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• Advertisement By the Editor.
• Plan of Lectures On Political Economy, For Winter 1800-1801.
• Outlines of Moral Philosophy. Part Third. [political Science.]
• Part III. *: of Man Considered As the Member of a Political Body. †
• Chapter I.: Of the History of Political Society.
• Chapter II.: Of the General Principles of Legislation and Government.
• Lectures On Political Economy.
• Errata.
• Introduction. of the Objects and Province of Political Economy. *
• [chapter I.]: [of the Title and Comprehension of the Science, In Its Most Extensive Meaning.]
• Chapter II. *: [of the Contents and Distribution of Political Economy Proper,—or of Part First.]
• [ Population. ]
• [ National Wealth. ]
• [ the Poor:—their Maintenance. ]
• [ Education.—prevention, Reformation, Correction of Crime. ]
• [chapter III.]: [preliminary Distinction of Positive Laws Into Two Classes; and the Relation of These to Political Economy Proper,—or to Part First.]
• Part First.—: of Political Economy Proper.
• [book First.]: [of Population.]
• [chapter I.]: Of Population Considered As an Article of the Natural History of Man.
• [chapter II.]: [of Population Considered As an Article of Political Economy.]
• [sect. I.—: Of Population As Affected By the Political Institutions Which Regulate the Sexual Connexion.]
• [sect. II.—: Of Population As Affected By the State of Manners Relative to the Connexion Between the Sexes.]
• [sect. III.—: Dependence of Population On the Means of Subsistence Enjoyed By the People.]
• [ Appendix. —: of the Means Which Have Been Employed to Ascertain the State of Population In Particular Instances. ]
• [book Second.]: [of National Wealth.]
• [chapter I. * ]: [of Productive and Unproductive Labour.]
• [sect. I.—: On the Circumstances Which Render Labour More Effective.]
• Chapter II.: [of Money, the Circulating Medium.]
• [sect. I.—: Of the Origin and Use of Money.]
• [sect. II.—: Of Real and Nominal Prices.]
• [sect. III.—: On the Effects of Plenty Or Scarcity of the Precious Metals Upon Prices.]
• Sect. IV.—: Of Money As the Standard of Value.
• [sect. V.—: Of Interest.]
• Appendices to Books First and Second.
• Appendix I.—: To B. I. Ch. II. § 3.
• Quotation On Population From Pinto.
• Appendix II.—: To B. II. Ch. II.
• Notes On the [ Parliamentary ] Bullion Report. ( Sent By Mr. Stewart to Lord Lauderdale, In February, March, and April, 1811.)

[National Wealth.]

[II.]* —The various questions concerning Population, lead by an easy transition to an examination of the nature and causes of National Wealth; a branch of Political Economy which presents a contrast no less striking than that which the former article exhibits, between the maxims of ancient and of modern policy.

As the wealth possessed by some of the most celebrated states of antiquity was acquired not by commerce but by the sword, it had no tendency to encourage a commercial spirit, excepting in so far as it ministered to luxury. Accordingly, we find that commerce was dreaded by the Roman statesmen on account of the luxury which they regarded as its necessary consequence; and it is a curious circumstance, that after their foreign conquests had brought immense riches into the public treasury, this very dread of the commercial spirit produced the same jealousy about the exportation of the precious metals with which the prejudices of the mercantile system of Political Economy so long inspired the legislators of Modern Europe. “Exportari aurum,” says Cicero, “non oportere, cum sæpe antea senatus, tum, me consule, gravissime judicavit.”* The same policy continued afterwards (partly indeed from other motives) under the Emperors; and it must be confessed, that in so far as their aim was to keep possession of the riches they had acquired, their views were somewhat more reasonable and consistent than those of our ancestors, for as they had no commodities of their own to give in exchange for the luxuries they imported, they must have paid for every thing in silver and gold. In the degenerate state, however, into which the Roman manners had then fallen, the progress of luxury was not to be checked by legislative restrictions, and the discouragements to commerce served only to prevent the operation of that antidote which nature has so beautifully provided against its pernicious effects, in the general diffusion of wealth among the body of a people, accompanied with that spirit of industry and frugality which commercial pursuits have a tendency to inspire.

