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[I.xi.g] third period - Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 2a An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 1 
An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. I ed. R. H. Campbell and A. S. Skinner, vol. II of the Glasgow Edition of the Works and Correspondence of Adam Smith (Indianapolis: Liberty Fund, 1981).
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1Between 1630 and 1640, or about 1636, the effect of the discovery of the mines of America in reducing the value of silver, appears to have been compleated, and the value of that metal seems never to have sunk lower in proportion to that of corn than it was about that time. It seems to have risen somewhat in the course of the present century, and it had probably begun to do so even some time before the end of the last.
2From 1637 to 1700, both inclusive, being the sixty–four last years of the last century, the average price of the quarter of nine bushels of the best wheat at Windsor market, appears, from the same accounts, to have been 2l. 11s. 0d. ⅓; which is only 1s. 0d. ⅓ dearer than it had been during the sixteen years before. But in the course of these sixty–four years there happened two events which must have produced a much greater scarcity of corn than what the course of the seasons would otherwise have occasioned, and which, therefore, without supposing any further reduction in the value of silver, will much more than account for this very small enhancement of price.
3The first of these events was the civil war, which, by discouraging tillage and interrupting commerce, must have raised the price of corn much above what the course of the seasons would otherwise have occasioned. It must have had this effect more or less at all the different markets in the kingdom, but particularly at those in the neighbourhood of London, which require to be supplied from the greatest distance. In 1648, accordingly, the price of the best wheat at Windsor market, appears, from the same accounts, to have been 4l. 5s. and in 1649 to have been 4l. the quarter of nine bushels. The excess of those two years above 2l. 10s. (the average price of the sixteen years preceding 1637) is 3l. 5s.; which divided among the sixty–four last years of the last century, will alone very nearly account for that small enhancement of price which seems to have taken place in them. These, however, though the highest, are by no means the only high prices which seem to have been occasioned by the civil wars.
4The second event was the bounty upon the exportation of corn, granted in 1688.1 The bounty, it has been thought by many people, by encouraging tillage,2 may, in a long course of years, have occasioned a greater abundance, and consequently a greater cheapness of corn in the home–market, than what would otherwise have taken place there. aHow far the bounty could produce this effect at any time,3 I shall examine hereafter;4 I shall only observe at present, thata between 1688 and 1700, it had bnotb time to produce cany suchc effect. During this short period its only effect must have been, by encouraging the exportation of the surplus produce of every year, and thereby hindering the abundance of one year from compensating the scarcity of another, to raise the price in the home–market. The scarcity which prevailed in England from 1693 to 1699, both inclusive, though no doubt principally owing to the badness of the seasons, and, therefore, extending through a considerable part of Europe, must have been somewhat enhanced by the bounty. In 1699, accordingly, the further exportation of corn was prohibited for nine months.5
5There was a third event which occurred in the course of the same period, and which, though it could not occasion any scarcity of corn, nor, perhaps, any augmentation in the real quantity of silver which was usually paid for it, must necessarily have occasioned some augmentation in the nominal sum. This event was the great ddebasementd of the silver coin, by clipping and wearing. This evil had begun in the reign of Charles II. and had gone on continually increasing till 1695;6 at which time, as we may learn from Mr. Lowndes, the current silver coin was, at an average, near five–and–twenty per cent. below its standard value.7 But the nominal sum which constitutes the market–price of every commodity is necessarily regulated, not so much by the quantity of silver, which, according to the standard, ought to be contained in it, as by that which, it is found by experience, actually is contained in it. This nominal sum, therefore, is necessarily higher when the coin is much edebasede by clipping and wearing, than when near to its standard value.
6In the course of the present century, the silver coin has not at any time been more below its standard weight than it is at present. But though very much defaced, its value has been kept up by that of the gold coin for which it is exchanged. For though before the late re–coinage,8 the gold coin was a good deal defaced too, it was less so than the silver. In 1695, on the contrary, the value of the silver coin was not kept up by the gold coin; a guinea then commonly exchanging for thirty shillings of the worn and clipt silver.9 Before the late re–coinage of the gold, the price of silver bullion was seldom higher than five shillings and seven–pence an ounce, which is but five–pence above the mint price. But in 1695, the common price of silver bullion was six shillings and five–pence an ounce* , which is fifteen–pence above the mint price. Even before the late recoinage of the gold, therefore, the coin, gold and silver together, when compared with silver bullion, was not supposed to be more than eight per cent. below its standard value. In 1695, on the contrary, it had been supposed to be near five–and–twenty per cent. below that value. But in the beginning of the present century, that is, immediately after the great recoinage in King William’s time, the greater part of the current silver coin must have been still nearer to its standard weight than it is at present. In the course of the present century too there has been no great publick calamity, such as the civil war, which could either discourage tillage, or interrupt the interior commerce of the country. And though the bounty, which has taken place through the greater part of this century, must always raise the price of corn somewhat higher than it otherwise would be in the actual state of tillage; yet as, in the course of this century, the bounty has had full time to produce all the good effects commonly imputed to it, to encourage tillage, and thereby to increase the quantity of corn in the home market, it mayg, upon the principles of a system which I shall explain and examine hereafter,g10 be supposed to have done something to lower the price of that commodity the one way, as well as to raise it the other. It is by many people supposed to have done more. h In the sixty–four ifirsti years of the present century accordingly, the average price of the quarter of nine bushels of the best wheat at Windsor market, appears, by the accounts of Eton College, to have been 2l. 0s. 6d19/32,11 which is about ten shillings and sixpence, or more than five–and–twenty per cent.12 cheaper than it had been during the sixty–four last years of the last century; and about nine shillings and six–pence cheaper than it had been during the sixteen years preceding 1636, when the discovery of the abundant mines of America may be supposed to have produced its full effect; and about one shilling cheaper than it had been in the twenty–six years preceding 1620, before that discovery can well be supposed to have produced its full effect. According to this account, the average price of middle wheat, during these sixty–four first years of the present century, comes out to have been about thirty–two shillings the quarter of eight bushels.
