Chapter XXV: Introduction (14)

I distinguish, therefore, between _luxury_, _sensuality_, and _excess_, three terms often confounded, but conveying very different ideas. A person may consume great quantities of superfluity from a principle of ostentation, or even with a political view to encourage industry; him I call _luxurious_. _Sensuality_ may be indulged in a cottage, as well as in a palace; and excess is purely relative to circumstances. _Luxury_, therefore, as well as _sensuality_, or any other passion, may be carried to _excess_, and so become vicious. Now _excess_ in consumption is vicious in proportion as it affects our _moral_, _physical_, _domestic_, or _political_ interests; that is to say, our _mind_, our _body_, our _private fortune_, or the _state_. When the consumption we make, does no harm in any of these respects, it may be called moderate and free from vice.

Our _moral_ and _physical_ interests are hurt by excess, in _eating_, _drinking_, _love_, and _ease_, or indolence; according as these gratifications do respectively affect the _mind_, or the _body_, or both.

Our _domestic_ interest frequently obliges us to call that _excess_, which nature hardly finds _sufficient_; and, on other occasions, both mind and body go to destruction, by _excesses_ which have contributed to amass the greatest fortunes.

The most direct _political_ inconvenience of excessive luxury, is, the loss of foreign trade. The more indirect follow as consequences of those already described; because they may render those employed in the service of the state, negligent and unfit, rapacious and corrupt, but these evils are more properly the _direct_ effects of the imperfections of the mind, than consequences resulting _naturally_ from excess in the consumption of superfluity. They ought, therefore, to be considered as secondary effects, since they may proceed from avarice as well as prodigality. The correcting of political vices resembles the weeding a bed of tender flowers, the roots are all blended together, and the leaves are almost alike. It is proper, therefore, to have both the discernment and dexterity of a good gardner for such an operation.

_CHAP._ XXI. From _luxury_ I pass to the _physical-necessary_, which I define from the consumption implied by it: a man has his physical-necessary when _he is fed, clothed, and protected from harm_. But as these enjoyments, we find, do by no means satisfy his desires, I am led to establish another _necessary_ which I call _political_. This I measure also by the consumption implied by it, to wit, that which is suitable to the _rank_ of the person.

_Rank_ again is determined by the _common opinion of men_, and this _opinion_ is founded upon circumstances, which relate to the _birth_, _education_, or _habits_ of the person. When common opinion has placed any one in a certain rank, he becomes entitled to enjoy certain articles of _physical-superfluity_, which enter into the composition of his _political-necessary_: thus, such as are raised above the level of the very lowest class of inhabitants, are entitled to have a Sunday’s dress; the farmer has a better coat than a labouring servant; the priest of the parish must have a gown; the magistrate of a little town must have ruffles, perhaps silk stockings; a provost a velvet coat, and a lord mayor a state coach; these and such like articles constitute what I call the _political-necessary_.

A man’s rank sometimes obliges him to certain articles of expence, which may possibly affect even his _physical-necessary_. How frequently do we see people cover their shoulders, at the expence of their belly. The competition between the desires of our _mind_, and those which proceed from our _animal oeconomy_ is so strong, that it is frequently hard to determine, whether the incapacity to supply our _physical wants_, proceeds from our having too far gratified our other desires, or from real poverty.

The lowest classes of a people, in a country of trade, must be restrained to their physical-necessary; but this restraint must be brought about, not by _oppression_, but by the effects of _competition_ alone. While this is supported among people of the same class, it has the effect to reduce them all to the _physical-necessary_, and when it reduces them lower it is a vice, and ought to be checked. A peculiar ingenuity in some workmen of the same class, will raise them above this level; and the more they can raise themselves above competition, the greater will their gains be. By becoming masters in any art, they share the profits of those whom they employ; and thus rise in rank and fortune, provided their frugality concur with every other natural or acquired advantage. It is therefore a principle, _to encourage competition universally, until it has had the effect to reduce people of industry to the physical-necessary, and to prevent it ever from bringing them lower_: from this results the necessity of applying every expedient for relieving certain classes of the load of their children, if you incline they should breed; and of preventing taxes and other burthens from affecting them unequally.

