An Inquiry into the Principles of Political Oeconomy (Vol. 1 of 2) / Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes

by Sir James Steuart

From the treasures mentioned by all the historians who have writ of the conquest of those kingdoms by the Romans, I do not think I am far from truth, when I compare the treasures of the frugal Greeks to the mines of the new world.

What effect, as to circulation, had the accumulation of these vast treasures? Not any to accelerate it, surely: and no person, the least conversant in antiquity, will pretend that the circulating specie in those times, bore as great a proportion to their treasures, as what is at present circulating among us, bears to the wealth of the most oeconomising Prince in Europe. If any one doubt of this particular, let him listen to Appian, who says, that the successors of Alexander, the possessors of those immense riches, lived with the greatest frugality. Those treasures were then, as I have said, a real addition to the value of their kingdoms; but had not the smallest influence upon prices. In those days of small circulation, the prices of every thing must have been vastly low, not from the great abundance of them, but because of the little demand; and as a proof of this, I cite the example of a country, which, within the space of fifty years, possessed in specie at one time, considerably beyond the worth of the land, houses, slaves, merchandize, natural produce, moveables, and ready money, at another. The example is mentioned by Mr. Hume, and I am surprized the consequence of it did not strike him. For if the money they possessed was greatly above the worth of all their property, moveable and immoveable, surely it never could be considered as a representation of their industry, which made so small a part of the whole. Athens possessed, before the Peloponesian war, a treasure of ten thousand talents; and fifty years afterwards, all Athens, in the several articles above specified, did not amount to the value of six thousand. Hume’s Political Discourses upon the Balance of Trade.

These treasures were spent in the war, and they had been laid up for no other purpose. Therefore I was in the right, when I observed above, Chap. 22. that war in antient times, had the effect that industry has now: it was the only means of making wealth circulate. But peace producing a general stagnation of circulation, people returned to the antient simplicity of their manners, and the prices of subsistence remained on the former footing; because there was no increase of appetite, or rising of demand upon any necessary article. So much for the state of wealth during the days of frugality.

The Romans subdued all those kingdoms of the Greeks, and drew their treasures to Rome. The republic went to destruction, and a succession of the most prodigal Princes ever known in history succeeded one another for about two hundred years. Those monstrous treasures were then thrown into circulation, and I must now give an idea of the effects produced by such a revolution.

I have already observed (Chap. 28.) that in consequence of the great prodigality of those times, the prices of superfluities rose to a monstrous height; while those of necessaries kept excessively low. The fact is indisputable, and any one who inclines to satisfy himself farther, may look into that valuable collection of examples of antient luxury, wealth, and at the same time of simplicity, found in Mr. Wallace’s Dissertation upon the Numbers of Mankind in antient and modern Times, p. 132. et seq.

But how is it to be accounted for, that the prices of superfluities should stand so high, while necessaries were so low? The reason is plain, from the principles we have laid down. The circulation of money had no resemblance to that of modern times: fortunes were made by corruption, fraud, concussion, rapine, and penury; not by trade and industry. Seneca amassed in four years 2,400,000 pounds sterling. An augur was worth 3 millions sterling. M. Antony owed on the Ides of March, 322,916 pounds sterling, and paid it before the calends of April. We know of no such circulation. Every revolution was violent: the powerful were rapacious and prodigal, the weak were poor and lived in the greatest simplicity: consequently, the objects of the desires of the rich were immensely dear; and the necessaries for the poor were excessively cheap. This is a confirmation of the principles we have laid down in Chap. [28]. that the price of subsistence must ever be in proportion to the faculties of the numerous classes of those who buy: that the price of every thing must be in proportion to the demand made for it; and that in every case, where the supply can naturally increase in proportion to the demand, there must be a determined proportion between the price of such articles and that of subsistence. Now in the examples given by Mr. Wallace, of such articles as were found at monstrous prices, we only find such as could not be increased according to demand: here is the enumeration of them. Large asses brought from Spain, peacocks, fine doves, mullets, lampreys, peaches, large asparagus, purple, wool, jewels, carpets, vestes Byssinæ, slaves skilled in the finer arts, pictures, statues, books, and rewards to those who taught the sciences. By casting a glance upon the catalogue, we may easily perceive that the extraordinary price must have proceeded from the impossibility of augmenting the supply in proportion to the demand; not from the abundance of the money, which had no effect in raising the price of necessaries. The cheapness again of these, did not proceed from vast plenty; but because the price must have remained in proportion to the faculties of the numerous poor; and because the augmentation of the wealth of the rich never could increase their consumption of any necessary article. Had the Roman empire been governed with order and tranquility, this taste of luxury, by precipitating money into the hands of the numerous classes, would, in time, have wrought the effects of multiplying the number of the industrious, by purging the lands; consequently, of increasing the demand for vendible subsistence; consequently, of raising the price of it. And on the other hand, the adequate proportion between services and rewards given by the public, would have checked the other branch of circulation which produced those monstrous fortunes, to wit, rapine and corruption: and industry receiving a regular encouragement, every article of extraordinary demand for delicate aliments, birds, fishes, fruits, &c. would have been supplied with sufficient abundance; and consequently, would have fallen in its price. But when either despotism or slavery were the patrimonial inheritance of every one on coming into the world, we are not to expect to see the same principles operate, as in ages where the monarch and the peasant are born equally free to enjoy the provision made for them by their forefathers.

I shall now come nearer home, and examine a very remarkable difference between the oeconomy in practice some hundred years ago, and that of the present time, with regard to the method of levying men and money.

This change is a consequence of trade and industry, and as I have been preparing the way for the introduction of other matters which equally owe their existence to them, it may not be improper, in this last chapter, to point out the natural causes of this change in modern politics. When people consider effects only, without examining the causes which produce them, they commonly blame rashly, or fall into an idle admiration of fortune. It is only by tracing natural causes, that we come at the means of forming a solid judgment of the nature of every abuse, and of every advantage.

The general taste for the extension of industry, is what has brought such loads of money into circulation; not the discovery of America. We read of treasures in antient times which appear to rival the wealth of modern Europe. Appian, as cited by Mr. Hume, mentions a treasure of the Kings of Egypt, of near two hundred millions sterling; and says, that all the successors of Alexander were nearly as rich, and fully as frugal. Frugality then is compatible with the greatest wealth. Therefore the wealth of America, has not been the cause of European refinement; but the extension of civil liberty has obliged the possessors of treasures, which in all ages have been coveted by man, to open their repositories, in order to procure the service of those who formerly made a branch of the property of the most wealthy. This is the foundation of trade and industry.

Why, therefore, has trade and industry laid the foundation of taxes and standing armies, which appear so contrary to the one and the other?