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The System or Theory of the Trade of the World. Treating Of the different Kinds of Value Of the Ballances of Trade Of Exchange Of Manufactures Of Companies And shewing the Pernicious Consequences of Credit, and that it destroys the Purpose of National Trade
London, Printed by H. Woodfall; and Sold by J. Roberts, near the Oxford-Arms in Warwick-Lane MDCCXX (Price Sixpence)
Having, for a long time since, looked upon Gold and Silver, as the Design or End of Commerce; I never could reconcile myself, to that generally received Opinion, that they increase it, and that by consequence, Credit also does the like; for how to imagine the End to be the Cause? This Contradiction induced me to seek out the Reason or first Cause, that drives Man to trade: And as for Years past, some Nations of Europe swell their Credit to such a prodigious Bulk, as though they strove to surpass one another, and as if Trade and Credit had not their bounds: my Design, by this Tract, is to shew the ill consequences of an unnatural Use of Credit. I extend it no farther than just what is necessary to attain that End; and I entitle it, The System or Theory of the Trade of the World, because it contains such Principles, as seem to me capable of answering any Event in Trade. I draw those Principles from the natural Bent of Man; and the Remarks and Conclusions I infer from them, appear to me most natural. But as this System will seem new, and contrary to the Notions hitherto generally received, and hath the ill Fate to appear at a time, when I myself could wish it false; I beg of my Readers, if possible, to reflect on it without regard to those former Notions.
I hope this Favour will be granted, together with that of excusing both the Style and Correction; my Design being easily perceived, and I expecting no private Profit or Interest, but in the Publick Welfare.Return to top of the Page
Of Gold and Silver, or Real Denominator
All things, either necessary or usefule to Mankind, have besides a proper Name to distinguish one from the other, another Name, that distinguishes or denotes what Proportion they bear to Gold and Silver; and that Proportion is call'd Value.
The Value or Proportion of all things useful, or necessary, is to Gold and Silver, in proportion to the Quantity of Gold and Silver that is in the world; so that the more Gold and Silver is in the World, the greater the Value of things will be.
As Gold and Silver not only express the Value of things; but also carry with them a Right, or Demand at will, on all things necessary: all Men have, one with the other, an equal desire to draw them to themselves; which can be done, but by Labour only: And as Man naturally loves his Ease, the Possession of a part of them lessens his Desires, and causes him to labour less; which gives him that hath little or no Possession (and consequently preserves his Desire intire) and opportunity by his Labour to slip into his place.
This Desire may be look'd upon as the great Spring that forces Movement or Labour; and the Love of Ease, as the small Spring or Pendulum, that keeps Men in a continual Equilibral Vibratin of Rich and Poor: so that the one always ballances the other, in such manner, as keeps Labour or Movement continually going, in a certain equal proportion.
All things in the World belong to all Mankind, the Rich and Poor taken together, half of them to half Mankind, a quarter to a quarter, and so on in proportion to the Quantity of Men; by reason all that is necessary or useful to Men, is the Produce of their Labour: And as all Men work all the Labour of the World, one half of them can work but one half of it, and so in proportion to the quantity of men.
The Nations of the World, with respect to Commerce, are but certain quantities of Men, which by reason of an advantageous Disposition or situation, for transporting their Labour, inhabit one place of the World preferably to another.
The mutual Exchange that Nations make of their Labour, is call'd Trade or Commerce.
The Design or End of Commerce, is the drawing to one's self Gold and Silver; which I call the grand real Measure or Denominator of the real Value of all things.
A Nation can naturally draw and keep unto itself, but such a proportion of the real Denominator of the World, as in proportion'd to the quantity of its Inhabitants, because the Denominator can be attracted but by Labour only; and as the whole World tend to the same End, the Labour of each Nation is continually opposed, by all the Labour of the rest of the World.
Whenever I mention the quantity of Inhabitants, I always suppose, that regard which ought to be had, to the Situation, and Disposition, of the different Countries of the World; the same quantity of inhabitants, not producing the same Effect, in all Countries, according as their Dispositions differ: which I shall shew hereafter.Return to top of the Page
Of Accidents that change the Proportion of Particular Denominators of Nations and their Effects
War and Mortality, Etc. may alter the Proportion of private Denominators; as when several Nations are at war together, it may happen, that other Nations may reap the benefit thereof: Because War disturbs and lessens the Labour of those Nations that are at war, by taking off their Poor from their usual Labour, and imploying them in the Defence of the State; so that those Nations not furnished unto the World their Proportion of Labour, cannot retain their former Proportion of the grand Denominator of the World; and those Nations which are at peace, and keep at work their whole Proportion of Poor, draw from those that are at war, besides their own Proportion, such a part of the grand Denominator, as is proportion'd to the number of Men imployed in the War.
