Chapter XVIII: Part III: Of the variations in the Proportion between the respective (2)

In 1688 was granted the parliamentary bounty upon the exportation of corn.
The country gentlemen, who then composed a still greater proportion of the
legislature than they do at present, had felt that the money price of corn
was falling. The bounty was an expedient to raise it artificially to the
high price at which it had frequently been sold in the times of Charles I.
and II. It was to take place, therefore, till wheat was so high as
fortyeight shillings the quarter; that is, twenty shillings, or 5-7ths
dearer than Mr King had, in that very year, estimated the grower’s price
to be in times of moderate plenty. If his calculations deserve any part of
the reputation which they have obtained very universally, eight-and-forty
shillings the quarter was a price which, without some such expedient as
the bounty, could not at that time be expected, except in years of
extraordinary scarcity. But the government of King William was not then
fully settled. It was in no condition to refuse anything to the country
gentlemen, from whom it was, at that very time, soliciting the first
establishment of the annual land-tax.

The value of silver, therefore, in proportion to that of corn, had
probably risen somewhat before the end of the last century; and it seems
to have continued to do so during the course of the greater part of the
present, though the necessary operation of the bounty must have hindered
that rise from being so sensible as it otherwise would have been in the
actual state of tillage.

In plentiful years, the bounty, by occasioning an extraordinary
exportation, necessarily raises the price of corn above what it otherwise
would be in those years. To encourage tillage, by keeping up the price of
corn, even in the most plentiful years, was the avowed end of the
institution.

In years of great scarcity, indeed, the bounty has generally been
suspended. It must, however, have had some effect upon the prices of many
of those years. By the extraordinary exportation which it occasions in
years of plenty, it must frequently hinder the plenty of one year from
compensating the scarcity of another.

Both in years of plenty and in years of scarcity, therefore, the bounty
raises the price of corn above what it naturally would be in the actual
state of tillage. If during the sixty-four first years of the present
century, therefore, the average price has been lower than during the
sixty-four last years of the last century, it must, in the same state of
tillage, have been much more so, had it not been for this operation of the
bounty.

But, without the bounty, it may be said the state of tillage would not
have been the same. What may have been the effects of this institution
upon the agriculture of the country, I shall endeavour to explain
hereafter, when I come to treat particularly of bounties. I shall only
observe at present, that this rise in the value of silver, in proportion
to that of corn, has not been peculiar to England. It has been observed to
have taken place in France during the same period, and nearly in the same
proportion, too, by three very faithful, diligent, and laborious
collectors of the prices of corn, Mr Dupré de St Maur, Mr Messance, and
the author of the Essay on the Police of Grain. But in France, till 1764,
the exportation of grain was by law prohibited; and it is somewhat
difficult to suppose, that nearly the same diminution of price which took
place in one country, notwithstanding this prohibition, should, in
another, be owing to the extraordinary encouragement given to exportation.

It would be more proper, perhaps, to consider this variation in the
average money price of corn as the effect rather of some gradual rise in
the real value of silver in the European market, than of any fall in the
real average value of corn. Corn, it has already been observed, is, at
distant periods of time, a more accurate measure of value than either
silver or, perhaps, any other commodity. When, after the discovery of the
abundant mines of America, corn rose to three and four times its former
money price, this change was universally ascribed, not to any rise in the
real value of corn, but to a fall in the real value of silver. If, during
the sixty-four first years of the present century, therefore, the average
money price of corn has fallen somewhat below what it had been during the
greater part of the last century, we should, in the same manner, impute
this change, not to any fall in the real value of corn, but to some rise
in the real value of silver in the European market.

The high price of corn during these ten or twelve years past, indeed, has
occasioned a suspicion that the real value of silver still continues to
fall in the European market. This high price of corn, however, seems
evidently to have been the effect of the extraordinary unfavourableness of
the seasons, and ought, therefore, to be regarded, not as a permanent, but
as a transitory and occasional event. The seasons, for these ten or twelve
years past, have been unfavourable through the greater part of Europe; and
the disorders of Poland have very much increased the scarcity in all those
countries, which, in dear years, used to be supplied from that market. So
long a course of bad seasons, though not a very common event, is by no
means a singular one; and whoever has inquired much into the history of
the prices of corn in former times, will be at no loss to recollect
several other examples of the same kind. Ten years of extraordinary
scarcity, besides, are not more wonderful than ten years of extraordinary
plenty. The low price of corn, from 1741 to 1750, both inclusive, may very
well be set in opposition to its high price during these last eight or ten
years. From 1741 to 1750, the average price of the quarter of nine bushels
of the best wheat, at Windsor market, it appears from the accounts of Eton
college, was only £ 1:13:9 ⅘, which is nearly 6s.3d. below the average
price of the sixty-four first years of the present century. The average
price of the quarter of eight bushels of middle wheat comes out, according
to this account, to have been, during these ten years, only £ 1:6:8.

