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the importations of foreign goods for home consumption, and to increase, as much as possible, the exportation of the produce of domestic industry. Its two great engines, therefore, for enriching

made for the use of money? It was replied, that when a horse, for example, was borrowed and returned, the use of the horse was an advantage distinct from the horse; and for such an advantage a charge might properly be made. But, when money was borrowed and used, the thing itself was consumed. It was no longer in the hands of the borrower, nor had it any value distinct from its use. When, therefore, the borrower returned a sum equal to the loan, he had done all that was required of him. To make him pay for the use of the money borrowed, was to make him pay for that which, as far as he was concerned, did not exist; that is, to make him pay something which he did not receive, or to make him pay twice for the same thing. Such arguments, however conclusive with the Churchmen, were not so readily appreciated by the people. The authority of the former, however, was sufficient to confine the loaning of money to the Jews; to whom, as beyond the pale of the Church, its reasoning did not apply. In this way this class was vested, as it were, with the monopoly of money-lending, and became the money-changers and bankers of the world. Nothing can be more striking than their continuance and success in a calling which subjected them not only to the denunciations of the Church, and to the contempt and hatred of all Christians, but to the rapacity and lawlessness of the feudal tyrants of the countries in which they sojourned. They were outside the protection of the law; and it was a virtue, rather than a crime, to rob and persecute them. Yet they still continued to acquire and hold the greater part of the money of the world. About the close of the eleventh century, however, upon the revival of commerce in the free cities of Italy, their inhabitants became so far emancipated from the teachings and rules of the Church that usury was not only tolerated, but held to be an honorable calling. Its practice was one of the causes of the marvellous progress of those cities. Florence became what London is at the present time, the monetary centre of the world. Their commercial spirit spread itself over the rest of Europe; and Italian bankers, known as the Lombards, soon became the rivals of the Jews, and were seated in every great mart of trade. It was from them that Lombard Street, in which they were chiefly collected in London, took its name. As they were Christians, and consequently tolerated, they soon eclipsed the Jews in their peculiar calling. The Church, however, did not change its attitude, nor was there any considerable amelioration in England of the laws against usury until 1546, in which its lawfulness was especially recognized by an act of Parliament. It was not till the Reformation, which emancipated the mind from the dogmas of the Church, that the subject of usury came to be treated in a manner which could lead to its proper solution. It could then be discussed upon its own merits. A large number of the leading reformers proclaimed its lawfulness; although to establish the rate to be charged was still considered to be, as it is to-day in many countries, a proper function of government. Even in the State of New York, the taking of more than seven per cent is punished by very severe penalties.

No proposition seems better established at the present time than that the charge for the use of money should, like that for all other kinds of property, be regulated by the demand; that the price of a horse, in the form of money, should be just as valuable to the holder as the horse. That so simple a truth should require ages to gain admittance into the mind or conviction of mankind must be almost wholly due to its teachers, and, in modern times, to Churchmen and Schoolmen. These classes have been the most formidable obstacles to the progress of society.

the country were restraints upon importation, and the encouragement of exportation.

"1st. The restraints upon importation of such foreign goods for home consumption as could be produced at home, from whatever country they could be imported."

"2d. Restraints upon the importation of goods of almost all kinds, from those particular countries with which the balance of trade was supposed to be disadvantageous.

"Exportations were encouraged, sometimes by drawbacks, sometimes by bounties, sometimes by advantageous treaties of commerce, and sometimes by the establishment of colonies in distant countries.

"The two sorts of restraints upon importations above mentioned, together with these four encouragements to exportation, constitute the six principal means by which the commercial system proposes to increase the quantity of gold and silver in any country, by turning the balance of trade' in its favor."1

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Smith has properly stated the theory upon which the socalled Mercantile System was based, that the precious metals can be brought into a country not producing them, only by exporting a greater value of merchandise than is imported, the balance being payable in coin. Hence the attempts by legislation to increase such balance. He opposed it on two grounds: first, the inadequacy of the object; secondly, the inadequacy of the means to the object. The means were absurd, for the reason that the ends were equally so; for why should the least valuable articles of commerce be the great object of commerce?

"That wealth," to give his own words, "consists in money, or in gold and silver, is a popular notion which naturally arises from the double function of money, as the instrument of commerce and as

Man has risen in the scale just in ratio as their power and influence have declined. As there is no motive so strong as that which leads to the acquisition of property, so no motive or incitement, on the whole, can be more beneficent in its results. Capital is always a great moral agency in society. Some one always stands ready to take every dollar that is produced, in the hope that by uniting it with his own labor he can greatly benefit his condition, and still return a fair compensation for its use. But for such capital, he might be compelled to remain in indolence, a prey to all its evils. As he acquires strength, he accumulates for the purpose of lending to others. Every dollar he gains becomes a co-worker with him. His labor not only raises him above want, but is the condition of his highest moral training, and, by the capital it acquires, is the foundation of those institutions which in the highest degree alleviate the sufferings, and promote the advancement and welfare, of the race.

1 Wealth of Nations, Book ii. Chap. i.

the measure of value. In consequence of its being the instrument of commerce, when we have money we can more readily obtain whatever else we have occasion for than by means of any other commodity. The great affair, we always find, is to get money. When that is obtained, there is no difficulty in making any subsequent purchase. In consequence of its being the measure of value, we estimate that of all other commodities by the quantity of money which they will exchange for. We say of a rich man, that he is worth a great deal, and of a poor man, that he is worth very little, money. A frugal man, or a man eager to be rich, is said to love money; and a careless, a generous, or a profuse man is said to be indifferent about it. To grow rich is to get money; and wealth and money, in short, are in common language considered as in every respect synonymous.