When a Nation has attracted a greater Proportion of the grand Denominator of the World, than its proper share; and the Cause of that Attraction ceases, that Nation cannot retain the Overplus of its proper Proportion of the grand Denominator, because in that case, the Proportion of Poor and Rich of that Nation is broken; that is to say, the number of Rich is too great, in proportion to the Poor, so as that Nation cannot furnish unto the World that share of Labour which is proportion'd to that part of the grand Denominator it possesses: in which case all the Labour of the Poor will not ballance the Expence of the Rich. So that there enters in that Nation, more Labour than goes out of it, to ballance its want of Poor: And as the End of Trade is the attracting Gold and Silver, all that difference of Labour is paid in Gold and Silver, until the Denominator be lessen'd, in proportion to other Nations; which also, and at the same time, proportions the number of Poor to that of Rich.
Thus as Labour draws the Denominator of the World, also the Denominator draws Labour from the World; so that if the particular Denominator of any Nation, be greater than its just Proportion, it will draw from the other Nations a Portion of Labour, proportion'd to its Excess; ad if its Denominator be less than its just Proportion, it will draw a Portion of Gold and Silver, proportion'd to what it wants of its just Proportion. Rich Gold and Silver Mines, that belong to certain Nations, and increase their Revenues beyond their natural Proportion act on those Nations, as they had drawn unto themselves by their Labour, a too great Portion of the Denominator of the World; and the Effects thereof, will last as long as the Mines, and act more or less in proportion as they are rich.Return to top of the Page
Of Credit, and its Effects on Trade
Man, generally speaking, being eager and greedy of Gain, is impatient in Trade; so that when he cannot have the Value of things, as soon as he would, he chuses rather to allow unto the Buyer, more or less time, at once to force the Vent, and to prevent any other's supplanting him.
That Time which is allow'd in Trade, is call'd Credit; and as it proceeds from Fear and Desire, and as all Men one with the other, are equally subject to the same Passions, the several Denominators of all the different Nations of the World, are all equally increased by Credit, in proportion to their quantity of Inhabitants.
Credit is to the Denominator, much as the Cypher is to Arithmetick; which of itself is of no Value, unless accompanied or mixed with Numbers, and loses that Value, as those Numbers vanish; in like manner, Credit, the Cypher of the grand Denominator, losing its Value, as Gold and Silver vanish: And as in Arithmetick, Cyphers increase the Value of Numbers; in like manner, Credit increases the Denomination of Value, proportion'd to the Increase of the Denominator by Credit. And as that Addition, or Credit, proceeds from the Nature of Man; I call the real Denominator, mixed with a natural Portion of Credit, the grand Natural Measure or Denominator of the World: and that Denomination which proceeds from it, the Natural Value of things.
If a Nation adds to its Denominator, such a Portion of Credit, as increases it beyond that Proportion which by Trade naturally belongs to it, that Increase of Credit will act on that Nation, as if it had drawn an equal Sum from a Gold or Silver Mine, and will preserve but its Proportion of that Increase; so that the rest thereof will in time be drawn off by the Labour of other Nations, in Gold or Silver. That Nation in that case being unable to furnish unto the rest of the World, the same quantity of Labour it furnish'd when its Denominator was Natural, and proportion'd to the Number of its Inhabitants, the Rich in that case being either richer than they were, or in greater number, consume more Labour than before; so that less Labour is exported from that Nation than was, before the Excess of its Denominator: And the contrary happens, when a Nation retrenches from its Denominator, such a Portion of Credit, as lessens it beyond its natural Proportion; that Diminution breaking the Proportion, between that and the other Nations, will cause it in time, to draw Gold and Silver proportionally from other Nations, until its Denominator recovers its natural Proportion.Return to top of the Page
When a Nation exports more or less Labour, than is imported into it, that difference between Exports and Imports of Labour, is called Ballance of Trade.
When the Ballance of Trade proceeds from the natural Excess, or Diminution of the Denominator by Trade only, it neither is very great, nor lasts long; because as a Denominator, till it hath attain'd its Proportion; also a Denominator above its Proportion, draws the Labour from other Nations, till it be lessen'd to its Proportion: so that Trade causes a Vibration, or continual Ebbing and Flowing; which may be called the natural Ballance of Trade.
