in money from a considerable part of his subjects; and if he will impose on them any burdens, he must take payment in commodities, with which alone they abound; a method attended with such great and obvious inconveniences, that they need not here be insisted on. All the money he can pretend to raise must be from his principal cities, where alone it circulates; and these, it is evident, cannot afford him so much as the whole state could, did gold and silver circulate throughout the whole. But besides this obvious diminution of the revenue, there is another cause of the poverty of the public in such a situation. Not only the sovereign receives less money, but the same money goes not so far as in times of industry and general commerce. Every thing is dearer where the gold and silver are supposed equal; and that because fewer commodities. come to market, and the whole coin bears a higher proportion to what is to be purchased by it; whence alone the prices of every thing are fixed and determined.

Here then we may learn the fallacy of the remark, often to be met with in historians, and even in common conversation, that any particular state is weak, though fertile, populous, and well cultivated, merely because it wants money. It appears, that the want of money can never injure any state within itself; for men and commodities are the real strength of any community. It is the simple manner of living which here hurts the public, by confining the gold and silver to few hands, and preventing its universal diffusion and circulation. On the contrary, industry and refinements of all kinds incorporate it with the whole state, however small its quantity may be they digest it into every vein, so to speak, and make it enter into every transaction and contract. No hand is entirely empty of it. And as the prices of

every thing fall by that means, the sovereign has a double advantage: he may draw money by his taxes from every part of the state; and what he receives goes further in every purchase and payment.

We may infer, from a comparison of prices, that money is not more plentiful in China than it was in Europe three centuries ago. But what immense power is that empire possessed of, if we may judge by the civil and military establishment maintained by it! Polybius tells us, that provisions were so cheap in Italy during his time, that in some places the stated price for a meal at the inns was a semis a head, little more than a farthing! Yet the Roman power had even then subdued the whole known world. About a century before that period, the Carthaginian ambassador said, by way of raillery, that no people lived more sociably amongst themselves than the Romans; for that, in every entertainment, which, as foreign ministers, they received, they still observed the same plate at every table. absolute quantity of the precious metals is a matter of great indifference. There are only two circumstances of any importance, namely, their gradual increase, and their thorough concoction and circulation through the state; and the influence of both these circumstances has here been explained.

The

In the following Essay we shall see an instance of a like fallacy as that above mentioned; where a collateral effect is taken for a cause, and where a consequence is ascribed to the plenty of money, though it be really owing to a change in the manners and customs of the people.

* Lib. ii. cap. 15.

† Plin. lib. xxxiii. cap. 11.

ESSAY IV.

OF INTEREST.

NOTHING is esteemed a more certain sign of the flourishing condition of any nation than the lowness of interest and with reason, though I believe the cause is somewhat different from what is commonly apprehended. Lowness of interest is generally ascribed to plenty of money. But money, however plentiful, has no other effect, if fixed, than to raise the price of labor. Silver is more common than gold, and therefore you receive a greater quantity of it for the same commodities. But do you pay less interest for it? Interest in Batavia and Jamaica is at 10 per cent., in Portugal at 6, though these places, as we may learn from the prices of every thing, abound more in gold and silver than either London or Amsterdam.

Were all the gold in England annihilated at once, and one and twenty shillings substituted in the place of every guinea, would money be more plentiful, or interest lower? No, surely: we should only use silver, instead of gold. Were gold rendered as common as silver, and silver as common as copper, would money be more plentiful, or interest lower? We may assuredly give the same answer. Our shillings would then be yellow,

eas.

and our halfpence white; and we should have no guinNo other difference would ever be observed; no alteration on commerce, manufactures, navigation, or interest; unless we imagine that the color of the metal is of any consequence.

Now, what is so visible in these greater variations of scarcity or abundance in the precious metals, must hold in all inferior changes. If the multiplying of gold and silver fifteen times makes no difference, much less can the doubling or tripling them. All augmentation has no other effect than to heighten the price of labor and commodities; and even this variation is little more than that of a name. In the progress towards these changes, the augmentation may have some influence, by exciting industry; but after the prices are settled, suitably to the new abundance of gold and silver, it has no manner of influence.

An effect always holds proportion with its cause. Prices have risen near four times since the discovery of the Indies; and it is probable gold and silver have multiplied much more: but interest has not fallen much above half. The rate of interest, therefore, is not derived from the quantity of the precious metals.

Money having chiefly a fictitious value, the greater or less plenty of it is of no consequence, if we consider a nation within itself; and the quantity of specie, when once fixed, though ever so large, has no other effect than to oblige every one to tell out a greater number of those shining bits of metal for clothes, furniture, or equipage, without increasing any one convenience of life. If a man borrow money to build a house, he then carries home a greater load; because the stone, timber, lead, glass, &c. with the labor of the masons and carpenters, are represented by a greater quantity of gold and

silver. But as these metals are considered chiefly as representations, there can no alteration arise from their bulk or quantity, their weight or color, either upon their real value or their interest. The same interest, in all cases, bears the same proportion to the sum. And if you lent me so much labor and so many commodities, by receiving five per cent. you always receive proportional labor and commodities, however represented, whether by yellow or white coin, whether by a pound or an ounce. It is in vain, therefore, to look for the cause of the fall or rise of interest in the greater or less quantity of gold and silver, which is fixed in any nation.

High interest arises from three circumstances: a great demand for borrowing, little riches to supply that demand, and great profits arising from commerce: and the circumstances are a clear proof of the small advance of commerce and industry, not of the scarcity of gold and silver. Low interest, on the other hand, proceeds from the three opposite circumstances: a small demand for borrowing; great riches to supply that demand; and small profits arising from commerce and these circumstances are all connected together, and proceed from the increase of industry and commerce, not of gold and silver. We shall endeavor to prove these points; and shall begin with the causes and the effects of a great or small demand for borrowing.

When a people have emerged ever so little from a savage state, and their numbers have increased beyond the original multitude, there must immediately arise an inequality of property; and while some possess large tracts of land, others are confined within narrow limits, and some are entirely without landed property. Those who possess more land than they can labor, employ those who possess none, and agree to receive a deter