Between 1741 and 1750, however, the bounty must have hindered the price of
corn from falling so low in the home market as it naturally would have
done. During these ten years, the quantity of all sorts of grain exported,
it appears from the custom-house books, amounted to no less than 8,029,156
quarters, one bushel. The bounty paid for this amounted to £
1,514,962:17:4 ½. In 1749, accordingly, Mr Pelham, at that time prime
minister, observed to the house of commons, that, for the three years
preceding, a very extraordinary sum had been paid as bounty for the
exportation of corn. He had good reason to make this observation, and in
the following year he might have had still better. In that single year,
the bounty paid amounted to no less than £ 324,176:10:6. {See Tracts on
the Corn Trade, Tract 3,} It is unnecessary to observe how much this
forced exportation must have raised the price of corn above what it
otherwise would have been in the home market.

At the end of the accounts annexed to this chapter the reader will find
the particular account of those ten years separated from the rest. He will
find there, too, the particular account of the preceding ten years, of
which the average is likewise below, though not so much below, the general
average of the sixty-four first years of the century. The year 1740,
however, was a year of extraordinary scarcity. These twenty years
preceding 1750 may very well be set in opposition to the twenty preceding
1770. As the former were a good deal below the general average of the
century, notwithstanding the intervention of one or two dear years; so the
latter have been a good deal above it, notwithstanding the intervention of
one or two cheap ones, of 1759, for example. If the former have not been
as much below the general average as the latter have been above it, we
ought probably to impute it to the bounty. The change has evidently been
too sudden to be ascribed to any change in the value of silver, which is
always slow and gradual. The suddenness of the effect can be accounted for
only by a cause which can operate suddenly, the accidental variations of
the seasons.

The money price of labour in Great Britain has, indeed, risen during the
course of the present century. This, however, seems to be the effect, not
so much of any diminution in the value of silver in the European market,
as of an increase in the demand for labour in Great Britain, arising from
the great, and almost universal prosperity of the country. In France, a
country not altogether so prosperous, the money price of labour has, since
the middle of the last century, been observed to sink gradually with the
average money price of corn. Both in the last century and in the present,
the day wages of common labour are there said to have been pretty
uniformly about the twentieth part of the average price of the septier of
wheat; a measure which contains a little more than four Winchester
bushels. In Great Britain, the real recompence of labour, it has already
been shewn, the real quantities of the necessaries and conveniencies of
life which are given to the labourer, has increased considerably during
the course of the present century. The rise in its money price seems to
have been the effect, not of any diminution of the value of silver in the
general market of Europe, but of a rise in the real price of labour, in
the particular market of Great Britain, owing to the peculiarly happy
circumstances of the country.

For some time after the first discovery of America, silver would continue
to sell at its former, or not much below its former price. The profits of
mining would for some time be very great, and much above their natural
rate. Those who imported that metal into Europe, however, would soon find
that the whole annual importation could not be disposed of at this high
price. Silver would gradually exchange for a smaller and a smaller
quantity of goods. Its price would sink gradually lower and lower, till it
fell to its natural price; or to what was just sufficient to pay,
according to their natural rates, the wages of the labour, the profits of
the stock, and the rent of the land, which must be paid in order to bring
it from the mine to the market. In the greater part of the silver mines of
Peru, the tax of the king of Spain, amounting to a tenth of the gross
produce, eats up, it has already been observed, the whole rent of the
land. This tax was originally a half; it soon afterwards fell to a third,
then to a fifth, and at last to a tenth, at which late it still continues.
In the greater part of the silver mines of Peru, this, it seems, is all
that remains, after replacing the stock of the undertaker of the work,
together with its ordinary profits; and it seems to be universally
acknowledged that these profits, which were once very high, are now as low
as they can well be, consistently with carrying on the works.

The tax of the king of Spain was reduced to a fifth of the registered
silver in 1504 {Solorzano, vol, ii.}, one-and-forty years before 1545, the
date of the discovery of the mines of Potosi. In the course of ninety
years, or before 1636, these mines, the most fertile in all America, had
time sufficient to produce their full effect, or to reduce the value of
silver in the European market as low as it could well fall, while it
continued to pay this tax to the king of Spain. Ninety years is time
sufficient to reduce any commodity, of which there is no monopoly, to its
natural price, or to the lowest price at which, while it pays a particular
tax, it can continue to be sold for any considerable time together.

The price of silver in the European market might, perhaps, have fallen
still lower, and it might have become necessary either to reduce the tax
upon it, not only to one-tenth, as in 1736, but to one twentieth, in the
same manner as that upon gold, or to give up working the greater part of
the American mines which are now wrought. The gradual increase of the
demand for silver, or the gradual enlargement of the market for the
produce of the silver mines of America, is probably the cause which has
prevented this from happening, and which has not only kept up the value of
silver in the European market, but has perhaps even raised it somewhat
higher than it was about the middle of the last century.

