Of The Extraordinary Restraints Upon The Importation Of Goods Of Almost All Kinds

Part I--Of the Unreasonableness of those Restraints, even upon the

Principles of the Commercial System.

To lay extraordinary restraints upon the importation of goods of almost

all kinds, from those particular countries with which the balance of

trade is supposed to be disadvantageous, is the second expedient by

which the commercial system proposes to increase the quantity of gold

and silver. Thus, in Grea
Britain, Silesia lawns may be imported for

home consumption, upon paying certain duties; but French cambrics and

lawns are prohibited to be imported, except into the port of London,

there to be warehoused for exportation. Higher duties are imposed upon

the wines of France than upon those of Portugal, or indeed of any other

country. By what is called the impost 1692, a duty of five and-twenty

per cent. of the rate or value, was laid upon all French goods; while

the goods of other nations were, the greater part of them, subjected to

much lighter duties, seldom exceeding five per cent. The wine, brandy,

salt, and vinegar of France, were indeed excepted; these commodities

being subjected to other heavy duties, either by other laws, or

by particular clauses of the same law. In 1696, a second duty of

twenty-five per cent. the first not having been thought a sufficient

discouragement, was imposed upon all French goods, except brandy;

together with a new duty of five-and-twenty pounds upon the ton of

French wine, and another of fifteen pounds upon the ton of French

vinegar. French goods have never been omitted in any of those general

subsidies or duties of five per cent. which have been imposed upon all,

or the greater part, of the goods enumerated in the book of rates. If we

count the one-third and two-third subsidies as making a complete subsidy

between them, there have been five of these general subsidies; so that,

before the commencement of the present war, seventy-five per cent. may

be considered as the lowest duty to which the greater part of the goods

of the growth, produce, or manufacture of France, were liable. But upon

the greater part of goods, those duties are equivalent to a prohibition.

The French, in their turn, have, I believe, treated our goods and

manufactures just as hardly; though I am not so well acquainted with

the particular hardships which they have imposed upon them. Those mutual

restraints have put an end to almost all fair commerce between the

two nations; and smugglers are now the principal importers, either of

British goods into France, or of French goods into Great Britain. The

principles which I have been examining, in the foregoing chapter, took

their origin from private interest and the spirit of monopoly; those

which I am going te examine in this, from national prejudice and

animosity. They are, accordingly, as might well be expected, still more

unreasonable. They are so, even upon the principles of the commercial


First, Though it were certain that in the case of a free trade between

France and England, for example, the balance would be in favour

of France, it would by no means follow that such a trade would be

disadvantageous to England, or that the general balance of its whole

trade would thereby be turned more against it. If the wines of France

are better and cheaper than those of Portugal, or its linens than those

of Germany, it would be more advantageous for Great Britain to purchase

both the wine and the foreign linen which it had occasion for of

France, than of Portugal and Germany. Though the value of the annual

importations from France would thereby be greatly augmented, the value

of the whole annual importations would be diminished, in proportion

as the French goods of the same quality were cheaper than those of the

other two countries. This would be the case, even upon the supposition

that the whole French goods imported were to be consumed in Great


But, Secondly, A great part of them might be re-exported to other

countries, where, being sold with profit, they might bring back a

return, equal in value, perhaps, to the prime cost of the whole French

goods imported. What has frequently been said of the East India trade,

might possibly be true of the French; that though the greater part of

East India goods were bought with gold and silver, the re-exportation of

a part of them to other countries brought back more gold and silver

to that which carried on the trade, than the prime cost of the whole

amounted to. One of the most important branches of the Dutch trade at

present, consists in the carriage of French goods to other European

countries. Some part even of the French wine drank in Great Britain, is

clandestinely imported from Holland and Zealand. If there was either

a free trade between France and England, or if French goods could be

imported upon paying only the same duties as those of other European

nations, to be drawn back upon exportation, England might have some

share of a trade which is found so advantageous to Holland.

Thirdly, and lastly, There is no certain criterion by which we can

determine on which side what is called the balance between any two

countries lies, or which of them exports to the greatest value. National

prejudice and animosity, prompted always by the private interest of

particular traders, are the principles which generally direct our

judgment upon all questions concerning it. There are two criterions,

however, which have frequently been appealed to upon such occasions, the

custom-house books and the course of exchange. The custom-house books, I

think, it is now generally acknowledged, are a very uncertain criterion,

on account of the inaccuracy of the valuation at which the greater part

of goods are rated in them. The course of exchange is, perhaps, almost

equally so.

When the exchange between two places, such as London and Paris, is at

par, it is said to be a sign that the debts due from London to Paris are

compensated by those due from Paris to London. On the contrary, when a

premium is paid at London for a bill upon Paris, it is said to be a sign

that the debts due from London to Paris are not compensated by those due

from Paris to London, but that a balance in money must be sent out

from the latter place; for the risk, trouble, and expense, of exporting

which, the premium is both demanded and given. But the ordinary state of

debt and credit between those two cities must necessarily be regulated,

it is said, by the ordinary course of their dealings with one another.

When neither of them imports from from other to a greater amount than it

exports to that other, the debts and credits of each may compensate one

another. But when one of them imports from the other to a greater value

than it exports to that other, the former necessarily becomes indebted

to the latter in a greater sum than the latter becomes indebted to it:

the debts and credits of each do not compensate one another, and money

must be sent out from that place of which the debts overbalance the

credits. The ordinary course of exchange, therefore, being an indication

of the ordinary state of debt and credit between two places, must

likewise be an indication of the ordinary course of their exports and

imports, as these necessarily regulate that state.

But though the ordinary course of exchange shall be allowed to be a

sufficient indication of the ordinary state of debt and credit between

any two places, it would not from thence follow, that the balance of

trade was in favour of that place which had the ordinary state of debt

and credit in its favour. The ordinary state of debt and credit between

any two places is not always entirely regulated by the ordinary course

of their dealings with one another, but is often influenced by that

of the dealings of either with many other places. If it is usual, for

example, for the merchants of England to pay for the goods which they

buy of Hamburg, Dantzic, Riga, etc. by bills upon Holland, the ordinary

state of debt and credit between England and Holland will not be

regulated entirely by the ordinary course of the dealings of those

two countries with one another, but will be influenced by that of the

dealings in England with those other places. England may be obliged to

send out every year money to Holland, though its annual exports to

that country may exceed very much the annual value of its imports from

thence, and though what is called the balance of trade may be very much

in favour of England.

