Thecaseinwhichitmaysometimesbeamatterofdeliberationhowfaritispropertocontinuethefreeimportationofcertainforeigngoodsis,whensomeforeignnationrestrainsbyhighdutiesorprohibitionstheimportationofsomeofourmanufacturesintotheircountry。Revengeinthiscasenaturallydictatesretaliation,andthatweshouldimposethelikedutiesandprohibitionsupontheimportationofsomeoralloftheirmanufacturesintoours。Nations,accordingly,seldomfailtoretaliateinthismanner。TheFrenchhavebeenparticularlyforwardtofavourtheirownmanufacturesbyrestrainingtheimportationofsuchforeigngoodsascouldcomeintocompetitionwiththem。InthisconsistedagreatpartofthepolicyofMr。Colbert,who,notwithstandinghisgreatabilities,seemsinthiscasetohavebeenimposeduponbythesophistryofmerchantsandmanufacturers,whoarealwaysdemandingamonopolyagainsttheircountrymen。ItisatpresenttheopinionofthemostintelligentmeninFrancethathisoperationsofthiskindhavenotbeenbeneficialtohiscountry。Thatminister,bythetariffof1667,imposedveryhighdutiesuponagreatnumberofforeignmanufactures。UponhisrefusingtomoderatetheminfavouroftheDutch,theyin1671prohibitedtheimportationofthewines,brandies,andmanufacturesofFrance。Thewarof1672
seemstohavebeeninpartoccasionedbythiscommercialdispute。
ThepeaceofNimeguenputanendtoitin1678bymoderatingsomeofthosedutiesinfavouroftheDutch,whoinconsequencetookofftheirprohibition。ItwasaboutthesametimethattheFrenchandEnglishbeganmutuallytooppresseachother’sindustrybythelikedutiesandprohibitions,ofwhichtheFrench,however,seemtohavesetthefirstexample。Thespiritofhostilitywhichhassubsistedbetweenthetwonationseversincehashithertohinderedthemfrombeingmoderatedoneitherside。In1697theEnglishprohibitedtheimportationofbonelace,themanufactureofFlanders。Thegovernmentofthatcountry,atthattimeunderthedominionofSpain,prohibitedinreturntheimportationofEnglishwoollens。In1700,theprohibitionofimportingbonelaceintoEnglandwastakenoffuponconditionthattheimportanceofEnglishwoollensintoFlandersshouldbeputonthesamefootingasbefore。
Theremaybegoodpolicyinretaliationsofthiskind,whenthereisaprobabilitythattheywillprocuretherepealofthehighdutiesorprohibitionscomplainedof。Therecoveryofagreatforeignmarketwillgenerallymorethancompensatethetransitoryinconveniencyofpayingdearerduringashorttimeforsomesortsofgoods。Tojudgewhethersuchretaliationsarelikelytoproducesuchaneffectdoesnot,perhaps,belongsomuchtothescienceofalegislator,whosedeliberationsoughttobegovernedbygeneralprincipleswhicharealwaysthesame,astotheskillofthatinsidiousandcraftyanimal,vulgarlycalledastatesmanorpolitician,whosecouncilsaredirectedbythemomentaryfluctuationsofaffairs。Whenthereisnoprobabilitythatanysuchrepealcanbeprocured,itseemsabadmethodofcompensatingtheinjurydonetocertainclassesofourpeopletodoanotherinjuryourselves,notonlytothoseclasses,buttoalmostalltheotherclassesofthem。Whenourneighboursprohibitsomemanufactureofours,wegenerallyprohibit,notonlythesame,forthatalonewouldseldomaffectthemconsiderably,butsomeothermanufactureoftheirs。Thismaynodoubtgiveencouragementtosomeparticularclassofworkmenamongourselves,andbyexcludingsomeoftheirrivals,mayenablethemtoraisetheirpriceinthehomemarket。Thoseworkmen,however,whosufferedbyourneighbours’prohibitionwillnotbebenefitedbyours。Onthecontrary,theyandalmostalltheotherclassesofourcitizenswilltherebybeobligedtopaydearerthanbeforeforcertaingoods。Everysuchlaw,therefore,imposesarealtaxuponthewholecountry,notinfavourofthatparticularclassofworkmenwhowereinjuredbyourneighbours’prohibition,butofsomeotherclass。
Thecaseinwhichitmaysometimesbeamatterofdeliberation,howfar,orinwhatmanner,itispropertorestorethefreeimportationofforeigngoods,afterithasbeenforsometimeinterrupted,is,whenparticularmanufactures,bymeansofhighdutiesorprohibitionsuponallforeigngoodswhichcancomeintocompetitionwiththem,havebeensofarextendedastoemployagreatmultitudeofhands。Humanitymayinthiscaserequirethatthefreedomoftradeshouldberestoredonlybyslowgradations,andwithagooddealofreserveandcircumspection。