7The value of silver, therefore, seems to have risen somewhat in proportion to that of corn during the course of the present century, and it had probably begun to do so even some time before the end of the last.
8In 1687, the price of the quarter of nine bushels of the best wheat at Windsor market was 1l. 5s. 2d. the lowest price at which it had ever been from 1595.
9In 1688, Mr. Gregory King, a man famous for his knowledge in matters of this kind, estimated the average price of wheat in years of moderate plenty to be to the grower 3s. 6d. the bushel, or eight–and–twenty shillings the quarter.13 The grower’s price I understand to be the same with what is sometimes called the contract price, or the price at which a farmer contracts for a certain number of years to deliver a certain quantity of corn to a dealer. As a contract of this kind saves the farmer the expence and trouble of marketing, the contract price is generally lower than what is supposed to be the average market price. Mr. King had judged eight–and–twenty shillings the quarter to be at that time the ordinary contract price in years of moderate plenty. Before the scarcity occasioned by the late extraordinary course of bad seasons, it wasj, I have been assured,j the ordinary contract price in all common years.
10In 1688 was granted the parliamentary bounty upon the exportation of corn.14 The country gentlemen, who then composed a still greater proportion of the legislature than they do at present,15 had felt that the money price of corn was falling. The bounty was an expedient to raise it artificially to the high price at which it had frequently been sold in the times of Charles I. and II. It was to take place, therefore, till wheat was so high as forty–eight shillings the quarter; that is twenty shillings, or 5/7ths dearer than Mr. King had in that very year estimated the grower’s price to be in times of moderate plenty. If his calculations deserve any part of the reputation which they have obtained very universally, eight–and–forty shillings the quarter, was a price which, without some such expedient as the bounty, could not at that time be expected, except in years of extraordinary scarcity. But the government of King William was not then fully settled. It was in no condition to refuse any thing to the country gentlemen, from whom it was at that very time soliciting the first establishment of the annual land–tax.16
11The value of silver, therefore, in proportion to that of corn, had probably risen somewhat before the end of the last century; and it seems to have continued to do so during the course of the greater part of the present;17 though the necessary operation of the bounty must have hindered that rise from being so sensible as it otherwise would have been in the actual state of tillage.
12In plentiful years the bounty, by occasioning an extraordinary exportation, necessarily raises the price of corn above what it otherwise would be in those years. To encourage tillage, by keeping up the price of corn even in the most plentiful years, was the avowed end of the institution.
13In years of great scarcity, indeed, the bounty has generally been suspended. It must, however, have had some effect kevenk upon the prices of many of those years. By the extraordinary exportation which it occasions in years of plenty, it must frequently hinder the plenty of one year from compensating the scarcity of another.
14Both in years of plenty and in years of scarcity, therefore, the bounty raises the price of corn above what it naturally would be in the actual state of tillage. If, during the sixty–four first years of the present century, therefore, the average price has been lower than during the sixty–four last years of the last century, it must, in the same state of tillage, have been much more so, had it not been for this operation of the bounty.18
15But without the bounty, it may be said, the state of tillage would not have been the same. What may have been the effects of this institution upon the agriculture of the country, I shall endeavour to explain hereafter, when I come to treat particularly of bounties. I shall only observe at present, that this rise in the value of silver, in proportion to that of corn, has not been peculiar to England. It has been observed to have taken place in France during the same period, and nearly in the same proportion too, by three very faithful, diligent, and laborious collectors of the prices of corn, Mr. Duprè de St. Maur, Mr. Messance, and the author of the Essay on the police of grain.19 But in France, till 1764, the exportation of grain was by law prohibited;20 and it is somewhat difficult to suppose, that nearly the same diminution of price which took place in one country, notwithstanding this prohibition, should in another be owing to the extraordinary encouragement given to exportation.
16It would be more proper, perhaps, to consider this variation in the average money price of corn as the effect rather of some gradual rise in the real value of silver in the European market, than of any fall in the real average value of corn. Corn, it has already been observed,21 is at distant periods of time a more accurate measure of value than either silver, or perhaps any other commodity. When, after the discovery of the abundant mines of America, corn rose to three and four times its former money price, this change was universally ascribed, not to any rise in the real value of corn, but to a fall in the real value of silver. If during the sixty–four first years of the present century, therefore, the average money price of corn has fallen somewhat below what it had been during the greater part of the last century, we should in the same manner impute this change, not to any fall in the real value of corn, but to some rise in the real value of silver in the European market.