_CHAP._ XXII. I now come to treat directly of inland commerce, as taking place upon the extinction of foreign trade, when all attempts to recover it are found to be vain. In such a situation, a wealthy nation is not to consider itself as undone: an able statesman must know how to make his people happy in every situation. It is an universal principle of conduct, private and political, to look forward, and to improve the present from the experience of the past. One great inconvenience resulting from a foreign trade _already lost_, is, that there is no farther question of making any new acquisition of wealth, or of replacing one farthing of what at any time may be sent out of the country. But the greatest inconveniencies are felt in the losing such a trade: these are numberless, when an able statesman is not at hand to prevent them.

That I may point them out in order, I make a short recapitulation of our principles: the slightest hint is sufficient to shew their force; and when my reader is sensible of a repetition, which he finds superfluous, let him reflect that this very circumstance is proof of their exactness. In this science we must use our principles as a carpenter uses his foot-rule; there is nothing new to him in this instrument; but still he must have it in his hand, to be able to know any thing, with accuracy, concerning his work.

In this chapter I throw in a short dissertation upon the difference between antient and modern luxury. Their natures and effects are briefly insisted on. I point out the resemblance between the luxury of modern times, and that of the few great trading cities of antiquity; such as Tyre and Carthage; and I shew in what respect it differed from that luxury which proved the downfall of the empires of Asia and Rome.

When empires were once formed, they were ruined by luxury, and preserved by means of their wars: because these made their wealth circulate.

When the trading states took a military turn, and became ambitious of conquest, their ruin soon followed: because war destroyed the industry which made their greatness.

The cause of difference I find to proceed from this; that in the _monarchy_, the riches from which the luxury sprung was the effect of rapine; in the _other_, the effect of industry. The first gave no equivalent for their wealth; the others did. Where no equivalent is given in the acquisition, all proportion is lost in the dissipation. The luxury of the robbers was monstrous and violent: that of the merchants, systematical and proportional. The luxury of the monarchies brought on neglect in public affairs: in the cities, it was this neglect which destroyed their luxury. The luxury of the monarchies had nothing to recommend it, but the gratification of the passions: the luxury of the others produced no harm, but from this very circumstance. From the contrast I have drawn, I establish the difference between antient and modern luxury. The first was violent; the last is systematical, and can be supported by industry and liberty only. A farther consequence is, that as rapine is incompatible with industry, so is arbitrary power: consequently, those absolute princes who establish industry in their country, in order to taste of the sweets of luxury and wealth, put insensibly a bridle in the mouths of their successors, who must, from this consideration alone, submit their government to a regular system of laws and political œconomy.

This is a better scheme for limiting the arbitrary power of Princes than all the rebellions that ever were contrived. Confusion establishes arbitrary power, and order destroys it.

_CHAP._ XXIII. When a nation, which has long dealt and enriched herself by a reciprocal commerce in manufactures with other nations, finds the balance of trade turn against her, it is her interest to put a total stop to it, and to remain as she is, rather than to persist habitually in a practice, which, by a change of circumstances, must have effects very opposite to those advantages which it produced formerly. Such a stop may be brought about by the means of duties and prohibitions, which a statesman can lay on importations, so soon as he perceives that they begin to preponderate with respect to the _exportations_ of his own country.

I illustrate this principle by an examination of those which influence the establishment of incorporated cities and boroughs. I shew how these may be considered as so many states, which domestic luxury, taxes, and the high price of living, have put out of a capacity to support a competition with strangers (that is with the open country) which here represents the rest of the world. I shew the reasonableness of such exclusive privileges, in favour of those who share the burthens peculiar to the community, in so far only as regards the supply of their own consumption; and I point out, by what methods any discouragements to industry may be prevented, as often as that industry has for its object the supplying the wants of those who are not included in the corporation.

