An Inquiry into the Nature and Causes of the Wealth of
the Nations
BOOK I
Of the Causes of
Improvement in the Productive Powers of Labor, and the Order according to Which
its Produce is Naturally Distributed among the Different Ranks of the People
Digressions
Concerning the Variations in the value of Silver during the Last Four Centuries
THIRD PERIOD
…
Since the first discovery of America , the
market for the produce of its silver mines has bee gradually more and more extensive.
First, the market of Europe has become gradually more and more extensive.
Since the discovery of America ,
the greater part of Europe has been much
improved. England , Holland , France
and Germany ; even Sweden , Denmark
and Russia
have all advanced considerably both in agriculture and in manufactures. Italy seems not
to have gone backwards. The fall of Italy
preceded the conquest of Peru .
Since that time, it seems rather to have recovered a little. Spain and Portugal indeed, are supposed to
have gone backwards. Portugal
however, is but a very small part of Europe, and the declension of Spain is not
perhaps so great, as is commonly imagined. In the beginning of the 16th
century, Spain was very poor
country, even in comparison with France , which has been so much
improved since that time. It was the well known remark of the Emperor Charles
V, who had travelled so frequently through both countries, that everything
abounded in France , but that
everything was wanting in Spain .
The increasing produce of the agriculture and manufactures of Europe
must necessarily have required a gradual increase in the quantity of silver
coin to circulate it; and increasing number of wealthy individuals must have
required the like increase in the quantity of their plate and other ornaments
of silver.
Secondly, America is itself a new market for the produce
of its own silver mines; and as its advances in agriculture, industry and
population are much more rapid than those of the most thriving countries in Europe , its demand must increase much more rapidly. The
English colonies are altogether a new market, which partly for coin and partly
for plate, requires a continually augmenting supply of silver through a great
continent where there never was any demand before. The greater part, too, of
the Spanish and Portuguese colonies are altogether new markets. New Granada,
the Yucatan , Paraguay
and the Brazils
were, before discovered, by the Europeans, inhabited by savage nations who had
neither arts, nor agriculture. A considerable degree of both has now been
introduced into all of them. Even Mexico
and Peru ,
though they cannot be considered as altogether new markets, are certainly much
more extensive ones, than they were before. After all the wonderful tales which
have been published concerning the splendid state of those countries in ancient
times, whoever reads, with any degree of sober judgment, the history of their
first discovery and conquest, will evidently discern that in arts, agriculture
and commerce, their inhabitants were much more ignorant than the Tatars in
Ukraine are in present. Even the Peruvians, the more civilized nation of the
two, though they made use of gold and silver ornaments, had no coined money of
any kind. Their whole commerce was carried on by barter, and there was accordingly
scarce any division of labor among them. Those who cultivated the ground were
obliged to build their own houses, to make their own houses, to make their own
household furniture, their own clothes, shoes and instrument of agriculture.
The few artificers among them are said to have been all maintained by the
sovereign, the nobles and the priests, and were probably their servants or
slaves. All the ancient arts of Mexico
and Peru have never
furnished one single manufacture to Europe .
The Spanish armies, though they scarce ever exceeded five hundred men, and
frequently did not amount to half that number, found almost great difficulty in
procuring subsistence. The famines which they are said to have occasioned
almost wherever they went, in countries too, which at the same time are
represented as very populous and well cultivated sufficiently demonstrate that
the story of this populousness and high cultivation is in a great measure
fabulous. The Spanish colonies are under government in many respects less
favorable to agriculture, improvement and population, that that in English
colonies. They seem however, to be advancing in all these much more rapidly
than any country in Europe . In a fertile soil and
happy climate, the great abundance and cheapness of land, a circumstance common
to all new colonies is, it seems, so great and advantage as to compensate many
defects in civil government. Frezier, who visited Peru
in 1713, represented Lima
as containing between twenty-five and twenty-eight thousand inhabitants. Ulloa,
who resided in the same country between 1740 and 1746, represent it as
containing more than 50.000. The difference in their accounts of the
populousness of several other principal towns in Chile
and Peru
is nearly the same; and as there seems to be no reason to doubt of the good
information of either, it marks an increase which is scarce inferior of that of
the English colonies. America
therefore, is a new market for the produce of its own silver mines, of which
the demand must increase much more rapidly than that of the most thriving
countries in Europe .