17The high price of corn during these ten or twelve years past, indeed, has occasioned a suspicion that the real value of silver still continues to fall in the European market. This high price of corn, however, seems evidently to have been the effect of the extraordinary unfavourableness of the seasons, and ought therefore to be regarded, not as a permanent, but as a transitory and occasional event. The seasons for these ten or twelve years past have been unfavourable through the greater part of Europe;22 and the disorders of Poland have very much increased the scarcity in all those countries, which, in dear years, used to be supplied from that market.23 So long a course of bad seasons, though not a very common event, is by no means a singular one; and whoever has enquired much into the history of the prices of corn in former times, will be at no loss to recollect several other examples of the same kind. Ten years of extraordinary scarcity, besides, are not more wonderful than ten years of extraordinary plenty. The low price of corn from 1741 to 1750, both inclusive, may very well be set in opposition to its high price during these last eight or ten years. From 1741 to 1750, the average price of the quarter of nine bushels of the best wheat at Windsor market, it appears from the accounts of Eton College, was only 1l. 13s. 9d.⅘, which is nearly 6s. 3d. below the average price of the sixty–four first years of the present century. The average price of the quarter of eight bushels of middle wheat, comes out, according to this account, to have been, during these ten years, only 1l. 6s. 8d.24
18Between 1741 and 1750, however, the bounty must have hindered the price of corn from falling so low in the home market as it naturally would have done. During these ten years the quantity of all sorts of grain exported, it appears from the custom–house books, amounted to no less than eight millions twenty–nine thousand one hundred and fifty–six quarters one bushel. The bounty paid for this amounted to 1,514,962l. 17s. 4d.½.25 In 1749 accordingly, Mr. Pelham, at that time prime minister, observed to the House of Commons,26 that for the three years preceding, a very extraordinary sum had been paid as bounty for the exportation of corn. He had good reason to make this observation, and in the following year he might have had still better. In that single year the bounty paid amounted to no less than 324,176l. 10s. 6d.*27 It is unnecessary to observe how much this forced exportation must have raised the price of corn above what it otherwise would have been in the home market.
19At the end of the accounts annexed to this chapter the reader will find the particular account of those ten years separated from the rest. He will find there too the particular account of the preceding ten years, of which the average is likewise below, though not so much below, the general average of the sixty–four first years of the century. The year 1740, however, was a year of extraordinary scarcity. These twenty years preceding 1750, may very well be set in opposition to the twenty preceding 1770. As the former were a good deal below the general average of the century, notwithstanding the intervention of one or two dear years; so the latter have been a good deal above it, notwithstanding the intervention of one or two cheap ones, of 1759, for example.28 If the former have not been as much below the general average, as the latter have been above it, we ought probably to impute it to the bounty. The change has evidently been too sudden to be ascribed to any change in the value of silver, which is always slow and gradual. The suddenness of the effect can be accounted for only by a cause which can operate suddenly, the accidental variation of the seasons.
20The money price of labour in Great Britain has, indeed, risen during the course of the present century.29 This, however, seems to be the effect, not so much of any diminution in the value of silver in the European market, as of an increase in the demand for labour in Great Britain, arising from the great, and almost universal prosperity of the country. In France, a country not altogether so prosperous, the money price of labour has, since the middle of the last century, been observed to sink gradually with the average money price of corn. Both in the last century and in the present, the day–wages of common labour are there said to have been pretty uniformly about the twentieth part of the average price of the septier of wheat, a measure which contains a little more than four Winchester bushels. In Great Britain the real recompence of labour, it has already been shown,30 the real mquantitiesm of the necessaries and conveniencies of life which are given to the labourer, has increased considerably during the course of the present century. The rise in its money price seems to have been the effect, not of any diminution of the value of silver in the general market of Europe, but of a rise in the real price of labour in the particular market of Great Britain, owing to the peculiarly happy circumstances of the country.
21For some time after the first discovery of America, silver would continue to sell at its former, or not much below its former price. The profits of mining would for some time be very great, and much above their natural rate. Those who imported that metal into Europe, however, would soon find that the whole annual importation could not be disposed of at this high price. Silver would gradually exchange for a smaller and a smaller quantity of goods. Its price would sink gradually lower and lower till it fell to its natural price; or to what was just sufficient to pay, according to their natural rates, the wages of the labour, the profits of the stock, and the rent of the land, which must be paid in order to bring it from the mine to the market. In the greater part of the silver mines of Peru, the tax of the king of Spain, amounting to a ntenthn of the gross produce, eats up, it has already been observed,31 the whole rent of the land. This tax was originally a half; it soon afterwards fell to a third,o then to a fifth, pand at last to a tenth,p at which rate it still continues. In the greater part of the silver mines of Peru this, it seems, is all that remains after replacing the stock of the undertaker of the work, together with its ordinary profits; and it seems to be universally acknowledged that these profits, which were once very high, are now as low as they can well be, consistently with carrying on qtheq works.
22The tax of the king of Spain was reduced to a fifth rpartr of the registered silver in 1504* , one and–tfortyt years before u1545u the date of the discovery of the mines of Potosi.32 In the course of vninety yearsv or before 1636, these mines, the most fertile in all America, had time sufficient to produce their full effect, or to reduce the value of silver in the European market as low as it could well fall, while it continued to pay this tax to the king of Spain. wNinetyw years is time sufficient to reduce any commodity, of which there is no monopoly, to its natural price, or to the lowest price at which, while it pays a particular tax, it can continue to be sold for any considerable time together.33
23The price of silver in the European market might perhaps have fallen still lower, and it might have become necessary either to xreducex the tax upon it, ynot only to one tenth, as in 1736, but to one twentieth,y in the same manner as that upon gold, or to give up working the greater part of the American mines which are now wrought. The gradual increase of the demand for silver, or the gradual enlargement of the market for the produce of the silver mines of America, is probably the cause which has prevented this from happening, and which has not only kept up the value of silver in the European market, but has perhaps even raised it somewhat higher than it was about the middle of the last century.
