbeemployedinpurchasingthoseofthissecondkind,seemsnotonlyprobablebutalmostunavoidable。Thoughsomeparticularmenmaysometimesincreasetheirexpenseveryconsiderablythoughtheirrevenuedoesnotincreaseatall,wemaybeassuredthatnoclassororderofmeneverdoesso;because,thoughtheprinciplesofcommonprudencedonotalwaysgoverntheconductofeveryindividual,theyalwaysinfluencethatofthemajorityofeveryclassororder。Buttherevenueofidlepeople,consideredasaclassororder,cannot,inthesmallestdegree,beincreasedbythoseoperationsofbanking。Theirexpenseingeneral,therefore,cannotbemuchincreasedbythem,thoughthatofafewindividualsamongthemmay,andinrealitysometimesis。Thedemandofidlepeople,therefore,forforeigngoodsbeingthesame,orverynearlythesame,asbefore,averysmallpartofthemoney,whichbeingforcedabroadbythoseoperationsofbanking,isemployedinpurchasingforeigngoodsforhomeconsumption,islikelytobeemployedinpurchasingthosefortheiruse。Thegreaterpartofitwillnaturallybedestinedfortheemploymentofindustry,andnotforthemaintenanceofidleness。
Whenwecomputethequantityofindustrywhichthecirculatingcapitalofanysocietycanemploy,wemustalwayshaveregardtothosepartsofitonlywhichconsistinprovisions,materials,andfinishedwork:theother,whichconsistsinmoney,andwhichservesonlytocirculatethosethree,mustalwaysbededucted。Inordertoputindustryintomotion,threethingsarerequisite;materialstoworkupon,toolstoworkwith,andthewagesorrecompenseforthesakeofwhichtheworkisdone。Moneyisneitheramaterialtoworkupon,noratooltoworkwith;andthoughthewagesoftheworkmanarecommonlypaidtohiminmoney,hisrealrevenue,likethatofallothermen,consists,notinmoney,butinthemoney’sworth;notinthemetalpieces,butinwhatcanbegotforthem。
Thequantityofindustrywhichanycapitalcanemploymust,evidently,beequaltothenumberofworkmenwhomitcansupplywithmaterials,tools,andamaintenancesuitabletothenatureofthework。Moneymayberequisiteforpurchasingthematerialsandtoolsofthework,aswellasthemaintenanceoftheworkmen。
Butthequantityofindustrywhichthewholecapitalcanemployiscertainlynotequalbothtothemoneywhichpurchases,andtothematerials,tools,andmaintenance,whicharepurchasedwithit;butonlytooneorotherofthosetwovalues,andtothelattermoreproperlythantotheformer。
Whenpaperissubstitutedintheroomofgoldandsilvermoney,thequantityofthematerials,tools,andmaintenance,whichthewholecirculatingcapitalcansupply,maybeincreasedbythewholevalueofgoldandsilverwhichusedtobeemployedinpurchasingthem。Thewholevalueofthegreatwheelofcirculationanddistributionisaddedtothegoodswhicharecirculatedanddistributedbymeansofit。Theoperation,insomemeasure,resemblesthatoftheundertakerofsomegreatwork,who,inconsequenceofsomeimprovementinmechanics,takesdownhisoldmachinery,andaddsthedifferencebetweenitspriceandthatofthenewtohiscirculatingcapital,tothefundfromwhichhefurnishesmaterialsandwagestohisworkmen。
Whatistheproportionwhichthecirculatingmoneyofanycountrybearstothewholevalueoftheannualproducecirculatedbymeansofit,itis,perhaps,impossibletodetermine。Ithasbeencomputedbydifferentauthorsatafifth,atatenth,atatwentieth,andatathirtiethpartofthatvalue。Buthowsmallsoevertheproportionwhichthecirculatingmoneymaybeartothewholevalueoftheannualproduce,asbutapart,andfrequentlybutasmallpart,ofthatproduce,iseverdestinedforthemaintenanceofindustry,itmustalwaysbearaveryconsiderableproportiontothatpart。When,therefore,bythesubstitutionofpaper,thegoldandsilvernecessaryforcirculationisreducedto,perhaps,afifthpartoftheformerquantity,ifthevalueofonlythegreaterpartoftheotherfour—fifthsbeaddedtothefundswhicharedestinedforthemaintenanceofindustry,itmustmakeaveryconsiderableadditiontothequantityofthatindustry,and,consequently,tothevalueoftheannualproduceoflandandlabour。