ESSAY III.

OF MONEY.

MONEY is not, properly speaking, one of the subjects of commerce, but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is none of the wheels of trade: it is the oil which renders the motion of the wheels more smooth and easy. If we consider any one kingdom by itself, it is evident that the greater or less plenty of money is of no consequence, since the prices of commodities are always proportioned to the plenty of money, and a crown in Harry VII.'s time served the same purpose as a pound does at present. It is only the public which draws any advantage from the greater plenty of money, and that only in its wars and negotiations with foreign states. And this is the reason why all rich and trading countries, from Carthage to Great Britain and Holland, have employed mercenary troops, which they hired from their poorer neighbors. Were they to make use of their native subjects, they would find less advantage from their superior riches, and from their great plenty of gold and silver, since the pay of all their servants must rise in proportion to the public opulence. Our small army of 20,000 men is maintained at as great

expense as a French army twice as numerous. The English fleet, during the late war, required as much money to support it as all the Roman legions, which kept the whole world in subjection, during the time of the emperors.*

The great number of people, and their greater industry, are serviceable in all cases, at home and abroad, in private and in public. But the greater plenty of money is very limited in its use, and may even sometimes be a loss to a nation in its commerce with foreigners.

There seems to be a happy concurrence of causes in human affairs, which checks the growth of trade and riches, and hinders them from being confined entirely to one people, as might naturally at first be dreaded from the advantages of an established commerce. Where one nation has gotten the start of another in trade, it is very difficult for the latter to regain the ground it has lost, because of the superior industry and skill of the former, and the greater stocks of which its merchants.

* A private soldier in the Roman infantry had a denarius a day, somewhat less than eighteen pence. The Roman emperors had commonly 25 legions in pay, which, allowing 5,000 men to a legion, makes 125,000, Tacit. Ann. lib. iv. It is true there were also auxiliaries to the legions; but their numbers are uncertain as well as their pay. To consider only the legionaries, the pay of the private men could not exceed 1,600,000 pounds. Now, the parliament in the last war commonly allowed for the fleet 2,500,000. We have therefore 900,000 over for the officers and other expenses of the Roman legions. There seem to have been but few officers in the Roman armies in comparison of what are employed in all our modern troops, except some Swiss corps. And these officers had very small pay: a centurion, for instance, only double a common soldier. And as the soldiers from their pay (Tacit. Ann. lib. i.) bought their own clothes, arms, tents, and baggage; this must also diminish considerably the other charges of the army. So little expensive was that mighty government, and so easy was its yoke over the world! And, indeed, this is the more natural conclusion from the foregoing calculations. For money, after the conquest of Egypt, seems to have been nearly in as great plenty at Rome as it is at present in the richest of the European kingdoms.

are possessed, and which enable them to trade on so much smaller profits. But these advantages are compensated, in some measure, by the low price of labor in every nation which has not an extensive commerce, and does not much abound in gold and silver. Manufactures, therefore, gradually shift their places, leaving those countries and provinces which they have already enriched, and flying to others, whither they are allured by the cheapness of provisions and labor, till they have enriched these also, and are again banished by the same causes. And in general we may observe, that the dearness of every thing, from plenty of money, is a disadvantage which attends an established commerce, and sets bounds to it in every country, by enabling the poorer states to undersell the richer in all foreign markets.

This has made me entertain a doubt concerning the benefit of banks and paper-credit, which are so generally esteemed advantageous to every nation. That provisions and labor should become dear by the increase of trade and money, is, in many respects, an inconvenience e; but an inconvenience that is unavoidable, and the effect of that public wealth and prosperity which are the end of all our wishes. It is compensated by the advantages which we reap from the possession of these precious metals, and the weight which they give the nation in all foreign wars and negotiations. But there appears no reason for increasing that inconvenience by a counterfeit money, which foreigners will not accept of in any payment, and which any great disorder in the state will reduce to nothing. There are, it is true, many people in every rich state, who, having large sums of money, would prefer paper, with good security; as being of more easy transport and more safe custody. If the pub

lic provide not a bank, private bankers will take advantage of this circumstance, as the goldsmiths formerly did in London, or as the bankers do at present in Dublin and therefore it is better, it may be thought, that a public company should enjoy the benefit of that papercredit, which always will have place in every opulent kingdom. But to endeavor artificially to increase such a credit, can never be the interest of any trading nation; but must lay them under disadvantages, by increasing money beyond its natural proportion to labor and commodities, and thereby heightening their price to the merchant and manufacturer. And in this view, it must be allowed, that no bank could be more advantageous than such a one as locked up all the money it received, and never augmented the circulating coin, as is usual by returning part of its treasure into commerce. A public bank, by this expedient, might cut off much of the dealings of private bankers and money-jobbers: and though the state bore the charge of salaries to the directors and tellers of this bank, (for, according to the preceding supposition, it would have no profit from its dealings,) the national advantage, resulting from the low price of labor and the destruction of paper-credit, would be a sufficient compensation. Not to mention, that so large a sum, lying ready at command, would be a convenience in times of great public danger and distress; and what part of it was used might be replaced at leisure, when peace and tranquillity was restored to the nation.

But of this subject of paper-credit we shall treat more largely hereafter. And I shall finish this Essay on Money, by proposing and explaining two observa

*This is the case with the bank of Amsterdam.

tions, which may perhaps serve to employ the thoughts of our speculative politicians.*

It was a shrewd observation of Anacharsis† the Scythian, who had never seen money in his own country, that gold and silver seemed to him of no use to the Greeks, but to assist them in numeration and arithmetic. It is indeed evident, that money is nothing but the representation of labor and commodities, and serves only as a method of rating or estimating them. Where coin is in greater plenty; as a greater quantity of it is required to represent the same quantity of goods; it can have no effect, either good or bad, taking a nation within itself; any more than it would make an alteration on a merchant's books, if, instead of the Arabian method of notation, which requires few characters, he should make use of the Roman, which requires a great many. Nay, the greater quantity of money, like the Roman characters, is rather inconvenient, and requires greater trouble both to keep and transport it. But, notwithstanding this conclusion, which must be allowed just, it is certain, that, since the discovery of the mines in America, industry has increased in all the nations of Europe, except in the possessors of those mines; and this may justly be ascribed, amongst other reasons, to the increase of gold and silver. Accordingly we find, that, in every kingdom, into which money begins to flow in greater abundance than formerly, every thing takes a new face: labor and industry gain life; the merchant becomes more enterprising, the manufacturer more diligent and skilful, and

* For to these only I all along address myself. It is enough that I submit to the ridicule sometimes in this age attached to the character of a philosopher, without adding to it that which belongs to a projector. EDITIONS F, G, H, N.

† Plut. Quomodo quis suos profectus in virtute sentire possit.