Essay on the Nature of Commerce

Richard Cantillon

[Part 3 of 7]

Chapter Sixteen

The more Labour there is in a State the more naturally rich the State is esteemed

In a long calculation worked out in the supplement it is shown that the labour of 25 grown persons suffices to provide 100 others, also grown up, with all the necessaries of life according to the European standard. In these estimates it is true the food, clothing, housing, etc. are coarse and rather elementary, but there is ease and plenty. It may be assumed that a good third of the people of state are too young or too old for daily work and that another sixth are proprietors of land, sick, or undertakers of different sorts who do not by the labour of their hands, contribute to the different needs of men. ...

It is true that it is of little difference in a state whether people are accustomed to wear coarse or fine clothes if both are equally lasting, and whether people eat nicely or coarsely if they have enough and are in good health, since drink, food, clothing, etc. are equally consumed whether fine or coarse, and that nothing is left in the state of this sort of wealth. ...

It will be so especially if these people are employed in drawing from the earth gold and silver which metals are not only durable but so to speak permanent, which fire itself cannot destroy, which are generally accepted as the measure of value, and which can always be exchanged for any of the necessaries of life: and if these inhabitants work to draw gold and silver into a state in exchange for the manufactures and work which they produce and send abroad, their labour will be equally useful and will in reality improve the state.

The point which seems to determine the comparative greatness of states is their reserve stock above the yearly consumption, like magazines of cloth, linen, corn, etc. to answer in bad years, or war. And as gold and silver can always buy these things, even from the enemies of the state, gold and silver are the true reserve stock of a state, and the larger or smaller actual quantity of this stock necessarily determines the comparative greatness of kingdoms and states.

If it the custom to draw gold and silver from abroad by exporting merchandises and produce of the state, such as corn, wine, wool, etc. this will not fail to enrich the state at the cost of a decrease of the population; but if gold and silver be attracted from abroad in exchange for the labour of the people, such as manufactures and articles which contain little of the produce of the soil, this will enrich the state in a useful and essential manner. ...

It is always the inspiration of the proprietors of land which encourages or discourages the different occupations of the people and the different kinds of labour which they invent.

The example of the prince, followed by his court, is generally capable of determining the inspiration and tastes of the other proprietors of land, and the example of these last naturally influences all the lower ranks. A prince, then, without doubt is able by his own example and without any constraint to give such a turn as he likes to the labour of his subjects.

If each proprietor in a state had only a little piece of land, like that which is usually leased to a single farmer, there would be hardly any cities. The people would be more numerous and the state very rich if every proprietor employed on some useful work the inhabitants supported on his land.

But when the nobles have great landed possessions, they of necessity bring about luxury and idleness. Whether an Abbot at the head of a hundred monks live on the produce of several fine estates, or a nobleman with 50 domestic servants, and horses kept only for his service, live on these estates, would be indifferent to the state if it could remain in constant peace.

But a nobleman with his retinue and his horses is useful to the state in time of war; he can always be useful in the magistracy and the keeping of order in the state in peace time; and in every case he is a great ornament to the country, while the monks are, as people say, neither useful nor ornamental in peace or war on this side of heaven. ...

If it were desired to make use of everything in a state it might be possible, it seems, to diminish the number of mendicants by incorporating them into the monasteries as vacancies or deaths occur there, without forbidding these retreats to those who can give no evidence of their skill in speculative sciences, who are capable of advancing the practical arts, i.e. in some section of mathematics. The celibacy of churchmen is not so disadvantageous as is popularly supposed, as is shown in the preceding chapter, but their idleness is very injurious.

Chapter Seventeen

Of Metals and Money, and especially of gold and silver

As land produces more or less corn according to its fertility and the labour spent upon it, so the mines of iron, lead, tin, gold, silver, etc. produce more or less of these metals according to the richness of the mines and the quantity and quality of the labour spent upon them, in digging, draining, smelting, refining, etc. Work in silver mines is dear on account of the mortality in causes, since rarely more than five or six years are spent in that labour.

The real or intrinsic value of metals is like everything else proportionable to the land and labour that enters into their production. The outlay on the land for this production is considerable only so far as the owner of the mine can obtain a profit from the work of the miners when the veins are unusually rich. The land needed for the subsistence of the miners and workers, that is the mining labour, is often the principal expense and the ruin of the proprietor.

The market value of metals, as of other merchandise or produce, is sometimes above, sometimes below, the intrinsic value, and varies with their plenty or scarcity according to the demand.

If the proprietors of land and the lower orders in a state who imitate them, rejected the use of time and copper, wrongly supposing that they are injurious to health, and if they all made use of dishes and utensils of earthenware, these metals would be at a very low price in the markets and the work that was carried on to extract them from the mine would be discontinued. But as these metals are found useful, and are employed in the service of life, they will always have a market value corresponding to their plenty or rarity and the demand for them; and they will always be mined to replace what is lost by daily use.

Iron is not merely serviceable for the daily use of common life but may be said to be in a certain sense necessarily; and if the Americans, who did not make use of it before the discovery of their continent, had found mines of it and known how to use it, they would doubtless have laboured to produce it at any cost.