From the long and constant practice of raising _taxes_ within incorporated cities, I conclude, that _taxes_ are a very natural consequence of luxury, and of the loss of foreign trade; and as Princes have taken the hint from the cities, to extend them universally, it is no wonder to see foreign trade put an end to, in consequence of such injudicious extensions.

_CHAP._ XXIV. I next proceed to the methods proper to be used, in the delicate operation of so great a revolution as that of degrading a people from their right of being considered as a trading nation.

If a statesman keeps a watchful eye over every article of importation; and examines minutely, the use every article imported is put to; he will easily discern, when it is proper to encourage, when to restrain, and when to prohibit.

In this examination, however, every relation must be taken in: because the importation of a foreign commodity affects many different interests, some within, some without the nation; some directly, others only consequentially. Nothing is so complex as the interests of trade. The importation of a commodity may first advance the interest of those at home, who furnish the commodities exported, of which the importation is the return. The importation may be useful for the advancement of manufactures, providing it consist in matter fit for them; yet if the whole manufacture produced from it be for home-consumption, the national interest will, on the whole, be hurt by the importation. The importation of wines and brandies is a great saving upon subsistence, in northern countries, where liquors distilled from grain are made to supply the place of them. These and many other relations must be examined, before a statesman can pass sentence upon an article of importation. The inquiry made, and accounts balanced on both sides, every hurtful article of importation should be cut off; and when this is done, if the consequence should prove a general stop to exportation, then is foreign trade decently interred, without any violent revolution; because the statesman is supposed to have proceeded gradually, and to have been all the while labouring to increase consumption at home, in proportion as the industrious have been forced to lie idle by the other operations.

When foreign trade is at an end, the number of inhabitants must be reduced to the proportion of home-subsistence, in case their former prosperity had carried them beyond it. The nation’s wealth must be kept entire, and made to circulate, so as to provide subsistence and employment for every body.

_CHAP._ XXV. Let a nation be reduced ever so low in point of foreign commerce, she will always find a demand from abroad for the superfluities of her natural productions; which, if rightly conducted, will prove a means of advancing her national wealth.

If the exportation of subsistence should go forward, while many are found in want at home, a restraint laid upon exportation will not redress the inconvenience; because the wretched will still remain so, unless they are assisted and put in a capacity to dispute the subsistence of their own country with foreign nations. The principal cause of this phenomenon is the preponderancy of the scale of work at home. When home-demand does not fill up the void, of which we have spoken, a vicious competition takes place among those who work for a physical-necessary; the price of their labour falls below the general standard of subsistence _abroad_; their portion is exported, and they are forced to starve.

A statesman, therefore, at the head of a luxurious people, must endeavour to keep his balance even; and if a subversion is necessary, it is far better it should happen by the preponderancy of the scale of demand. Here is my reason for preferring this alternative.

All subversions are bad, and are attended with bad consequences. If the scale of work preponderates, the industrious will starve, their subsistence will be exported; the nation gains by the balance, but appears in a manner to sell her inhabitants. If the scale of demand preponderates, luxury must increase, but the poor are fed at the expence of the rich, and the national stock of wealth stands as it was. Upon the cessation, therefore, of foreign trade, you must either lose your people, or encourage luxury.

The statesman having regulated the concerns of his outward commerce, must apply more closely than ever to his domestic concerns. I reduce the principal objects of his attention to three. 1. To regulate the progress of luxury according to the hands ready to supply the demand for it. 2. To circumscribe the bounds of it, that is, the multiplication of his people, to the proportion of the extent and fertility of the soil. And in the last place, to distribute his people into classes, according as circumstances (of which he is not master) may demand.

Here I point out the reasons why the progress of luxury does less hurt to a great kingdom than to a small state. Why sumptuary laws are good in an imperial town of Germany, and why they would be hurtful in London or Paris. Why the establishment of a standing army, _in a country fully peopled_ and rich, should be accompanied with endeavours to diminish luxury, in order to prevent too great a preponderancy of the scale of demand, and the rising of prices, which would cut off the hopes of recovering a foreign trade.