The fatal effects which had been found, in the history of so many states, to be produced by a sudden influx of riches from abroad, combined with an ignorance of the salutary tendencies of commerce, led the ancient lawgivers very generally to check, as much as possible, the commercial spirit by the force of positive institutions. Plato prohibits the introduction into his imaginary Commonwealth, of any arts but those which minister to the necessities of human life, and refused to give laws to the Arcadians, because they were rich and loved magnificence;—while Phocion, who saw in the wealth of the Athenians the seeds of their ruin, proposed that artisans should be considered as slaves, and deprived of the rights of citizens. That these ideas correspond perfectly with the prevailing, or rather the unanimous opinion of antiquity, appears from numerous passages in the Greek and Roman authors. At present, I shall only mention Plutarch’s Life of Pericles, and the 8th, 17th, 20th, and 94th Epistles of Seneca.

How different are the ideas which now prevail universally on the same subject! “It is no longer,” says Raynal, “a people immersed in poverty, that becomes formidable to a rich nation. Power is at present an attendant on riches, because they are no longer the fruit of conquest, but the produce of lives spent in perpetual employment. Gold and silver corrupt only those indolent minds which indulge in the delights of luxury, upon that stage of low intrigue which is called greatness. The same metals put in motion the hands and arms of the people, exciting a spirit of agriculture in the fields, of navigation in the maritime cities, and multiplying over the whole face of the country, the comforts, enjoyments, and ornaments of life.”* Montesquieu himself does not seem to have been sufficiently aware of this essential difference between the wealth acquired by commerce and by rapine, in the parallel which he draws between the Carthaginians and the Romans. The former were indeed subdued by the latter, but they must be allowed to have maintained a far more obstinate and glorious struggle for their political existence, than was afterwards exhibited by their conquerors when assailed by the arms of the barbarians.

Agreeably to these remarks, and in direct contradiction to the maxims of ancient policy, we find everywhere, when we cast our eyes over the surface of the globe, that the most wealthy states are those where the people are the most industrious, humane, and enlightened, and where the liberty they enjoy, by entering as an elementary principle into the very existence of the political order, rests on the most solid and durable basis. Indeed, it was the general diffusion of wealth among the lower orders of men which first gave birth to the spirit of independence in Modern Europe, and which has produced under some of its governments, and more especially under our own, a more equal diffusion of freedom and of happiness than took place under the most celebrated constitutions of antiquity.

The difference between the condition of ancient and of modern nations, in consequence of the abolition of domestic slavery, has been already remarked, and the effects which it has produced have in no instance been more conspicuous than upon the sources of national opulence. As the ground is now universally cultivated (at least in this part of Europe) by men whose subsistence depends on the fruits of their own industry, the measure of their exertions can be increased only by the multiplication of their wants and necessities; or (as Sir James Steuart expresses it) “by the operation of manufactures and commerce, in rendering men slaves to their own passions and desires.” Hence the important distinction upon which this ingenious writer has laid so great stress between labour and industry. “The former,” he observes, “may always be procured, even by force, at the expense of furnishing man with his daily sustenance, whereas the latter cannot possibly be established, but by means of an adequate equivalent, proportioned not to what is absolutely necessary, but to what may satisfy the reasonable desire of the industrious, which equivalent becomes, in its turn, the means of diffusing a similar taste for superfluities among all classes of people.”1

One of the best illustrations I know of this distinction between labour and industry, and of the consequent difference between the ancient and modern system of Political Economy, is to be found in the discourse (commonly, and I think justly, attributed to Xenophon) “On the Improvement of the Revenue of the State of Athens.”2 From this work of Xenophon we learn the opinion of the author with regard to the three principal classes of the Athenian people—the Citizens, the Strangers, and the Slaves; and it is particularly remarkable, that even among the lowest order of the citizens, he never once supposes the expediency, or even the possibility, of exciting a spirit of industry by any of the motives which operate so effectually on the minds of the multitude in Modern Europe. On the contrary, his professed object is to secure the same advantages at which Political Economy now aims, through the medium of men’s natural propensities, by regulations of police, altogether unconnected with the habits of the people for whose welfare they were destined.

With this view, he lays down a plan for improving the revenue of the State, (by means of taxes to be imposed on its confederate cities,) in such a manner, as out of it to give every Athenian citizen a pension of three oboli a day, or threepence three farthings of our money.