Thirdly, the East Indies is
another market for the produce of the silver mines in America , and
market which, from the time of the first discovery of those mines, has been
continually taking off a greater and greater quantity of silver. Since that
time, the direct trade between America and East Indies, which is carried on by
means of the Acapulco ships, has been continually augmenting, and the indirect
intercourse by the way of Europe has been augmenting in a still greater
proportion. During the 16th century, the Portuguese were the only
European nation who carried on any regular trade to the East
Indies . In the last years of that century, the Dutch begun to
encroach upon this monopoly, and in a few years expelled them from their
principal settlements in India .
During the greater part of the last century, those two nations divided the most
considerable part of the East India trade between them; the trade of the Dutch
continually augmenting in a still greater proportion than that of the
Portuguese, declined. The English and French carried on some trade with India in the
last century, but it has been greatly augmented in the course of the present
century. Even the Muscovites now trade regularly with China by a sort of caravans which go overland
through Siberia and Tartary, to Peking . The East India trade of all these nations, if we except that
of the French, which the last war had well nigh annihilated, had been almost
continually augmenting. The increasing consumption of East India goods in Europe is, it seems, so great as to afford a gradual
increase of employment to them all.
Tea for example, was drug very
little used in Europe before middle of the
last century. At present, the value of the tea annually imported by the East
India Company, for the use of their own countrymen, amounts more than a million
and a half a year; and even this is not enough; a great deal more being
constantly smuggled into the country from the ports of Holland, the Gottenburgh
in Sweden, and from the coast of France too, as long as the French East India
Company was in prosperity. The consumption of the porcelain of China , of the spiceries of the Moluccas, of the
pieces of goods of Bengal , and innumerable
other articles, has increased very nearly in a like proportion. The tonnage
accordingly of all European shipping employed in East India trade, at any one
time during the last century, was not perhaps, much greater than that of the
East India Company before the late reduction of their shipping.
But in the East Indies,
particularly in China and Indostan, the value of the precious metals, when the
Europeans first began to trade to those countries, was muchmore higher than in
Europe; and it still continue to be so. In rice countries, which generally
yield two, sometimes three time a year, each of them more plentiful than any
common crop of corn, the abundance of food must be much greater than in any
other country of equal extent. Such countries are accordingly much more
populous. In them too, the rich, having a great superabundance of food to
dispose of beyond what they themselves can consume, have the means of
purchasing a much greater quantity of the labor of the people. The retinue of a
grandee in china or Indostan accordingly is, by all accounts, much more
numerous and splendid than of the richest subjects in Europe .
The same superabundance of food, which they have on disposal, enables them to
give a greater quantity of it for all singular and rare productions which
nature furnishes, but in very small quantities; such as the precious metals and
the precious stones, the great objects of competition of the rich. Though the
mines, which supplied the Indian market had been as abundant as those which
supplied the European, such commodities would naturally exchange for a greater
quantity of food in India
than in Europe .
But the mines, which supplied the
Indian market with precious metals, seem to have been a good deal less
abundant, and those which supplied it with the precious stones a good deal more
so, than the mines which supplied the European. The precious metals therefore,
would naturally exchange in India
for somewhat a greater quantity of the precious stones, for a much greater
quantity of food than in Europe . The money
price of diamonds, the greatest of all superfluities, would be somewhat lower,
and that of food, the first of all necessaries, a great deal lower in the one
country than in the other. But the real price of labor, the real quantity of
necessaries of life which is given to the laborer, it ha already been observed,
is lower both in China and
Indostan, the two great markets of India ,
than it is through the greater part of Europe .