Besides this natural Ballance, another is sometimes felt, which may be called the lasting Ballance, and happens when the Denominator, or yearly Revenues, exceed unnaturally.
To give an Idea of the manner by which this lasting Ballance is formed, I shal suppose a Nation composed of four Millions of Souls, and that with a natural Denominator, the Produce of the annual Labour of that Nation, amounts to ten Pounds Sterling a Head, one with the other; which in all makes forty Millions a Year. I suppose also, that this Nation, in this natural State, will draw from the rest of the World, for its Necessities, conveniences, or Superfluities, ten Millions of labour, or foreign Goods; and as I suppose its Denominator exactly natural, it will export such an equal quantity of Labour, as will ballance the ten Millions of Imports: but if to the natural Denominator of this Nation, there be added a Portion of Credit; for example, twenty Millions, bearing an annual Income unto the Proprietors thereof, after the rate of five per cent there will be an unnatural annual Million added to the Rich of that Nation, which amounts to two and a half per cent of all the Labour of that Nation; so that the Labour thereof must extend itself in Denomination of Value, so as to answer the extraordinary Demand of the Rich. And as I suppose the Trade of that Nation to amount to ten Millions of Imports, it's easy to conceive, that after this Excess of Denomination, the ten MIllions of Exports will not ballance the ten Millions of Imports; so that the Ballance will run two and a half per cent against this Nation: consequently there will be 250 Thousand Pounds exported in Coin or Bullion, preferably to any other Store of Labour, that being not only the End of Trade, but also the only Store of Labour, that retains a real Denomination, by the strength of Law that fixes Coin, while all other Labour receives an Addition of negative Denomination. And thus in proportion to a greater Excess, even with respect to the Store, or Capital; for example, I suppose that to the whole Value of the Lands, and other Store of natural and real Labour, there be a sudden, unnatural, and imaginary Addition of 500 Millions, it's easy to conceive, that the Proprietors of those 500 Millions, will draw a Portion of the whole Capital; and there being no Augmentation of Poor, Labour must extend itself, in proportion to the additional Stock: So that if I suppose the Denomination of all the Capital, or natural and real Store of Labour of that Nation to amount to 1000 Millions, this unnatural and imaginary Denomination, will raise Labour to fifty per cent of negative or imaginary Denomination, and cause the Ballance to run against that Nation, in like Proportion, and so annually, or thereabouts, until its whole Denomination return, into the proportional Equilibrium of the rest of the World.
What precedes, supposes the real Part of the Denominator, of such a Bulk, as if the Ballance of Trade had reduced the Denominator to its natural Proportion, there should still remain such a Part, as could support that unnatural Portion of Credit, which had been added to the Denominator of that Nation: But if the real Part of the Denominator, is found to be so small, that being wholly taken off, the Denominator would still exceed the natural Proportion; in that case, when the Ballance had reduced the real part of the Denominator, so as to be just sufficient to support the remaining Excess of the Denominator, that Nation would then be obliged to live on its Store or Capital of exportable labour. After which, Credit would in time be forc'd to yield, in proportion to the remaining Excess of the Denominator. Thus would the Denominator take its natural Proportion, after which all things in time would enter into their natural Proportions, and Denominations; so that all the Profit a Nation gains, by unnatural swelling its Denominator, consists only in the Inhabitants living for a time in proportion to that swelling, so as to make a greater Figure than the rest of the World, but always at the cost of their Coin, or of their Store of real and exportable Labour. For as the whole Creation is in a perpetual Motion, and as God made Man for Labour, so not thing in this World is of any solid or durable Worth, but what is the Produce of Labour; and whatever else bears a Denomination of Value, is only a Shadow without Substance, which must either be wrought for, or vanish to its primitive Nothing, the greatest Power on Earth not being able to create any thing out of nothing. It may substitute the Shadow instead of the Substance, to the full proportion of Substance that belongs to that Power; but then that Substance should be drawn off, or wil in time disappear or slip away of itself. For all Men have a natural Right to their Proportion of what is in the World; so that if we see private Men enjoy above their Proportions, it's either by a greater Government of Passions, or a superior Strength, Genius, or some other Accident. But as Nations are composed of all sorts of Men, they all move in the same equally mix'd manner, and attain to the same End, each in proportion to its number. Thus do Nations attract their Proportions of what is in the World, by the force of the natural right of their Inhabitants; consequently a Nation cannot retain more than its natural Proportion of what is in the World, and the Ballance of Trade must run against it.Of Exchange, and its Effects.