Werethosehighdutiesandprohibitionstakenawayallatonce,cheaperforeigngoodsofthesamekindmightbepouredsofastintothehomemarketastodepriveallatoncemanythousandsofourpeopleoftheirordinaryemploymentandmeansofsubsistence。
Thedisorderwhichthiswouldoccasionmightnodoubtbeveryconsiderable。Itwouldinallprobability,however,bemuchlessthaniscommonlyimagined,forthetwofollowingreasons:—
First,allthosemanufactures,ofwhichanypartiscommonlyexportedtootherEuropeancountrieswithoutabounty,couldbeverylittleaffectedbythefreestimportationofforeigngoods。
Suchmanufacturesmustbesoldascheapabroadasanyotherforeigngoodsofthesamequalityandkind,andconsequentlymustbesoldcheaperathome。Theywouldstill,therefore,keeppossessionofthehomemarket,andthoughacapriciousmanoffashionmightsometimespreferforeignwares,merelybecausetheywereforeign,tocheaperandbettergoodsofthesamekindthatweremadeathome,thisfollycould,fromthenatureofthings,extendtosofewthatitcouldmakenosensibleimpressionuponthegeneralemploymentofthepeople。Butagreatpartofallthedifferentbranchesofourwoollenmanufacture,ofourtannedleather,andofourhardware,areannuallyexportedtootherEuropeancountrieswithoutanybounty,andthesearethemanufactureswhichemploythegreatestnumberofhands。Thesilk,perhaps,isthemanufacturewhichwouldsufferthemostbythisfreedomoftrade,andafteritthelinen,thoughthelattermuchlessthantheformer。
Secondly,thoughagreatnumberofpeopleshould,bythusrestoringthefreedomoftrade,bethrownallatonceoutoftheirordinaryemploymentandcommonmethodofsubsistence,itwouldbynomeansfollowthattheywouldtherebybedeprivedeitherofemploymentorsubsistence。Bythereductionofthearmyandnavyattheendofthelatewar,morethanahundredthousandsoldiersandseamen,anumberequaltowhatisemployedinthegreatestmanufactures,wereallatoncethrownoutoftheirordinaryemployment;but,thoughtheynodoubtsufferedsomeinconveniency,theywerenottherebydeprivedofallemploymentandsubsistence。Thegreaterpartoftheseamen,itisprobable,graduallybetookthemselvestothemerchant—serviceastheycouldfindoccasion,andinthemeantimeboththeyandthesoldierswereabsorbedinthegreatmassofthepeople,andemployedinagreatvarietyofoccupations。Notonlynogreatconvulsion,butnosensibledisorderarosefromsogreatachangeinthesituationofmorethanahundredthousandmen,allaccustomedtotheuseofarms,andmanyofthemtorapineandplunder。Thenumberofvagrantswasscarceanywheresensiblyincreasedbyit,eventhewagesoflabourwerenotreducedbyitinanyoccupation,sofarasIhavebeenabletolearn,exceptinthatofseameninthemerchantservice。Butifwecomparetogetherthehabitsofasoldierandofanysortofmanufacturer,weshallfindthatthoseofthelatterdonottendsomuchtodisqualifyhimfrombeingemployedinanewtrade,asthoseoftheformerfrombeingemployedinany。Themanufacturerhasalwaysbeenaccustomedtolookforhissubsistencefromhislabouronly:thesoldiertoexpectitfromhispay。Applicationandindustryhavebeenfamiliartotheone;idlenessanddissipationtotheother。
Butitissurelymucheasiertochangethedirectionofindustryfromonesortoflabourtoanotherthantoturnidlenessanddissipationtoany。Tothegreaterpartofmanufacturesbesides,ithasalreadybeenobserved,thereareothercollateralmanufacturesofsosimilaranaturethataworkmancaneasilytransferhisindustryfromoneofthemtoanother。Thegreaterpartofsuchworkmentooareoccasionallyemployedincountrylabour。Thestockwhichemployedtheminaparticularmanufacturebeforewillstillremaininthecountrytoemployanequalnumberofpeopleinsomeotherway。Thecapitalofthecountryremainingthesame,thedemandforlabourwilllikewisebethesame,orverynearlythesame,thoughitmaybeexertedindifferentplacesandfordifferentoccupations。Soldiersandseamen,indeed,whendischargedfromtheking’sservice,areatlibertytoexerciseanytrade,withinanytownorplaceofGreatBritainorIreland。Letthesamenaturallibertyofexercisingwhatspeciesofindustrytheyplease,berestoredtoallhisMajesty’ssubjects,inthesamemannerastosoldiersandseamen;thatis,breakdowntheexclusiveprivilegesofcorporations,andrepealtheStatuteofApprenticeship,bothwhicharerealencroachmentsuponnaturalliberty,andaddtothesetherepealoftheLawofSettlements,sothatapoorworkman,whenthrownoutofemploymenteitherinonetradeorinoneplace,mayseekforitinanothertradeorinanotherplacewithoutthefeareitherofaprosecutionorofaremoval,andneitherthepublicnortheindividualswillsuffermuchmorefromtheoccasionaldisbandingsomeparticularclassesofmanufacturersthanfromthatofsoldiers。Ourmanufacturershavenodoubtgreatmeritwiththeircountry,buttheycannothavemorethanthosewhodefenditwiththeirblood,nordeservetobetreatedwithmoredelicacy。