In case the resources he points out for obtaining this revenue should prove deficient, people from all quarters, (he observes,) princes and strangers of note in all countries, would be proud of contributing towards it, to have their names transmitted to posterity in the public monuments of Athens.

Besides providing this daily pension of threepence three farthings for every citizen of Athens, rich and poor, Xenophon proposed to build, at the public expense, a number of trading vessels, a great many inns, and houses of entertainment for all strangers in the sea-ports, to erect shops, warehouses, and exchanges, the rents of which would not only increase the revenue, but add to the beauty and magnificence of the city. In a word, the great aim of this ancient system of Political Economy, (as Sir James Steuart has well observed,) is to accomplish by the labour of slaves, and by the subsidies of strangers, what a free people in our days are constantly performing by their own industrious exertions.1

In consequence of this independent industry of our lower orders, and more especially of the action and re-action of manufactures, commerce, and agriculture on each other, there has gradually arisen in the mechanism of modern society, a complexness of parts, and, at the same time, an apparent simplicity of design, essentially different from what fell under the review of ancient politicians.

Among other important consequences resulting from this mechanism, there is one which it may not be improper to mention at present, as it affords a peculiarly striking proof of the essential difference between the state of mankind in ancient and in modern times. The circumstance I allude to is, the effect of internal commerce in circulating money through all the different parts of the political body; affording by this very process a sensible illustration of the systematical relations which now connect together all the different orders of men in the same community, and which render every change in the condition of any one order a source either of advantage or loss to all the others. How different the case was in the old world, we may infer from the low price which the necessaries of life bore at a time when the precious metals were in the greatest abundance among the higher classes; and when the pecuniary expenses of some individuals, in articles of luxury and of ornament, were on a scale far exceeding the most extravagant ideas of modern ages.

These, and some other facts of the same kind, demonstrate how much the relation between prices and the quantity of the precious metals depends on that circulation of money which is produced by an active internal commerce: But the only inference I wish to draw from them at present is, the disjointed organization of society in the ancient Commonwealths, when compared with that comprehensive mechanism, which, in such a country as ours, combines so beautifully into one system the different classes and interests of individuals.

Another circumstance which has had a powerful influence on the condition of civilized nations in modern times, is the activity and extent of maritime trade, so wonderfully facilitated by the improvements which have taken place in the art of navigation, and so strongly encouraged by the intercourse which these have opened with parts of the globe formerly unknown.

It is observed by Dr. Robertson,* that in the ancient world land trade was the principal object, and maritime trade only a secondary one. This was not entirely owing to the cause to which he ascribes it,—the imperfection of the art of navigation: it was the natural effect of the geographical situation of the three continents to which the operations of commerce were confined. They all either touched, or nearly touched, each other; and the Mediterranean seas, which they included, served only to facilitate the operations of a commerce, of which the land was the principal element.

Of the extent to which human ingenuity and industry were able, in ancient times, to carry on foreign trade, under the great disadvantages of land-carriage, an idea may be formed from the remains of this species of commerce, still existing in the East; for although since the passage to India by the Cape of Good Hope was opened, the trade from that country to Europe has been carried on by sea, a considerable portion of its valuable productions are, to this day, conveyed by land to other parts of the earth. This mode of communication is, indeed, rendered absolutely necessary, by the unbroken continuity of many of the most extensive provinces of Asia; and in a still greater degree, by the effect of the same circumstances in the Continent of Africa. The religious pilgrimages to Mecca, enjoined by the founder of the Mahometan faith, have contributed to increase, or, at least, to concentrate this commercial intercourse, by drawing annually to the Holy City numerous caravans, both of pilgrims and merchants, from all the countries where the Mahometan worship is established, extending to the shores of the Atlantic on the one hand, and to the remotest regions of the East on the other. During the few days of its continuance, the Fair of Mecca is said to be the greatest on the face of the earth; and of the immense value to which mercantile transactions are there carried on, the most unequivocal proof (as Dr. Robertson remarks) is afforded by the despatch, the silence, the mutual confidence and good faith with which they are conducted.