The Excess of the Denominator, with respect to the Indies, or other far distant Countries, between whom is not Exchange, and where the Ballance is always exported in Species or Bullion, is never sensible, but when the real part of the Denominator is so far reduced, as not to be able to support the remaining Excess of the denominator. But in Europe, where Exchanges are made use of, the Excess is felt by their difference, which always follows the Excess of the Denominator, and is greater or lesser between one Nation and the rest, as the Proportion of their several private Denominators differ. For as there happens an Overplus or Difference, which cannot be paid in Labour; those Foreigners that will not run the hazard of transporting Coin, and that cannot or will not stay till the Ballance return in its Equilibrium, allow to those that are willing to stay, or run those risks, a certain Consideration great or small, in proportion to the Ballance of Trade, or according as they can agree.
When by the Excess of the Denominator, the Difference of Exchange is considerably increas'd against a Nation, and Coin become scarce; Foreigners finding a great Loss by way of Exchange, become more impatient of having their own transmitted to them, and chuse rather to imploy it in Goods or Labour, to be transported for their Account, to those Countries it will yield most, in hopes by that means to prevent part of that Loss they would be oliged to bear by way of Exchange. This forces the Labour of that Nation to rise and extend itself in Denomination of Value, so as to answer that Increase of Demand: But as that Increase is forced by the negative part of the Denominator, proceeding from its Excess, or from those Debts that compose it, all that Increase is imaginary or negative. So that when Merchants go about to convert elsewhere, the Labour of that Nation into Gold or Silver, they find themselves in that case obliged to retrench all that forc'd Increase; because that Labour of the rest of the World which interferes with it, being charged but with a natural Denomination, will force its Vent perferably to that which is charged with a greater Denomination. Thus Foreigners finding also their Account short this way, cease to credit this Nation, by importing into it no more Labour than they are sure to export out of it. Thus will that Nation, after having lived on its Coin, be obliged to live on its Store of exportable Labour, until Credit yields; and in the mean while, foreign Manufacturers, whose Labour is not risen, and consequently having more Demand for it than before, find themselves in a condition to imploy that Nation's Produce, or Materials, perceiving they can, by the great Difference of Exchange, allow a great Price for them: this forces those Materials to rise in Denomination of Value, even beyond the Proportion of Exchange, and consequently beyond the Proportion of Manufactures. After which, the Manufacturer finding neither the same Demand, nor Profit as before, is obliged to lessen the Number of his Workmen. Thus by degrees the Workmen are obliged to quit their usual Labour, and betake themselves to other, being forced out of the natural Proportion, to fill up that, which hath regard to the Excess of the Denominator.
From what hath been said hitherto, may be drawn the following Conclusions.
That Credit is of pernicious consequence to that Nation, that uses or encourages it beyond Nature, by reason it exists but at the cost or exclusion of Coin, which composes the real part of the Denominator.
That what is properly call'd Value of things, in a Nation whose Denominator exceeds not its natural Proportion, is a mix'd Denomination, compos'd of the Real Part, and of the Natural Portion of Credit of the Denominator.
That what is call'd Value, in a Nation whose Denominator exceeds the natural Proportion, is not only a mix'd Denominator compos'd of the Real Part, and Natural Portion of Credit but also of the Excess of the Denominator; and that that Excess of Value is negative, and acts positively against that Nation: so that instead of gaining by Trade, it loses proportionably to that Excess of Denomination of Value.
That the Denominator of the World being unlimited, and indefinite, by reason of that indefinite Variation, or Increase, it continually bears, by a continual Addition of Gold and Silver, which is daily drawn from the several Mines of the World; it follows, that the private Denominators of private Nations, are also indefinite.
That although the natural Denominator of a Nation be indefinitely moving, it is however a certain Point, to which a Nation can naturally attain to, by Trade.
That that Point is ever proportioned to the bulk of the general Denominator of the World, and to its number of Inhabitants.
That as Labour is the Foundation of Trade, that Point cannot be attained to, but by that Portion of Labour, which is proportioned to the number of Inhabitants that compose a Nation; nor maintained, when attained to, but by that same Labour.