Toexpect,indeed,thatthefreedomoftradeshouldeverbeentirelyrestoredinGreatBritainisasabsurdastoexpectthatanOceanaorUtopiashouldeverbeestablishedinit。Notonlytheprejudicesofthepublic,butwhatismuchmoreunconquerable,theprivateinterestsofmanyindividuals,irresistiblyopposeit。Weretheofficersofthearmytoopposewiththesamezealandunanimityanyreductioninthenumbersofforceswithwhichmastermanufacturerssetthemselvesagainsteverylawthatislikelytoincreasethenumberoftheirrivalsinthehomemarket;weretheformertoanimatetheirsoldiersinthesamemannerasthelatterenflametheirworkmentoattackwithviolenceandoutragetheproposersofanysuchregulation,toattempttoreducethearmywouldbeasdangerousasithasnowbecometoattempttodiminishinanyrespectthemonopolywhichourmanufacturershaveobtainedagainstus。Thismonopolyhassomuchincreasedthenumberofsomeparticulartribesofthemthat,likeanovergrownstandingarmy,theyhavebecomeformidabletothegovernment,anduponmanyoccasionsintimidatethelegislature。TheMemberofParliamentwhosupportseveryproposalforstrengtheningthismonopolyissuretoacquirenotonlythereputationofunderstandingtrade,butgreatpopularityandinfluencewithanorderofmenwhosenumbersandwealthrenderthemofgreatimportance。Ifheopposesthem,onthecontrary,andstillmoreifhehasauthorityenoughtobeabletothwartthem,neitherthemostacknowledgedprobity,northehighestrank,northegreatestpublicservicescanprotecthimfromthemostinfamousabuseanddetraction,frompersonalinsults,norsometimesfromrealdanger,arisingfromtheinsolentoutrageoffuriousanddisappointedmonopolists。
Theundertakerofagreatmanufacture,who,bythehomemarketsbeingsuddenlylaidopentothecompetitionofforeigners,shouldbeobligedtoabandonhistrade,wouldnodoubtsufferveryconsiderably。Thatpartofhiscapitalwhichhadusuallybeenemployedinpurchasingmaterialsandinpayinghisworkmenmight,withoutmuchdifficulty,perhaps,findanotheremployment。Butthatpartofitwhichwasfixedinworkhouses,andintheinstrumentsoftrade,couldscarcebedisposedofwithoutconsiderableloss。Theequitableregard,therefore,tohisinterestrequiresthatchangesofthiskindshouldneverbeintroducedsuddenly,butslowly,gradually,andafteraverylongwarning。Thelegislature,wereitpossiblethatitsdeliberationscouldbealwaysdirected,notbytheclamorousimportunityofpartialinterests,butbyanextensiveviewofthegeneralgood,oughtuponthisveryaccount,perhaps,tobeparticularlycarefulneithertoestablishanynewmonopoliesofthiskind,nortoextendfurtherthosewhicharealreadyestablished。Everysuchregulationintroducessomedegreeofrealdisorderintotheconstitutionofthestate,whichitwillbedifficultafterwardstocurewithoutoccasioninganotherdisorder。
Howfaritmaybepropertoimposetaxesupontheimportationofforeigngoods,inordernottopreventtheirimportationbuttoraisearevenueforgovernment,IshallconsiderhereafterwhenIcometotreatoftaxes。Taxesimposedwithaviewtoprevent,oreventodiminishimportation,areevidentlyasdestructiveoftherevenueofthecustomsasofthefreedomoftrade。
CHAPTERIII
OftheextraordinaryRestraintsupontheImportationofGoodsofalmostallkindsfromthoseCountrieswithwhichtheBalanceissupposedtobedisadvantageousPARTI