The wages of the laborer will there purchase a smaller quantity of food; an as
the money price of food is much lower in India than in Europe, the money price
there lower upon a double account: upon account both of small quantity of food
which it will purchase, and of low price of that food.
But in countries of equal art and
industry, the money price of the greater part of manufactures will be in
portion to the money price of labor; and in manufacturing and industry, China
and Indostan though inferior, seem not to be much inferior to any part of
Europe. Through greater part of Europe too,
the expense of land-carriages increases very much both the real and the nominal
price of most manufactures. It costs more labor, and therefore more money, to
bring first the materials, and afterwards to complete manufacture to the
market. In china and Indostan the extent and variety of inland navigation save
the greater part of its labor, and consequently of its money, and thereby
reduce still lower both the real, and the nominal price of the greater parts of
its manufactures.
Upon all those accounts, the
precious metals axe a commodity which it always has been, and still continues
to be, extremely advantageous to carry from Europe to India .
…
The annual importation of the
precious metals into Cadiz and Lisbon
indeed, is not equal to the whole annual produce of the mines of America . Some
parts are sent annually by the Acapulco
ships to Manilla; some part is employed in a contraband trade which the Spanish
colonies carry on with those of all other European nations; and some part no
doubt, remains in the country. The mines in America , besides, are by no means
the only gold and silver mines in the world. They are however, by far the most
abundant. The produce of all the other mines which are known is insignificant,
it is acknowledged, in comparison with theirs; and the far greater part of
their produce, it is likewise acknowledged, is annually imported into Cadiz and Lisbon .
But he consumption of Birmingham
alone, at the rate of 50,000 pounds a year, is equal to the
hundred-and-twentieth part of this annual importation at the rate of six
millions a year. The whole annual consumption of gold and silver therefore, in
all the different countries of the world where those metals are used, may be
perhaps by nearly equal to the whole annual produce. The reminder may be no
more than sufficient to supply the increasing demand of all thriving countries.
It may even have fallen so far, short of time demand as somewhat to rise the
price of those metals in the European markets.
The quantity of brass and iron
annually brought from the mine to the market is out of all proportion greater
that that of gold and silver. We do not know, however, upon this account,
imagine that those coarse metals are likely to multiply beyond the demand, or
to become gradually cheaper and cheaper. Why should we imagine that the
precious metals are likely to do so? The coarse metals indeed, though harder,
are put to much harder uses, and, as they are of less value, less care is
employed in their preservation. The precious metals however, are not
necessarily immortal any more than they, but are liable too, wasted, and
consumed in a great variety of ways.
The price of all metals, though
liable to slow and gradual variations, varies less fro year to year than that
of almost any other part, of the rude produce of land; and the price of the
precious metals is even less liable to sudden variations than that of the
coarse ones. The durableness of metal is the foundation of this extraordinary steadiness
of price. The corn which was brought to the market last year will be all or
most of all consumed long before end of this year. But some part of the iron which
was brought from the mine two or three hundred years ago may be still in use,
and perhaps some part of the gold which was brought from it two or three thousands
years ago. The different masses of corn which in different years must supply the
consumption of the world will always be nearly in proportion to the respective produce
of those different years. But the proportion between different masses of iron which
may be in use in two different years will be very little affected by any
accidental difference in the produce of the iron mines of those two years; and
the proportion between the masses of gold will be still less affected by any
such difference in the produce of the gold mines. Though the produce of the
greater part of metallic mines, therefore, varies, perhaps still more from year
to year than that of the greater part of corn fields, those variations have not
the same effect upon the price of the one species of commodities as upon that
of the other.
Variations in the Proportion between the Respective Values of Gold and
Silver
…
(Adam Smith: “THE WEALTH OF
NATIONS” W. Strahan & T. Cadell, 1776 - London )