Since the first discovery of America, the market for the produce of its
silver mines has been growing gradually more and more extensive.

First, the market of Europe has become gradually more and more extensive.
Since the discovery of America, the greater part of Europe has been much
improved. England, Holland, France, and Germany; even Sweden, Denmark, and
Russia, have all advanced considerably, both in agriculture and in
manufactures. Italy seems not to have gone backwards. The fall of Italy
preceded the conquest of Peru. Since that time it seems rather to have
recovered a little. Spain and Portugal, indeed, are supposed to have gone
backwards. Portugal, however, is but a very small part of Europe, and the
declension of Spain is not, perhaps, so great as is commonly imagined. In
the beginning of the sixteenth century, Spain was a very poor country,
even in comparison with France, which has been so much improved since that
time. It was the well known remark of the emperor Charles V. who had
travelled so frequently through both countries, that every thing abounded
in France, but that every thing was wanting in Spain. The increasing
produce of the agriculture and manufactures of Europe must necessarily
have required a gradual increase in the quantity of silver coin to
circulate it; and the increasing number of wealthy individuals must have
required the like increase in the quantity of their plate and other
ornaments of silver.

Secondly, America is itself a new market, for the produce of its own
silver mines; and as its advances in agriculture, industry, and
population, are much more rapid than those of the most thriving countries
in Europe, its demand must increase much more rapidly. The English
colonies are altogether a new market, which, partly for coin, and partly
for plate, requires a continual augmenting supply of silver through a
great continent where there never was any demand before. The greater part,
too, of the Spanish and Portuguese colonies, are altogether new markets.
New Granada, the Yucatan, Paraguay, and the Brazils, were, before
discovered by the Europeans, inhabited by savage nations, who had neither
arts nor agriculture. A considerable degree of both has now been
introduced into all of them. Even Mexico and Peru, though they cannot be
considered as altogether new markets, are certainly much more extensive
ones than they ever were before. After all the wonderful tales which have
been published concerning the splendid state of those countries in ancient
times, whoever reads, with any degree of sober judgment, the history of
their first discovery and conquest, will evidently discern that, in arts,
agriculture, and commerce, their inhabitants were much more ignorant than
the Tartars of the Ukraine are at present. Even the Peruvians, the more
civilized nation of the two, though they made use of gold and silver as
ornaments, had no coined money of any kind. Their whole commerce was
carried on by barter, and there was accordingly scarce any division of
labour among them. Those who cultivated the ground, were obliged to build
their own houses, to make their own household furniture, their own
clothes, shoes, and instruments of agriculture. The few artificers among
them are said to have been all maintained by the sovereign, the nobles,
and the priests, and were probably their servants or slaves. All the
ancient arts of Mexico and Peru have never furnished one single
manufacture to Europe. The Spanish armies, though they scarce ever
exceeded five hundred men, and frequently did not amount to half that
number, found almost everywhere great difficulty in procuring subsistence.
The famines which they are said to have occasioned almost wherever they
went, in countries, too, which at the same time are represented as very
populous and well cultivated, sufficiently demonstrate that the story of
this populousness and high cultivation is in a great measure fabulous. The
Spanish colonies are under a government in many respects less favourable
to agriculture, improvement, and population, than that of the English
colonies. They seem, however, to be advancing in all those much more
rapidly than any country in Europe. In a fertile soil and happy climate,
the great abundance and cheapness of land, a circumstance common to all
new colonies, is, it seems, so great an advantage, as to compensate many
defects in civil government. Frezier, who visited Peru in 1713, represents
Lima as containing between twenty-five and twenty-eight thousand
inhabitants. Ulloa, who resided in the same country between 1740 and 1746,
represents it as containing more than fifty thousand. The difference in
their accounts of the populousness of several other principal towns of
Chili and Peru is nearly the same; and as there seems to be no reason to
doubt of the good information of either, it marks an increase which is
scarce inferior to that of the English colonies. America, therefore, is a
new market for the produce of its own silver mines, of which the demand
must increase much more rapidly than that of the most thriving country in
Europe.