24Since the first discovery of America, the market for the produce of its silver mines has been growing gradually more and more extensive.
25 First, The market of Europe has become gradually more and more extensive. Since the discovery of America, the greater part of Europe has been much improved. England, Holland, France, and Germany; even Sweden, Denmark, and Russia, have all advanced considerably both in agriculture and in manufactures. Italy seems not to have gone backwards. The fall of Italy preceded the conquest of Peru. Since that time it seems rather to have recovered a little. Spain and Portugal, indeed, are supposed to have gone backwards. Portugal, however, is but a very small part of Europe, and the declension of Spain is not, perhaps, so great as is commonly imagined. In the beginning of the sixteenth century, Spain was a very poor country, even in comparison with France, which has been so much improved since that time. It was the well–known remark of the Emperor Charles V. who had travelled so frequently through both countries, that every thing abounded in France, but that every thing was wanting in Spain. The increasing produce of the agriculture and manufactures of Europe must necessarily have required a gradual increase in the quantity of silver coin to circulate it; and the increasing number of wealthy individuals must have required the like increase in the quantity of their plate and other ornaments of silver.
26Secondly, America is itself a new market for the produce of its own silver mines; and as its advances in agriculture, industry, and population, are much more rapid than those of the most thriving countries in Europe, its demand must increase much more rapidly. The English colonies are altogether a new market, which, partly for coin and partly for plate, requires a continually augmenting supply of silver through a great continent where there never was any demand before. The greater part too of the Spanish and Portuguese colonies are altogether new markets. New Granada, the Yucatan, Paraguay, and the Brazils were, before discovered by the Europeans, inhabited by savage nations, who had neither arts nor agriculture. A considerable degree of both has now been introduced into all of them. Even Mexico and Peru, though they cannot be considered as altogether new markets, are certainly much more extensive ones than they ever were before. After all the wonderful tales which have been published concerning the splendid state of those countries in antient times, whoever reads, with any degree of sober judgment, the history of their first discovery and conquest, will evidently discern that, in arts, agriculture, and commerce, their inhabitants were much more ignorant than the Tartars of the Ukraine are at present. Even the Peruvians, the more civilized nation of the two, though they made use of gold and silver as ornaments, had no coined money of any kind. Their whole commerce was carried on by barter, and there was accordingly scarce any division of labour among them.34 Those who cultivated the ground were obliged to build their own houses, to make their own houshold furniture, their own clothes, shoes, and instruments of agriculture. The few artificers among them are said to have been all maintained by the sovereign, the nobles, and the priests, and were probably their servants or slaves. All the ancient arts of Mexico and Peru have never furnished one single manufacture to Europe. The Spanish armies, though they scarce ever exceeded five hundred men, and frequently did not amount to half that number, found almost every where great difficulty in procuring subsistence. The famines which they are said to have occasioned almost wherever they went, in countries too which at the same time are represented as very populous and well–cultivated, sufficiently demonstrate that the story of this populousness and high cultivation is in a great measure fabulous. The Spanish colonies are under a government in many respects less favourable to agriculture, improvement and population, than that of the English colonies.35 They seem, however, to be advancing in all these much more rapidly than any country in Europe. In a fertile soil and happy climate, the great abundance and cheapness of land, a circumstance common to all new colonies,36 is, it seems, so great an advantage as to compensate many defects in civil government. Frezier, who visited Peru in 1713, represents Lima as containing between twenty–five and twenty–eight thousand inhabitants.37 Ulloa, who resided in the same country between 1740 and 1746, represents it as containing more than fifty thousand.38 The difference in their accounts of the populousness of several other principal towns in Chili and Peru is nearly the same;39 and as there seems to be no reason to doubt of the good information of either, it marks an increase which is scarce inferior to that of the English colonies. America, therefore, is a new market for the produce of its own silver mines, of which the demand must increase much more rapidly than that of the most thriving country in Europe.