Having briefly gone through the objects of the statesman’s concern, I come to examine the natural consequences of this revolution upon the spirit, government, and manners of a people, who from industrious and frugal are become luxurious and polite.

The traders withdraw their stocks as trade decays, and lend it out at home to landed men, who thereby are enabled to become luxurious. This indemnifies the industrious for the loss of foreign demand. When the money, formerly employed in order to gain more, begins to circulate at home, for providing superfluities, and augmenting domestic consumption, the country appears daily to be growing more opulent; tradesmen and manufacturers, who were formerly confined to a physical-necessary, are now easy in their circumstances; they increase their consumption; this accelerates circulation; an air of plenty and ease spreads over the face of the country; and the very consequences of their decline, are construed as invincible proofs of their growing prosperity.

Riches may be considered by a statesman in three different lights; as a mine when they are locked up; as an object of trade when they are employed in order to gain more; or as an object of luxury, and fund for taxation, when they are spent in the gratification of our political wants.

The general cast of mind and disposition of the inhabitants of every country (in so far as regards money) may, I think, be reduced to one or other of these three modifications. It is the business of a statesman to work upon the spirit of his people, so as to model their taste of expence by insensible degrees, and to bring it to be analogous to that principle which is most conducive to national prosperity. Hoarding in private people, can hardly ever be advantageous to a state; when the state hoards, the case is very different, as shall be shewn. While money is employed to gain more, it never can procure to the proprietor, either power or authority; but when, in the last case, it is employed for the gratification of our desires, in the hands of the ambitious, it acquires power; consequently, may rival that influence which no person ought to enjoy, but he who is at the head of the state. This is the mother of faction, and the root from which all hurtful parties spring. It is by such means that governments (be they good or bad) are brought into anarchy. Private wealth corrupted, and at last destroyed the excellence of the Roman commonwealth: and private wealth alone established the liberty of Holland upon the ruins of Spanish tyranny. So soon therefore as the inhabitants of a country begin to employ their riches to gratify their inclinations, at the same time should a statesman begin to make himself rich, in order to preserve that superiority which is essential to _him_ who sits at the head of every principle of action. And whenever this lies beyond his reach, the power he had will soon disappear; and the government will take a new form.

A statesman acquires wealth by imposing taxes upon his people: rapine is the tax of the despote; capitation, land tax, and others which affect persons, are those of the monarch; excises upon consumption are imposed by limited governments. The first lay all flat, the second affect growing wealth, the last accelerate dissipation. I conclude my chapter with some little historical illustrations concerning the power and influence of great men in a state, under different circumstances.

_CHAP._ XXVI. I next consider the nature of what I call the _balance of wealth_. The more circulation there is in a country, the more this object becomes important. While the greatest part of a nation’s coin was locked up; or while it circulated by rapine and extortion, the effects discovered in modern times, where it circulates by industry, and as an adequate equivalent for services, were hardly perceived.

The specie, or circulating coin of a country, must be considered as a part of the national patrimony. This is constantly changing hands in a country of industry, and he who is proprietor of any part of it, is in so far a proprietor of the public stock.

With this species of property, every other may be acquired. When it is given as the price of land, such an exchange produces no alteration in the respective situation of the parties. An estate in land is neither better or worse than another in coin of the same value. If I purchase an annuity, or pay off my debts with the coin I have in my pocket, neither I or the person with whom I transact, make any change of situation in point of wealth.

But if I lay out my coin for consumable commodities for my own use, then so soon as any part of what I buy is consumed, I become poorer: for this operation annihilates, in a manner, as to me, the coin I had. This I call a vibration in the balance of wealth; I grow poorer, and he who produced the consumable commodity for my use, is so far richer: the balance, therefore, is turned against me, in his favour.

As many people, therefore, live by producing consumable commodities, one use of coin is to render inconsumable, as it were, that part of them which is superfluous to our own consumption. By this operation the superfluity passes into other hands who consume it, and the coin which the industrious receive in return purchases a supply for all their wants, in proportion as they choose to relieve them.