"A rich country, in the same manner as a rich man, is supposed to be a country abounding in money; and to heap up gold and silver in any country is supposed to be the readiest way to enrich it. For some time after the discovery of America, the first inquiry of the Spaniards, when they arrived upon any unknown coast, used to be, if there was any gold or silver to be found in the neighborhood. By the information which they received, they judged whether it was worth while to make a settlement there, or if the country was worth the conquering. Plano Carpino, a monk, sent ambassador from the King of France to one of the sons of the famous Genghis Khan, says that the Tartars used frequently to ask him if there was plenty of sheep and oxen in the kingdom of France. Their inquiry had the same object with that of the Spaniards. They wanted to know if the country was rich enough to be worth the conquering. Among the Tartars, as among all other nations of shepherds, who are generally ignorant of the use of money, cattle are the instruments of commerce and the measures of value. Wealth, therefore, according to them, consisted in cattle, as, according to the Spaniards, it consisted in gold and silver. Of the two, the Tartar notion, perhaps, was the nearest to the truth. . . . "It is not because wealth consists more essentially in money than in goods, that the merchant finds it generally more easy to buy goods with money than money with goods; but because money is the known and established instrument of commerce, for which every thing is given in exchange, but which is not always with equal readiness to be got in exchange for every thing. The greater part of goods, besides, are more perishable than money, and he may frequently sustain a much greater loss by keeping them. When his goods are upon hand, too, he is more liable to such demands for money as he may not be able to answer, than when he has got their price in his coffers. Over and above all this, his profit arises more directly from selling than from buying; and he is, upon all these accounts, generally much more anxious to exchange his goods for money than his money for goods. But though a particular mer chant, with abundance of goods in his warehouse, may sometimes be ruined by not being able to sell them in time, a nation or country is not liable to the same accident. The whole capital of a mer

chant frequently consists in perishable goods destined for purchasing money. But it is but a very small part of the annual produce of the land and labor of a country which can ever be destined for purchasing gold and silver from their neighbors. The far greater part is circulated and consumed among themselves; and, even of the surplus which is sent abroad, the greater part is generally destined for the purchase of other foreign goods. Though gold and silver, therefore, could not be had in exchange for the goods destined to purchase them, the nation might not be ruined. It might, indeed, suffer some loss and inconvenience, and be forced upon some of those expedients which are necessary for supplying the place of money. The annual produce of its land and labor, however, would be the same, or very nearly the same, as usual; because the same, or very nearly the same, consumable capital would be employed in maintaining it. And though goods do not always draw money as readily as money draws goods, in the long run they draw it more necessarily than even it draws them. Goods can serve many other purposes besides purchasing money; but money can serve no other purpose besides purchasing goods. Money, therefore, necessarily runs after goods; but goods do not always or necessarily run after money. The man who buys does not always mean to sell again, but frequently to use or to consume; whereas, he who sells always means to buy again. The one may frequently have done the whole, but the other can never have done more than the one-half of his business. It is not for its own sake that men desire money, but for the sake of what they can purchase with it."1

The distinction that Smith made between money as an instrument of commerce, and as a measure of value, is wholly fanciful. Money is an instrument of commerce for the reason that it is a measure of value; and a measure of value for the reason that it is an instrument of commerce. The instrument and the measure are always identical. They can never be separated. A person sells a barrel of flour for ten dollars in gold, for the reason that the gold has the same value with the flour. Equivalents are exchanged. Five dollars in gold would not be accepted for the flour, for the very good reason that they are not worth as much. The instrument and the measure pass from buyer to seller at the same moment and by the same act, and vice versa; for the flour is the instrument of commerce which measures the value of the gold, just as much as the gold is the instrument of commerce which measures the value of the flour. The measure is never separated from the value, as in the case of the yardstick, which never passes with the goods it measures. Smith's double function of money, there

1 Wealth of Nations, Book iii. Chap. i.

fore, which he took without credit from Law, is a pure fiction, a fiction, unfortunately, which has done a vast amount of mischief; for it is one which has been accepted as a fundamental principle in monetary science from his day to our own, and is the great cause of the confusion and error which still prevail.

As a person is rich in proportion to the amount of coin-the highest form of property - which he holds, so a person is rich in proportion to the number of oxen and horses he owns. Money is not every thing, no more than oxen and horses. The Spaniards were right, as their only object was wealth, in making gold and silver in South America and Mexico their chief object, in place of the other products of these countries. They grew rich much faster by wringing these articles out of the natives, than they could by any other mode. The amount of gold and silver they collected was something the like of which was never seen. They enriched themselves beyond measure. There is, however, another side to this picture. The adventurers were a set of robbers and cut-throats, and in the end shared the fate of robbers and cut-throats. Like all of their class, they were speedily rid of their ill-gotten gains; and both Spain and her colonies have ever since been paying the penalties of their follies and crimes in impoverishment, a prey to intestine feuds, without ambition, without capacity or hope, a by-word and reproach among the nations. The Tartars inquired, and very properly, of an ambassador sent by the King of France, whether there were many sheep or oxen in that country, as a means of informing themselves of the degree of its wealth, their wealth consisting chiefly in their herds. This does not prove them to be a higher form of capital; only that, from their want of exchangeable commodities, it was the only kind of capital they could acquire in any considerable amount. These could not be sent to Peru and Mexico in exchange for gold. In the same sense, an Esquimaux would ask a West Indian whether there were many seals and walruses in his country. By such inquiries by a people ignorant of, or possessing little gold and silver, Smith would infer that these articles did not constitute wealth. Indeed, he seems to think such inquiries to be conclusive; as he intimates that the Tartars' test of wealth sheep and oxen - was a better one than that of the Spaniards-gold and silver.

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