Hume's Political Discourses

by David Hume

Our modern politics embrace the only method of banishing money—the using paper-credit; they reject the only method of amassing it, the practice of hoarding; and they adopt a hundred contrivances which serve to no purpose but to check industry, and rob ourselves and our neighbours of the common benefits of art and nature.

All taxes, however, upon foreign commodities are not to be regarded as prejudicial or useless, but those only which are founded on the jealousy above mentioned. A tax on German linen encourages home manufactures, and thereby multiplies our people and industry; a tax on brandy increases the sale of rum, and supports our southern colonies. And as it is necessary imposts should be levied for the support of government, it may be thought more convenient to lay them on foreign commodities, which can easily be intercepted at the port and subjected to the impost. We ought, however, always to remember the maxim of Dr. Swift, that, in the arithmetic of the customs, two and two make not four, but often make only one. It can scarcely be doubted but if the duties on wine were lowered to a third, they would yield much more to the Government than at present; our people might thereby afford to drink commonly a better and more wholesome liquor, and no prejudice would ensue to the balance of trade, of which we are so jealous. The manufacture of ale beyond the agriculture is but inconsiderable, and gives employment to few hands. The transport of wine and corn would not be much inferior. {p66}

But are there not frequent instances, you will say, of states and kingdoms which were formerly rich and opulent, and are now poor and beggarly? Has not the money left them with which they formerly abounded? I answer, if they lose their trade, industry, and people, they cannot expect to keep their gold and silver, for these precious metals will hold proportion to the former advantages. When Lisbon and Amsterdam got the East India trade from Venice and Genoa, they also got the profits and money which arose from it. Where the seat of government is transferred, where expensive armies are maintained at a distance, where great funds are possessed by foreigners, there naturally follows from these causes a diminution of the specie. But these, we may observe, are violent and forcible methods of carrying away money, and are in time commonly attended with the transport of people and industry; but where these remain, and the drain is not continued, the money always finds its way back again, by a hundred canals of which we have no notion or suspicion. What immense treasures have been spent, by so many nations, in Flanders since the revolution, in the course of three long wars! More money perhaps than the half of what is at present in all Europe. But what has now become of it? Is it in the narrow compass of the Austrian provinces? No, surely; it has most of it returned to the several countries whence it came, and has followed that art and industry by which at first it was acquired. For above a thousand years the money of Europe has been flowing to Rome by an open and sensible current; but it has been emptied by many secret and insensible canals, and the want of industry and commerce renders at present the papal dominions the poorest territories in all Italy.

In short, a government has great reason to preserve with care its people and its manufactures. Its money it may safely trust to the course of human affairs, without fear or jealousy; or if it ever give attention to this latter circumstance, it ought only to be so far as it affects the former.

NOTES, OF THE BALANCE OF TRADE.

[17] There is another cause, though more limited in its operation, which checks the wrong balance of trade, to every particular nation to which the kingdom trades. When we import more goods than we export, the exchange turns against us, and this becomes a new encouragement to export, as much as the charge of carriage and insurance of the money which becomes due would amount to. For the exchange can never rise higher than that sum.

[18] It must carefully be remarked that throughout this discourse, wherever I speak of the level of money I mean always its proportional level to the commodities, labour, industry, and skill which is in the several states; and I assert that where these advantages are double, treble, quadruple to what they are in the neighbouring states, the money infallibly will also be double, treble, quadruple. The only circumstance that can obstruct the exactness of these proportions is the expense of transporting the commodities from one place to another, and this expense is sometimes unequal. Thus the corn, cattle, cheese, butter of Derbyshire cannot draw the money of London so much as the manufactures of London draw the money of Derbyshire. But this objection is only a seeming one, for so far as the transport of commodities is expensive, so far is the communication between the places obstructed and imperfect.

[19] We observed in essay Of Money, that money, when increasing, gives encouragement to industry during the interval between the increase of money and the rise of the prices. A good effect of this nature may follow too from paper-credit; but it is dangerous to precipitate matters at the risk of losing all by the failing of that credit, as must happen upon any violent shock in public affairs.

[20] There were about eight ounces of silver in a pound sterling in Harry VII.’s time.

[21] The poverty which Stanyan speaks of is only to be seen in the most mountainous cantons, where there is no commodity to bring money; and even there the people are not poorer than in the diocese of Saltsburg on the one hand, or Savoy on the other.