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

lead to extravagance; though vanity

almost always does. Every Tartar chief, accordingly, has a

treasure. The treasures of Mazepa, chief of the Cossacks in the

Ukraine, the famous ally of Charles XII., are said to have been

very great. The French kings of the Merovingian race had all

treasures. When they divided their kingdom among their different

children, they divided their treasures too. The Saxon princes,

and the first kings after the Conquest, seem likewise to have

accumulated treasures. The first exploit of every new reign was

commonly to seize the treasure of the preceding king, as the most

essential measure for securing the succession. The sovereigns of

improved and commercial countries are not under the same

necessity of accummlating treasures, because they can generally

draw from their subjects extraordinary aids upon extraordinary

occasions. They are likewise less disposed to do so. They

naturally, perhaps necessarily, follow the mode of the times ;

and their expense comes to be regulated by the same extravagant

vanity which directs that of all the other great proprietors in

their dominions. The insignificant pageantry of their court

becomes every day more brilliant; and the expense of it not only

prevents accumulation, but frequently encroaches upon the funds

destined for more necessary expenses. What Dercyllidas said of

the court of Persia, may be applied to that of several European

princes, that he saw there much splendour, but little strength,

and many servants, but few soldiers.

 

The importation of gold and silver is not the principal, much

less the sole benefit, which a nation derives from its foreign

trade. Between whatever places foreign trade is carried on, they

all of them derive two distinct benefits from it. It carries out

that surplus part of the produce of their land and labour for

which there is no demand among them, and brings back in return

for it something else for which there is a demand. It gives a

value to their superfluities, by exchanging them for something

else, which may satisfy a part of their wants and increase their

enjoyments. By means of it, the narrowness of the home market

does not hinder the division of labour in any particular branch

of art or manufacture from being carried to the highest

perfection. By opening a more extensive market for whatever part

of the produce of their labour may exceed the home consumption,

it encourages them to improve its productive power, and to

augment its annual produce to the utmost, and thereby to increase

the real revenue and wealth of the society. These great and

important services foreign trade is continually occupied in

performing to all the different countries between which it is

carried on. They all derive great benefit from it, though that in

which the merchant resides generally derives the greatest, as he

is generally more employed in supplying the wants, and carrying

out the superfluities of his own, than of any other particular

country. To import the gold and silver which may be wanted into

the countries which have no mines, is, no doubt a part of the

business of foreign commerce. It is, however, a most

insignificant part of it. A country which carried on foreign

trade merely upon this account, could scarce have occasion to

freight a ship in a century.

 

It is not by the importation of gold and silver that the

discovery of America has enriched Europe. By the abundance of the

American mines, those metals have become cheaper. A service of

plate can now be purchased for about a third part of the corn, or

a third part of the labour, which it would have cost in the

fifteenth century. With the same annual expense of labour and

commodities, Europe can annually purchase about three times the

quantity of plate which it could have purchased at that time. But

when a commodity comes to be sold for a third part of what bad

been its usual price, not only those who purchased it before can

purchase three times their former quantity, but it is brought

down to the level of a much greater number of purchasers, perhaps

to more than ten, perhaps to more than twenty times the former

number. So that there may be in Europe at present, not only more

than three times, but more than twenty or thirty times the

quantity of plate which would have been in it, even in its

present state of improvement, had the discovery of the American

mines never been made. So far Europe has, no doubt, gained a real

conveniency, though surely a very trifling one. The cheapness of

gold and silver renders those metals rather less fit for the

purposes of money than they were before. In order to make the

same purchases, we must load ourselves with a greater quantity of

them, and carry about a shilling in our pocket, where a groat

would have done before. It is difficult to say which is most

trifling, this inconveniency, or the opposite conveniency.

Neither the one nor the other could have made any very essential

change in the state of Europe. The discovery of America, however,

certainly made a most essential one. By opening a new and

inexhaustible market to all the commodities of Europe, it gave

occasion to new divisions of labour and improvements of art,

which in the narrow circle of the ancient commerce could never

have taken place, for want of a market to take off the greater

part of their produce. The productive powers of labour were

improved, and its produce increased in all the different

countries of Europe, and together with it the real revenue and

wealth of the inhabitants. The commodities of Europe were almost

all new to America, and many of those of America were new to

Europe. A new set of exchanges, therefore, began to take place,

which had never been thought of before, and which should

naturally have proved as advantageous to the new, as it certainly

did to the old continent. The savage injustice of the Europeans

rendered an event, which ought to have been beneficial to all,

ruinous and destructive to several of those unfortunate

countries.

