Nassau Senior on how the universal acceptance of gold and silver currency creates a world economy (1830)

Nassau William Senior

The British classical economist Nassau William Senior (1790-1864) wrote a number of works on both paper money and hard currency in the late 1820s. In this quote he discusses how the portability and widespread acceptance of precious metal currency creates a true global economy:

In fact the portableness of the precious metals and the universality of the demand for them render the whole commercial world one country, in which bullion is the money and the inhabitants of each nation form a distinct class of labourers. We know that in the small market of every district the remuneration paid to the producer is in proportion to the value produced. And consequently that if one man can by superior diligence, or superior skill, or by the assistance of a larger capital, or by deferring for a longer time his remuneration, or by any advantage natural or acquired, occasion a more valuable product, he will receive a higher reward. It is thus that a lawyer is better paid than a watchmaker, a watchmaker than a weaver, a first-rate than an ordinary workman. And for the same reason in the general market of the world an Englishman is better paid than a Frenchman, a Frenchman than a Pole, and a Pole than a Hindoo.

The financial crises created by the French Revolution and the Napoleonic Wars during the 1790s to the mid-1810s persisted well after the hostilities came to an end in 1815. The French had experienced one of the world’s worst hyperinflations with the confiscated, land-backed paper currency called the “assignats” and the British Empire which had bankrolled the pro-monarch and anti-republican coalition had been forced to suspend the payment of gold on demand for its paper notes. This gave classical economists a great deal to think about concerning governments’ role in monetary matters as we see in the writings of David Ricardo on bullion and here with Senior on paper money. Senior is interested in where gold and silver come from, what impact their importation has on domestic prices, how this effects the return on capital and the level of wages. He comes to the conclusion that when there is a widely accepted “world currency” like gold these impacts are not restricted to one economy or one labor force but to the entire world where this currency is used in exchanges. In other worlds, the use of gold as a medium of exchange makes “the whole commercial world one country” - which is what the world was becoming by the end of the 19th century, before this was destroyed by the outbreak of the First World War in 1914.