The vibration of the balance of wealth, therefore, is no more than the changes which are daily taking place, as to the relative proportion of riches between the individuals of a state: and as this vibration can only be produced when the coin any one possesses comes to disappear, without his retaining the possession of any real equivalent which he can alienate for the same value; it follows, that the balance is constantly turning in favour of those who either sell their effects, their service, or their work; and this balance they retain, in proportion as their gains exceed their own consumption. On the other hand, the balance is constantly turning against the idle consumers; because they are supposed to produce nothing; consequently, the whole of their consumption goes in diminution of their wealth.

Hitherto the question has only been about the balance of moveable wealth, that is coin; but the introduction of this, together with a taste for superfluity, has the effect of melting down _solid property_ into what I call _symbolical money_.

When once this refinement upon the use of money takes place, we see houses, lands, jurisdictions, provinces, principalities, crowns, scepters and empires, thrown into circulation by means of the symbolical money called bank notes, transfer in bank stock, accounts, bonds, mortgages, alienations of domain, mortgage of taxes, and cessions made in definitive treaties.

As frugality and industry are in our days capable of amassing the greatest fortunes in solid property, so is dissipation, by the means of symbolical money, as certain an expedient for the annihilation of them. From this I conclude, that dissipation implies frugality, and frugality dissipation. In every country of great circulation, they balance and destroy one another; and since there is no such thing as equality of fortune to be preserved without proscribing alienation, that is circulation, the next best expedient for making people equal, I think, is to enrich them by turns.

I conclude my chapter by inquiring into the effects of national debts upon the vibration of this balance; and I conclude, from the principles laid down, that with respect to the collective interests of the state, that is, between the state itself, the creditors, and the people, there is no vibration of wealth produced by loans to the public. But that according as the money borrowed is spent in the country or abroad, in so far the balance is either made to vibrate between individuals at home, or to turn against the state in favour of foreign nations.

_CHAP._ XXVII. I next endeavour to shew how necessary a thing it is for a statesman to acquire a thorough knowledge of the nature and effects of circulation. By this he is able to judge, when the coin _circulating_ in the country is sufficient for carrying on alienation; and when it is not, he is taught how to augment the quantity of it, either by drawing it from the repositories as oft as he finds the inhabitants disposed to lock it up; or by substituting symbolical or paper money in place of it, when the metals are really wanting.

Here I observe, that the _circulating_ or _current_ money of any nation is constantly in proportion to the taste of dissipation in the rich, and application to industry in the poor.

When the dissipation of the rich, tends to call off the industrious from supplying the branches of exportation, then the statesman, in place of facilitating the melting down of solid property in favour of domestic circulation, by the easy introduction of symbolical money, should render this operation more difficult, permitting the lands to be loaded by entails, substitutions, trusts, settlements, and other inventions which may hurt the credit of young people, such as retarding the term of coming to full age, and others of a like nature.

On the other hand, while lands remain ill cultivated; while the numerous classes remain idle and poor; and while much money is found locked up, the very opposite administration is expedient: Every method then must be employed to facilitate and establish the credit of those who have solid property; such as the introduction of loans upon interest; the breaking entails upon estates; the facilitating the sale of them, in favour of the liquidation of all claims competent to the industrious, against the proprietors, even declaring the cause of creditors the favourable side in all ambiguous law-suits; and, last of all, allowing arrestment of the person for moveable debts, which is supporting the interest of creditors as far, I think, as is possible, in any free nation. Every regulation becomes, in short, expedient, which can favour the industrious, accelerate circulation, and establish a credit to every one in proportion to his worth.

The more money becomes necessary for carrying on consumption, the more it is easy to levy taxes; the use of which is to advance the public good, by drawing from the rich, a fund sufficient to employ both the _deserving_, and the _poor_, in the service of the state; or to correct the bad consequences of domestic luxury as to foreign trade, by providing a fund for the payment of bounties upon exportation.