In the way, besides, in which the par of exchange has hitherto been

computed, the ordinary course of exchange can afford no sufficient

indication that the ordinary state of debt and credit is in favour of

that country which seems to have, or which is supposed to have, the

ordinary course of exchange in its favour; or, in other words, the

real exchange may be, and in fact often is, so very different from the

computed one, that, from the course of the latter, no certain conclusion

can, upon many occasions, be drawn concerning that of the former.

When for a sum or money paid in England, containing, according to the

standard of the English mint, a certain number of ounces of pure silver,

you receive a bill for a sum of money to be paid in France, containing,

according to the standard of the French mint, an equal number of ounces

of pure silver, exchange is said to be at par between England and

France. When you pay more, you are supposed to give a premium, and

exchange is said to be against England, and in favour of France. When

you pay less, you are supposed to get a premium, and exchange is said to

be against France, and in favour of England.

But, first, We cannot always judge of the value of the current money of

different countries by the standard of their respective mints. In some

it is more, in others it is less worn, clipt, and otherwise degenerated

from that standard. But the value of the current coin of every country,

compared with that of any other country, is in proportion, not to the

quantity of pure silver which it ought to contain, but to that which it

actually does contain. Before the reformation of the silver coin in King

William's time, exchange between England and Holland, computed in the

usual manner, according to the standard of their respective mints, was

five-and twenty per cent. against England. But the value of the current

coin of England, as we learn from Mr Lowndes, was at that time rather

more than five-and-twenty per cent. below its standard value. The

real exchange, therefore, may even at that time have been in favour of

England, notwithstanding the computed exchange was so much against it;

a smaller number or ounces of pure silver, actually paid in England, may

have purchased a bill for a greater number of ounces of pure silver to

be paid in Holland, and the man who was supposed to give, may in reality

have got the premium. The French coin was, before the late reformation

of the English gold coin, much less wore than the English, and was

perhaps two or three per cent. nearer its standard. If the computed

exchange with France, therefore, was not more than two or three per

cent. against England, the real exchange might have been in its favour.

Since the reformation of the gold coin, the exchange has been constantly

in favour of England, and against France.

Secondly, In some countries the expense of coinage is defrayed by the

government; in others, it is defrayed by the private people, who carry

their bullion to the mint, and the government even derives some revenue

from the coinage. In England it is defrayed by the government; and if

you carry a pound weight of standard silver to the mint, you get back

sixty-two shillings, containing a pound weight of the like standard

silver. In France a duty of eight per cent. is deducted for the coinage,

which not only defrays the expense of it, but affords a small revenue

to the government. In England, as the coinage costs nothing, the current

coin can never be much more valuable than the quantity of bullion which

it actually contains. In France, the workmanship, as you pay for it,

adds to the value, in the same manner as to that of wrought plate. A sum

of French money, therefore, containing an equal weight of pure silver,

is more valuable than a sum of English money containing an equal weight

of pure silver, and must require more bullion, or other commodities, to

purchase it. Though the current coin of the two countries, therefore,

were equally near the standards of their respective mints, a sum of

English money could not well purchase a sum of French money containing

an equal number of ounces of pure silver, nor, consequently, a bill upon

France for such a sum. If, for such a bill, no more additional money was

paid than what was sufficient to compensate the expense of the French

coinage, the real exchange might be at par between the two countries;

their debts and credits might mutually compensate one another, while

the computed exchange was considerably in favour of France. If less than

this was paid, the real exchange might be in favour of England, while

the computed was in favour of France.

Thirdly, and lastly, In some places, as at Amsterdam, Hamburg, Venice,

etc. foreign bills of exchange are paid in what they call bank money;

while in others, as at London, Lisbon, Antwerp, Leghorn, etc. they are

paid in the common currency of the country. What is called bank money,

is always of more value than the same nominal sum of common currency.

A thousand guilders in the bank of Amsterdam, for example, are of more

value than a thousand guilders of Amsterdam currency. The difference

between them is called the agio of the bank, which at Amsterdam is

generally about five per cent. Supposing the current money of the two

countries equally near to the standard of their respective mints, and

that the one pays foreign bills in this common currency, while the other

pays them in bank money, it is evident that the computed exchange may

be in favour of that which pays in bank money, though the real exchange

should be in favour of that which pays in current money; for the same

reason that the computed exchange may be in favour of that which pays

in better money, or in money nearer to its own standard, though the real

exchange should be in favour of that which pays in worse. The computed

exchange, before the late reformation of the gold coin, was generally

against London with Amsterdam, Hamburg, Venice, and, I believe, with all

other places which pay in what is called bank money. It will by no

means follow, however, that the real exchange was against it. Since the

reformation of the gold coin, it has been in favour of London, even

with those places. The computed exchange has generally been in favour

of London with Lisbon, Antwerp, Leghorn, and, if you except France, I

believe with most other parts of Europe that pay in common currency; and

it is not improbable that the real exchange was so too.

Digression concerning Banks of Deposit, particularly concerning that of


The currency of a great state, such as France or England, generally

consists almost entirely of its own coin. Should this currency,

therefore, be at any time worn, clipt, or otherwise degraded below its

standard value, the state, by a reformation of its coin, can effectually

re-establish its currency. But the currency of a small state, such as

Genoa or Hamburg, can seldom consist altogether in its own coin,

but must be made up, in a great measure, of the coins of all the

neighbouring states with which its inhabitants have a continual

intercourse. Such a state, therefore, by reforming its coin, will not

always be able to reform its currency. If foreign bills of exchange are

paid in this currency, the uncertain value of any sum, of what is in

its own nature so uncertain, must render the exchange always very

much against such a state, its currency being in all foreign states

necessarily valued even below what it is worth.