That when the Ballance of Trade runs, and continues generally running, against a Nation, we may conclude its Denominator exceeds its natural Proportion.
That if Trade was not curbed by Laws, or disturbed by those Accidents that happen in long Wars, etc. which break the natural Proportion, either of People, or of private Denominators; Time would bring all trading Nations of the World into that Equilibrium, which is proportioned, and belongs to the number of their Inhabitants.
That the Riches or Strength of a Nation consists in the Number of its Inhabitants.
Lastly, That as one State may be defended by another, by means of Gold and Silver, as was experienced in the last Wars; Trade is absolutely necessary, being the only means by which a Nation can attain to it Proportion of Riches.
The Manufactures of the World may be reduced to two sorts; that is, the Necessary, which consist in all that is wrought for Man's Necessities or conveniences; and the Superfluous, which consist in all that is wrought, and serves to gratify his Vanity or Pleasures.
While the private Denominator of a Nation is, and lasts in its natural Proportions, and fly from that Proportion, as it moves from it: So that if the Denominator be under its Proportion, necessary Manufactures flourish, and gain from the superfluous in like Proportion; and when it is above its Proportion, the superfluous flourish, and gain also from the necessary in like Proportion.
National Profit happens only, when necessary Manufactures are in their full Proportions, or beyond it; and national Loss, when the superfluous exceed their Proportion.
Manufactures of private Nations may be considered three Ways. That is, the Natural in a bare Proportion, which are those which are naturally just sufficient to answer the intire Demand of the Inhabitants. The Natural in great Proportion, which are those, which besides the Demand of the Inhabitants, furnish an Overplus which is transported to the rest of the World. And the Natural in small Proportion, which are those that cannot naturally be sufficient to answer the Inhabitants Wants, without Help from the rest of the World.
Every Nation naturally possesses a Mixture of these three sorts of Manufactures; but in such a manner, as the Natural in great Proportion, exceed as much, or more, the Demand of the Inhabitants, as those in small Proportion, are short of that Demand; so that they ballance one another by Trade. Neighbouring Nations have, generally speaking, a certain natural Portion, either great or small, of the same Produce and Manufactures, according to their Number of Inhabitants, and as they are disposed and situated.
No Nation can encourage or enlarge its Proportion of any private and natural Manufacture, without discouraging the rest; because whether an Allowance be given, either to the Manufacturer, or Transporter, that Allowance serves, and is employed to attract the Workmen from those other Manufactures, which have some likeness to the encouraged Manufacture: So that what is transported of the encouraged Manufacture, beyond nature, only ballances the Diminution of the others.
When the natural Proportion of one, or more Manufactures, although necessary, is not large enough to answer the intire Demand of the Inhabitants, the best and safest Way is freely to suffer their Importation from the rest of the World; Taxes on Imports being no more than a Degree of Prohibition, and Prohibition only forcing those Manufactures to extend themselves beyond their natural Proportions, to the prejudice of those, which are, according to the Disposition of the country, natural beyond the intire Demand of the Inhabitants; which lessens or hinders their Exportation, in proportion to the prejudice they receive by the Increase of those Manufactures, which are but in part natural, and whereof the Importation is prohibited.
