A. Precious-metal-money is a commodity like all other commodities, and therefore useful only for certain purposes. It is as little to the wealth-interest of a people, by means of a continually favorable balance, to import infinite quantities of the precious metals, as it is to its power-interest, by means of its commercial policy, to accumulate infinite stores of powder. The person who possesses other exchangeable goods will be as well able, in case of need, to obtain gold and silver therewith as to obtain powder.[A2-2-1] We part with no capital when we export the precious metals and import other commodities instead; we simply exchange thereby one form of capital for another.[A2-2-2] The notion that the gain in trade is coincident with the balance of account paid in cash, is just as palpably false in the trade among nations as in trade among private persons.[A2-2-3] It would be a decided hardship to most men, if they were to receive payment at once in money for all that they possessed: and the nation is made up of individuals.[A2-2-4] And even the reasons which make payments in cash more uniformly desirable, in the case of private persons not engaged in mercantile pursuits, cease in the case of whole nations.[A2-2-5]
B. But a continual over-balance (Ueberbilanz) is not at all possible. Every relative increase of the amount of money must enhance the price of commodities, lower the value of money, and thus produce an exportation of money until a restoration of the level with other countries.[A2-2-6] The prohibitions of the exportation of money, so often resorted to, can avail nothing, because the precious metals are among the specifically most valuable goods; and because it is easier yet to smuggle them out of a country than to smuggle them into it.[A2-2-7]
C. The signs by which the mercantile system supposed it could estimate the favorableness of the balance of trade are essentially deceptive.[A2-2-8] We cannot, for instance, from the course of exchange, determine whether the payments made by us to foreign countries have been made for purchases, to absentees, etc., or as loans; and yet, according to the mercantilists, the latter are as useful to us as the former are injurious.[A2-2-9] And even the most accurate tariff-record (Zollregister) of the exportation and importation of commodities affords no guaranty[A2-2-10] that, in many instances, the rendering of the counter-value may not remain absent, by reason of bankruptcy, shipwreck, or the emigration of property.[A2-2-11]
D. Every act of exchange is advantageous only because through it a greater value is received than the one parted with was. (?) Fortunately, in normal trade, where both parties satisfy a real want, and neither party is deceived, this is actually the case on both sides.[A2-2-12] In accordance with all this,[A2-2-13] Baudrillart is of opinion that the whole theory of the balance of trade no longer exists.
[A2-2-1] Even Petty and North, with their deep insight into the nature and functions of money, could not possibly entertain the mercantile theory of the balance of trade. Petty considers the exportation of money useful, even when commodities are brought back in exchange for it, and which are of greater value in the interior than the exported money. (Quantulumcunque concerning Money, 1682.) According to North, no one is richer simply because he has his property in the form of gold and silver plate, etc.; he is even poorer, because he allows his goods to lie in that shape unproductive. Hence the importation of money is, in itself, not more advantageous than the importation of logs of wood; at most, the difference that, in case of excess, it would be easier to get rid of the money than of the wood, is of importance. Therefore, a state need never care very anxiously for its supplies of money. A rich nation will never suffer from a want of money. (Discourses upon Trade, 1691, pp. 11, 17.) According to Berkeley (Querist, 1735, pp. 566 ff.), there is no greater error than to measure the wealth of a nation by its gold and silver. It is to the interest of a people to keep their money or to send it off according as its industry is thereby promoted. Quesnay declares it to be impossible that the exports of a country should be permanently greater than its imports: tout achat est vente et toute vente est achat.
Adam Smith (W. of N., IV, 1) compares the Spanish discoverers who inquired on every island, first of all, for gold, to the Mongolians, whom Rubruquis (c. 32) was obliged to give information to concerning the cattle of France: "of the two, perhaps the Tartar nation was the nearest to the truth." Precious-metal-money may be even more easily dispensed with than most other commodities, since, in case of necessity, it can, by reason of its greater transportability be readily obtained from without, and can also be supplied by exchange and by credit. "Money makes but a small part of the national capital and always the most unprofitable part of it.... Money necessarily runs after goods, but goods do not always or necessarily run after money." J. B. Say calls the exportation of money more advantageous than that of other commodities, because the former is of use, not through its physical qualities, but only through its value, and the value of the money which remains behind correspondingly rises by reason of the exportation. (Traité, I, ch. 17.) Compare especially Bastiat, Maudit Argent, 1849.
[A2-2-2] Against Ganilh, Théorie de l'Economie politique, II, 200.
[A2-2-3] Even Mun had, in every balance of trade, distinguished three persons who participated in it; the merchant might lose when the nation in general gained, and vice versa; the king, with his duties, always gained. (Ch. 7.) The British Merchant (p. 23) maintained even, that when the merchant himself gains nothing and takes his back-freight (Rückfracht) in money, his country gains the whole amount thereof.
[A2-2-4] "Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage, naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society." (Ad. Smith, W. of N., IV, ch. 2.)
[A2-2-5] For the reason that money, in international trade, for the most part, loses its character as money, and appears more as a commodity. Exhaustively in Adam Smith and J. B. Say, l. c. The English state paid, during the French war of the Revolution, in subsidies to foreign countries, £44,800,000; and yet, up to the end of 1797, imperial loans and the payments of private individuals included, not as much as one million in cash went out of the country. (Rose, Brief Examination into the Increase of the Revenue of Great Britain, 1799.) When France paid the five milliards to Germany, the plus value of English exportation to Germany above the English importation thence rose from 274,000,000 (1869) to 478,000,000 (1872), and the increase in the amount of French from 39,400,000 (1869) to 131,700,000 (1873). The entire German under-balance (Unterbilanz), Soetbeer (loc. cit.) estimates at 878,000,000 of marks.