In imposing taxes, a statesman should attend to the nature of those branches of circulation where the balance is made to vibrate, in order to distinguish them from those where no vibration is implied. When a man buys an estate, it would be absurd to make him pay a tax of _cent. per cent._ though you may safely make him pay at that rate, when he buys a pint of gin, or a pound of chocolate.

In taxes, again, upon consumption, a particular attention is to be had, not to confound those which are paid by people who consume to gratify their desires, with those which are paid by such as consume in order to produce; that is to say, those which affect the rich, with those which affect the industrious.

Farther, a statesman must see with perspicuity how far the imposition of taxes may influence the prices of exportable goods; and in so far as prices are influenced by them, they must be refunded with interest, and even when that is not sufficient to support the foreign competition, premiums or bounties are to be thrown in, at the expence of new impositions upon domestic consumption.

As all augmentations must at last come to a stop, so must these expedients for the support of foreign trade against the influence of domestic abuse; but when trade comes to a stop, taxes may be increased; because the considerations in favour of exportation are removed. The statesman then must change his plan, and make use of the power and influence he acquires by an opulent exchequer, to root out the abuses which have dried up the spring from which his country used to receive a continual augmentation of wealth.

I conclude my chapter with this reflection: That under a wise administration, every vice in a state carries a proper antidote along with it.

If luxury extinguishes foreign trade it gives birth to taxation; and money in the hands of a good statesman is an irresistible engine for correcting every abuse.

In treating of taxes, I frequently look no farther than my pen, when I raise my head and look about, I find the politics of my closet very different from those of the century in which I live. I agree that the difference is striking; but still reason is reason, and there is no impossibility in the supposition of its becoming practice.

_CHAP._ XXVIII. Prices imply alienation for money, and frequent and familiar alienations only can fix a standard.

The price of articles of the first necessity regulate, in a great measure, the price of every thing else. Now the frequent and familiar alienation of such articles implies industry, and a numerous class of free hands; because these only are the buyers. No alienation is implied in the consumption of necessaries, by those whose occupation it is to produce them for themselves. Did every one, therefore, supply himself with necessaries, there would be no alienation of them; consequently, no price fixed. From hence it follows, that the price of necessaries depends on the occupations of a people, and not on the quantity of their specie.

The standard price of _subsistence_ is in the compound proportion of the number of those who are obliged to buy, and of the demand found for their labour. Subsistence never can rise above the level of the faculties of the numerous classes of a people; because so soon as a price rises above the faculties of the buyer, his demand is withdrawn; and when the demand of a numerous class is withdrawn, subsistence is found in too great plenty for the rich, to bear a high price.

The more equal, therefore, the faculties of the industrious populace of any country are, the less distress will follow upon scarcity, and those only, whose means cannot reach that standard price, run any risk of starving.

The faculties, therefore, of the _physical-necessarians_ (as we have taken the liberty to call them) will, in countries of industry, determine the standard value of subsistence; and the value, _in money_, which they receive for their work, will determine the standard of those faculties; consequently, the price of subsistence must rise and fall according to the number of workmen, and demand for their work: that is to say, the price of subsistence must be in the compound proportion above mentioned.

Here I am led into an examination of the opinion of Messrs. De Montesquieu and Hume, who think that the price of every thing depends upon the _quantity of specie_ in the country, which they consider as the representation of _every thing vendible_; as if these two quantities, the _commodities_, and the _specie_, were divided into aliquot parts, exactly proportioned to one another. I do my endeavour to investigate the meaning of these propositions, in order to shew in what respect they lead to error, in place of throwing light upon an intricate question: and then I propose another doctrine, which is, that nothing can determine the value of a vendible commodity, any where, _but the complicated operations of demand and competition_, which however frequently _influenced_ by wealth, yet never can be _regulated_ by it.

