Front Page Titles (by Subject) 4.: Where profit from Mines of the precious Metals is the object of the Mother Country. - Colony
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4.: Where profit from Mines of the precious Metals is the object of the Mother Country. - James Mill, Colony 
Supplement to the Encyclopedia Britannica (London: J. Innes, 1825).
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Where profit from Mines of the precious Metals is the object of the Mother Country.
There is another singular case, created by mines of the precious metals. A colony may be formed and retained for the sake of the gold and silver it may produce. Of this species of colony, we have something of a specimen in the Spanish colonies of Mexico and Peru. The question is, whether any advantage can ever be derived from a colony of this description? The answer to this question is not doubtful; but it is not very easy, within the limits to which we are confined, to make the evidence of it perfectly clear to every body. In one case, and in one case alone, an advantage may be derived. That is the case, in which the colony contains the richest mines in the world. The richest mines in the world always, in the case of the precious metals, supply the whole world; because, from those mines, the metals can be afforded cheaper than the expense of working will allow them to be afforded from any other mines; and the principle of competition soon excludes the produce of all other mines from the market.
Now, the country, which contains the richest mines, may so order matters, as to gain from foreign countries, on all the precious metals which she sells to them, nearly the whole of that difference which exists between what the metal in working costs to her, and what, in working, it costs at the mines, which, next to hers, are the most fertile in the world.
She must always sell the metal so cheap, as to exclude the metal of those other mines from the market; that is, a trifle cheaper than they can afford to sell it. But, if her mines are sufficiently fertile, the metal may cost her much less in working than the price at which she may thus dispose of it. All the difference she may put in her exchequer. In three ways this might be done. The government might work the mines wholly itself. It might let them to an exclusive company. It might impose a tax upon the produce of the mine. In any one of these ways it might derive a sort of tribute from the rest of the world, on account of the gold and silver with which it supplied them. This could not be done, if the mines, without being taxed, were allowed to be worked by the people at large; because, in that case, the competition of the different adventurers would make them undersell one another, till they reduced the price as low as the cost of working would allow. Could the tax at the mine be duly regulated, that would be the most profitable mode; because the private adventurers would work the mines far more economically, than either the government or an exclusive company.
It is evident that this is a mode of deriving advantage from the possession of the richest mines of the precious metals, very different from that which was pursued by the Spanish government, and which has been so beautifully exposed by Dr. Smith. That government endeavoured to derive advantage from its mines, by preventing other countries from getting any part of their produce, and by accumulating the whole at home. By accumulating at home the whole of the produce of its mines, it believed (such was the state of its mind) that Spain would become exceedingly rich. By preventing other countries from receiving any part of that produce, it believed that it would compel them to continue poor. And, if all countries continued poor, and Spain became exceedingly rich, Spain would be the master of all countries.
In this specimen of political logic, which it would not be difficult to match nearer home, there are two assumptions, and both of them false. In the first place, that a country can accumulate, to any considerable extent, the precious metals; that is, any other way than by locking them up and guarding them in strong holds: In the next place that, if it could accumulate them, it would be richer by that means.
The first of these assumptions, that a country can keep in circulation a greater proportion than other countries of the precious metals, “by hedging in the cuckoo,” as it is humourously described by Dr. Smith, has been finely exposed by that illustrious philosopher, and requires no explanation here.
On the second assumption, that a country, if it could hedge in the precious metals, would become richer by that process, a few reflections appear to be required.
It is now sufficiently understood, that money, in any country, supposing other things to remain the same, is valuable just in proportion to its quantity. Take Mr. Hume’s supposition, that England were walled round by a wall of brass, and that the quantity of her money were, in one night, by a miracle, either raised to double, or reduced to one half. In the first case, every piece would be reduced to one half of its former value; in the second case, it would be raised to double its former value, and the value of the whole would remain exactly the same. The country would, therefore, be neither the richer nor the poorer; she would neither produce more nor enjoy more on that account.
It is never then, by keeping the precious metals, that a country can derive any advantage from them; it is by the very opposite, by parting with them. If it has been foolish enough to hoard up a quantity of the produce of its capital and labour in the shape of gold and silver, it may, when it pleases, make a better use of it. It may exchange it with other countries for something that is useful. Gold and silver, so long as they are hoarded up, are of no use whatsoever. They contribute neither to enjoyment nor production. You may, however, purchase with them, something that is useful. You may exchange them either for some article of luxury, and then they contribute to enjoyment; or you may exchange them for the materials of some manufacture, or the necessaries of the labourer, and then they contribute to production; then the effect of them is to augment the riches, augment the active capital, augment the annual produce of the country. So long as any country hoards up gold and silver, so long as it abstains from parting with them to other countries for other things, so long it deprives itself of a great advantage.