27Thirdly, The East Indies is another market for the produce of the silver mines of America, and a market which, from the time of the first discovery of those mines, has been continually taking off a greater and a greater quantity of silver. Since that time, the direct trade between America and the East Indies, which is carried on by means of the Acapulco ships,40 has been continually augmenting, and the indirect intercourse by the way of Europe has been augmenting in a still greater proportion. During the sixteenth century, the Portuguese were the only European nation who carried on any regular trade to the East Indies. In the last years of that century the Dutch began to encroach upon this monopoly, and in a few years expelled them from their principal settlements in India. During the greater part of the last century those two nations divided the most considerable part of the East India trade between them; the trade of the Dutch continually augmenting in a still greater proportion than that of the Portuguese declined. The English and French carried on some trade with India in the last century, but it has been greatly augmented in the course of the present. The East India trade of the Swedes and Danes began in the course of the present century. Even the Muscovites now trade regularly with China by a sort of caravans which go over land through Siberia and Tartary to Pekin. The East India trade of all these nations, if we except that of the French, which the last war had well nigh annihilated, has been almost continually augmenting. The increasing consumption of East India goods in Europe is, it seems, so great, as to afford a gradual increase of employment to them all. Tea, for example, was a drug very little used in Europe before the middle of the last century. At present the value of the tea annually imported by the English East India Company, for the use of their own countrymen, amounts to more than a million and a half a year; and even this is not enough; a great deal more being constantly smuggled into the country from the ports of Holland, from Gottenburg in Sweden, and from the coast of France too, as long as the French East India Company was in prosperity. The consumption of the porcelain of China, of the spiceries of the Moluccas, of the piece goods of Bengal, and of innumerable other articles, has increased very nearly in a like proportion. The tonnage accordingly of all the European shipping employed in the East India trade, at any one time during the last century, was not, perhaps, much greater than that of the English East India Company before the late reduction of their shipping.41
28But in the East Indies, particularly in China and Indostan, the value of the precious metals, when the Europeans first began to trade to those countries, was much higher than in Europe; and it still continues to be so. In rice countries, which generally yield two, sometimes three crops in the year, each of them more plentiful than any common crop of corn, the abundance of food must be much greater than in any corn country of equal extent.42 Such countries are accordingly much more populous. In them too the rich, having a greater super–abundance of food to dispose of beyond what they themselves can consume, have the means of purchasing a much greater quantity of the labour of other people. The retinue of a grandee in China or Indostan accordingly is, by all accounts, much more numerous and splendid than that of the richest subjects in Europe. The same super–abundance of food, of which they have the disposal, enables them to give a greater quantity of it for all those singular and rare productions which nature furnishes but in very small quantities; such as the precious metals and the precious stones, the great objects of the competition of the rich.43 Though the mines, therefore, which supplied the Indian market had been as abundant as those which supplied the European, such commodities would naturally exchange for a greater quantity of food in India than in Europe. But the mines which supplied the Indian market with the precious metals seem to have been a good deal less abundant, and those which supplied it with the precious stones a good deal more so, than the mines which supplied the European. The precious metals, therefore, would naturally exchange zin Indiaz for somewhat a greater quantity of the precious stones, and for a much greater quantity of food a than in Europe.44 The money price of diamonds, the greatest of all superfluities, would be somewhat lower, and that of food, the first of all necessaries, a great deal lower in the one country than in the other. But the real price of labour, the real quantity of the necessaries of life which is given to the labourer, it has already been observed,45 is lower both in China and Indostan, the two great markets of India, than it is through the greater part of Europe. The wages of the labourer will there purchase a smaller quantity of food; and as the money price of food is much lower in India than in Europe, the money price of labour is there lower upon a double account; upon account both of the small quantity of food which it will purchase, and of the low price of that food. But in countries of equal art and industry, the money price of the greater part of manufactures will be in proportion to the money price of labour; and in manufacturing art and industry, China and Indostan, though inferior, seem not to be much inferior to any part of Europe. The money price of the greater part of manufactures, therefore, will naturally be much lower in those great empires than it is any–where in Europe. Through the greater part of Europe too the expence of land–carriage increases very much both the real and nominal price of most manufactures. It costs more labour, and therefore more money, to bring first the materials, and afterwards the compleat manufacture to market. In China and Indostan the extent and variety of inland navigations46 save the greater part of this labour, and consequently of this money, and thereby reduce still lower both the real and the nominal price of the greater part of their manufactures. Upon all these accounts, the precious metals are a commodity which it always has been, and still continues to be, extremely advantageous to carry from Europe to India. There is scarce any commodity which brings a better price there; or which, in proportion to the quantity of labour and commodities which it costs in Europe, will purchase or command a greater quantity of labour and commodities in India. It is more advantageous too to carry silver thither than gold; because in China, and the greater part of the other markets of India, the proportion between fine silver and fine gold is but as tenb, or at most as twelve,b to one; whereas in Europe it is as fourteen or fifteen to one.47 In China, and the greater part of the other markets of India, tenc, or at most twelve,c ounces of silver will purchase an ounce of gold: in Europe it requires from fourteen to fifteen ounces. In the cargoes, therefore, of the greater part of European ships which sail to India, silver has generally been one of the most valuable articles. It is the most valuable article in the Acapulco ships which sail to Manilla. The silver of the new continent seems in this manner to be done of the principal commoditiesd by which the commerce between the two extremities of the old one is carried on, and it is by means of ite, in a great measure,e that those distant parts of the world are connected with one another.
29In order to supply so very widely extended a market, the quantity of silver annually brought from the mines must not only be sufficient to support that continual increase both of coin and of plate which is required in all thriving countries; but to repair that continual waste and consumption of silver which takes place in all countries where that metal is used.
30The continual consumption of the precious metals in coin by wearing, and in plate both by wearing and cleaning, is very sensible; and in commodities of which the use is so very widely extended, would alone require a very great annual supply. The consumption of those metals in some particular manufactures, though it may not perhaps be greater upon the whole than this gradual consumption, is, however, much more sensible, as it is much more rapid. In the manufactures of Birmingham alone, the quantity of gold and siver annually employed in gilding and plating, and thereby disqualified from ever afterwards appearing in the shape of those metals, is said to amount to more than fifty thousand pounds sterling. We may from thence form some notion how great must be the annual consumption in all the different parts of the world, either in manufactures of the same kind with those of Birmingham, or in laces, embroideries, gold and silver stuffs, the gilding of books, furniture, &c. A considerable quantity too must be annually lost in transporting those metals from one place to another both by sea and by land. In the greater part of the governments of Asia, besides, the almost universal custom of concealing treasures in the bowels of the earth, of which the knowledge frequently dies with the person who makes the concealment, must occasion the loss of a still greater quantity.