_CHAP._ XXIX. In this chapter I follow the succession of Mr. Hume’s ideas, in his political discourses; and as he is led from his principles to believe, that there is no such thing as a wrong balance of trade against a nation, but on the contrary thinks that the nature of money resembles that of a fluid, which tends every where to a level: In pursuing the consequences of our former reasoning, I shew, that nothing is so easy, or more common than a right or a wrong balance of trade; and I observe, that what we mean by a balance, is not the bringing the fluid to a level, but either the accumulating or raising it in some countries, by the means of national industry and frugality, which is a right balance; or the depressing it in others, by national luxury and dissipation, which is a wrong one. Thus the general doctrine of the _level_ can only take place, on the supposition that all nations are equally frugal and industrious; or rather, that they have an equal mixture of these and their opposite qualities, together with a reciprocal trade entirely laid open. When the ideas of different people are fairly exposed, every question comes to be resolved without disputation: vices in reasoning seldom take place but when terms are not rightly understood.

_CHAP._ XXX. As the intention of this inquiry is not to treat of population, agriculture, trade, industry, &c. as particular subjects, but as objects influencing the political œconomy of modern states, my end is answered, so soon as I find the general principles relating to each sufficiently deduced and ranged under general heads. The use, therefore, of a chapter of miscellaneous questions and observations, is to serve as an exercise on what is gone before; to introduce, without a direct connection, questions analogous to the subject of the book, or to give a further extension to such as I have treated, in the course of the chapters, with too much brevity.

In the first and second questions, I endeavour to shew, that the quantity of coin in any country, is no sufficient rule for judging of the state of her foreign trade; because money may be acquired and expended by operations nowise mercantile. A nation, may borrow from foreigners more than the amount of the balance against her: she may pay away, in subsidies, and foreign wars, sums greatly beyond the value of a right balance on her trade. She may call in her specie, and trade with it abroad, while paper is made to circulate in its place at home: or she may lock it up in banks, where it never may appear. In short, the riches of a trading nation may resemble those of a trading man; who may be immensely rich, with very little specie in his possession.

On the other hand, the riches of a prodigal nation may resemble those of a prodigal man; who may be full of money, borrowed from all hands, upon the credit of a large fund of solid property.

The third question concerns the effects of riches in those countries where trade and industry are little known. Under such circumstances, coin must be locked up, or virtue will go to wreck. Why? Because, if coin circulate where there is no industry, it must circulate for no adequate equivalent in work or service; that is, for the gratification of the passions, or in monstrous prodigality. Experience demonstrated the truth of this principle. While the Greek Monarchs of Asia and Ægypt remained in possession of their vast treasures, virtue and simplicity stood their ground; when those riches were thrown into circulation, under the first Roman Emperors, we see the horrible consequences which ensued. What could produce such monsters, except a taste of dissipation, without rational objects to discharge their wealth upon? All the money in the universe, thrown into the hands of an extravagant modern Prince, would not affect his morals; the taste of luxury would soon discharge him of it; and the consequence would be, to enrich those who gratified his desires, and that nearly in proportion to their service. But in antient times, the violence of government stopped the progress of industry: the consequence of which was, that the few productions of it were sold for the most exorbitant prices, and the wealth accumulated by private people commonly occasioned their destruction; because rapine was the only expedient Princes had fallen upon to draw back money into their coffers.

Comparing the antient with our modern œconomy, I find both are curious and entertaining. A contrast often makes us reflect upon circumstances which otherwise might escape our observation.

In the fourth and fifth questions, I apply the principles we have laid down, in order to discover why the establishment of trade and industry has naturally given rise to an established system of taxation, and regular standing armies.

This leads me to compare circumstances relative to the œconomy of Europe some centuries ago, when taxes were almost unknown, with the present times, when they are becoming daily more familiar; and I shew that they are, in a great part, paid in lieu of the personal service to which the subjects were formerly bound, and by the means of which states were supported; and if they are extended beyond this proportion, it is in consequence of a new circulation opened between the state and those who serve it: so that the effect of taxes, spent within a country well governed, is to draw money gratuitously from those who have a superfluity of it, in order to bestow it upon those who are willing and capable to advance the service of the state; that is, in other words, to oblige private people to lay out their money for the service of their country.

