An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader with highlighter txt) 📖

to infer the diminution of the value of silver from any

observations which they had made upon the prices either of corn, or of

other commodities, they had still less reason to infer it from any supposed

increase of wealth and improvement.

 

Second Period. � But how various soever may have been the opinions of the

learned concerning the progress of the value of silver during the first

period, they are unanimous concerning it during the second.

 

From about 1570 to about 1640, during a period of about seventy years, the

variation in the proportion between the value of silver and that of corn

held a quite opposite course. Silver sunk in its real value, or would

exchange for a smaller quantity of labour than before; and corn rose in its

nominal price, and, instead of being commonly sold for about two ounces of

silver the quarter, or about ten shillings of our present money, came to be

sold for six and eight ounces of silver the quarter, or about thirty and

forty shillings of our present money.

 

The discovery of the abundant mines of America seems to have been the sole

cause of this diminution in the value of silver, in proportion to that of

corn. It is accounted for, accordingly, in the same manner by every body ;

and there never has been any dispute, either about the fact, or about the

cause of it. The greater part of Europe was, during this period, advancing

in industry and improvement, and the demand for silver must consequently

have been increasing; but the increase of the supply had, it seems, so far

exceeded that of the demand, that the value of that metal sunk considerably.

The discovery of the mines of America, it is to be observed, does not seem

to have had any very sensible effect upon the prices of things in England

till after 1570; though even the mines of Potosi had been discovered more

than twenty years before.

 

From 1595 to 1620, both inclusive, the average price of the quarter of nine

bushels of the best wheat, at Windsor market, appears, from the accounts of

Eton college, to have been � 2:1:6 9/13. From which sum, neglecting the

fraction, and deducting a ninth, or 4s. 7 1/3d., the price of the quarter of

eight bushels comes out to have been � 1:16:10 2/3. And from this sum,

neglecting likewise the fraction, and deducting a ninth, or 4s. 1 1/9d., for

the difference between the price of the best wheat and that of the middle

wheat, the price of the middle wheat comes out to have been about � 1:12:8

8/9, or about six ounces and one-third of an ounce of silver.

 

From 1621 to 1636, both inclusive, the average price of the same measure of

the best wheat, at the same market, appears, from the same accounts, to have

been � 2:10s.; from which, making the like deductions as in the foregoing

case, the average price of the quarter of eight bushels of middle wheat comes

out to have been � 1:19:6, or about seven ounces and two-thirds of an ounce

of silver.

 

Third Period. - Between 1630 and 1640, or about 1636, the effect of the

discovery of the mines of America, in reducing the value of silver, appears

to have been completed, and the value of that metal seems never to have sunk

lower in proportion to that of corn than it was about that time. It seems to

have risen somewhat in the course of the present century, and it had

probably begun to do so, even some time before the end of the last.

 

From 1637 to 1700, both inclusive, being the sixty-four last years of the

last century the average price of the quarter of nine bushels of the best

wheat, at Windsor market, appears, from the same accounts, to have been �

2:11:0 1/3, which is only 1s. 0 1/3d. dearer than it had been during the

sixteen years before. But, in the course of these sixty-four years, there

happened two events, which must have produced a much greater scarcity of

corn than what the course of the season is would otherwise have occasioned,

and which, therefore, without supposing any further reduction in the value

of silver, will much more than account for this very small enhancement of

price.

 

The first of these events was the civil war, which, by discouraging tillage

and interrupting commerce, must have raised the price of corn much above

what the course of the seasons would otherwise have occasioned. It must have

had this effect, more or less, at all the different markets in the kingdom,

but particularly at those in the neighbourhood of London, which require to

be supplied from the greatest distance. In 1648, accordingly, the price of

the best wheat, at Windsor market, appears, from the same accounts, to have

been � 4:5s., and, in 1649, to have been � 4, the quarter of nine bushels.

The excess of those two years above � 2:10s. (the average price of the

sixteen years preceding 1637 is � 3:5s., which, divided among the sixty four

last years of the last century, will alone very nearly account for that

small enhancement of price which seems to have taken place in them. These,

however, though the highest, are by no means the only high prices which seem

to have been occasioned by the civil wars.