In order to remedy the inconvenience to which this disadvantageous

exchange must have subjected their merchants, such small states, when

they began to attend to the interest of trade, have frequently enacted

that foreign bills of exchange of a certain value should be paid, not in

common currency, but by an order upon, or by a transfer in the books of

a certain bank, established upon the credit, and under the protection

of the state, this bank being always obliged to pay, in good and true

money, exactly according to the standard of the state. The banks of

Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to have been

all originally established with this view, though some of them may have

afterwards been made subservient to other purposes. The money of such

banks, being better than the common currency of the country, necessarily

bore an agio, which was greater or smaller, according as the currency

was supposed to be more or less degraded below the standard of the

state. The agio of the bank of Hamburg, for example, which is said to be

commonly about fourteen per cent. is the supposed difference between the

good standard money of the state, and the clipt, worn, and diminished

currency, poured into it from all the neighbouring states.

Before 1609, the great quantity of clipt and worn foreign coin which the

extensive trade of Amsterdam brought from all parts of Europe, reduced

the value of its currency about nine per cent. below that of good money

fresh from the mint. Such money no sooner appeared, than it was melted

down or carried away, as it always is in such circumstances. The

merchants, with plenty of currency, could not always find a sufficient

quantity of good money to pay their bills of exchange; and the value of

those bills, in spite of several regulations which were made to prevent

it, became in a great measure uncertain.

In order to remedy these inconveniencies, a bank was established in

1609, under the guarantee of the city. This bank received both foreign

coin, and the light and worn coin of the country, at its real intrinsic

value in the good standard money of the country, deducting only so much

as was necessary for defraying the expense of coinage and the other

necessary expense of management. For the value which remained after this

small deduction was made, it gave a credit in its books. This credit was

called bank money, which, as it represented money exactly according

to the standard of the mint, was always of the same real value, and

intrinsically worth more than current money. It was at the same time

enacted, that all bills drawn upon or negotiated at Amsterdam, of the

value of 600 guilders and upwards, should be paid in bank money, which

at once took away all uncertainty in the value of those bills. Every

merchant, in consequence of this regulation, was obliged to keep an

account with the bank, in order to pay his foreign bills of exchange,

which necessarily occasioned a certain demand for bank money.

Bank money, over and above both its intrinsic superiority to currency,

and the additional value which this demand necessarily gives it, has

likewise some other advantages, It is secure from fire, robbery, and

other accidents; the city of Amsterdam is bound for it; it can be paid

away by a simple transfer, without the trouble of counting, or the risk

of transporting it from one place to another. In consequence of those

different advantages, it seems from the beginning to have borne an agio;

and it is generally believed that all the money originally deposited in

the bank, was allowed to remain there, nobody caring to demand payment

of a debt which he could sell for a premium in the market. By demanding

payment of the bank, the owner of a bank credit would lose this premium.

As a shilling fresh from the mint will buy no more goods in the market

than one of our common worn shillings, so the good and true money which

might be brought from the coffers of the bank into those of a private

person, being mixed and confounded with the common currency of the

country, would be of no more value than that currency, from which it

could no longer be readily distinguished. While it remained in the

coffers of the bank, its superiority was known and ascertained. When it

had come into those of a private person, its superiority could not well

be ascertained without more trouble than perhaps the difference was

worth. By being brought from the coffers of the bank, besides, it lost

all the other advantages of bank money; its security, its easy and safe

transferability, its use in paying foreign bills of exchange. Over and

above all this, it could not be brought from those coffers, as will

appear by and by, without previously paying for the keeping.

Those deposits of coin, or those deposits which the bank was bound to

restore in coin, constituted the original capital of the bank, or the

whole value of what was represented by what is called bank money. At

present they are supposed to constitute but a very small part of it. In

order to facilitate the trade in bullion, the bank has been for these

many years in the practice of giving credit in its books, upon deposits

of gold and silver bullion. This credit is generally about five per

cent. below the mint price of such bullion. The bank grants at the same

time what is called a recipice or receipt, entitling the person who

makes the deposit, or the bearer, to take out the bullion again at any

time within six months, upon transferring to the bank a quantity of bank

money equal to that for which credit had been given in its books when

the deposit was made, and upon paying one-fourth per cent. for the

keeping, if the deposit was in silver; and one-half per cent. if it

was in gold; but at the same time declaring, that in default of such

payment, and upon the expiration of this term, the deposit should belong

to the bank, at the price at which it had been received, or for which

credit had been given in the transfer books. What is thus paid for the

keeping of the deposit may be considered as a sort of warehouse rent;

and why this warehouse rent should be so much dearer for gold than for

silver, several different reasons have been assigned. The fineness of

gold, it has been said, is more difficult to be ascertained than that of

silver. Frauds are more easily practised, and occasion a greater loss in

the most precious metal. Silver, besides, being the standard metal, the

state, it has been said, wishes to encourage more the making of deposits

of silver than those of gold.

Deposits of bullion are most commonly made when the price is somewhat

lower than ordinary, and they are taken out again when it happens to

rise. In Holland the market price of bullion is generally above the mint

price, for the same reason that it was so in England before the late

reformation of the gold coin. The difference is said to be commonly from

about six to sixteen stivers upon the mark, or eight ounces of silver,

of eleven parts of fine and one part alloy. The bank price, or the

credit which the bank gives for the deposits of such silver (when made

in foreign coin, of which the fineness is well known and ascertained,

such as Mexico dollars), is twenty-two guilders the mark: the mint

price is about twenty-three guilders, and the market price is from

twenty-three guilders six, to twenty-three guilders sixteen stivers, or

from two to three per cent. above the mint price.

The following are the prices at which the bank of Amsterdam at present

{September 1775} receives bullion and coin of different kinds:


Mexico dollars ................. 22 Guilders / mark

French crowns .................. 22

English silver coin............. 22

Mexico dollars, new coin........ 21 10

Ducatoons....................... 3 0

Rix-dollars..................... 2 8

Bar silver, containing 11-12ths fine silver, 21 Guilders / mark, and in

this proportion down to 1-4th fine, on which 5 guilders are given. Fine

bars,................. 28 Guilders / mark.


Portugal coin................. 310 Guilders / mark

Guineas....................... 310

Louis d'ors, new.............. 310

Ditto old.............. 300

New ducats.................... 4 19 8 per ducat

Bar or ingot gold is received in proportion to its fineness, compared

with the above foreign gold coin. Upon fine bars the bank gives 340 per

mark. In general, however, something more is given upon coin of a known

fineness, than upon gold and silver bars, of which the fineness cannot

be ascertained but by a process of melting and assaying.