OftheUnreasonablenessofthoseRestraintsevenuponthePrinciplesoftheCommercialSystemTOlayextraordinaryrestraintsuponthethoseparticularcountrieswithwhichtheimportationofgoodsofalmostallkindsfrombalanceoftradeissupposedtobedisadvantageous,isthesecondexpedientbywhichthecommercialsystemproposestoincreasethequantityofgoldandsilver。ThusinGreatBritain,Silesialawnsmaybeimportedforhomeconsumptionuponpayingcertainduties。ButFrenchcambricsandlawnsareprohibitedtobeimported,exceptintotheportofLondon,theretobewarehousedforexportation。HigherdutiesareimposeduponthewinesofFrancethanuponthoseofPortugal,orindeedofanyothercountry。Bywhatiscalledtheimpost1692,adutyoffive—and—twentypercentoftherateorvaluewaslaiduponallFrenchgoods;whilethegoodsofothernationswere,thegreaterpartofthem,subjectedtomuchlighterduties,seldomexceedingfivepercent。Thewine,brandy,saltandvinegarofFrancewereindeedexcepted;thesecommoditiesbeingsubjectedtootherheavyduties,eitherbyotherlaws,orbyparticularclausesofthesamelaw。In1696,aseconddutyoftwenty—fivepercent,thefirstnothavingbeenthoughtasufficientdiscouragement,wasimposeduponallFrenchgoods,exceptbrandy;togetherwithanewdutyoffive—and—twentypoundsuponthetonofFrenchwine,andanotheroffifteenpoundsuponthetonofFrenchvinegar。Frenchgoodshaveneverbeenomittedinanyofthosegeneralsubsidies,ordutiesoffivepercent,whichhavebeenimposeduponall,orthegreaterpartofthegoodsenumeratedinthebookofrates。Ifwecounttheone—thirdandtwo—thirdsubsidiesasmakingacompletesubsidybetweenthem,therehavebeenfiveofthesegeneralsubsidies;sothatbeforethecommencementofthepresentwarseventy—fivepercentmaybeconsideredasthelowestdutytowhichthegreaterpartofthegoodsofthegrowth,produce,ormanufactureofFrancewereliable。Butuponthegreaterpartofgoods,thosedutiesareequivalenttoaprohibition。TheFrenchintheirturnhave,Ibelieve,treatedourgoodsandmanufacturesjustashardly;thoughIamnotsowellacquaintedwiththeparticularhardshipswhichtheyhaveimposeduponthem。Thosemutualrestraintshaveputanendtoalmostallfaircommercebetweenthetwonations,andsmugglersarenowtheprincipalimporters,eitherofBritishgoodsintoFrance,orofFrenchgoodsintoGreatBritain。TheprincipleswhichIhavebeenexaminingintheforegoingchaptertooktheiroriginfromprivateinterestandthespiritofmonopoly;thosewhichIamgoingtoexamineinthis,fromnationalprejudiceandanimosity。Theyare,accordingly,asmightwellbeexpected,stillmoreunreasonable。
Theyareso,evenupontheprinciplesofthecommercialsystem。
First,thoughitwerecertainthatinthecaseofafreetradebetweenFranceandEngland,forexample,thebalancewouldbeinfavourofFrance,itwouldbynomeansfollowthatsuchatradewouldbedisadvantageoustoEngland,orthatthegeneralbalanceofitswholetradewouldtherebybeturnedmoreagainstit。IfthewinesofFrancearebetterandcheaperthanthoseofPortugal,oritslinensthanthoseofGermany,itwouldbemoreadvantageousforGreatBritaintopurchaseboththewineandtheforeignlinenwhichithadoccasionforofFrancethanofPortugalandGermany。ThoughthevalueoftheannualimportationsfromFrancewouldtherebybegreatlyaugmented,thevalueofthewholeannualimportationswouldbediminished,inproportionastheFrenchgoodsofthesamequalitywerecheaperthanthoseoftheothertwocountries。Thiswouldbethecase,evenuponthesuppositionthatthewholeFrenchgoodsimportedweretobeconsumedinGreatBritain。
But,secondly,agreatpartofthemmightbere—exportedtoothercountries,where,beingsoldwithprofit,theymightbringbackareturnequalinvalue,perhaps,totheprimecostofthewholeFrenchgoodsimported。WhathasfrequentlybeensaidoftheEastIndiatrademightpossiblybetrueoftheFrench;thatthoughthegreaterpartofEastIndiagoodswereboughtwithgoldandsilver,there—exportationofapartofthemtoothercountriesbroughtbackmoregoldandsilvertothatwhichcarriedonthetradethantheprimecostofthewholeamountedto。OneofthemostimportantbranchesoftheDutchtrade,atpresent,consistsinthecarriageofFrenchgoodstootherEuropeancountries。SomepartevenoftheFrenchwinedrankinGreatBritainisclandestinelyimportedfromHollandandZeeland。IftherewaseitherafreetradebetweenFranceandEngland,orifFrenchgoodscouldbeimporteduponpayingonlythesamedutiesasthoseofotherEuropeannations,tobedrawnbackuponexportation,EnglandmighthavesomeshareofatradewhichisfoundsoadvantageoustoHolland。