31The quantity of gold and silver imported at both Cadiz and Lisbon (including not only what comes under register, but what may be supposed to be smuggled) amounts, according to the best accounts, to about six millions sterling a year.
32According to Mr. Meggens* the annual importation of the precious metals into Spain, at an average of six years; viz. from 1748 to 1753, both inclusive; and into Portugal, at an average of seven years; viz. from 1747 to 1753, both inclusive; amounted in silver to 1,101,107 pounds weight; and in gold to 49,940 pounds weight. The silver, at sixty–two shillings the pound Troy, amounts to 3,413,431l. 10s. sterling. The gold, at forty–four guineas and a half the pound Troy, amounts to 2,333,446l. 14s. sterling.48 Both together amount to 5,746,878l. 4s. sterling. The account of what was imported under register, he assures us is exact. He gives us the detail of the particular places from which the gold and silver were brought, and of the particular quantity of each metal, which, according to the register, each of them afforded. He makes an allowance too for the quantity of each metal which he supposes may have been smuggled. The great experience of this judicious merchant renders his opinion of considerable weight.
33According to the eloquent and, sometimes, well–informed Author of the Philosophical and Political History of the establishment of the Europeans in the two Indies, the annual importation of registered gold and silver into Spain, at an average of eleven years; viz. from 1754 to 1764, both inclusive; amounted to 13,984,185 g⅗g piastres of ten reals. On account of what may have been smuggled, however, the whole annual importation, he supposes, may have amounted to seventeen millions of piastres; which, at 4s. 6d. the piastre, is equal to 3,825,000 l. sterling. He gives the detail too of the particular places from which the gold and silver were brought, and of the particular quantities of each metal which, according to the register, each of them afforded.49 He informs us too, that if we were to judge of the quantity of gold annually imported from the Brazils into Lisbon by the amount of the tax paid to the king of Portugal, which it seems is one–fifth of the standard metal, we might value it at eighteen millions of cruzadoes, or forty–five millions of French livres, equal to about two millions sterling. On account of what may have been smuggled, however, we may safely, he says, add to this sum an eighth more, or 250,000 l. sterling, so that the whole will amount to 2,250,000 l. sterling. According to this account, therefore, the whole annual importation of the precious metals into both Spain and Portugal, amounts to about 6,075,000 l. sterling.50
34Several other very well authenticatedh, though manuscript,h accounts, I have been assured, agree, in making this whole annual importation amount at an average to about six millions sterling, sometimes a little more, sometimes a little less.
35The annual importation of the precious metals into Cadiz and Lisbon, indeed, is not equal to the whole annual produce of the mines of America. Some part is sent annually by the Acapulco ships to Manilla; some part is employed in the contraband trade which the Spanish colonies carry on with those of other European nations; and some part, no doubt, remains in the country. The mines of America, besides, are by no means the only gold and silver mines in the world. They are, however, by far the most abundant. The produce of all the other mines which are known, is insignificant, it is acknowledged, in comparison with theirs; and the far greater part of their produce, it is likewise acknowledged, is annually imported into Cadiz and Lisbon. But the consumption of Birmingham alone, at the rate of fifty thousand pounds a year, is equal to the hundred–and–twentieth part of this annual importation at the rate of six millions a year. The whole annual consumption of gold and silver, therefore, in all the different countries of the world where those metals are used, may perhaps be nearly equal to the whole annual produce. The remainder may be no more than sufficient to supply the increasing demand of all thriving countries. It may even have fallen so far short of this demand as somewhat to raise the price of those metals in the European market.
36The quantity of brass and iron annually brought from the mine to the market is out of all proportion greater than that of gold and silver. We do not, however, upon this account, imagine that those coarse metals are likely to multiply beyond the demand, or to become gradually cheaper and cheaper. Why should we imagine that the precious metals are likely to do so? The coarse metals, indeed, though harder, are put to much harder uses, and, as they are of less value, less care is employed in their preservation. The precious metals, however, are not necessarily immortal any more than they, but are liable too to be lost, wasted, and consumed in a great variety of ways.
37The price of all metals, though liable to slow and gradual variations, varies less from year to year than that of almost any other part of the rude produce of land;51 and the price of the precious metals is even less liable to sudden variations than that of the coarse ones. The durableness of metals is the foundation of this extraordinary steadiness of price. The corn which was brought to market last year, will be all or almost all consumed long before the end of this year. But some part of the iron which was brought from the mine two or three hundred years ago, may be still in use, and perhaps some part of the gold which was brought from it two or three thousand years ago. The different masses of corn which in different years must supply the consumption of the world, will always be nearly in proportion to the respective produce of those different years. But the proportion between the different masses of iron which may be in use in two different years, will be very little affected by any accidental difference in the produce of the iron mines of those two years; and the proportion between the masses of gold will be still less affected by any such difference in the produce of the gold mines. Though the produce of the greater part of metallick mines, therefore, varies, perhaps, still more from year to year than that of the greater part of cornfields, those variations have not the same effect upon the price of the one species of commodities, as upon that of the other.