The proportions between the bank price, the mint price, and the market

price of gold bullion, are nearly the same. A person can generally sell

his receipt for the difference between the mint price of bullion and the

market price. A receipt for bullion is almost always worth something,

and it very seldom happens, therefore, that anybody suffers his receipts

to expire, or allows his bullion to fall to the bank at the price at

which it had been received, either by not taking it out before the end

of the six months, or by neglecting to pay one fourth or one half per

cent. in order to obtain a new receipt for another six months. This,

however, though it happens seldom, is said to happen sometimes, and more

frequently with regard to gold than with regard to silver, on account

of the higher warehouse rent which is paid for the keeping of the more

precious metal.

The person who, by making a deposit of bullion, obtains both a bank

credit and a receipt, pays his bills of exchange as they become due,

with his bank credit; and either sells or keeps his receipt, according

as he judges that the price of bullion is likely to rise or to fall. The

receipt and the bank credit seldom keep long together, and there is no

occasion that they should. The person who has a receipt, and who wants

to take out bullion, finds always plenty of bank credits, or bank money,

to buy at the ordinary price, and the person who has bank money, and

wants to take out bullion, finds receipts always in equal abundance.

The owners of bank credits, and the holders of receipts, constitute two

different sorts of creditors against the bank. The holder of a

receipt cannot draw out the bullion for which it is granted, without

re-assigning to the bank a sum of bank money equal to the price at which

the bullion had been received. If he has no bank money of his own, he

must purchase it of those who have it. The owner of bank money cannot

draw out bullion, without producing to the bank receipts for the

quantity which he wants. If he has none of his own, he must buy them

of those who have them. The holder of a receipt, when he purchases bank

money, purchases the power of taking out a quantity of bullion, of which

the mint price is five per cent. above the bank price. The agio of five

per cent. therefore, which he commonly pays for it, is paid, not for

an imaginary, but for a real value. The owner of bank money, when he

purchases a receipt, purchases the power of taking out a quantity of

bullion, of which the market price is commonly from two to three per

cent. above the mint price. The price which he pays for it, therefore,

is paid likewise for a real value. The price of the receipt, and the

price of the bank money, compound or make up between them the full value

or price of the bullion.

Upon deposits of the coin current in the country, the bank grant

receipts likewise, as well as bank credits; but those receipts are

frequently of no value and will bring no price in the market. Upon

ducatoons, for example, which in the currency pass for three guilders

three stivers each, the bank gives a credit of three guilders only, or

five per cent. below their current value. It grants a receipt likewise,

entitling the bearer to take out the number of ducatoons deposited at

any time within six months, upon paying one fourth per cent. for the

keeping. This receipt will frequently bring no price in the market.

Three guilders, bank money, generally sell in the market for three

guilders three stivers, the full value of the ducatoons, if they were

taken out of the bank; and before they can be taken out, one-fourth

per cent. must be paid for the keeping, which would be mere loss to the

holder of the receipt. If the agio of the bank, however, should at any

time fall to three per cent. such receipts might bring some price in the

market, and might sell for one and three-fourths per cent. But the agio

of the bank being now generally about five per cent. such receipts are

frequently allowed to expire, or, as they express it, to fall to the

bank. The receipts which are given for deposits of gold ducats fall to

it yet more frequently, because a higher warehouse rent, or one half per

cent. must be paid for the keeping of them, before they can be taken out

again. The five per cent. which the bank gains, when deposits either

of coin or bullion are allowed to fall to it, maybe considered as the

warehouse rent for the perpetual keeping of such deposits.

The sum of bank money, for which the receipts are expired, must be very

considerable. It must comprehend the whole original capital of the bank,

which, it is generally supposed, has been allowed to remain there from

the time it was first deposited, nobody caring either to renew his

receipt, or to take out his deposit, as, for the reasons already

assigned, neither the one nor the other could be done without loss. But

whatever may be the amount of this sum, the proportion which it bears to

the whole mass of bank money is supposed to be very small. The bank of

Amsterdam has, for these many years past, been the great warehouse of

Europe for bullion, for which the receipts are very seldom allowed to

expire, or, as they express it, to fall to the bank. The far greater

part of the bank money, or of the credits upon the books of the bank,

is supposed to have been created, for these many years past, by such

deposits, which the dealers in bullion are continually both making and


No demand can be made upon the bank, but by means of a recipice or

receipt. The smaller mass of bank money, for which the receipts are

expired, is mixed and confounded with the much greater mass for which

they are still in force; so that, though there may be a considerable sum

of bank money, for which there are no receipts, there is no specific sum

or portion of it which may not at any time be demanded by one. The bank

cannot be debtor to two persons for the same thing; and the owner of

bank money who has no receipt, cannot demand payment of the bank till

he buys one. In ordinary and quiet times, he can find no difficulty in

getting one to buy at the market price, which generally corresponds with

the price at which he can sell the coin or bullion it entitles him to

take out of the bank.

It might be otherwise during a public calamity; an invasion, for

example, such as that of the French in 1672. The owners of bank money

being then all eager to draw it out of the bank, in order to have it in

their own keeping, the demand for receipts might raise their price to

an exorbitant height. The holders of them might form extravagant

expectations, and, instead of two or three per cent. demand half the

bank money for which credit had been given upon the deposits that the

receipts had respectively been granted for. The enemy, informed of the

constitution of the bank, might even buy them up, in order to prevent

the carrying away of the treasure. In such emergencies, the bank, it is

supposed, would break through its ordinary rule of making payment only

to the holders of receipts. The holders of receipts, who had no bank

money, must have received within two or three per cent. of the value of

the deposit for which their respective receipts had been granted. The

bank, therefore, it is said, would in this case make no scruple of

paying, either with money or bullion, the full value of what the owners

of bank money, who could get no receipts, were credited for in its

books; paying, at the same time, two or three per cent. to such holders

of receipts as had no bank money, that being the whole value which, in

this state of things, could justly be supposed due to them.