Thirdly,andlastly,thereisnocertaincriterionbywhichwecandetermineonwhichsidewhatiscalledthebalancebetweenanytwocountrieslies,orwhichofthemexportstothegreatestvalue。Nationalprejudiceandanimosity,promptedalwaysbytheprivateinterestofparticulartraders,aretheprincipleswhichgenerallydirectourjudgmentuponallquestionsconcerningit。
Therearetwocriterions,however,whichhavefrequentlybeenappealedtouponsuchoccasions,thecustomhousebooksandthecourseofexchange。Thecustom—housebooks,Ithink,itisnowgenerallyacknowledged,areaveryuncertaincriterion,onaccountoftheinaccuracyofthevaluationatwhichthegreaterpartofgoodsareratedinthem。Thecourseofexchangeis,perhaps,almostequallyso。
Whentheexchangebetweentwoplaces,suchasLondonandParis,isatpar,itissaidtobeasignthatthedebtsduefromLondontoParisarecompensatedbythoseduefromParistoLondon。Onthecontrary,whenapremiumispaidatLondonforabilluponParis,itissaidtobeasignthatthedebtsduefromLondontoParisarenotcompensatedbythoseduefromParistoLondon,butthatabalanceinmoneymustbesentoutfromthelatterplace;fortherisk,trouble,andexpenseofexportingwhich,thepremiumisbothdemandedandgiven。Buttheordinarystateofdebtandcreditbetweenthosetwocitiesmustnecessarilyberegulated,itissaid,bytheordinarycourseoftheirdealingswithoneanother。Whenneitherofthemimportsfromtheothertoagreateramountthanitexportstothatother,thedebtsandcreditsofeachmaycompensateoneanother。Butwhenoneofthemimportsfromtheothertoagreatervaluethanitexportstothatother,theformernecessarilybecomesindebtedtothelatterinagreatersumthanthelatterbecomesindebtedtoit;thedebtsandcreditsofeachdonotcompensateoneanother,andmoneymustbesentoutfromthatplaceofwhichthedebtsoverbalancethecredits。Theordinarycourseofexchange,therefore,beinganindicationoftheordinarystateofdebtandcreditbetweentwoplaces,mustlikewisebeanindicationoftheordinarycourseoftheirexportsandimports,asthesenecessarilyregulatethatstate。
Butthoughtheordinarycourseofexchangeshouldbeallowedtobeasufficientindicationoftheordinarystateofdebtandcreditbetweenanytwoplaces,itwouldnotfromthencefollowthatthebalanceoftradewasinfavourofthatplacewhichhadtheordinarystateofdebtandcreditinitsfavour。Theordinarystateofdebtandcreditbetweenanytwoplacesisnotalwaysentirelyregulatedbytheordinarycourseoftheirdealingswithoneanother;butisofteninfluencedbythatofthedealingsofeitherwithmanyotherplaces。Ifitisusual,forexample,forthemerchantsofEnglandtopayforthegoodswhichtheybuyofHamburg,Danzig,Riga,etc。,bybillsuponHolland,theordinarystateofdebtandcreditbetweenEnglandandHollandwillnotberegulatedentirelybytheordinarycourseofthedealingsofthosetwocountrieswithoneanother,butwillbeinfluencedbythatofthedealingsofEnglandwiththoseotherplaces。EnglandmaybeobligedtosendouteveryyearmoneytoHolland,thoughitsannualexportstothatcountrymayexceedverymuchtheannualvalueofitsimportsfromthence;andthoughwhatiscalledthebalanceoftrademaybeverymuchinfavourofEngland。
Intheway,besides,inwhichtheparofexchangehashithertobeencomputed,theordinarycourseofexchangecanaffordnosufficientindicationthattheordinarystateofdebtandcreditisinfavourofthatcountrywhichseemstohave,orwhichissupposedtohave,theordinarycourseofexchangeinitsfavour:or,inotherwords,therealexchangemaybe,and,infact,oftenissoverydifferentfromthecomputedone,thatfromthecourseofthelatternocertainconclusioncan,uponmanyoccasions,bedrawnconcerningthatoftheformer。
WhenforasumofmoneypaidinEngland,containing,accordingtothestandardoftheEnglishmint,acertainnumberofouncesofpuresilver,youreceiveabillforasumofmoneytobepaidinFrance,containing,accordingtothestandardoftheFrenchmint,anequalnumberofouncesofpuresilver,exchangeissaidtobeatparbetweenEnglandandFrance。Whenyoupaymore,youaresupposedtogiveapremium,andexchangeissaidtobeagainstEnglandandinfavourofFrance。Whenyoupayless,youaresupposedtogetapremium,andexchangeissaidtobeagainstFranceandinfavourofEngland。