I have mentioned these facts chiefly as proofs of the extent to which the commercial transactions of ancient nations may have been carried, notwithstanding their comparative ignorance of the art of navigation. Accordingly, it has been argued by a late writer, (Mr. Heeren of Göttingen,* ) that although particular states, in modern times, may have carried their trade to a higher degree than single states of the ancient world; yet, on the other hand, commerce was, in the earlier ages, more equally divided among nations than at present, when a few countries in the western parts of Europe are become almost the only seats of the commerce of the globe. It has been observed by the same author, that while, in consequence of our extended navigation and maritime trade, the nations which are in possession of them have made the most important improvements, a multitude of other nations, whose situations now lie out of the road of commerce, have sunk into the lowest state of barbarism. But although there may be some foundation for these remarks, no comparison certainly can be made between the land trade carried on of old, and the commerce which has originated in modern Europe, when considered in connexion with human improvement and happiness. Nothing, indeed, can shew this more clearly than the stationary condition in which the race still remains in those parts of the world, where the former species of traffic is carried on upon the greatest scale. The facts which have been collected to illustrate the extent of their traffic serve only to place in the stronger light the peculiar advantages of that maritime intercourse, which unites, by a rapid intercourse, the most remote harbours of the globe; more particularly when combined with that inland trade, which, by means of water conveyance, penetrates in every direction the interior of a continent.

The origin of that maritime commerce which so peculiarly distinguishes modern times, is to be ascribed in a great measure to the discovery of the New World, and of the passage to India by the Cape of Good Hope. The former of these events, more particularly, was necessarily accompanied with the most important consequences; extending, in an incalculable degree, the mutual connexion of nations; and by encouraging the art of man to contend with the dangers of the ocean, throwing a new light on those beneficent arrangements which Providence has made for the improvement of the human race. It is to this event that the subsequent progress of navigation, and of that commercial spirit which now exerts so powerful an influence over the condition of mankind, may be ultimately traced; and, if it had not happened, it may be reasonably questioned whether the circumnavigation of Africa would have produced any essential change in the course of trade, or in the relations which had till then connected together the different parts of the globe.

The activity of trade thus excited and maintained by the boldness and skill of modern navigators, has been farther aided, in an immense degree, by the commerce of money, so expeditiously and easily carried on in modern times by the simple and beautiful expedient of bills of exchange. By means of these, debts and credits may be shifted from one place to another, so as to answer all the purposes of transportation of the precious metals; the same ends being accomplished by this happy invention in foreign commerce, to which coins are subservient in the details of ordinary business.

The invention of bills of exchange has been generally ascribed, since the time of Montesquieu, to the Jews. “It is a known fact,” says this eminent writer, “that under Philip Augustus and Philip the Long, the Jews who were chased from France took refuge in Lombardy, and that there they gave to foreign merchants and travellers secret letters drawn upon those to whom they had entrusted their effects in France, which bills were accordingly accepted by their correspondents.” “Commerce,” he adds, “by this means, became capable of eluding violence, and of maintaining everywhere its ground; the richest merchant having nothing but invisible effects, which he could convey imperceptibly wherever he pleased.”*

In these observations, Montesquieu has probably gone a little too far; for although the Jews may have invented the modern forms of transactions of this nature, (a fact, however, which is by no means indisputably ascertained,) there are very strong reasons for believing that the practice in question was not altogether unknown among the commercial states of antiquity. The idea, indeed, of thus exchanging one debtor for another, or of a reciprocal transfer of credits, is so extremely obvious, that it could not possibly fail to occur wherever an extensive commerce has subsisted between different nations; and, in fact, some traces of such transactions in ancient times, have been discovered by the learned industry of modern writers.

Notwithstanding, however, these circumstances, I believe it may be safely asserted, that it was in modern Europe that this mode of settling accompts, and transacting payments between foreign merchants, was first reduced to a system; a chain of correspondences being established all over the commercial world, among a particular description of traders, whose business it is to negotiate pecuniary transactions; and who, by confining their attention to this branch of commerce, have given a regularity and correctness, formerly unknown, to all other mercantile operations. The improvements which have taken place, during the course of a few centuries, in the general state of political society, all over this part of the world, by giving rise to the establishment of regular posts, and promoting everywhere a disposition to good faith and mutual confidence, are, in truth, (as I shall have occasion afterwards to show,) the foundation of those multiplied mercantile relations, of which the refinements now under our consideration may be regarded as the necessary consequences, and without which they could not possibly have existed.