 

The discovery of a passage to the East Indies by the Cape of Good

Hope, which happened much about the same time, opened perhaps a

still more extensive range to foreign commerce, than even that of

America, notwithstanding the greater distance. There were but two

nations in America, in any respect, superior to the savages, and

these were destroyed almost as soon as discovered. The rest were

mere savages. But the empires of China, Indostan, Japan, as well

as several others in the East Indies, without having richer mines

of gold or silver, were, in every other respect, much richer,

better cultivated, and more advanced in all arts and

manufactures, than either Mexico or Peru, even though we should

credit, what plainly deserves no credit, the exaggerated accounts

of the Spanish writers concerning the ancient state of those

empires. But rich and civilized nations can always exchange to a

much greater value with one another, than with savages and

barbarians. Europe, however, has hitherto derived much less

advantage from its commerce with the East Indies, than from that

with America. The Portuguese monopolized the East India trade to

themselves for about a century ; and it was only indirectly, and

through them, that the other nations of Europe could either send

out or receive any goods from that country. When the Dutch, in

the beginning of the last century, began to encroach upon them,

they vested their whole East India commerce in an exclusive

company. The English, French, Swedes, and Danes, have all

followed their example; so that no great nation of Europe has

ever yet had the benefit of a free commerce to the East Indies.

No other reason need be assigned why it has never been so

advantageous as the trade to America, which, between almost every

nation of Europe and its own colonies, is free to all its

subjects. The exclusive privileges of those East India companies,

their great riches, the great favour and protection which these

have procured them from their respective governments, have

excited much envy against them. This envy has frequently

represented their trade as altogether pernicious, on account of

the great quantities of silver which it every year exports from

the countries from which it is carried on. The parties concerned

have replied, that their trade by this continual exportation of

silver, might indeed tend to impoverish Europe in general, but

not the particular country from which it was carried on ;

because, by the exportation of a part of the returns to other

European countries, it annually brought home a much greater

quantity of that metal than it carried out. Both the objection

and the reply are founded in the popular notion which I have been

just now examining. It is therefore unnecessary to say any thing

further about either. By the annual exportation of silver to the

East Indies, plate is probably somrwhat dearer in Europe than it

otherwise might have been ; and coined silver probably purchases

a larger quantity both of labour and commodities. The former of

these two effects is a very small loss, the latter a very small

advantage ; both too insignificant to deserve any part of the

public attention. The trade to the East Indies, by opening a

market to the commodities of Europe, or, what comes nearly to the

same thing, to the gold and silver which is purchased with those

commodities, must necessarily tend to increase the annual

production of European commodities, and consequently the real

wealth and revenue of Europe. That it has hitherto increased them

so little, is probably owing to the restraints which it

everywhere labours under.

 

I thought it necessary, though at the hazard of being tedious, to

examine at full length this popular notion, that wealth consists

in money or in gold and silver. Money, in common language, as I

have already observed, frequently signifies wealth ; and this

ambiguity of expression has rendered this popular notion so

familiar to us, that even they who are convinced of its

absurdity, are very apt to forget their own principles, and, in

the course of their reasonings, to take it for granted as a

certain and undeniable truth. Some of the best English writers

upon commerce set out with observing, that the wealth of a

country consists, not in its gold and silver only, but in its

lands, houses, and consumable goods of all different kinds. In

the course of their reasonings, however, the lands, houses, and

consumable goods, seem to slip out of their memory; and the

strain of their argument frequently supposes that all wealth

consists in gold and silver, and that to multiply those metals is

the great object of national industry and commerce.

 

The two principles being established, however, that wealth

consisted in gold and silver, and that those metals could be

brought into a country which had no mines, only by the balance of

trade, or by exporting to a greater value than it imported ; it

necessarily became the great object of political economy to

diminish as much as possible the importation of foreign goods for

home consumption, and to increase as much as possible the

exportation of the produce of domestic industry. Its two great

engines for enriching the country, therefore, were restraints

upon importation, and encouragement to exportation.

 

The restraints upon importation were of two kinds.

 

First, restraints upon the importation of such foreign goods for

home consumption as could be produced at home, from whatever

country they were imported.

 

Secondly, restraints upon the importation of goods of almost all

kinds, from those particular countries with which the balance of

trade was supposed to be disadvantageous.

 

Those different restraints consisted sometimes in high duties,

and sometimes in absolute prohibitions.

 

Exportation was encouraged sometimes by drawbacks,