Even in ordinary and quiet times, it is the interest of the holders of

receipts to depress the agio, in order either to buy bank money (and

consequently the bullion which their receipts would then enable them

to take out of the bank ) so much cheaper, or to sell their receipts

to those who have bank money, and who want to take out bullion, so much

dearer; the price of a receipt being generally equal to the difference

between the market price of bank money and that of the coin or bullion

for which the receipt had been granted. It is the interest of the owners

of bank money, on the contrary, to raise the agio, in order either

to sell their bank money so much dearer, or to buy a receipt so much

cheaper. To prevent the stock-jobbing tricks which those opposite

interests might sometimes occasion, the bank has of late years come to

the resolution, to sell at all times bank money for currency at five

per cent. agio, and to buy it in again at four per cent. agio. In

consequence of this resolution, the agio can never either rise above

five, or sink below four per cent.; and the proportion between the

market price of bank and that of current money is kept at all times

very near the proportion between their intrinsic values. Before this

resolution was taken, the market price of bank money used sometimes to

rise so high as nine per cent. agio, and sometimes to sink so low as

par, according as opposite interests happened to influence the market.

The bank of Amsterdam professes to lend out no part of what is deposited

with it, but for every guilder for which it gives credit in its books,

to keep in its repositories the value of a guilder either in money or

bullion. That it keeps in its repositories all the money or bullion for

which there are receipts in force for which it is at all times liable to

be called upon, and which in reality is continually going from it, and

returning to it again, cannot well be doubted. But whether it does so

likewise with regard to that part of its capital for which the receipts

are long ago expired, for which, in ordinary and quiet times, it cannot

be called upon, and which, in reality, is very likely to remain with it

for ever, or as long as the states of the United Provinces subsist, may

perhaps appear more uncertain. At Amsterdam, however, no point of faith

is better established than that, for every guilder circulated as bank

money, there is a correspondent guilder in gold or silver to be found in

the treasures of the bank. The city is guarantee that it should be so.

The bank is under the direction of the four reigning burgomasters

who are changed every year. Each new set of burgomasters visits the

treasure, compares it with the books, receives it upon oath, and

delivers it over, with the same awful solemnity to the set which

succeeds; and in that sober and religious country, oaths are not yet

disregarded. A rotation of this kind seems alone a sufficient security

against any practices which cannot be avowed. Amidst all the revolutions

which faction has ever occasioned in the government of Amsterdam, the

prevailing party has at no time accused their predecessors of infidelity

in the administration of the bank. No accusation could have affected

more deeply the reputation and fortune of the disgraced party; and if

such an accusation could have been supported, we may be assured that it

would have been brought. In 1672, when the French king was at Utrecht,

the bank of Amsterdam paid so readily, as left no doubt of the fidelity

with which it had observed its engagements. Some of the pieces which

were then brought from its repositories, appeared to have been scorched

with the fire which happened in the town-house soon after the bank was

established. Those pieces, therefore, must have lain there from that


What may be the amount of the treasure in the bank, is a question

which has long employed the speculations of the curious. Nothing but

conjecture can be offered concerning it. It is generally reckoned,

that there are about 2000 people who keep accounts with the bank; and

allowing them to have, one with another, the value of £1500 sterling

lying upon their respective accounts (a very large allowance), the whole

quantity of bank money, and consequently of treasure in the bank, will

amount to about £3,000,000 sterling, or, at eleven guilders the pound

sterling, 33,000,000 of guilders; a great sum, and sufficient to carry

on a very extensive circulation, but vastly below the extravagant ideas

which some people have formed of this treasure.

The city of Amsterdam derives a considerable revenue from the bank.

Besides what may be called the warehouse rent above mentioned, each

person, upon first opening an account with the bank, pays a fee of ten

guilders; and for every new account, three guilder's three stivers; for

every transfer, two stivers; and if the transfer is for less than 300

guilders, six stivers, in order to discourage the multiplicity of small

transactions. The person who neglects to balance his account twice

in the year, forfeits twenty-five guilders. The person who orders a

transfer for more than is upon his account, is obliged to pay three

per cent. for the sum overdrawn, and his order is set aside into the

bargain. The bank is supposed, too, to make a considerable profit by the

sale of the foreign coin or bullion which sometimes falls to it by the

expiring of receipts, and which is always kept till it can be sold with

advantage. It makes a profit, likewise, by selling bank money at five

per cent. agio, and buying it in at four. These different emoluments

amount to a good deal more than what is necessary for paying the

salaries of officers, and defraying the expense of management. What

is paid for the keeping of bullion upon receipts, is alone supposed to

amount to a neat annual revenue of between 150,000 and 200,000 guilders.

Public utility, however, and not revenue, was the original object of

this institution. Its object was to relieve the merchants from the

inconvenience of a disadvantageous exchange. The revenue which has

arisen from it was unforeseen, and may be considered as accidental. But

it is now time to return from this long digression, into which I have

been insensibly led, in endeavouring to explain the reasons why the

exchange between the countries which pay in what is called bank money,

and those which pay in common currency, should generally appear to be

in favour of the former, and against the latter. The former pay in a

species of money, of which the intrinsic value is always the same, and

exactly agreeable to the standard of their respective mints; the latter

is a species of money, of which the intrinsic value is continually

varying, and is almost always more or less below that standard.

PART II.--Of the Unreasonableness of those extraordinary Restraints,

upon other Principles.

In the foregoing part of this chapter, I have endeavoured to show, even

upon the principles of the commercial system, how unnecessary it is to

lay extraordinary restraints upon the importation of goods from

those countries with which the balance of trade is supposed to be


Nothing, however, can be more absurd than this whole doctrine of the

balance of trade, upon which, not only these restraints, but almost all

the other regulations of commerce, are founded. When two places trade

with one another, this doctrine supposes that, if the balance be even,

neither of them either loses or gains; but if it leans in any degree to

one side, that one of them loses, and the other gains, in proportion to

its declension from the exact equilibrium. Both suppositions are false.

A trade, which is forced by means of bounties and monopolies, may be,

and commonly is, disadvantageous to the country in whose favour it is

meant to be established, as I shall endeavour to show hereafter.