Thirdly, the East Indies is another market for the produce of the silver
mines of America, and a market which, from the time of the first discovery
of those mines, has been continually taking off a greater and a greater
quantity of silver. Since that time, the direct trade between America and
the East Indies, which is carried on by means of the Acapulco ships, has
been continually augmenting, and the indirect intercourse by the way of
Europe has been augmenting in a still greater proportion. During the
sixteenth century, the Portuguese were the only European nation who
carried on any regular trade to the East Indies. In the last years of that
century, the Dutch began to encroach upon this monopoly, and in a few
years expelled them from their principal settlements in India. During the
greater part of the last century, those two nations divided the most
considerable part of the East India trade between them; the trade of the
Dutch continually augmenting in a still greater proportion than that of
the Portuguese declined. The English and French carried on some trade with
India in the last century, but it has been greatly augmented in the course
of the present. The East India trade of the Swedes and Danes began in the
course of the present century. Even the Muscovites now trade regularly
with China, by a sort of caravans which go over land through Siberia and
Tartary to Pekin. The East India trade of all these nations, if we except
that of the French, which the last war had well nigh annihilated, has been
almost continually augmenting. The increasing consumptions of East India
goods in Europe is, it seems, so great, as to afford a gradual increase of
employment to them all. Tea, for example, was a drug very little used in
Europe, before the middle of the last century. At present, the value of
the tea annually imported by the English East India company, for the use
of their own countrymen, amounts to more than a million and a half a year;
and even this is not enough; a great deal more being constantly smuggled
into the country from the ports of Holland, from Gottenburgh in Sweden,
and from the coast of France, too, as long as the French East India
company was in prosperity. The consumption of the porcelain of China, of
the spiceries of the Moluccas, of the piece goods of Bengal, and of
innumerable other articles, has increased very nearly in a like
proportion. The tonnage, accordingly, of all the European shipping
employed in the East India trade, at any one time during the last century,
was not, perhaps, much greater than that of the English East India company
before the late reduction of their shipping.

But in the East Indies, particularly in China and Indostan, the value of
the precious metals, when the Europeans first began to trade to those
countries, was much higher than in Europe; and it still continues to be
so. In rice countries, which generally yield two, sometimes three crops in
the year, each of them more plentiful than any common crop of corn, the
abundance of food must be much greater than in any corn country of equal
extent. Such countries are accordingly much more populous. In them, too,
the rich, having a greater superabundance of food to dispose of beyond
what they themselves can consume, have the means of purchasing a much
greater quantity of the labour of other people. The retinue of a grandee
in China or Indostan accordingly is, by all accounts, much more numerous
and splendid than that of the richest subjects in Europe. The same
superabundance of food, of which they have the disposal, enables them to
give a greater quantity of it for all those singular and rare productions
which nature furnishes but in very small quantities; such as the precious
metals and the precious stones, the great objects of the competition of
the rich. Though the mines, therefore, which supplied the Indian market,
had been as abundant as those which supplied the European, such
commodities would naturally exchange for a greater quantity of food in
India than in Europe. But the mines which supplied the Indian market with
the precious metals seem to have been a good deal less abundant, and those
which supplied it with the precious stones a good deal more so, than the
mines which supplied the European. The precious metals, therefore, would
naturally exchange in India for a somewhat greater quantity of the
precious stones, and for a much greater quantity of food than in Europe.
The money price of diamonds, the greatest of all superfluities, would be
somewhat lower, and that of food, the first of all necessaries, a great
deal lower in the one country than in the other. But the real price of
labour, the real quantity of the necessaries of life which is given to the
labourer, it has already been observed, is lower both in China and
Indostan, the two great markets of India, than it is through the greater
part of Europe. The wages of the labourer will there purchase a smaller
quantity of food: and as the money price of food is much lower in India
than in Europe, the money price of labour is there lower upon a double
account; upon account both of the small quantity of food which it will
purchase, and of the low price of that food. But in countries of equal art
and industry, the money price of the greater part of manufactures will be
in proportion to the money price of labour; and in manufacturing art and
industry, China and Indostan, though inferior, seem not to be much
inferior to any part of Europe. The money price of the greater part of
manufactures, therefore, will naturally be much lower in those great
empires than it is anywhere in Europe. Through the greater part of Europe,
too, the expense of land-carriage increases very much both the real and
nominal price of most manufactures. It costs more labour, and therefore
more money, to bring first the materials, and afterwards the complete
manufacture to market. In China and Indostan, the extent and variety of
inland navigations save the greater part of this labour, and consequently
of this money, and thereby reduce still lower both the real and the
nominal price of the greater part of their manufactures. Upon all these
accounts, the precious metals are a commodity which it always has been,
and still continues to be, extremely advantageous to carry from Europe to
India. There is scarce any commodity which brings a better price there; or
which, in proportion to the quantity of labour and commodities which it
costs in Europe, will purchase or command a greater quantity of labour and
commodities in India. It is more advantageous, too, to carry silver
thither than gold; because in China, and the greater part of the other
markets of India, the proportion between fine silver and fine gold is but
as ten, or at most as twelve to one; whereas in Europe it is as fourteen
or fifteen to one. In China, and the greater part of the other markets of
India, ten, or at most twelve ounces of silver, will purchase an ounce of
gold; in Europe, it requires from fourteen to fifteen ounces. In the
cargoes, therefore, of the greater part of European ships which sail to
India, silver has generally been one of the most valuable articles. It is
the most valuable article in the Acapulco ships which sail to Manilla. The
silver of the new continent seems, in this manner, to be one of the
principal commodities by which the commerce between the two extremities of
the old one is carried on; and it is by means of it, in a great measure,
that those distant parts of the world are connected with one another.