But,first,wecannotalwaysjudgeofthevalueofthecurrentmoneyofdifferentcountriesbythestandardoftheirrespectivemints。Insomeitismore,inothersitislessworn,clipt,andotherwisedegeneratedfromthatstandard。Butthevalueofthecurrentcoinofeverycountry,comparedwiththatofanyothercountry,isinproportionnottothequantityofpuresilverwhichitoughttocontain,buttothatwhichitactuallydoescontain。BeforethereformationofthesilvercoininKingWilliam’stime,exchangebetweenEnglandandHolland,computedintheusualmanneraccordingtothestandardoftheirrespectivemints,wasfive—and—twentypercentagainstEngland。ButthevalueofthecurrentcoinofEngland,aswelearnfromMr。
Lowndes,wasatthattimerathermorethanfive—and—twentypercentbelowitsstandardvalue。Therealexchange,therefore,mayevenatthattimehavebeeninfavourofEngland,notwithstandingthecomputedexchangewassomuchagainstit;asmallernumberofouncesofpuresilveractuallypaidinEnglandmayhavepurchasedabillforagreaternumberofouncesofpuresilvertobepaidinHolland,andthemanwhowassupposedtogivemayinrealityhavegotthepremium。TheFrenchcoinwas,beforethelatereformationoftheEnglishgoldcoin,muchlesswornthantheEnglish,andwasperhapstwoorthreepercentneareritsstandard。IfthecomputedexchangewithFrance,therefore,wasnotmorethantwoorthreepercentagainstEngland,therealexchangemighthavebeeninitsfavour。Sincethereformationofthegoldcoin,theexchangehasbeenconstantlyinfavourofEngland,andagainstFrance。
Secondly,insomecountries,theexpenseofcoinageisdefrayedbythegovernment;inothers,itisdefrayedbytheprivatepeoplewhocarrytheirbulliontothemint,andthegovernmentevenderivessomerevenuefromthecoinage。InEngland,itisdefrayedbythegovernment,andifyoucarryapoundweightofstandardsilvertothemint,yougetbacksixty—twoshillings,containingapoundweightofthelikestandardsilver。InFrance,adutyofeightpercentisdeductedforthecoinage,whichnotonlydefraystheexpenseofit,butaffordsasmallrevenuetothegovernment。InEngland,asthecoinagecostsnothing;thecurrentcoincanneverbemuchmorevaluablethanthequantityofbullionwhichitactuallycontains。
InFrance,theworkmanship,asyoupayforit,addstothevalueinthesamemannerastothatofwroughtplate。AsumofFrenchmoney,therefore,containingacertainweightofpuresilver,ismorevaluablethanasumofEnglishmoneycontaininganequalweightofpuresilver,andmustrequiremorebullion,orothercommodities,topurchaseit。Thoughthecurrentcoinofthetwocountries,therefore,wereequallynearthestandardsoftheirrespectivemints,asumofEnglishmoneycouldnotwellpurchaseasumofFrenchmoneycontaininganequalnumberofouncesofpuresilver,norconsequentlyabilluponFranceforsuchasum。
IfforsuchabillnomoreadditionalmoneywaspaidthanwhatwassufficienttocompensatetheexpenseoftheFrenchcoinage,therealexchangemightbeatparbetweenthetwocountries,theirdebtsandcreditsmightmutuallycompensateoneanother,whilethecomputedexchangewasconsiderablyinfavourofFrance。
Iflessthanthiswaspaid,therealexchangemightbeinfavourofEngland,whilethecomputedwasinfavourofFrance。
Thirdly,andlastly,insomeplaces,asatAmsterdam,Hamburg,Venice,etc。,foreignbillsofexchangearepaidinwhattheycallbankmoney;whileinothers,asatLondon,Lisbon,Antwerp,Leghorn,etc。,theyarepaidinthecommoncurrencyofthecountry。Whatiscalledbankmoneyisalwaysofmorevaluethanthesamenominalsumofcommoncurrency。AthousandguildersintheBankofAmsterdam,forexample,areofmorevaluethanathousandguildersofAmsterdamcurrency。Thedifferencebetweenthemiscalledtheagioofthebank,which,atAmsterdam,isgenerallyaboutfivepercent。Supposingthecurrentmoneyofthetwocountriesequallyneartothestandardoftheirrespectivemints,andthattheonepaysforeignbillsinthiscommoncurrency,whiletheotherpaystheminbankmoney,itisevidentthatthecomputedexchangemaybeinfavourofthatwhichpaysinbankmoney,thoughtherealexchangeshouldbeinfavourofthatwhichpaysincurrentmoney;forthesamereasonthatthecomputedexchangemaybeinfavourofthatwhichpaysinbettermoney,orinmoneynearertoitsownstandard,thoughtherealexchangeshouldbeinfavourofthatwhichpaysinworse。Thecomputedexchange,beforethelatereformationofthegoldcoin,wasgenerallyagainstLondonwithAmsterdam,Hamburg,Venice,and,Ibelieve,withallotherplaceswhichpayinwhatiscalledbankmoney。Itwillbynomeansfollow,however,thattherealexchangewasagainstit。Sincethereformationofthegoldcoin,ithasbeeninfavourofLondonevenwiththoseplaces。ThecomputedexchangehasgenerallybeeninfavourofLondonwithLisbon,Antwerp,Leghorn,and,ifyouexceptFrance,Ibelieve,withmostotherpartsofEuropethatpayincommoncurrency;anditisnotimprobablethattherealexchangewassotoo。