 

The second event was the bounty upon the exportation of corn, granted in

1688. The bounty, it has been thought by many people, by encouraging

tillage, may, in a long course of years, have occasioned a greater

abundance, and, consequently, a greater cheapness of corn in the home

market, than what would otherwise have taken place there. How far the bounty

could produce this effect at any time I shall examine hereafter: I shall

only observe at present, that between 1688 and 1700, it had not time to

produce any such effect. During this short period, its only effect must have

been, by encouraging the exportation of the surplus produce of every year,

and thereby hindering the abundance of one year from compensating the

scarcity of another, to raise the price in the home market. The scarcity

which prevailed in England, from 1693 to 1699, both inclusive, though no

doubt principally owing to the badness of the seasons, and, therefore,

extending through a considerable part of Europe, must have been somewhat

enhanced by the bounty. In 1699, accordingly, the further exportation of

corn was prohibited for nine months.

 

There was a third event which occurred in the course of the same period, and

which, though it could not occasion any scarcity of corn, nor, perhaps, any

augmentation in the real quantity of silver which was usually paid for it,

must necessarily have occasioned some augmetation in the nominal sum. This

event was the great debasement of the silver coin, by clipping and wearing.

This evil had begun in the reign of Charles II. and had gone on continually

increasing till 1695; at which time, as we may learn from Mr Lowndes, the

current silver coin was, at an average, near five-and-twenty per cent. below

its standard value. But the nominal sum which constitutes the market price

of every commodity is necessarily regulated, not so much by the quantity of

silver, which, according to the standard, ought to be contained in it, as by

that which, it is found by experience, actually is contained in it. This

nominal sum, therefore, is necessarily higher when the coin is much debased

by clipping and wearing, than when near to its standard value.

 

In the course of the present century, the silver coin has not at any time

been more below its standard weight than it is at present. But though very

much defaced, its value has been kept up by that of the gold coin, for which

it is exchanged. For though, before the late recoinage, the gold coin was a

good deal defaced too, it was less so than the silver. In 1695, on the

contrary, the value of the silver coin was not kept up by the gold coin; a

guinea then commonly exchanging for thirty shillings of the worn and clipt

silver. Before the late recoinage of the gold, the price of silver bullion

was seldom higher than five shillings and sevenpence an ounce, which is but

fivepence above the mint price. But in 1695, the common price of silver

bullion was six shillings and fivepence an ounce, {Lowndes’s Essay on the

Silver Coin, 68.} which is fifteen pence above the mint price. Even before

the late recoinage of the gold, therefore, the coin, gold and silver

together, when compared with silver bullion, was not supposed to be more

than eight per cent. below its standard value, In 1695, on the contrary, it

had been supposed to be near five-and-twenty per cent. below that value. But

in the beginning of the present century, that is, immediately after the

great recoinage in King William’s time, the greater part of the current

silver coin must have been still nearer to its standard weight than it is at

present. In the course of the present century, too, there has been no great

public calamity, such as a civil war, which could either discourage tillage,

or interrupt the interior commerce of the country. And though the bounty

which has taken place through the greater part of this century, must always

raise the price of corn somewhat higher than it otherwise would be in the

actual state of tillage ; yet, as in the course of this century, the bounty

has had full time to produce all the good effects commonly imputed to it to

encourage tillage, and thereby to increase the quantity of corn in the home

market, it may, upon the principles of a system which I shall explain and

examine hereafter, be supposed to have done something to lower the price of

that commodity the one way, as well as to raise it the other. It is by many

people supposed to have done more. In the sixty-four years of the present

century, accordingly, the average price of the quarter of nine bushels of

the best wheat, at Windsor market, appears, by the accounts of Eton college,

to have been � 2:0:6 10/32, which is about ten shillings and sixpence, or

more than five-and-twenty percent. cheaper than it had been during the

sixty-four last years of the last century; and about nine shillings and

sixpence cheaper than it had been during the sixteen years preceding 1636,

when the discovery of the abundant mines of America may be supposed to have

produced its full effect ; and about one shilling cheaper than it had been

in the twenty-six years preceding 1620, before that discovery can well be

supposed to have produced its full effect. According to this account, the

average price of middle wheat, during these sixty-four first years of the

present century, comes out to have been about thirty-two shillings the

quarter of eight bushels.

 

The value of silver, therefore, seems to have risen somewhat in proportion

to that of corn during the course of the present century, and it had

probably begun to do so even some time before the end of the last.

 

In 1687, the price of the quarter of nine bushels of the best wheat, at

Windsor market, was � 1:5:2, the lowest price at which it had ever been from

1595.

 

In 1688, Mr Gregory King, a man famous for his knowledge in matters of this

kind, estimated the average price of wheat, in years of moderate plenty, to

be to the grower 3s. 6d. the bushel, or eight-and-twenty shillings the

quarter. The grower’s price I understand to be the same with what is

sometimes called the contract price, or the price at which a