In order to supply so very widely extended a market, the quantity of
silver annually brought from the mines must not only be sufficient to
support that continued increase, both of coin and of plate, which is
required in all thriving countries; but to repair that continual waste and
consumption of silver which takes place in all countries where that metal
is used.

The continual consumption of the precious metals in coin by wearing, and
in plate both by wearing and cleaning, is very sensible; and in
commodities of which the use is so very widely extended, would alone
require a very great annual supply. The consumption of those metals in
some particular manufactures, though it may not perhaps be greater upon
the whole than this gradual consumption, is, however, much more sensible,
as it is much more rapid. In the manufactures of Birmingham alone, the
quantity of gold and silver annually employed in gilding and plating, and
thereby disqualified from ever afterwards appearing in the shape of those
metals, is said to amount to more than fifty thousand pounds sterling. We
may from thence form some notion how great must be the annual consumption
in all the different parts of the world, either in manufactures of the
same kind with those of Birmingham, or in laces, embroideries, gold and
silver stuffs, the gilding of books, furniture, etc. A considerable
quantity, too, must be annually lost in transporting those metals from one
place to another both by sea and by land. In the greater part of the
governments of Asia, besides, the almost universal custom of concealing
treasures in the bowels of the earth, of which the knowledge frequently
dies with the person who makes the concealment, must occasion the loss of
a still greater quantity.

The quantity of gold and silver imported at both Cadiz and Lisbon
(including not only what comes under register, but what may be supposed to
be smuggled) amounts, according to the best accounts, to about six
millions sterling a-year.

According to Mr Meggens {Postscript to the Universal Merchant p. 15 and
16. This postscript was not printed till 1756, three years after the
publication of the book, which has never had a second edition. The
postscript is, therefore, to be found in few copies; it corrects several
errors in the book.}, the annual importation of the precious metals into
Spain, at an average of six years, viz. from 1748 to 1753, both inclusive,
and into Portugal, at an average of seven years, viz. from 1747 to 1753,
both inclusive, amounted in silver to 1,101,107 pounds weight, and in gold
to 49,940 pounds weight. The silver, at sixty two shillings the pound
troy, amounts to £ 3,413,431:10s. sterling. The gold, at forty-four
guineas and a half the pound troy, amounts to £ 2,333,446:14s. sterling.
Both together amount to £ 5,746,878:4s. sterling. The account of what was
imported under register, he assures us, is exact. He gives us the detail
of the particular places from which the gold and silver were brought, and
of the particular quantity of each metal, which, according to the
register, each of them afforded. He makes an allowance, too, for the
quantity of each metal which, he supposes, may have been smuggled. The
great experience of this judicious merchant renders his opinion of
considerable weight.

According to the eloquent, and sometimes well-informed, author of the
Philosophical and Political History of the Establishment of the Europeans
in the two Indies, the annual importation of registered gold and silver
into Spain, at an average of eleven years, viz. from 1754 to 1764, both
inclusive, amounted to 13,984,185 ⅗ piastres of ten reals. On account of
what may have been smuggled, however, the whole annual importation, he
supposes, may have amounted to seventeen millions of piastres, which, at
4s. 6d. the piastre, is equal to £ 3,825,000 sterling. He gives the
detail, too, of the particular places from which the gold and silver were
brought, and of the particular quantities of each metal, which according
to the register, each of them afforded. He informs us, too, that if we
were to judge of the quantity of gold annually imported from the Brazils
to Lisbon, by the amount of the tax paid to the king of Portugal, which it
seems, is one-fifth of the standard metal, we might value it at eighteen
millions of cruzadoes, or forty-five millions of French livres, equal to
about twenty millions sterling. On account of what may have been smuggled,
however, we may safely, he says, add to this sum an eighth more, or £
250,000 sterling, so that the whole will amount to £ 2,250,000 sterling.
According to this account, therefore, the whole annual importation of the
precious metals into both Spain and Portugal, mounts to about £ 6,075,000
sterling.

Several other very well authenticated, though manuscript accounts, I have
been assured, agree in making this whole annual importation amount, at an
average, to about six millions sterling; sometimes a little more,
sometimes a little less.

The annual importation of the precious metals into Cadiz and Lisbon,
indeed, is not equal to the whole annual produce of the mines of America.
Some part is sent annually by the Acapulco ships to Manilla; some part is
employed in a contraband trade, which the Spanish colonies carry on with
those of other European nations; and some part, no doubt, remains in the
country. The mines of America, besides, are by no means the only gold and
silver mines in the world. They, are, however, by far the most abundant.
The produce of all the other mines which are known is insignificant, it is
acknowledged, in comparison with theirs; and the far greater part of
their produce, it is likewise acknowledged, is annually imported into
Cadiz and Lisbon. But the consumption of Birmingham alone, at the rate of
fifty thousand pounds a-year, is equal to the hundred-and-twentieth part
of this annual importation, at the rate of six millions a-year. The whole
annual consumption of gold and silver, therefore, in all the different
countries of the world where those metals are used, may, perhaps, be
nearly equal to the whole annual produce. The remainder may be no more
than sufficient to supply the increasing demand of all thriving countries.
It may even have fallen so far short of this demand, as somewhat to raise
the price of those metals in the European market.