This consider'd we may conclude, that Trade is never in a better condition, than when it's natural and free; the forcing it either by Laws, or Taxes, being always dangerous: because though the intended Benefit or Advantage be perceived, it is difficult to perceive its Countrecoup; which ever is at least in full proportion to the intended Benefit: Nature not yielding at once, sharpens those Countrecoups, and commonly causes a greater Evil, than the intended Benefit can ballance. Moreover, Trade being a tacit and natural Agreement, to give or furnish a Proportion of certain Denominations of Labour, to be drawn back in like Proportion, in such other Denominations, as best suits Necessity or Fancy; Man naturally seeks, and finds, the most easy and natural Means of attaining his Ends, and cannot be diverted from those Means, but by Force, and against his Will.Return to top of the Page
Of the Situation and Disposition of Countries, with their Proportions of Denominator
The best Situations are those near the Sea, where the Labour of the World may be imported and exported with least Charges; and whose Dispositions are such, as by means of Rivers or Canals, the Labour of the Inhabitants may be easily transported from one end of the Country to the other, at small Charge: The Inhabitants of such a Situation, and Disposition, bearing a greater Denominator, than an inferiour Situation and Disposition could, though occupy'd by an equal number of Inhabitants; because all the Charge in transporting Labour, from the Extremitys to the Sea-Ports, is properly a Waste, or Loss, of the Inhabitants Labour: so that there will be more Days work required, to attract one from the Sea Ports, according to the Distance or Disposition. For example, I suppose the Charges of Transportation of Labour from the Extremitys to the Ports, increase it one half every hundred Miles, and reciprocally from the Ports to the Extremitys; that is, supposing one with another a Day's work at two hundred Miles from the Port, is worth or will produce Eight-pence, that this same Day's Work transported within a hundred Miles of the Port, will produce Twelve-pence by reason of the Charge of Transportation, and that for the same reason of the Charge of Transportation, and that for the same reason it yields Eighteen-Pence at the Port, it is plain one Day's Labour of the most distant Inhabitants can produce one at the Port, but after Ten-Pence or five Quarters of a Day's Charges, so that they must furnish nine Quarters of a Day's Work, for one at the Port; and reciprocally a Day's Work transported from the Port to them, will produce but four Ninths of a Day's Work, the Charges of Transportation abated. So that those Inhabitants neither furnishing, nor attracting, the Labour of the World, but after the rate of two Days and a quarter for one, they can neither attract, nor retain, the Denominator, but in like proportion; and nine Inhabitants will be required at the Extremitys, to support such a Denominator, as four Inhabitants could at the Port: and in like manner, it will require three Inhabitants at a hundred Miles from the Port, to support such a Denominator, as two could support at the Port. And thus in proportion to a greater Distance, or a worse Disposition than the Supposition; such as mountainous Countries, which are inacessible to Carriages, and of such a Disposition, as cannot receive Inhabitants but here and there, in certain Corners, which are capable of Productions, but so far and dispers'd from one another, that those Inhabitants may be look'd upon as out of the World, and are of use to a Country only when they quit their Habitations, either to work elsewhere in Harvest-time, or to defend the State.Return to top of the Page
Companies, generally speaking, can be of no advantage to the State, excepting only when private People are not able to attain the intended Ends; such as the bettering the Disposition of the Country, either in making Rivers navigable, or adding Canals in order to quicken the Communication, and render the Disposition capable of bearing a greater number of Inhabitants.
My Reasons are, First, They deprive Man of his natural Right to make the best of his Industry, according to his Genius, or Inclination. Secondly, They encourage Foreigners to live on the Labour of the State. Thirdly, It's exceeding hard to find a number of Men as careful and labourious, as is necessary in buying and selling, and at the same time so generous and disinterested, as not to turn things to their own private advantage, when occasion serves. So that considering the natural Bent of Man, I conceive private Persons will trade to better advantage for the State, than Companies can; besides the danger of their extending their Credit beyond their Proportions to the prejudice and exclusion of Coin, and dividing annually more than they gain by Trade or Labour, to the prejudice of the Proprietors of the real annual Revenues of the Kingdom, by thrusting them out of their natural Proportions of the Whole. For if to the whole Property there be added an unnatural and negative Half, that bears an annual Revenue or Attraction of Labour, in proportion to that Half, the Possessors of the first and natural All, will not be able to attract above two Thirds of all the annual Labour. It is true, they will still attempt the same Denomination of Labour they did before the Addition; but as the added Portion, in attracting its Portion of Labour, would raise it 50 per cent in Denomination, the Proprietors of the first and natural All, having no more than their first annual Denomination, will not be able to attract any more Labour, than two thirds of that they attracted before the Addition. Thus they are thrust out of one Third, and are in effect Proprietors but of two Thirds, instead of the Whole they were possessed of: which is properly only a Transfer of the Propriety of Labour, from the real to the negative possesors; the whole annual Labour of a Nation being always equal to all its annual Revenues, of what Denomination soever they be.Return to top of the Page
Of Altering the Denomination of Coin, and its Effects
When by some Accident or other, the Denominator or Denomination of the Whole is larger than the State can bear, the Remedys are, either to proportion the People to the Denominator, or the Denominator to the People: but as the first is most difficult, and almost impossible, the proportioning the Denominator to the People must be prefer'd. Which may be done either by laying a Tax on the Inhabitants, to be employ'd in sinking the Debts of the Nation, or be reserved against a future Exigency of the State; or by raising the Denomination of Coin, in proportion to such a Portion as would be thought necessary to be cut off from a Nation. For example, I suppose, that by reason of the Excess of the Denominator, whether it be to draw more Coin into a Nation, or only to preserve that already in it, the Denomination of Coin be doubled; it is plain Credit then would be reduced to one half, whilst the real Part of the Denominator, still being the same Portion of the grand Denominator of the World, it can express but that selfsame Portion, and can retain but that same Strength or Value, which is proportioned to that Portion, whether its Denomination be high or low, which is different as to Credit; it being only a Denomination of a certain Number of Unities of the private Denominator of a Nation, that Denomination alters in Value in like proportion, as the Unity is altered. And as in this case the Unity would be reduced to half its former Value, Credit would also be reduced to half its former Value, and would express but one half of that Portion of the grand Denominator of the World, it did express before this Operation; and reciprocally, the lowering the Denomination of Coin, enlarge the Denominator, by enlarging Credit.
