When the capital of a country has become sufficient for all the employment that can be procured for it, the first effect is the lowering of interest, which sinks down under the rate appointed by law, and under the rate at which it is lent out at in other countries.
When capital is not in sufficient quantity, those who want to borrow are more numerous than those who have money to lend; then the competition is amongst the borrowers to obtain the preference, and they all give as high an interest as the law allows, and would give more if they could avoid the penalty, which, in all countries, has been attached to accepting more than the regulated sum; a sum regulated merely to prevent the effect of competition, which might induce people to give more than in the end they would find they could afford to pay.
When capital becomes over abundant, the very reverse takes place; the lenders become rivals, and offer to lend at an under rate of interest.
The first effect of this is, that people who were but scantily supplied with capital before borrow, and carry on business more at ease, so that more capital is employed in business, and new employments are found out for capital.
The usual employments for a superabundant capital are improving lands, building houses, erecting machines, digging canals, &c. for the use of trade; and finally, giving longer credit to merchants in other countries, {137} as well as to those who are running in debt in their own. The stock on hand in manufactured goods increases something also. But when all these have taken place, to as great an extent as wanted, then the money begins to flow into other countries. By degrees, more money is sent away than should go, and the persons who are the proprietors of it frequently follow.
If the capital that leaves a country were only that which cannot find employment in it, the harm would not be great, though it would tend to enrich other countries, and bring them nearer a level. But that is not the case, the advantage of lending money abroad, if regularly paid at a higher interest than can be obtained at home, induces people to draw their money from trade, and vest it in the hands of foreigners. The Venetians, the Genoese, the Dutch, the Hanseatic Towns, and the cities of Flanders, did this; and the capital, which, when employed at home, formerly maintained perhaps one hundred people in affluence and industry, only supported one single family living in indolence and splendid penury. {138}
After being in possession of money for a considerable time, men prefer a certain employment at a low interest to one attended with risk, even where the interest is higher; and when great sums have been got by trade, those who have got them retire and live on the interest, which men, who have only gained a small capital cannot do.
There are many other circumstances, besides the abundance of capital, that tend to carry it away from a wealthy country. The depreciation of money that takes place, in every country that grows
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{137} As the subject is here treated in the general way, applicable to all nations, the employment found by national debt, and the funds rising is not taken into account, as it will be noticed in the case of England. When money is plenty, all individuals in trade give longer credit; but this employs little more capital, when they give it to each other it employs no more, but when to consumers it does.