[1 ]1 William and Mary, c. 12 (1688). When malt or barley did not exceed 24s. per Winchester quarter, rye, 32s., wheat 48s., the bounties per quarter were 2s. 6d. for malt or barley, 3s. 6d. for rye, and 5s. for wheat. See below, III.iv.20, IV.v.a.5, IV.v.b.37, V.ii.k.13.
[2 ]See below, IV.v.a.7.
[3 ]The impact of the bounty on the state of tillage is considered in LJ (A) vi.95; cf. LJ (B) 233, ed. Cannan 180.
[4 ]Below, IV.v.
[5 ]10 William III, c.3. The prohibition was for one year from 10 February 1699.
[6 ]Though clipping had been reducing the weight of coins for a century, the price of silver bullion began to rise only in 1694, and very sharply only in 1695. J. K. Horsefield, British Monetary Experiments 1650–1710 (Cambridge Mass., 1960), 11 and 27.
[7 ]‘I infer, First, That the Moneys commonly Currant are Diminished near one Half, to wit, in a Proportion something greater than that of Ten to Twenty two.’ (W. Lowndes, Report, 107.) Lowndes is mentioned below, IV.iii.a.9.
[8 ]The recoinage of 1774 is considered at I.v.29 and IV.vi.18.
[9 ]‘The value of the Silver in the Coin ought to be Raised to the Foot of Six Shillings Three Pence in every Crown, because the Price of Standard Silver in Bullion is Risen (from divers necessary and unnecessary Causes, producing at length a great scarcity thereof in England) to Six Shillings Five Pence an Ounce.’ (W. Lowndes, Report, 68.)
[10 ]See below, IV.v.a.
[h]; a notion which I shall examine hereafter 1
[11 ]A mistake. 19/32 should read 9/32. See below (274).
[12 ]A mistake. The reduction is about 21·5 per cent. The fall has been calculated on the average of £2. 0s. 6 19/32d. for 1701 to 1764 instead of on the average of £2. 11s. 0½d. for 1637 to 1700.
[13 ]Gregory King, State and Condition of England, 1688, in G. Chalmers, Comparative Strength of Great Britain to 1803, 53; quoted in C. D’avenant, Political and Commercial Works, ed. C. Whitworth, ii.217, who adds ‘this value is what the same is worth upon the spot where the corn grew; but this value is increased by the carriage to the place where it is at last spent, at least ¼ part more.’ King is mentioned above, I.viii.34.
[14 ]1 William and Mary, c.12 (1688). See I.xi.g.4.
[15 ]See below, IV.v.a.23, where Smith comments on the futility of this policy.
[16 ]In LJ (A) vi.139 the yield of the land tax in King William’s time, calculated at 4s. in the pound, is stated to have been £2·5 million in England. See also LJ (B) 234, ed. Cannan 181.
[17 ]Cf. IV.i.14 and IV.v.a.5.
[18 ]Below, IV.v.a.7.
[19 ]Smith refers to Messance above, I.viii.49, as an author of ‘great knowledge and ingenuity’. In Letter 115 addressed to Hailes, dated 15 January 1769, wherein Smith reviewed a number of printed authorities, Messance was described as ‘the most judicious author of them all’. See also I.xi.n.5.
[20 ]Below, IV.v.a.5 and IV.ix.38.
[21 ]Above, I.v.15.
[22 ]A view which is supported by recent investigations. The weather in the early 1770s seems to have been unfavourable. E. L. Jones, Seasons and Prices (London, 1964), 144–6.
[23 ]See below, I.xi.n.1.
[24 ]The sum of £1. 6s. 8d. is obtained by deducting one–ninth from £1 13s. 9⅘d. to allow for the difference in measure, and then by deducting one–ninth from the remainder to take account of the difference in quality. See above, I.xi.f.4.
[25 ]The amounts said to have been paid in bounties in this paragraph were derived by multiplying the figures for grain exported given in C. Smith, Three Tracts on the Corn Trade and Corn Laws (London, 1766), 110–11, by the bounties quoted ibid., 81 n. See above, 212, n. 1.
[26 ]‘It is hardly possible to suppose, that the provisions necessary for the poor can be dear in this country, where there is such a superabundance of corn, that incredible quantities have been lately exported. I should be afraid to mention what quantities have been exported, if it did not appear upon our custom–house books; but from them it appears, that lately there was in three months’ time above £220,000 paid for bounties upon corn exported; and all our other exports have, since the peace, been more considerable than they had ever been for many years before.’ (Cobbett’s Parliamentary History, xiv (1747–53), col. 589 (1749).)
[27 ]See below, IV.v.a.39, where it is stated that the bounty had sometimes cost more than £300,000. Cf. V.ii.k.29.
[28 ]Smith’s figures at the end of the chapter do not continue to 1770 but stop in 1764. It is difficult to see why he cites 1759 as a cheap year, since the price he gives for 1761 is 9s. 7d. lower.
[29 ]There were regional variations. The index of money wages in London rose from 100 in 1700 to 118 in 1776; in Lancashire from 100 to 200. The comparable indices of real wages were 100 to 98 and 100 to 167. E. W. Gilboy, ‘The Cost of Living and Real Wages in Eighteenth Century England’, Review of Economic Statistics, xviii (1936), 134–43.
