But as to manufactures for exportation, which are not peculiar, but which are produced by different countries, their prices are violently pulled down by foreign competition; and the workmen are forced to diminish them. This hurts them effectually, not because of the diminution of the prices; because, properly speaking, this diminution is only relative to the denominations of the coin; their gains[gains] will purchase as many grains of bullion in the market as before, but not so much coin, and consequently not so much of any commodity which, by the principles just laid down, have attached themselves to the denominations of the coin, and have risen in their price along with it.
From this short exposition of a very intricate matter, we may conclude, that the imposition of coinage does not raise the price of such merchandize as is in common to several nations, and which trade demands from each, without any competition with the natives; that is to say, the prices of them stand as formerly with respect to strangers; because although the prices be made to sink at home, with respect to the denominations of the coin, yet strangers, being obliged to pay for them in those denominations, are also obliged to pay an advanced price for the coin, in order to procure them. This is the price of coinage. This, I confess, is a little subtil, but I believe the reasoning will be found just.
On the other hand, when trade extends itself to other commodities, to those, I mean, which it buys in competition with the natives (and which are made to rise and fall from the vicissitudes of inland demand) or to such commodities as are peculiar to the country; in these cases, I have little doubt but the prices, once raised and continued high for some time, attach themselves to the denominations of the coin, and rise along with it; that is to say, coinage is included over and above the price which the merchandize would have born had no coinage been imposed.
How this hurts the industrious, and how the state may indemnify them.
The conclusion I draw from this reasoning, is, that the imposition of coinage has not, in fact, the effect of reducing the prices of commodities to fewer grains of bullion than before, excepting those of such commodities as are sold in competition with other nations; and even then it may be said, that it is not the imposition of the coinage, but the competition with strangers, which reduces them to the minimum of their value, as well as the profits of those who work in them, to the minimum of a physical necessary. This last circumstance shews why those who work for foreign exportation, are the poorest class of all the industrious of a state, but the most useful to it, at the same time. I believe experience supports the truth of these conclusions. I shall here by the bye observe, that as the state is made to profit by the diminution of the profits of this most useful class; as she receives the coinage which strangers pay, and which is really deducted from the manufacturers who support exportation, she ought to indemnify this class (as may be done in a thousand ways, by premiums, for example, upon exportation) out of the profits arising upon coinage, instead of making coinage free, to the evident loss of the nation, and benefit to strangers, as we shall now endeavour to prove.
CHAP. II.
Concerning the Influence which the imposing the Price of Coinage, and the Duty of Seigniorage in the English Mint, will have upon the Course of Exchange, and Trade of Great Britain.
Theory of prices upon articles of exportation.
In the preceding chapter we have examined a very nice theory, into which such a number of circumstances have been combined, depending upon facts, that little stress is to be laid upon several conclusions which have been drawn from it, unless they be approved by experience.
Let the best workman in London make a watch, he cannot depend upon its being a good one, until it be tried; and when that is done, the application of his theory will enable him to discover all the defects and irregularities in the movement. It is just so in political matters. The force of theory is not sufficient to form a good plan; but it is useful for discovering many faults which would not have been foreseen without it. The more extensive, therefore, any theory is made, the more it is useful for these purposes. It is proper only to observe that the more complicated any principle of it is, the less dependance can be had upon its operation when applied to practice.