101 most important subjects that concern the welfare of the race have been accepted without reserve, while the comments upon them by his followers have only served to perpetuate, and involve in still greater uncertainty and confusion, the errors and absurdities they contain. It comes within the scope of this work to discuss only that part of Smith's "Wealth of Nations" that relates to the subject of money. Of the origin and nature of this he gives the following account: "When the division of labor has been thoroughly established, it is but a very small part of man's wants which the produce of his own labor can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labor, which is over and above his own consumption for such part of the produce of other men's labor as he has occasion for. Every man thus lives by exchanging, or becomes in some measure a merchant; and society itself grows to be what is properly a commercial society. But, when the division of labor first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in its operations. One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former, consequently, would be glad to dispose of, and the latter to purchase, a part of this superfluity. But, if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it; but they have nothing to offer in exchange except the different productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for. No exchange can, in this case, be made between them. He cannot be their merchant, nor they his customers; and they are all of them thus mutually less serviceable to one another. In order to avoid the inconvenience of such situations, every prudent man, in the division of labor, must naturally have endeavored to manage every period of society, after the first establishment of his affairs in such a manner as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry. "Many different commodities, it is probable, were successively both thought of and employed for this purpose of exchange. In ages of society, cattle are said to have been the instrument of commerce, and though they must have been a most inconvenient one, yet, in old times, we find things were frequently valued according to the number of cattle which had been given in exchange for them. The arms of Diomede, says Homer, cost only nine oxen, the rude but that of Glaucus cost an hundred oxen. Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides, or dressed leather, in some other countries; and there is at this day a village in Scotland where it is not uncommon, I am told, for a workman to carry nails, instead of money, to the baker's shop or to the ale-house. "In all countries, however, men seem at last to have determined, by irresistible reasons, to give preference to metals above every commodity. Metals can be not only kept with as little loss as any other commodity, scarce any thing being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again, a quality which no other equally durable commodities possess, and which, more than any other qualities, renders them fit to be the instruments of commerce and circulation. ... "Different metals have been made use of by different nations for this purpose. Iron was the common instrument of commerce among the ancient Spartans; copper among the ancient Romans; gold and silver among all rich and commercial nations. . . . ... "The use of the metals in their rude state was attended with two very considerable inconveniences: first, the trouble of weighing, and, secondly, that of assaying them. In the precious metals, where a small difference in the quantity makes a great difference in value, even the business of weighing with proper exactness requires at least very accurate weights and scales. . . . The operation of assaying is still more difficult and still more tedious. To prevent such abuses and facilitate exchanges and thereby to encourage all sorts of industry and commerce, it has been found necessary, in all countries that have made any considerable advances toward improvement, to affix a public stamp upon certain quantities of such particular metals as were in those countries commonly made use of to purchase goods. Hence the origin of coined money, and of those public offices called Mints. "It is in this manner that money has become, in all civilized nations, the universal instrument of commerce, by the intervention of which goods of all kinds were bought and sold, or exchanged for one another. What are the rules which men naturally observe in exchanging them, either for money or for one another, I shall now proceed to examine. These rules determine what may be called the relative or exchangeable value of goods." 1 From what has preceded, it will be seen that Smith fell into precisely the error of those who hold governments to have arisen, from a sense of their necessity, out of compacts formally proposed by the people, and entered into between the governments and the governed. Such writers imagine the people to 1 Wealth of Nations, Book i. Chap. iv. say: In his illustrations, Smith, like the advocates of the * original compact," has inverted the whole order of Nature, or of human development. Mankind never speculated upon governments, upon their necessity, or upon the modes of their organization and administration, until ages after governments, and powerful ones too, had existed. Smith committed the common error in assuming the conditions and operations which he saw about him to reflect those which took place while the race was in its infancy. If money, from any cause, had suddenly disappeared from his own country, he would, with others, have undertaken, from a sense of its necessity, to provide a new supply. What he and his associates would have