But that trade which, without force or constraint, is naturally and

regularly carried on between any two places, is always advantageous,

though not always equally so, to both.

By advantage or gain, I understand, not the increase of the quantity

of gold and silver, but that of the exchangeable value of the annual

produce of the land and labour of the country, or the increase of the

annual revenue of its inhabitants.

If the balance be even, and if the trade between the two places consist

altogether in the exchange of their native commodities, they will, upon

most occasions, not only both gain, but they will gain equally, or very

nearly equally; each will, in this case, afford a market for a part of

the surplus produce of the other; each will replace a capital which had

been employed in raising and preparing for the market this part of the

surplus produce of the other, and which had been distributed among, and

given revenue and maintenance to, a certain number of its inhabitants.

Some part of the inhabitants of each, therefore, will directly derive

their revenue and maintenance from the other. As the commodities

exchanged, too, are supposed to be of equal value, so the two capitals

employed in the trade will, upon most occasions, be equal, or very

nearly equal; and both being employed in raising the native commodities

of the two countries, the revenue and maintenance which their

distribution will afford to the inhabitants of each will be equal, or

very nearly equal. This revenue and maintenance, thus mutually afforded,

will be greater or smaller, in proportion to the extent of their

dealings. If these should annually amount to £100,000, for example, or

to £1,000,000, on each side, each of them will afford an annual revenue,

in the one case, of £100,000, and, in the other, of £1,000,000, to the

inhabitants of the other.

If their trade should be of such a nature, that one of them exported

to the other nothing but native commodities, while the returns of that

other consisted altogether in foreign goods; the balance, in this

case, would still be supposed even, commodities being paid for with

commodities. They would, in this case too, both gain, but they would not

gain equally; and the inhabitants of the country which exported nothing

but native commodities, would derive the greatest revenue from the

trade. If England, for example, should import from France nothing but

the native commodities of that country, and not having such commodities

of its own as were in demand there, should annually repay them by

sending thither a large quantity of foreign goods, tobacco, we shall

suppose, and East India goods; this trade, though it would give some

revenue to the inhabitants of both countries, would give more to those

of France than to those of England. The whole French capital annually

employed in it would annually be distributed among the people of

France; but that part of the English capital only, which was employed

in producing the English commodities with which those foreign goods were

purchased, would be annually distributed among the people of England.

The greater part of it would replace the capitals which had been

employed in Virginia, Indostan, and China, and which had given revenue

and maintenance to the inhabitants of those distant countries. If the

capitals were equal, or nearly equal, therefore, this employment of

the French capital would augment much more the revenue of the people of

France, than that of the English capital would the revenue of the people

of England. France would, in this case, carry on a direct foreign

trade of consumption with England; whereas England would carry on a

round-about trade of the same kind with France. The different effects of

a capital employed in the direct, and of one employed in the round-about

foreign trade of consumption, have already been fully explained.

There is not, probably, between any two countries, a trade which

consists altogether in the exchange, either of native commodities on

both sides, or of native commodities on one side, and of foreign goods

on the other. Almost all countries exchange with one another, partly

native and partly foreign goods. That country, however, in whose cargoes

there is the greatest proportion of native, and the least of foreign

goods, will always be the principal gainer.

If it was not with tobacco and East India goods, but with gold and

silver, that England paid for the commodities annually imported from

France, the balance, in this case, would be supposed uneven, commodities

not being paid for with commodities, but with gold and silver. The

trade, however, would in this case, as in the foregoing, give some

revenue to the inhabitants of both countries, but more to those of

France than to those of England. It would give some revenue to those of

England. The capital which had been employed in producing the English

goods that purchased this gold and silver, the capital which had been

distributed among, and given revenue to, certain inhabitants of England,

would thereby be replaced, and enabled to continue that employment. The

whole capital of England would no more be diminished by this exportation

of gold and silver, than by the exportation of an equal value of any

other goods. On the contrary, it would, in most cases, be augmented. No

goods are sent abroad but those for which the demand is supposed to be

greater abroad than at home, and of which the returns, consequently,

it is expected, will be of more value at home than the commodities

exported. If the tobacco which in England is worth only £100,000, when

sent to France, will purchase wine which is in England worth £110,000,

the exchange will augment the capital of England by £10,000. If £100,000

of English gold, in the same manner, purchase French wine, which in

England is worth £110,000, this exchange will equally augment the

capital of England by £10,000. As a merchant, who has £110,000 worth of

wine in his cellar, is a richer man than he who has only £100,000 worth

of tobacco in his warehouse, so is he likewise a richer man than he who

has only £100,000 worth of gold in his coffers. He can put into motion

a greater quantity of industry, and give revenue, maintenance, and

employment, to a greater number of people, than either of the other

two. But the capital of the country is equal to the capital of all

its different inhabitants; and the quantity of industry which can be

annually maintained in it is equal to what all those different capitals

can maintain. Both the capital of the country, therefore, and the

quantity of industry which can be annually maintained in it, must

generally be augmented by this exchange. It would, indeed, be more

advantageous for England that it could purchase the wines of France

with its own hardware and broad cloth, than with either the tobacco of

Virginia, or the gold and silver of Brazil and Peru. A direct foreign

trade of consumption is always more advantageous than a round-about one.

But a round-about foreign trade of consumption, which is carried on with

gold and silver, does not seem to be less advantageous than any other

equally round-about one. Neither is a country which has no mines, more

likely to be exhausted of gold and silver by this annual exportation of

those metals, than one which does not grow tobacco by the like annual

exportation of that plant. As a country which has wherewithal to buy

tobacco will never be long in want of it, so neither will one be long in

want of gold and silver which has wherewithal to purchase those metals.