[30 ]Above, I.viii.35.
[31 ]Above, I.xi.c.25.
[32 ]Date given in Juan and Ulloa, Voyage historique, i.521–2, trans. John Adams, ii.146–7.
[v–v]a century 1
[w–w]A hundred 1
[33 ]See above, I.vii.6.
[34 ]See above, I.iv.2, where Smith discusses the inconveniences of barter, and below, IV.vii.b.7, where Mexico is cited in addition to Peru as an example of such an economy. See, however, LJ (A) vi.117–18: ‘The Europeans, on their first going into China, Mexico, Peru, and all the eastern countries, found metalls used as the instruments of commerce, and they had the publick stamp upon them . . .’
[35 ]See below, IV.vii.b.7–9. Smith comments on the advantage of English institutions to the colonies at IV.vii.b.16–25.
[36 ]This point is made at I.ix.11, IV.vii.b.2 and 6.
[37 ]‘The number of Spanish Families in Lima may make up about 8 or 9,000 Whites; the rest are only Mestizo’s, Mulatto’s, Blacks and some Indians; tho’ in the whole, there are about 25 or 30,000 Souls, including the Friers and Nuns, who take up at least a Quarter of the City.’ (A. F. Frézier, A Voyage to the South Sea, 218.)
[38 ]The same figure is cited below, IV.vii.b.7. Juan and Ulloa do not quote an exact figure but state: ‘the inhabitants of Lima are composed of whites, or Spaniards, Negroes, Indians, Mestizos and other casts proceeding from the mixture of all three.’ Of Spanish families there were ‘sixteen or eighteen thousand whites’; ‘the Negroes, Mulattoes, and their descendants, form the greatest number of the inhabitants’; the Indians and Mestizos ‘are very small in proportion to the largeness of the city, and the multitudes of the second class’. (Voyage historique, i.443–5, trans. John Adams, ii.52–5.)
[39 ]Juan and Ulloa (Voyage historique, i.468 and ii.49, trans. John Adams, ii.84 and 258) gave Callao as having a population of 4,000 and Santiago ‘at about four thousand families’. Frézier (A Voyage to the South Sea, 102 and 202) suggests the number of inhabitants in Callao does not exceed 400 ‘tho’ they reckon 600’; in Santiago, 2,000 white, with the rest about three times as great without including ‘Friendly Indians’, whom he puts at 15,000.
[40 ]One ship, and after 1720 two ships, were to sail from Acapulco to the Philippines. Details of the trade, particularly of what could be carried are in G. de Uztariz, The Theory and Practice of Commerce, translated by John Kippax (London, 1751), i.206–8.
[41 ]12 George III, c.54 (1772) prohibited the East India Company from building ships at home until its total tonnage in service was below 45,000 tons and from employing ships constructed after March 1772. The objective was to conserve supplies of timber.
[42 ]See above, I.xi.b.37.
[43 ]A similar point is made above, I.xi.c.36.
[a]in India 1
[44 ]See below, I.xi.h.2.
[45 ]Above, I.viii.24.
[46 ]See above, I.iii.7.
[47 ]‘In Japan where there are a good many silver mines the ratio of gold to silver is today 1 to 8: in China 1 to 10: in the other countries of the Indies on this side 1 to 11, 1 to 12, 1 to 13, and 1 to 14, as we get nearer to the West and to Europe.’ (Cantillon, Essai, 365, ed. Higgs 275.) ‘In Japan, the proportion of gold to silver, is as one to eight; in China, as one to ten; in other parts of India, as one to eleven, twelve, thirteen or fourteen, as we advance further west. The like variations are to be met in with Europe . . . When Columbus penetrated into America, the proportion was less than one to twelve. The quantity of these metals which was then brought from Mexico and Peru, not only made them more common, but still increased the value of gold above silver, as there were greater plenty of the latter in those parts. Spain, that was of course the best judge of the proportion, settled it at one to fifteen in the coin of the kingdom; and this system, with some slight variations, was adopted throughout Europe.’ (G. T. F. Raynal, Histoire philosophique et politique des établissemens et du commerce des Européens dans les deux Indes (Amsterdam, 1775), iii.381, translated by J. Justamond, A Philosophical and Political History of the Settlements and Trade of the Europeans in the East and West Indies (Edinburgh, 1777), ii.423–4.)
[d–d]the principal commodity 1
[ff* ]Postscript to the Universal Merchant, p. 15 and 16. This Postscript was not printed till 1756, three years after the publication of the book, which has never had a second edition. The postscript is, therefore, to be found in few copies. It corrects several errors in the book.f
[48 ]It is stated below that the annual imports into Spain and Portugal does not much exceed six millions sterling, IV.i.28.
[49 ]G. T. F. Raynal, Histoire philosophique, iii.307–8, trans. J. Justamond, ii.368–9.
[50 ]The same point is made below, I.xi.h.6. Cf. G. T. F. Raynal, Histoire philosophique, iii.380, trans. J. Justamond, ii.423:
[51 ]See above, I.v.16.
[ff* ]Postscript to the Universal Merchant, p. 15 and 16. This Postscript was not printed till 1756, three years after the publication of the book, which has never had a second edition. The postscript is, therefore, to be found in few copies. It corrects several errors in the book.f