LITMIR.BIZ

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      As my chief view in this sketch is, to examine how far industry and commerce are affected by the quantity of circulating coin, I premise the following plain propositions. Supposing, first, the quantity of money in circulation, and the quantity of goods in the market, to continue the same, the price will rise and fall with the demand. For when more goods are demanded than the market affords, those who offer the highest price will be preferred: as, on the other hand, when the goods brought to market exceed the demand, the venders have no resource but to entice purchasers by a low price. The price of fish, flesh, butter, and cheese, is much higher than formerly; for these being now the daily food even of the lowest people, the demand for them is greatly increased.<141>

      Supposing a fluctuation in the quantity of goods only, the price falls as the quantity increases, and rises as the quantity decreases. The farmer whose quantity of corn is doubled by a favourable season, must sell at half the usual price; because the purchaser, who sees a superfluity, will pay no more for it. The contrary happens upon a scanty crop: those who want corn must starve, or give the market-price, however high. The manufactures of wool, flax, and metals, are much cheaper than formerly; for though the demand has increased, yet by skill and industry the quantities produced have increased in a greater proportion. More pot-herbs are consumed than formerly: and yet by skilful culture the quantity is so much greater in proportion, as to have lowered the price to less than one half of what it was eighty years ago.

      It is easy to combine the quantity and demand, supposing a fluctuation in both. Where the quantity exceeds the usual demand, more people will be tempted to purchase by the low price; and where the demand rises considerably above the quantity, the price will rise in proportion. <142> In Mathematical language, these propositions may be thus expressed, that the price is directly as the demand, and inversely as the quantity.

      A variation in the quantity of circulating coin is the most intricate circumstance; because it never happens without making a variation in the demand for goods, and frequently in the quantity. I take the liberty, however, to suppose that there is no variation but in the quantity of circulating coin; for though that cannot happen in reality, yet the result of the supposition will throw light upon what really happens: the subject is involved, and I wish to make it plain. I put a simple case, that the half of our current coin is at once swept away by some extraordinary accident. This at first will embarrass our internal commerce, as the vender will insist for the usual price, which now cannot be afforded. But the error of such demand will soon be discovered; and the price of commodities, after some fluctuation, will settle at the one half of what it was formerly. At the same time, there is here no downfal in the value of commodities, which cannot happen while<143> the quantity and demand continue unvaried. The purchasing for a sixpence what formerly cost a shilling, makes no alteration in the value of the thing purchased; because a sixpence is equal in value to what a shilling was formerly. In a word, when money is scarce, it must bear a high value: it must in particular go far in the purchase of goods; which we express by saying, that goods are cheap. Put next the case, that by some accident our coin is instantly doubled: the result must be, not instantaneous indeed, to double the price of commodities. Upon the former supposition, a sixpence is in effect advanced to be a shilling: upon the present supposition, a shilling has in effect sunk down to a sixpence. And here again it ought to be observed, that though the price is augmented, there is no real alteration in the value of commodities. A bullock that, some years ago, could have been purchased for ten pounds, will at present yield fifteen. The vulgar ignorantly think, that the value of horned cattle has arisen in that proportion. The advanced price may, in some degree, be occasioned by a greater consumption; but it is chiefly occasioned<144> by a greater quantity of money in circulation.⁴

      Combining all the circumstances, the result is, that if the quantity of goods and of money continue the same, the price will be in proportion to the demand. If the demand and quantity of goods continue the same, the price will be in proportion to the quantity of money. And if the demand and quantity of money continue the same, the price will fall as the quantity increases, and rise as the quantity diminishes.

      These speculative notions will enable us with accuracy to examine, how industry and commerce are affected by variations in the quantity of circulating coin. It is evident, that arts and manufactures cannot be carried on to any extent without coin. Persons totally employed in any art or manufacture require wages daily or weekly, because they must go to market for every necessary of life. The clothier, the taylor, the shoemaker, the gardener, the farmer, must employ servants to prepare their goods for the market; to whom, for that reason, wages ought to be regularly paid. In a word, commerce among<145> an endless number of individuals, who depend on each other even for necessaries, would be inextricable without a quantity of circulating coin. Money may be justly conceived to be the oil, that lubricates all the springs and wheels of a great machine, and preserves it in motion.^* Supposing us now to be provided with no more of that precious oil than is barely sufficient for the easy motion of our industry and manufactures, a diminution of the necessary quantity must retard them: our industry and manufactures must decay; and if we do not confine the expence of living to our present circumstances, which seldom happens, the balance of trade with foreign nations will turn against us, and leave us no resource for making the balance equal but to export our gold and sil-<146>ver. And when we are drained of these metals, farewell to arts and manufactures: we shall be reduced to the condition of savages, which is, that each individual must depend entirely on his own labour for procuring every necessary of life. The consequences of the balance turning for us, are at first directly opposite: but at the long-run come to be the same: they are sweet in the mouth, but bitter in the stomach. An influx of riches by this balance, rouses our activity. Plenty of money elevates our spirits, and inspires an appetite for pleasure: we indulge a taste for show and embellishment, become hospitable, and refine upon the arts of luxury. Plenty of money is a prevailing motive even with the most sedate, to exert themselves in building, in husbandry, in manufactures, and in other solid improvements. Such articles require both hands and materials, the prices of which are raised by the additional demand. The labourer now whose wages are thus raised, is not satisfied with mere necessaries, but insists for conveniencies, the price of which also is raised by the new demand. In short, increase of money raises the price<147> of every commodity; partly from the greater quantity of money, and partly from the additional demand for supplying artificial wants. Hitherto a delightful view of prosperous commerce: but behold the remote consequences. High wages at first promote industry, and double the quantity of labour: but the utmost exertion of labour is limited within certain bounds; and a perpetual influx of gold and silver will not for ever be attended with a proportional quantity of work: The price of labour will rise in proportion to the quantity of money; but the produce will not rise in the same proportion; and for that reason our manufactures will be dearer than formerly. Hence a dismal scene. The high price at home of our manufactures will exclude us from foreign markets; for if the merchant cannot draw there for his goods what he paid at home, with some profit, he must abandon foreign commerce altogether. And, what is still more dismal, we shall be deprived even of our own markets; for in spite of the utmost vigilance, foreign commodities, cheaper than our own, will be poured in upon us. The last scene<148> is to be deprived of our gold and silver, and reduced to the same miserable state as if the balance had been against us from the beginning.

      However certain it may be, that an addition to the quantity of money must raise the price of labour and of manufactures, yet there is a fact that seems to contradict the proposition, which is, that in no other country are labour and manufactures so cheap as in the two peninsulas on the right and left of the Ganges, though in no other country is there such plenty of money. To account for this singular fact, political writers say, that money is there amassed by the nabobs, and withdrawn from circulation. This is not satisfactory: the chief exportation from these peninsulas is their manufactures, the price of which comes first to the merchant and manufacturer; and how can that happen without raising the price of labour? Rice, it is true, is the food of their labouring poor; and an acre of rice yields more food than five acres of wheat: but the cheapness of necessaries, though it hath a considerable influence in keeping down the price of labour, cannot keep it constantly down, <149> in opposition to an overflowing current of money. The populousness of these two countries is a circumstance totally overlooked. Every traveller is amazed how such swarms of people can find bread, however fertile

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