The quantity of brass and iron annually brought from the mine to the
market, is out of all proportion greater than that of gold and silver. We
do not, however, upon this account, imagine that those coarse metals are
likely to multiply beyond the demand, or to become gradually cheaper and
cheaper. Why should we imagine that the precious metals are likely to do
so? The coarse metals, indeed, though harder, are put to much harder uses,
and, as they are of less value, less care is employed in their
preservation. The precious metals, however, are not necessarily immortal
any more than they, but are liable, too, to be lost, wasted, and consumed,
in a great variety of ways.

The price of all metals, though liable to slow and gradual variations,
varies less from year to year than that of almost any other part of the
rude produce of land: and the price of the precious metals is even less
liable to sudden variations than that of the coarse ones. The durableness
of metals is the foundation of this extraordinary steadiness of price. The
corn which was brought to market last year will be all, or almost all,
consumed, long before the end of this year. But some part of the iron
which was brought from the mine two or three hundred years ago, may be
still in use, and, perhaps, some part of the gold which was brought from
it two or three thousand years ago. The different masses of corn, which,
in different years, must supply the consumption of the world, will always
be nearly in proportion to the respective produce of those different
years. But the proportion between the different masses of iron which may
be in use in two different years, will be very little affected by any
accidental difference in the produce of the iron mines of those two years;
and the proportion between the masses of gold will be still less affected
by any such difference in the produce of the gold mines. Though the
produce of the greater part of metallic mines, therefore, varies, perhaps,
still more from year to year than that of the greater part of corn fields,
those variations have not the same effect upon the price of the one
species of commodities as upon that of the other.

_Variations in the Proportion between the respective Values of Gold and
Silver._

Before the discovery of the mines of America, the value of fine gold to
fine silver was regulated in the different mines of Europe, between the
proportions of one to ten and one to twelve; that is, an ounce of fine
gold was supposed to be worth from ten to twelve ounces of fine silver.
About the middle of the last century, it came to be regulated, between the
proportions of one to fourteen and one to fifteen; that is, an ounce of
fine gold came to be supposed worth between fourteen and fifteen ounces of
fine silver. Gold rose in its nominal value, or in the quantity of silver
which was given for it. Both metals sunk in their real value, or in the
quantity of labour which they could purchase; but silver sunk more than
gold. Though both the gold and silver mines of America exceeded in
fertility all those which had ever been known before, the fertility of the
silver mines had, it seems, been proportionally still greater than that of
the gold ones.

The great quantities of silver carried annually from Europe to India,
have, in some of the English settlements, gradually reduced the value of
that metal in proportion to gold. In the mint of Calcutta, an ounce of
fine gold is supposed to be worth fifteen ounces of fine silver, in the
same manner as in Europe. It is in the mint, perhaps, rated too high for
the value which it bears in the market of Bengal. In China, the proportion
of gold to silver still continues as one to ten, or one to twelve. In
Japan, it is said to be as one to eight.

The proportion between the quantities of gold and silver annually imported
into Europe, according to Mr Meggens’ account, is as one to twenty-two
nearly; that is, for one ounce of gold there are imported a little more
than twenty-two ounces of silver. The great quantity of silver sent
annually to the East Indies reduces, he supposes, the quantities of those
metals which remain in Europe to the proportion of one to fourteen or
fifteen, the proportion of their values. The proportion between their
values, he seems to think, must necessarily be the same as that between
their quantities, and would therefore be as one to twenty-two, were it not
for this greater exportation of silver.

But the ordinary proportion between the respective values of two
commodities is not necessarily the same as that between the quantities of
them which are commonly in the market. The price of an ox, reckoned at ten
guineas, is about three score times the price of a lamb, reckoned at 3s.
6d. It would be absurd, however, to infer from thence, that there are
commonly in the market three score lambs for one ox; and it would be just
as absurd to infer, because an ounce of gold will commonly purchase from
fourteen or fifteen ounces of silver, that there are commonly in the
market only fourteen or fifteen ounces of silver for one ounce of gold.