What precedes, shews what is feasible in case of extreme Necessity; but as such an Operation would be of great prejudice to the Proprietors of Land, Nations ought by all means to prevent, either the Want of such a Remedy, or Necessity of such an Unravelling, as would be the more pernicious, the longer it had been a coming; and when the Disposition of natural Manufactures would be enlarged, in proportion to the swelling of the Denominator and Denomination: because supposing a Nation had enlarged its Denominator, and Denomination, so as to want such a Reduction; that Nation ought first to consider how long the Evil was coming, that the Remedy might be applied accordingly: for when the Evil is new and sudden, it may at once alter the natural Proportion of Rich and Poor of that Nation; but it cannot, though ever so great, alter the natural Proportion of necessary and superfluous Manufactures, but gradually, and with time. And while necessary and superfluous Labours are in their natural Proportions, the Denominator may be proportioned thereto, without exposing Trade to any sensible Convulsions: But when the Evil is of long standing, the Proportion of necessary Manufactures is then too small, by reason as the Denominator of a Nation increases, the Manufactures of Superfluities draw from the necessary Manufactures their Workmen, the Masters of the superfluous raising more Apprentices than before, and those of the necessary less in like proportion. So that if after several Years unnatural Increase of Denominator, a Nation would suddenly cure the Evil, by suddenly proportioning the Denominator to the Inhabitants, the Remedy would prove too sharp; for in that case the Wants of Superfluities would be much lessened, and those of Necessities much increased; and in such a manner as the necessary Manufactures could not at any rate answer the extraordinary Demand, until they had attracted from the superfluous, those Workmen they had lost, while the Denominator was increasing; which is a Work of time.
As I suppose that Nation I make use of for example in a natural State, I do not suppose it loaded with a foreign Debt; therefore before I make an end of this Tract, I think proper to take notice, that a Nation must look upon a foreign Debt, as part of its All; which, tough negative, acts positively on that Nation, and, according to the Rules of this system, as long as both the Confidence and Fear of Strangers keep them in a ballance. But when those two Passions fly from their Equilibrium, the Debt acts beyond the Rules, in proportion to the Distance of that Equilibrium, and to the Largeness of the Debt. Thus is an indebted Nation not only obliged to keep those strange Creditors out of its own Labour, but also its Coin and Bullion are ever subject to their Passions and Occasions; they having it in their power, at will, irregularly to turn the Ballance.
As I do not pretend to know the State of Nations; I make no Application, but leave it to those, who, by their Station, are best capable of it. I shall only add, That in stating the Case of Nations, regard ought to be had, either to the Empire over, or Subjection to other Nations; that, in many cases, altering the Proportion of the Denominator. For supposing two equal Nations, and that one hath such a Power or Right over the other; as, for example, one quarter of the yearly Produce of its Labour be expended in the other: in that case the imperial Nation will support a Denominator one quarter above its natural Proportion; and its Proportion of superfluous Manufactures, will run above nature in like Proportion. but then the subjected Nation will support but three quarters of its natural Denominator; and its Proportion of necessary Manufacturers will run above nature; and as fast as the other quarter is attracted from the World, it will be drawn off by the imperial one: So that these two Nations must be looked upon, one as composed of more Rich by one quarter than its natural Proportion, and the other of less Rich in like proportion. And as the Excess of Rich in the one, is supported by the Inhabitants of the other, it will keep its ground; but both taken together, will still keep but their natural Proportion. So that where a Nation is found to bear a greater Proportion of Denominator, and superfluous Manufactures, than its Number of Inhabitants seem capable of naturally supporting, it will, if looked into, appear, That that Increase is maintained by the Labour of other Nations; which, by some Accident or other, are either subjected or indebted to it.