It is a losing trade, it is said, which a workman carries on with the

alehouse; and the trade which a manufacturing nation would naturally

carry on with a wine country, may be considered as a trade of the same

nature. I answer, that the trade with the alehouse is not necessarily a

losing trade. In its own nature it is just as advantageous as any other,

though, perhaps, somewhat more liable to be abused. The employment of

a brewer, and even that of a retailer of fermented liquors, are as

necessary division's of labour as any other. It will generally be more

advantageous for a workman to buy of the brewer the quantity he has

occasion for, than to brew it himself; and if he is a poor workman,

it will generally be more advantageous for him to buy it by little and

little of the retailer, than a large quantity of the brewer. He may

no doubt buy too much of either, as he may of any other dealers in his

neighbourhood; of the butcher, if he is a glutton; or of the draper, if

he affects to be a beau among his companions. It is advantageous to the

great body of workmen, notwithstanding, that all these trades should

be free, though this freedom may be abused in all of them, and is more

likely to be so, perhaps, in some than in others. Though individuals,

besides, may sometimes ruin their fortunes by an excessive consumption

of fermented liquors, there seems to be no risk that a nation should do

so. Though in every country there are many people who spend upon such

liquors more than they can afford, there are always many more who spend

less. It deserves to be remarked, too, that if we consult experience,

the cheapness of wine seems to be a cause, not of drunkenness, but

of sobriety. The inhabitants of the wine countries are in general the

soberest people of Europe; witness the Spaniards, the Italians, and

the inhabitants of the southern provinces of France. People are seldom

guilty of excess in what is their daily fare. Nobody affects the

character of liberality and good fellowship, by being profuse of

a liquor which is as cheap as small beer. On the contrary, in the

countries which, either from excessive heat or cold, produce no grapes,

and where wine consequently is dear and a rarity, drunkenness is a

common vice, as among the northern nations, and all those who live

between the tropics, the negroes, for example on the coast of Guinea.

When a French regiment comes from some of the northern provinces of

France, where wine is somewhat dear, to be quartered in the southern,

where it is very cheap, the soldiers, I have frequently heard it

observed, are at first debauched by the cheapness and novelty of good

wine; but after a few months residence, the greater part of them become

as sober as the rest of the inhabitants. Were the duties upon foreign

wines, and the excises upon malt, beer, and ale, to be taken away all at

once, it might, in the same manner, occasion in Great Britain a pretty

general and temporary drunkenness among the middling and inferior ranks

of people, which would probably be soon followed by a permanent and

almost universal sobriety. At present, drunkenness is by no means the

vice of people of fashion, or of those who can easily afford the most

expensive liquors. A gentleman drunk with ale has scarce ever been seen

among us. The restraints upon the wine trade in Great Britain, besides,

do not so much seem calculated to hinder the people from going, if I may

say so, to the alehouse, as from going where they can buy the best and

cheapest liquor. They favour the wine trade of Portugal, and discourage

that of France. The Portuguese, it is said, indeed, are better customers

for our manufactures than the French, and should therefore be encouraged

in preference to them. As they give us their custom, it is pretended we

should give them ours. The sneaking arts of underling tradesmen are thus

erected into political maxims for the conduct of a great empire; for

it is the most underling tradesmen only who make it a rule to employ

chiefly their own customers. A great trader purchases his goods always

where they are cheapest and best, without regard to any little interest

of this kind.

By such maxims as these, however, nations have been taught that their

interest consisted in beggaring all their neighbours. Each nation has

been made to look with an invidious eye upon the prosperity of all the

nations with which it trades, and to consider their gain as its own

loss. Commerce, which ought naturally to be, among nations as among

individuals, a bond of union and friendship, has become the most fertile

source of discord and animosity. The capricious ambition of kings and

ministers has not, during the present and the preceding century, been

more fatal to the repose of Europe, than the impertinent jealousy of

merchants and manufacturers. The violence and injustice of the rulers of

mankind is an ancient evil, for which, I am afraid, the nature of

human affairs can scarce admit of a remedy: but the mean rapacity, the

monopolizing spirit, of merchants and manufacturers, who neither are,

nor ought to be, the rulers of mankind, though it cannot, perhaps, be

corrected, may very easily be prevented from disturbing the tranquillity

of anybody but themselves.