The quantity of silver commonly in the market, it is probable, is much
greater in proportion to that of gold, than the value of a certain
quantity of gold is to that of an equal quantity of silver. The whole
quantity of a cheap commodity brought to market is commonly not only
greater, but of greater value, than the whole quantity of a dear one. The
whole quantity of bread annually brought to market, is not only greater,
but of greater value, than the whole quantity of butcher’s meat; the whole
quantity of butcher’s meat, than the whole quantity of poultry; and the
whole quantity of poultry, than the whole quantity of wild fowl. There are
so many more purchasers for the cheap than for the dear commodity, that,
not only a greater quantity of it, but a greater value can commonly be
disposed of. The whole quantity, therefore, of the cheap commodity, must
commonly be greater in proportion to the whole quantity of the dear one,
than the value of a certain quantity of the dear one, is to the value of
an equal quantity of the cheap one. When we compare the precious metals
with one another, silver is a cheap, and gold a dear commodity. We ought
naturally to expect, therefore, that there should always be in the market,
not only a greater quantity, but a greater value of silver than of gold.
Let any man, who has a little of both, compare his own silver with his
gold plate, and he will probably find, that not only the quantity, but the
value of the former, greatly exceeds that of the latter. Many people,
besides, have a good deal of silver who have no gold plate, which, even
with those who have it, is generally confined to watch-cases, snuff-boxes,
and such like trinkets, of which the whole amount is seldom of great
value. In the British coin, indeed, the value of the gold preponderates
greatly, but it is not so in that of all countries. In the coin of some
countries, the value of the two metals is nearly equal. In the Scotch
coin, before the union with England, the gold preponderated very little,
though it did somewhat {See Ruddiman’s Preface to Anderson’s Diplomata,
etc. Scotiae.}, as it appears by the accounts of the mint. In the coin of
many countries the silver preponderates. In France, the largest sums are
commonly paid in that metal, and it is there difficult to get more gold
than what is necessary to carry about in your pocket. The superior value,
however, of the silver plate above that of the gold, which takes place in
all countries, will much more than compensate the preponderancy of the
gold coin above the silver, which takes place only in some countries.

Though, in one sense of the word, silver always has been, and probably
always will be, much cheaper than gold; yet, in another sense, gold may
perhaps, in the present state of the Spanish market, be said to be
somewhat cheaper than silver. A commodity may be said to be dear or cheap
not only according to the absolute greatness or smallness of its usual
price, but according as that price is more or less above the lowest for
which it is possible to bring it to market for any considerable time
together. This lowest price is that which barely replaces, with a moderate
profit, the stock which must be employed in bringing the commodity
thither. It is the price which affords nothing to the landlord, of which
rent makes not any component part, but which resolves itself altogether
into wages and profit. But, in the present state of the Spanish market,
gold is certainly somewhat nearer to this lowest price than silver. The
tax of the king of Spain upon gold is only one-twentieth part of the
standard metal, or five per cent.; whereas his tax upon silver amounts to
one-tenth part of it, or to ten per cent. In these taxes, too, it has
already been observed, consists the whole rent of the greater part of the
gold and silver mines of Spanish America; and that upon gold is still
worse paid than that upon silver. The profits of the undertakers of gold
mines, too, as they more rarely make a fortune, must, in general, be still
more moderate than those of the undertakers of silver mines. The price of
Spanish gold, therefore, as it affords both less rent and less profit,
must, in the Spanish market, be somewhat nearer to the lowest price for
which it is possible to bring it thither, than the price of Spanish
silver. When all expenses are computed, the whole quantity of the one
metal, it would seem, cannot, in the Spanish market, be disposed of so
advantageously as the whole quantity of the other. The tax, indeed, of the
king of Portugal upon the gold of the Brazils, is the same with the
ancient tax of the king of Spain upon the silver of Mexico and Peru; or
one-fifth part of the standard metal. It may therefore be uncertain,
whether, to the general market of Europe, the whole mass of American gold
comes at a price nearer to the lowest for which it is possible to bring it
thither, than the whole mass of American silver.

The price of diamonds and other precious stones may, perhaps, be still
nearer to the lowest price at which it is possible to bring them to
market, than even the price of gold.

Though it is not very probable that any part of a tax, which is not only
imposed upon one of the most proper subjects of taxation, a mere luxury
and superfluity, but which affords so very important a revenue as the tax
upon silver, will ever be given up as long as it is possible to pay it;
yet the same impossibility of paying it, which, in 1736. made it necessary
to reduce it from one-fifth to one-tenth, may in time make it necessary to
reduce it still further; in the same manner as it made it necessary to
reduce the tax upon gold to one-twentieth. That the silver mines of
Spanish America, like all other mines, become gradually more expensive in
the working, on account of the greater depths at which it is necessary to
carry on the works, and of the greater expense of drawing out the water,
and of supplying them with fresh air at those depths, is acknowledged by
everybody who has inquired into the state of those mines.