From the same principles, and from a very succinct historical deduction of the facts relating to the state of the militia of Europe, from the time of the Romans, I endeavour to shew, that standing armies in our days are become necessary, while Princes have the rage of making war; because, without keeping up such bodies of men in time of peace, the call of the luxurious would provide employment for them, which they would not choose to quit, when the will of their sovereign might command their attendance.

These questions lead me to inquire into the method of estimating the relative power of different states in making war.

Here I reduce power to the two principles of men and money; the men at the command of a state, are those who have a poor and precarious living, or at least a worse condition than that which the state can offer for their military service; consequently, the more a people are usefully employed, the less they are calculated for filling armies. From hence it is that luxury is said to render a nation effeminate: a true proposition, when rightly understood, relatively to the industrious, not to the luxurious classes of the people.

The annual revenue of a state is in proportion to the circulation; because it is at the time of circulation only that national contributions can be levied with the fewest inconveniencies. Money which does not circulate is of no use to the proprietors, and consequently can be of no utility to the state.

Credit is in proportion to the capacity of paying the interest of money borrowed.

Having abundantly insisted on the advantages of industry in providing for the poor, I now come to consider its permanent effects, after the first end has been accomplished. If a thousand pounds are bestowed upon making a fire-work, a number of people are thereby employed, and gain a temporary livelihood. If the same sum is bestowed for making a canal for watering the fields of a province, a like number of people may reap the same benefit, and hitherto accounts stand even: but the fire-work played off, what remains, but the smoke and stink of the powder? Whereas the consequence of the canal is a perpetual fertility to a formerly barren soil. Here I enter again into an examination and confrontation of antient and modern oeconomy. I shew that the magnificence of the antients had not the same tendency to destroy simplicity, as the luxury of modern times has; because they owed their magnificence to the slavery of the inferior classes of people, who got no return for their labour farther than bare subsistence. Whereas modern magnificence depends upon industry; which draws after it such a retribution in money, as soon enables those who at first contributed to the luxury of others, to call for the like services from an inferior class, who are entering on the course which the more wealthy abandon.

I conclude this chapter with an inquiry into the principles which ought to regulate the establishment of trading companies. Those principles relate to the _advantages_ and _disadvantages_ which severally attend them. The principal advantage in common to all, proceeds from the union of private stocks; consequently, the statesman ought to protect companies so far only as this union promotes the end for which they were instituted: but whenever he finds that the strength of united stocks is made use of to oppress the unincorporated industrious, he ought to take these under his protection, by providing an outlet for _their_ industry, by which he will frustrate any attempt of turning that into a monopoly, which was intended only to extend trade and industry.

The second advantage is peculiar to such companies as trade to foreign parts under exclusive privileges. By these a state reaps the benefit of keeping prices low in foreign markets; because the company is freed from the competition of their own countrymen. But the inconvenience resulting in consequence of this, is, that as the company _buys_, so they also _sell_ without competition. The method, therefore, of preventing the bad consequence of this, is, for the state constantly to be at the great expence of every such settlement in favour of foreign trade; and to grant the exclusive privilege in favour of commerce in general, and not in the common way, as an indemnification to particular people for the expence of making the settlement, or from other political considerations. When an exclusive privilege is granted upon such principles, the state may retain a power of inspection into all their affairs, and may open the doors of the company to new subscribers, in proportion to the demand for the trade, in place of allowing the company to swell their stock with borrowed money. By such means frauds are prevented; a foundation is laid for several mercantile operations, which advance the prosperity of the state, without hurting the company; and jealousy is taken away, by preventing the too close connection between the members of it, when few in number, from degenerating into an oppressive and scandalous monopoly.

END OF THE SECOND BOOK.

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AN
INQUIRY
INTO THE
PRINCIPLES OF POLITICAL OECONOMY.

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BOOK III.

OF MONEY AND COIN.