DIGRESSIONCONCERNINGBANKSOFDEPOSIT,PARTICULARLYCONCERNING
THATOFAMSTERDAM
Thecurrencyofagreatstate,suchasFranceorEngland,generallyconsistsalmostentirelyofitsowncoin。Shouldthiscurrency,therefore,beatanytimeworn,clipt,orotherwisedegradedbelowitsstandardvalue,thestatebyareformationofitscoincaneffectuallyre—establishitscurrency。Butthecurrencyofasmallstate,suchasGenoaorHamburg,canseldomconsistaltogetherinitsowncoin,butmustbemadeup,inagreatmeasure,ofthecoinsofalltheneighbouringstateswithwhichitsinhabitantshaveacontinualintercourse。Suchastate,therefore,byreformingitscoin,willnotalwaysbeabletoreformitscurrency。Ifforeignbillsofexchangearepaidinthiscurrency,theuncertainvalueofanysum,ofwhatisinitsownnaturesouncertain,mustrendertheexchangealwaysverymuchagainstsuchastate,itscurrencybeing,inallforeignstates,necessarilyvaluedevenbelowwhatitisworth。
Inordertoremedytheinconveniencetowhichthisdisadvantageousexchangemusthavesubjectedtheirmerchants,suchsmallstates,whentheybegantoattendtotheinterestoftrade,havefrequentlyenacted,thatforeignbillsofexchangeofacertainvalueshouldbepaidnotincommoncurrency,butbyanorderupon,orbyatransferinthebooksofacertainbank,establisheduponthecredit,andundertheprotectionofthestate;thisbankbeingalwaysobligedtopay,ingoodandtruemoney,exactlyaccordingtothestandardofthestate。ThebanksofVenice,Genoa,Amsterdam,Hamburg,andNuremberg,seemtohavebeenalloriginallyestablishedwiththisview,thoughsomeofthemmayhaveafterwardsbeenmadesubservienttootherpurposes。
Themoneyofsuchbanksbeingbetterthanthecommoncurrencyofthecountry,necessarilyboreanagio,whichwasgreaterorsmalleraccordingasthecurrencywassupposedtobemoreorlessdegradedbelowthestandardofthestate。TheagiooftheBankofHamburg,forexample,whichissaidtobecommonlyaboutfourteenpercentisthesupposeddifferencebetweenthegoodstandardmoneyofthestate,andtheclipt,worn,anddiminishedcurrencypouredintoitfromalltheneighbouringstates。
Before1609thegreatquantityofcliptandwornforeigncoin,whichtheextensivetradeofAmsterdambroughtfromallpartsofEurope,reducedthevalueofitscurrencyaboutninepercentbelowthatofgoodmoneyfreshfromthemint。Suchmoneynosoonerappearedthanitwasmelteddownorcarriedaway,asitalwaysisinsuchcircumstances。Themerchants,withplentyofcurrency,couldnotalwaysfindasufficientquantityofgoodmoneytopaytheirbillsofexchange;andthevalueofthosebills,inspiteofseveralregulationswhichweremadetopreventit,becameinagreatmeasureuncertain。
Inordertoremedytheseinconveniences,abankwasestablishedin1609undertheguaranteeofthecity。Thisbankreceivedbothforeigncoin,andthelightandworncoinofthecountryatitsrealintrinsicvalueinthegoodstandardmoneyofthecountry,deductingonlysomuchaswasnecessaryfordefrayingtheexpenseofcoinage,andtheothernecessaryexpenseofmanagement。Forthevaluewhichremained,afterthissmalldeductionwasmade,itgaveacreditinitsbooks。Thiscreditwascalledbankmoney,which,asitrepresentedmoneyexactlyaccordingtothestandardofthemint,wasalwaysofthesamerealvalue,andintrinsicallyworthmorethancurrentmoney。Itwasatthesametimeenacted,thatallbillsdrawnuponornegotiatedatAmsterdamofthevalueofsixhundredguildersandupwardsshouldbepaidinbankmoney,whichatoncetookawayalluncertaintyinthevalueofthosebills。Everymerchant,inconsequenceofthisregulation,wasobligedtokeepanaccountwiththebankinordertopayhisforeignbillsofexchange,whichnecessarilyoccasionedacertaindemandforbankmoney。