In a passage already quoted from Montesquieu, [p. 41,] it is observed,—by the invention of bills of exchange, merchants were enabled to elude the grasp of despotism. The observation is just, and it touches on a circumstance equally important to civil liberty, and to the prosperity of commerce. Whether these advantages are not in some degree compensated by the selfish independence of capitalists, who by the same causes which increase their influence on public affairs, are released from local connexions, and rendered citizens of the world at large, is a question of more difficult discussion.

Among the various circumstances, however, which distinguish the modern systems of political economy, and add to the intricacy of this branch of study, none is more conspicuous than the fabric of public credit, particularly in the great commercial states of Europe; an innovation which not only affects essentially all the branches of trade, in consequence of its intimate connexion with the commerce of money, but in its more remote tendency affects the condition of all the different classes of the community.

One advantage, however, (among many inconveniences,) which may be traced to this innovation, is the attention which sovereigns have been forced to give, for their own sakes, to the advancement of industry and wealth among their subjects; and although their efforts towards this end have not been always enlightened, yet they have almost everywhere contributed materially to ameliorate gradually the condition of the body of the people. The strength of modern empires is now understood to depend on internal cultivation; presenting in this respect a striking contrast to those in the Old World, which rose by conquest, and were fed by precarious tribute. The greater the number of such states, which thus found their importance on their internal advantages and resources, and the more liberal the policy by which they are connected, the greater will be the prosperity of each individually; and the more solid will be the foundation which is laid for the future happiness of the human race.

It is remarked by Mr. Hume, in one of his political discourses, that “though all kinds of government be improved in modern times, yet monarchical governments seem to have made the greatest advances towards perfection. It may now,” he says, “be affirmed of civilized monarchies, what was formerly said in praise of republics alone, that they are a government of laws, not of men. They are found susceptible of order, method, and constancy, to a surprising degree. Property is there secure; industry encouraged; the arts flourish; and the prince lives secure among his subjects like a father among his children. There are, perhaps, and have been for two centuries, near two hundred absolute princes, great and small, in Europe; and allowing twenty years to each reign, we may suppose that there have been in the whole two thousand monarchs, or tyrants, (as the Greeks would have called them,) yet of these there has not been one, not even Philip II. of Spain, so bad as Tiberius, Caligula, Nero, or Domitian, who were four in twelve among the Roman emperors.”*

Of this very remarkable fact, an explanation may no doubt be found, in part, in the diffusion of knowledge among all orders of men by means of the press, which has everywhere raised a bulwark against the oppression of rulers in the light and spirit of the people; but much must likewise be ascribed to the influence which juster views of Political Economy have had upon the counsels even of absolute princes, by convincing them how inseparably the true interests of governors and the governed are connected together;—a consideration which, while it opens an encouraging prospect with respect to the future history of the world, affords an additional proof of a proposition which I shall afterwards endeavour to illustrate; that the science of Political Economy, much more than that part of the theory of government which relates to forms of administration, is entitled, in the present circumstances of mankind, to the attention of the speculative politician.

† In treating of the various questions connected with the general title of National Wealth, I shall be obliged to confine myself to very partial views on the subject. The field is of immense extent; and one of the most interesting portions of it (that relating to the question about the freedom of trade) has been surveyed already by Mr. Smith, with so great accuracy, that little remains for me but to consider a few incidental questions which have not entered into his plan, and to examine such of his fundamental principles as seem to myself to require limitations or corrections, or which have been disputed on solid grounds by political writers of a later date. An outline of his reasonings on this important article will be necessary for the sake of connexion; but I shall direct my attention more particularly to certain applications of the general doctrine, about which doubts have been suggested either by Mr. Smith himself, or by later writers. Of this kind are the questions,—First, with respect to the expediency of restrictions on the commerce of money, in the case of pecuniary loans. Second, concerning the expediency of restrictions on that branch of commerce which is employed about the necessaries of life; and Third, concerning the expediency of restrictions on the commerce of land.