That it was the spirit of monopoly which originally both invented and

propagated this doctrine, cannot be doubted and they who first taught

it, were by no means such fools as they who believed it. In every

country it always is, and must be, the interest of the great body of

the people, to buy whatever they want of those who sell it cheapest. The

proposition is so very manifest, that it seems ridiculous to take any

pains to prove it; nor could it ever have been called in question, had

not the interested sophistry of merchants and manufacturers confounded

the common sense of mankind. Their interest is, in this respect,

directly opposite to that of the great body of the people. As it is

the interest of the freemen of a corporation to hinder the rest of the

inhabitants from employing any workmen but themselves; so it is the

interest of the merchants and manufacturers of every country to secure

to themselves the monopoly of the home market. Hence, in Great Britain,

and in most other European countries, the extraordinary duties upon

almost all goods imported by alien merchants. Hence the high duties and

prohibitions upon all those foreign manufactures which can come into

competition with our own. Hence, too, the extraordinary restraints upon

the importation of almost all sorts of goods from those countries with

which the balance of trade is supposed to be disadvantageous; that is,

from those against whom national animosity happens ta be most violently


The wealth of neighbouring nations, however, though dangerous in war and

politics, is certainly advantageous in trade. In a state of hostility,

it may enable our enemies to maintain fleets and armies superior to our

own; but in a state of peace and commerce it must likewise enable them

to exchange with us to a greater value, and to afford a better market,

either for the immediate produce of our own industry, or for whatever

is purchased with that produce. As a rich man is likely to be a better

customer to the industrious people in his neighbourhood, than a poor,

so is likewise a rich nation. A rich man, indeed, who is himself a

manufacturer, is a very dangerous neighbour to all those who deal in

the same way. All the rest of the neighbourhood, however, by far the

greatest number, profit by the good market which his expense affords

them. They even profit by his underselling the poorer workmen who deal

in the same way with him. The manufacturers of a rich nation, in the

same manner, may no doubt be very dangerous rivals to those of their

neighbours. This very competition, however, is advantageous to the great

body of the people, who profit greatly, besides, by the good market

which the great expense of such a nation affords them in every other

way. Private people, who want to make a fortune, never think of retiring

to the remote and poor provinces of the country, but resort either to

the capital, or to some of the great commercial towns. They know, that

where little wealth circulates, there is little to be got; but that

where a great deal is in motion, some share of it may fall to them. The

same maxim which would in this manner direct the common sense of one, or

ten, or twenty individuals, should regulate the judgment of one, or ten,

or twenty millions, and should make a whole nation regard the riches of

its neighbours, as a probable cause and occasion for itself to acquire

riches. A nation that would enrich itself by foreign trade, is certainly

most likely to do so, when its neighbours are all rich, industrious and

commercial nations. A great nation, surrounded on all sides by wandering

savages and poor barbarians, might, no doubt, acquire riches by the

cultivation of its own lands, and by its own interior commerce, but not

by foreign trade. It seems to have been in this manner that the ancient

Egyptians and the modern Chinese acquired their great wealth. The

ancient Egyptians, it is said, neglected foreign commerce, and the

modern Chinese, it is known, hold it in the utmost contempt, and scarce

deign to afford it the decent protection of the laws. The modern

maxims of foreign commerce, by aiming at the impoverishment of all

our neighbours, so far as they are capable of producing their

intended effect, tend to render that very commerce insignificant and


It is in consequence of these maxims, that the commerce between

France and England has, in both countries, been subjected to so many

discouragements and restraints. If those two countries, however, were

to consider their real interest, without either mercantile jealousy or

national animosity, the commerce of France might be more advantageous to

Great Britain than that of any other country, and, for the same reason,

that of Great Britain to France. France is the nearest neighbour to

Great Britain. In the trade between the southern coast of England and

the northern and north-western coast of France, the returns might be

expected, in the same manner as in the inland trade, four, five, or six

times in the year. The capital, therefore, employed in this trade could,

in each of the two countries, keep in motion four, five, or six times

the quantity of industry, and afford employment and subsistence to four,

five, or six times the number of people, which all equal capital could

do in the greater part of the other branches of foreign trade. Between

the parts of France and Great Britain most remote from one another, the

returns might be expected, at least, once in the year; and even this

trade would so far be at least equally advantageous, as the greater part

of the other branches of our foreign European trade. It would be, at

least, three times more advantageous than the boasted trade with our

North American colonies, in which the returns were seldom made in

less than three years, frequently not in less than four or five years.

France, besides, is supposed to contain 24,000,000 of inhabitants.

Our North American colonies were never supposed to contain more than

3,000,000; and France is a much richer country than North America;

though, on account of the more unequal distribution of riches, there

is much more poverty and beggary in the one country than in the other.

France, therefore, could afford a market at least eight times more

extensive, and, on account of the superior frequency of the returns,

four-and-twenty times more advantageous than that which our North

American colonies ever afforded. The trade of Great Britain would

be just as advantageous to France, and, in proportion to the wealth,

population, and proximity of the respective countries, would have

the same superiority over that which France carries on with her own

colonies. Such is the very great difference between that trade which the

wisdom of both nations has thought proper to discourage, and that which

it has favoured the most.

But the very same circumstances which would have rendered an open and

free commerce between the two countries so advantageous to both,

have occasioned the principal obstructions to that commerce. Being

neighbours, they are necessarily enemies, and the wealth and power of

each becomes, upon that account, more formidable to the other; and what

would increase the advantage of national friendship, serves only to

inflame the violence of national animosity. They are both rich and

industrious nations; and the merchants and manufacturers of each

dread the competition of the skill and activity of those of the other.

Mercantile jealousy is excited, and both inflames, and is itself

inflamed, by the violence of national animosity, and the traders of

both countries have announced, with all the passionate confidence of

interested falsehood, the certain ruin of each, in consequence of

that unfavourable balance of trade, which, they pretend, would be the

infallible effect of an unrestrained commerce with the other.

There is no commercial country in Europe, of which the approaching

ruin has not frequently been foretold by the pretended doctors of this

system, from all unfavourably balance of trade. After all the anxiety,

however, which they have excited about this, after all the vain attempts

of almost all trading nations to turn that balance in their own favour,

and against their neighbours, it does not appear that any one nation in

Europe has been, in any respect, impoverished by this cause. Every town

and country, on the contrary, in proportion as they have opened their

ports to all nations, instead of being ruined by this free trade, as the

principles of the commercial system would lead us to expect, have been

enriched by it. Though there are in Europe indeed, a few towns which, in

same respects, deserve the name of free ports, there is no country which

does so. Holland, perhaps, approaches the nearest to this character of

any, though still very remote from it; and Holland, it is acknowledged,

not only derives its whole wealth, but a great part of its necessary

subsistence, from foreign trade.

There is another balance, indeed, which has already been explained, very

different from the balance of trade, and which, according as it happens

to be either favourable or unfavourable, necessarily occasions the

prosperity or decay of every nation. This is the balance of the annual

produce and consumption. If the exchangeable value of the annual

produce, it has already been observed, exceeds that of the annual

consumption, the capital of the society must annually increase in

proportion to this excess. The society in this case lives within its

revenue; and what is annually saved out of its revenue, is naturally

added to its capital, and employed so as to increase still further the

annual produce. If the exchangeable value of the annual produce, on

the contrary, fall short of the annual consumption, the capital of

the society must annually decay in proportion to this deficiency.

The expense of the society, in this case, exceeds its revenue, and

necessarily encroaches upon its capital. Its capital, therefore, must

necessarily decay, and, together with it, the exchangeable value of the

annual produce of its industry.

This balance of produce and consumption is entirely different from what

is called the balance of trade. It might take place in a nation which

had no foreign trade, but which was entirely separated from all the

world. It may take place in the whole globe of the earth, of which the

wealth, population, and improvement, may be either gradually increasing

or gradually decaying.

The balance of produce and consumption may be constantly in favour of a

nation, though what is called the balance of trade be generally against

it. A nation may import to a greater value than it exports for half

a century, perhaps, together; the gold and silver which comes into

it during all this time, may be all immediately sent out of it; its

circulating coin may gradually decay, different sorts of paper money

being substituted in its place, and even the debts, too, which it

contracts in the principal nations with whom it deals, may be gradually

increasing; and yet its real wealth, the exchangeable value of the

annual produce of its lands and labour, may, during the same period,

have been increasing in a much greater proportion. The state of our

North American colonies, and of the trade which they carried on with

Great Britain, before the commencement of the present disturbances,

{This paragraph was written in the year 1775.} may serve as a proof that

this is by no means an impossible supposition.