Bankmoney,overandaboveitsintrinsicsuperioritytocurrency,andtheadditionalvaluewhichthisdemandnecessarilygivesit,haslikewisesomeotheradvantages。Itissecurefromfire,robbery,andotheraccidents;thecityofAmsterdamisboundforit;itcanbepaidawaybyasimpletransfer,withoutthetroubleofcounting,ortheriskoftransportingitfromoneplacetoanother。Inconsequenceofthosedifferentadvantages,itseemsfromthebeginningtohaveborneagio,anditisgenerallybelievedthatallthemoneyoriginallydepositedinthebankwasallowedtoremainthere,nobodycaringtodemandpaymentofadebtwhichhecouldsellforapremiuminthemarket。Bydemandingpaymentofthebank,theownerofabankcreditwouldlosethispremium。Asashillingfreshfromthemintwillbuynomoregoodsinthemarketthanoneofourcommonwornshillings,sothegoodandtruemoneywhichmightbebroughtfromthecoffersofthebankintothoseofaprivateperson,beingmixedandconfoundedwiththecommoncurrencyofthecountry,wouldbeofnomorevaluethanthatcurrencyfromwhichitcouldnolongerbereadilydistinguished。Whileitremainedinthecoffersofthebank,itssuperioritywasknownandascertained。Whenithadcomeintothoseofaprivateperson,itssuperioritycouldnotwellbeascertainedwithoutmoretroublethanperhapsthedifferencewasworth。Bybeingbroughtfromthecoffersofthebank,besides,itlostalltheotheradvantagesofbankmoney;itssecurity,itseasyandsafetransferability,itsuseinpayingforeignbillsofexchange。Overandaboveallthis,itcouldnotbebroughtfromthosecoffers,asitwillappearbyandby,withoutpreviouslypayingforthekeeping。
Thosedepositsofcoin,orthosedepositswhichthebankwasboundtorestoreincoin,constitutedtheoriginalcapitalofthebank,orthewholevalueofwhatwasrepresentedbywhatiscalledbankmoney。Atpresenttheyaresupposedtoconstitutebutaverysmallpartofit。Inordertofacilitatethetradeinbullion,thebankhasbeenforthesemanyyearsinthepracticeofgivingcreditinitsbooksupondepositsofgoldandsilverbullion。Thiscreditisgenerallyaboutfivepercentbelowthemintpriceofsuchbullion。Thebankgrantsatthesametimewhatiscalledarecipeorreceipt,entitlingthepersonwhomakesthedeposit,orthebearer,totakeoutthebullionagainatanytimewithinsixmonths,uponre—transferringtothebankaquantityofbankmoneyequaltothatforwhichcredithadbeengiveninitsbookswhenthedepositwasmade,anduponpayingone—fourthpercentforthekeeping,ifthedepositwasinsilver;andone—halfpercentifitwasingold;butatthesametimedeclaringthat,indefaultofsuchpayment,andupontheexpirationofthisterm,thedepositshouldbelongtothebankatthepriceatwhichithadbeenreceived,orforwhichcredithadbeengiveninthetransferbooks。Whatisthuspaidforthekeepingofthedepositmaybeconsideredasasortofwarehouserent;andwhythiswarehouserentshouldbesomuchdearerforgoldthanforsilver,severaldifferentreasonshavebeenassigned。Thefinenessofgold,ithasbeensaid,ismoredifficulttobeascertainedthanthatofsilver。Fraudsaremoreeasilypractised,andoccasionagreaterlossinthemorepreciousmetal。Silver,besides,beingthestandardmetal,thestate,ithasbeensaid,wishestoencouragemorethemakingofdepositsofsilverthanthoseofgold。
Depositsofbullionaremostcommonlymadewhenthepriceissomewhatlowerthanordinary;andtheyaretakenoutagainwhenithappenstorise。InHollandthemarketpriceofbullionisgenerallyabovethemintprice,forthesamereasonthatitwassoinEnglandbeforethelatereformationofthegoldcoin。Thedifferenceissaidtobecommonlyfromaboutsixtosixteenstiversuponthemark,oreightouncesofsilverofelevenpartsfineandonepartalloy。Thebankprice,orthecreditwhichthebankgivesfordepositsofsuchsilver(whenmadeinforeigncoin,ofwhichthefinenessiswellknownandascertained,suchasMexicodollars),istwenty—twoguildersthemark;themintpriceisabouttwenty—threeguilders,andthemarketpriceisfromtwenty—threeguilderssixtotwenty—threeguilderssixteenstivers,orfromtwotothreepercentabovethemintprice。*Theproportionsbetweenthebankprice,themintprice,andthemarketpriceofgoldbullionarenearlythesame。Apersoncangenerallysellhisreceiptforthedifferencebetweenthemintpriceofbullionandthemarketprice。Areceiptforbullionisalmostalwaysworthsomething,anditveryseldomhappens,therefore,thatanybodysuffershisreceipttoexpire,orallowshisbulliontofalltothebankatthepriceatwhichithadbeenreceived,eitherbynottakingitoutbeforetheendofthesixmonths,orbyneglectingtopaytheone—fourthorone—halfpercentinordertoobtainanewreceiptforanothersixmonths。