Gold and silver are capable of serving not only the same purpose as tin and copper but most of the purposes of lead and iron. They have this further advantage over other metals that they are not consumed by fire and are so durable that they may be esteemed permanent bodies. It is not surprising, therefore, that men who found the other metals useful should have esteemed gold and silver even before they are used in exchange. The Romans prized them from the foundation of Rome and yet only used them as money 500 years later. Perhaps all other nations did the like and only adopted these metals as money long after using them for other purposes. However we find from the oldest historians that from time immemorial gold and silver were used as money in Egypt and Asia, and we learn in the Book of Genesis that silver monies were made in the time of Abraham. ...

Pure silver is hardly ever found in the mines. The ancients did not know the art of refining to perfection. They always made their silver coins of fince silver, and yet those which remain to us of the Greeks, Romans, Jews and Asiatics are never perfectly pure. Today there is more skill, the secret of making silver pur has been discovered. The different methods of refining it are not part of my subject. Many authors have treated of it, Mr Boizard among others. I will only observe that there is a good deal of expense in refining silver and for this reason an ounce of fine silver is generally preferred to two ounces which contain one half of copper or other alloy. It is expensive to separate the alloy and extract the one ounce of pure silver which is in these two ounces, while by simple melting any other metal can be combined with silver in any proportion desired. If copper is sometimes used as an alloy to fine silver it is only to render it more malleable and more suitable for the objects made of it. But in the valuation of all silver the copper or alloy is reckoned at nothing and only the amount of fine pure silver is considered. For this reason an assay is always made to ascertain the amount of pure silver. ...

Usage has conferred upon gold and silver the title intrinsic value, to designate and signify the quantity of true gold or silver contained in a bar; but in this essay I have always used the term intrinsic value to signify the amount of land and labour which enter into production, not having found any term more suitable to express my meaning. I mention this only to avoid misunderstanding. When gold and silver are not in question the term will always hold good without any confusion.

We have seen that the metals such as gold, silver, iron, etc. serve several purposes and have a value proportionable to the land and labour which enter into their production. We shall see in part II of this essay that men have been forced of necessity to employ a common measure to find in their dealings the proportion and the value of the products and merchandise they wished to exchange. The only question is what product or merchandise would be most suitable for this common measure, and whether it has not been necessity rather that fancy which has given this preference to gold, silver and copper which are generally in use today for this purpose.

Ordinary products like corn, wine, meat, etc. have a real value and serve the needs of life, but they are all perishable and difficult to be transported, and therefore hardly suitable to serve as a common measure.

Merchandise such as cloth, linen, leather, etc. is persishable also and cannot be subdivided without in some sort changing their value for the service of man. Like raw produce they cost a good deal for carriage; they even cause expense for storage, and consequently are unsuitable for a common measure.

Diamonds and other precious stones, even if they had no instrinsic value and were esteemed only from fancy, would be suitable for a common measure if they were not susceptible of imitation and if they could be divided without loss. With these defects and that of being unserviceable in use they cannot serve as a common measure. ...

Copper alone served as money to the Romans until 484 years after the founding of Rome, and in Sweden it is still used even in large payments: but it is too bulky for very considerable payments, and the Swedes themselves prefer payment in gold or silver rather than in copper.

In the American Colonies tobacco, sugar, and cocoa have been used as money: but these commodities are too bulky, perishable, and of unequal quality: they are therefore hardly suitable to serve as money or a common measure of value.

Gold and silver alone are of small volume, equal goodness, easily transported, divisible without loss, convenient to keep, beautiful and brilliant in the articles made of them and durable almost to eternity. All who have used other articles as money return to these as soon as they can get enough of them for exchange. It is only in the smallest purchases that gold and silver are unsuitable. Gold or even silver coins of the value of a liard or a denier would be too small to be handled easily. It is said that the Chinese, in small transactions, cut off little pieces with scissors from their plates of silver, and weighed the pieces. But since their trade with Europe they have begun to use copper for such occasions.

It is then not surprising that all countries have arrived at using gold and silver as money or a common measure of value and copper for small payments. Utility and need have decided them, and not fancy or consent. Silver requires much labour and dear labour for its production. Silver miners are highly paid because they rarely live more than five or six years at this work, which causes a high mortality: and so a little silver coin corresponds to as much land and labour as a large copper coin.

Money or the common measure of value must correspond in fact and reality in terms of land and labour to the articles exchanged for it. Otherwise it would have only an imaginary value. If for example a prince or a republic gave currency in the state to something which had not such a real and instrinsic value, not only would the other states refuse to accept it on that footing but the inhabitants themselves would reject it when they perceived its lack of real value. When towards the end of the first Punic War the Romans wished to give the copper as, weighing two ounces, the same value as the as of 1 pound or 12 ounces had before, it could not long be maintained in exchange. The history of all times shews that when princes have debased their money, keeping it at the same nominal value, all raw produce and manufacturers have gone up in price in proportion to the debasement of the coinage.

Mr Locke says that the consent of mankind has given its value to gold and silver. This cannot be doubted since absolute necessity had no share in it. It is the same consent which has given and does give every day a value to lace, line, fine cloths, copper, and other metals. Man could subsist without any of these things, but it must not be concluded that they have but an imaginary value. They have a value proportionable to the land and labour which enter into their production. Gold and silver, like other merchandise and raw produce, can only be produced at costs roughly proportionable to the value set upon them, and whatever man produces by labour, this labour must furnish his maintenance. It is the great principle that one hears every day from the mouths of the humble classes who have no part in our speculations, and who live by their labour or their undertakings. "Everybody must live."

End of the first part.

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