But although in my practical conclusions on the more important questions, I am disposed to agree with Mr. Smith, I shall have frequent occasion to differ from him widely in stating the first principles of the science, as well as in my opinion of the logical propriety of various technical phrases and technical distinctions which he has sanctioned with his authority. I must take the liberty also to observe, that the plan of arrangement of his invaluable work, is far from being unexceptionable; and I am not without hopes, that by the criticisms which I have to offer on its imperfections in this respect, I shall be able to simplify the study of its doctrines to those who may adopt it, (which most persons in this country now do, and, in my opinion, for the most solid reasons,) as the elementary groundwork for their future speculations on that branch of Political Economy to which it relates.

The great variety of subjects which the plan of the course embraces, will necessarily confine my attention, in general, to those principles of Political Economy which are of a universal application. To examine the modifications which may be requisite in particular instances, in consequence of the peculiarities in the physical or moral circumstances of nations, would lead me into details inconsistent with the nature of academic lectures. In discussing, however, the two articles already mentioned, (those of Population and of National Wealth,) my reasonings will often have a reference to the interests of our own country. And if I should be thus occasionally led to deviate a little from systematical method, I flatter myself, that the inconvenience will be more than compensated, not only by the useful information to which I shall be able to lead your attention, but by the light which such digressions cannot fail to throw on our general principles. It is, indeed, one of the most fruitful sources of error and paradox in disquisitions of this kind, to reason abstractedly concerning the resources of states, without any regard either to existing forms of society, or to varieties in the physical and geographical advantages of different regions. It is a source of error, not only because the soundest general rules ought to be applied with caution in particular cases, but because the greater part of political writers, even when they express themselves in the most general and abstract terms, have been insensibly warped, more or less, in their speculations, by local habits, and local combinations of circumstances to which they have been accustomed. To this source may be distinctly traced many of the apparent diversities in the theories of different politicians; and among others, some of the contradictions between the partisans and the opponents of the agricultural system of Political Economy. The very ingenious author himself, of the Essay on Circulation and Credit,* has not perhaps always recollected, that, while his antagonists had a view, more especially to a territory like France, his mind was occupied about Holland. An attentive consideration of this circumstance will, if I do not deceive myself, account, in many instances, for an apparent diversity of opinion among speculative politicians, upon points concerning which there could not possibly have been any disagreement, if both parties had stated fully all the local particulars by which their general principles were tacitly, perhaps unconsciously, modified in their own habits of thinking.

In studying Political Economy, it is more particularly necessary for an inhabitant of these kingdoms, to keep in remembrance the many peculiarities of our situation, combining an immense fund of agricultural riches, with the advantages arising from an insular form, from the number and disposition of our navigable rivers, and from an extent of coast amounting (according to Sir William Petty’s computation, a computation which, I apprehend, falls short greatly of the truth) to three thousand eight hundred miles. Nor ought he to lose sight of the prodigies which the industry and spirit of the people, improving on their natural advantages, have already effected, under the protecting influence of civil liberty; connecting the different parts of our islands by an extended system of inland navigation, which (considering the mountainous surface of the country) may be justly regarded as one of the proudest monuments of human power.

[* ] [This numeral apparently omitted by inadvertence.]

[* ] [Pro Flacco, cap. xxviii.]

[* ] [Histoire Philosophique des Etablissemens et du Commerce, &c.]

[1 ] Sir James Steuart’s Works, Vol. II. p. 163, 8vo edition, [An Inquiry into the Principles of Political Economy, Book II. chap. xxx.]

[2 ] A translation of this Discourse is introduced into the first volume of the edition of D’Avenant’s Political Works, published by Sir Charles Whitworth.

[1 ] Vol. II. pp. 166-168. [Ibidem.]

[* ] [Historical Disquisition concerning the Knowledge which the Antients had of India, and the Progress of Trade, &c.]

[* ] [Mr. Stewart, though he did not read German, possessed in manuscript an English translation of Heeren’s work on the Policy and Commerce of the Ancient Nations.]

[* ] [Esprit des Loix. Liv. XXI. chap. xvi.]

[* ] [Essays, Vol. I., Essay Of Civil Liberty.]

[† ] [All that follows under II., or the head of National Wealth, is deleted in the older transcript.]

[* ] [Mr. Stewart probably refers to the Traité de la Circulation et du Crédit, Amst. 1771, by Isaac Pinto.]