These causes, which are equivalent to a growing scarcity of silver (for a
commodity may be said to grow scarcer when it becomes more difficult and
expensive to collect a certain quantity of it), must, in time, produce one
or other of the three following events: The increase of the expense must
either, first, be compensated altogether by a proportionable increase in
the price of the metal; or, secondly, it must be compensated altogether by
a proportionable diminution of the tax upon silver; or, thirdly, it must
be compensated partly by the one and partly by the other of those two
expedients. This third event is very possible. As gold rose in its price
in proportion to silver, notwithstanding a great diminution of the tax
upon gold, so silver might rise in its price in proportion to labour and
commodities, notwithstanding an equal diminution of the tax upon silver.

Such successive reductions of the tax, however, though they may not
prevent altogether, must certainly retard, more or less, the rise of the
value of silver in the European market. In consequence of such reductions,
many mines may be wrought which could not be wrought before, because they
could not afford to pay the old tax; and the quantity of silver annually
brought to market, must always be somewhat greater, and, therefore, the
value of any given quantity somewhat less, than it otherwise would have
been. In consequence of the reduction in 1736, the value of silver in the
European market, though it may not at this day be lower than before that
reduction, is, probably, at least ten per cent. lower than it would have
been, had the court of Spain continued to exact the old tax. That,
notwithstanding this reduction, the value of silver has, during the course
of the present century, begun to rise somewhat in the European market, the
facts and arguments which have been alleged above, dispose me to believe,
or more properly to suspect and conjecture; for the best opinion which I
can form upon this subject, scarce, perhaps, deserves the name of belief.
The rise, indeed, supposing there has been any, has hitherto been so very
small, that after all that has been said, it may, perhaps, appear to many
people uncertain, not only whether this event has actually taken place,
but whether the contrary may not have taken place, or whether the value of
silver may not still continue to fall in the European market.

It must be observed, however, that whatever may be the supposed annual
importation of gold and silver, there must be a certain period at which
the annual consumption of those metals will be equal to that annual
importation. Their consumption must increase as their mass increases, or
rather in a much greater proportion. As their mass increases, their value
diminishes. They are more used, and less cared for, and their consumption
consequently increases in a greater proportion than their mass. After a
certain period, therefore, the annual consumption of those metals must, in
this manner, become equal to their annual importation, provided that
importation is not continually increasing; which, in the present times, is
not supposed to be the case.

If, when the annual consumption has become equal to the annual
importation, the annual importation should gradually diminish, the annual
consumption may, for some time, exceed the annual importation. The mass of
those metals may gradually and insensibly diminish, and their value
gradually and insensibly rise, till the annual importation becoming again
stationary, the annual consumption will gradually and insensibly
accommodate itself to what that annual importation can maintain.

_Grounds of the suspicion that the Value of Silver still continues to
decrease._

The increase of the wealth of Europe, and the popular notion, that as the
quantity of the precious metals naturally increases with the increase of
wealth, so their value diminishes as their quantity increases, may,
perhaps, dispose many people to believe that their value still continues
to fall in the European market; and the still gradually increasing price
of many parts of the rude produce of land may confirm them still farther
in this opinion.

That that increase in the quantity of the precious metals, which arises in
any country from the increase of wealth, has no tendency to diminish their
value, I have endeavoured to shew already. Gold and silver naturally
resort to a rich country, for the same reason that all sorts of luxuries
and curiosities resort to it; not because they are cheaper there than in
poorer countries, but because they are dearer, or because a better price
is given for them. It is the superiority of price which attracts them; and
as soon as that superiority ceases, they necessarily cease to go thither.

If you except corn, and such other vegetables as are raised altogether by
human industry, that all other sorts of rude produce, cattle, poultry,
game of all kinds, the useful fossils and minerals of the earth, etc.
naturally grow dearer, as the society advances in wealth and improvement,
I have endeavoured to shew already. Though such commodities, therefore,
come to exchange for a greater quantity of silver than before, it will not
from thence follow that silver has become really cheaper, or will purchase
less labour than before; but that such commodities have become really
dearer, or will purchase more labour than before. It is not their nominal
price only, but their real price, which rises in the progress of
improvement. The rise of their nominal price is the effect, not of any
degradation of the value of silver, but of the rise in their real price.

_Different Effects of the Progress of Improvement upon three different
sorts of rude Produce._

These different sorts of rude produce may be divided into three classes.
The first comprehends those which it is scarce in the power of human
industry to multiply at all. The second, those which it can multiply in
proportion to the demand. The third, those in which the efficacy of
industry is either limited or uncertain. In the progress of wealth and
improvement, the real price of the first may rise to any degree of
extravagance, and seems not to be limited by any certain boundary. That of
the second, though it may rise greatly, has, however, a certain boundary,
beyond which it cannot well pass for any considerable time together. That
of the third, though its natural tendency is to rise in the progress of
improvement, yet in the same degree of improvement it may sometimes happen
even to fall, sometimes to continue the same, and sometimes to rise more
or less, according as different accidents render the efforts of human
industry, in multiplying this sort of rude produce, more or less
successful.