done he supposed were the means by which money was first brought into use. But the early state or condition which he describes as leading to the use of money is purely mythical. Commerce, in the outset, resulted from no plan or method. It never occurred to any one to save or accumulate till he saw some object that took his fancy, and was told he could have it in exchange for some article which he could produce or acquire by his own labor. The motive had always to be first supplied. The most powerful incentive of all was the desire to possess the precious metals, which were undoubtedly among the first acquisitions of all races capable of civilization. Those articles which appeal most strongly to the sense of beauty in man, not those that discharge the primary wants of his nature, alone supply adequate motives to continued ex - ertion to those industries upon which civilization rests. Had man felt no other want than for food, he could have had no other existence than an animal one. Had the precious metals been found in any greater abundance at any time than they have been, their possession would not have required that persistent labor so necessary to his highest moral as well as material welfare. As they were indestructible, as well as in universal demand, their possessor, as far as they would go, became at once the master of the property and services of others who possessed them in a less degree. With their discovery, the power of acquisition, on any thing like a scale sufficient to constitute wealth or civilization, was for the first time secured to the race. Without them, a person in possession of herds, or of the productions of Nature, unlimited in number or quantity, might not be able to supply himself with a single article of which he might stand in need other than that which he possessed. As the precious metals in primitive times stood in precisely the same relations to the nature and wants of man that they do to-day, they served on their first discovery precisely as they do to-day, as money in trade. Discussion and agreement had nothing more to do with their adoption as money than they had with the adoption of eating as a means of sustaining life, or of clothing to protect from the cold. Nothing like an "instrument of commerce" was ever thought or conceived of. With the precious metals, all the conditions. necessary for division of labor were supplied long before the necessity or importance of such division was felt, much less thought of. No mission or duty was ever assigned to the race till all the conditions for its fulfilment had been amply and generously supplied. To assume otherwise would be to impugn both Divine power and goodness. Man, in every stage of his progress, could always command the precious metals in abundance, provided he was possessed of a plenty of other articles in demand for consumption. The primitive butcher and baker were never in want of a circulating medium so long as there was a demand for their meat or bread. The existence of butchers and bakers implies division of labor and a highly advanced social condition, which would have been impossible but for the previous use of the precious metals as the universal solvents of transactions. They complained of the want of money, of a "circulating medium," only when the market was overstocked with their own particular goods. Oxen, according to Smith, were money among the Greeks; tobacco among the Virginia colonists; dried cod in Newfoundland; and sugar in the West Indies. Such assertions are absurdities on their face. The use of all such articles in exchange, the one for the other, is simple barter, and can never be any thing else. An ox that is exchanged for a certain quantity of sheep is no more rendered money by such act of exchange than it is converted into the sheep. To call sheep or oxen, or tobacco money, is to say that oxen are sheep, or tobacco is gold and silver. They never were used as money, and they never can be used as money. Money is the universal equivalent, always accepted at its cost, for whatever a person has to sell. There can be no other definition of it. All other articles may or may not be accepted as such equivalents. A person who has an ox for sale will take nothing but money, unless he wishes to deal in simple barter, which is the exception, not the rule. He would gain nothing by exchanging it for a horse, or for sheep. He could barter his ox now with much less difficulty than in ancient times. He might not find it very difficult to dispose of its various parts, in such cities as New York and London, for such articles as he might wish to acquire. But had all parties possessed of merchandise no other modes of effecting their exchanges but those in kind, society would be speedily remitted to its original condition of barbarism. It may often happen that oxen, tobacco, codfish, and sugar may be largely received in exchange for what a person has to sell, to be held by him till they can be converted into money, just as they were produced to be converted into money. It makes no difference to their possessor whether they are acquired at first or second hand. The object is the same in either case. Their acceptance in barter does not make them money. A country shopkeeper may barter a portion of his stock for produce, which he transports to market, and there converts into money. But this process does not make either the goods money, or the produce money. He may "make money," as the phrase is, or he may be ruined by the fall of that for which he exchanges his goods. He can never tell the extent of his losses or profits till he has converted that which he has received into money. The radical error, however, of Smith, with all his school, was |