What is Wealth?

Wealth consists, not in the matter or substance, but in the value of that matter or substance.

A lot of metal money is worth no more than fewer metal money of higher value.

Value, in the form of commodities, is equivalent to value to the same amount in the form of money.

An individual might need to liquidate his metal money in order to give a new direction to his capital. But a nation is never obliged to do so.

This liquidation is effected with the circulating money of the nation, which it occupies only for the time; the same money going almost immediately to operate another act of liquidation or of exchange.

Chapter 15 said that the abundance of specie is not even necessary for the national facilitation of exchanges and sales; for that buyers really buy with products, — each with his respective portion of the products he has concurred in creating= that with this he buys money, which serves but to buy some further product; and that, in this operation, money affords but a temporary convenience; like the vehicles employed to convey to market the produce of a farm, and to bring back the articles that have been purchased with the produce.

Whatever amount of money may have been employed in the purchase of liquidation, it has passed for as much as it was taken for= and, at the close of the transaction, the individual is neither richer nor poorer.

The loss or profit arises out of the nature of the transaction itself, and has no reference to the medium employed in the course of it.

Why is money so generally preferred to commodities, when the value on both sides is equal?

This requires a little explanation.

When I come to treat of money, it will be shown, that the coined metal of equal value commands a preference, because it insures to the holder the attainment of the objects of desire by means of one exchange instead of two. He is not, like the holder of any other com- modity, obliged, in the first instance, to exchange his own commodity, money, for the purpose of obtaining, by a second exchange, the object of his desire; one act of exchange suffices.

This it is, combined with the extreme facility of apportionment, afforded by graduated denominations of the coin, which renders it so useful in exchanges of value.

Every individual, who has an exchange to make, becomes a consumer of the commodity, money; that is to say, every individual in the community; which accounts for the universal preference of money to commodities at large, where the value is equal.

In no one way do the causes, that influence individual preference of money to commodities, operate upon international commerce. When the nation has a smaller stock than its necessities require, its value within the nation is raised, and for- eign and native merchants are equally interested in the importation of more= when it is redundant, its relative value to commodities at large is reduced, and it becomes advantageous to export to that spot, where its command of commodities may be greater than at home. To retain it by compulsory measures, is to force individuals to keep what is a burthen to them. 154

are now speaking of is not occasioned by the export, but by the consumption, which might have taken place without any export whatever. I may, therefore, say, with the strictest truth, that the export of the specie has caused no loss at all to the nation.

The ignorance called the balance of trade prevails even among the upper classes, writers and statesmen of the purest intentions and well informed on other points.

We should guard against some fallacies which are often set up in opposition to liberal principles, and are unfortunately the groundwork of the prevailing policy of most of the European States.

I shall uniformly reduce the objections to the simplest terms possible, that their weight may be the more easily estimated. It has been urged, with much confidence, that, had the export of 20,000 dollars never been made, France would remain in possession of that additional value; in fact, that the nation has lost the amount twice over; first, by the act of export; sec- ondly, by that of consumption= whereas, the consumption of an indigenous product would have entailed a single loss only. But I answer as before, that the export of specie has occa- sioned no loss; that it was balanced by equivalent value im- ported; and that it is so certain, that nothing has been lost except the 20,000 dollars worth of imported commodities, that I defy any one to point out any other losers than the con- sumers of those commodities. If there has been no loser, it is clear there can have been no loss.

They say that by increasing the currency through the means of a favourable balance of trade, the total capital of a nation is augmented, and, on the contrary, by diminishing it, that capital is reduced. Bul it must be always kept in mind, that capital consists, not of so much silver or gold, but of the values devoted to reproductive consumption, which values nec- essarily assume an infinite variety of successive forms.

When it is intended to vest a given capital in any concern, or to place it out at interest, the first step is undoubtedly to realize the amount, by converting 155 into ready money the different values one has at command. The value of the capital, thus assuming the transient form of money, is quickly transmuted by one exchange after another into buildings, works, and per- ishable substances requisite for the projected enterprise. The ready money employed for the occasion passes again into other hands, for the purpose of facilitating fresh exchanges, as soon as it has accomplished its momentary duty; in like manner as do many other substances, the shape of which this capital successively assumes. So that the value of capital is neither lost nor impaired by parting with its value, whatever material shape it happens to be under, provided that we part with it in a way that ensures its renovation.

Would you put a stop to the emigration of capital?

It is not to be prevented by keeping the specie in the country. A man resolved to transfer his capital elsewhere can do it just as effectually by the consignment of goods, whose export is per- mitted. 156

So much the better, we may be told; for our manufacturers will benefit by the exports. True; but their value exists no longer in the nation, since they bring back no return wherewith to make new purchases; there has been a transfer of so much capital from a/mongst you, to give activity not to your own, but to some other nation’s industry.

This is a real ground of apprehension. Capital naturally flows to those places that hold out security and lucrative employment, and gradu- ally retires from countries offering no such advantages= but it may easily enough retire, without being ever converted into specie.

Suppose a French dealer in foreign commodities to consign to a foreign country a capital of 10,000 dollars in specie for the purchase of cotton; when his cotton arrives, he possesses 20,000 dollars value in cotton instead of specie, putting his profit out of the question for the moment.

Has anybody lost this amount of specie? Certainly not= the adventurer has come honestly by it.

A cotton manufacturer gives cash for the cargo;

is he the loser of the price? No, surely= on the contrary, the article in his hands will increase to twice its value, so as to leave him a profit, after repaying all his advances.

If no individual capitalist has lost the 20,000 dollars exported, how can the nation have lost them? The loss will fall on the con- sumer, they will tell you= in fact, all the cotton goods bought and consumed will be so much positive loss; but the same consumers might have consumed linens or woollens of exactly the same value, without one dollar of the 20,000 being sent out of the country, and yet there would equally be a loss or consumption to that amount of value.

The loss of value we

If the export of specie causes no diminution of national capital, provided it be followed by a corresponding return, on the other hand, its import brings no accession of capital.

For, in reality, before specie can be imported, it must have been pur- chased by an equivalent value exported for that purpose.

On this point it has been alleged, that by sending abroad goods instead of specie, a demand is created for goods, and the pro- ducers enabled to make a profit upon their production. I answer, that, even when specie is sent abroad, that specie must have been first obtained by the export of some indigenous product; for, we may rest assured, that the foreign owner of it did not give it to the French importer for nothing; and France had nothing to offer in the first instance but her domestic products. If the supply of the precious metals in the country be more than sufficient for the wants of the country, it is a fitter object of export than another commodity; and, if more

pose national wealth; they are useful to the community no longer than while they do not exceed the national demand for them. Any such excess must make the sellers more numerous than the buyers; consequently must depress the price in pro- portion, and thus create a powerful inducement to buy in the home market, in the expectation of making a profit upon the export. This may be illustrated by an example.

of the specie be exported than the excess of the supply above the demand for the purposes of circulation, we may calculate with certainty, that, since the value of specie must have been necessarily raised by the exportation, other specie will be imported to replace what has been withdrawn; for the purchase of which last, home products must have been sent abroad, which will have yielded a profit to the home producers.

In a word, every value sent out of France, for the purchase of foreign returns for the French market, may be re- solved into a product of domestic industry, given either first or last, for France has nothing else to procure them with.

Suppose for a moment the internal traffic and national wealth of a given country to be such as to require the constant em- ploy of a thousand carriages of different kinds.

Suppose, too, that, by some peculiar system of commerce, we should suc- ceed in getting more carriages annually imported, than were annually destroyed by wear and tear; so that, at the year’s end, there should be 1500 instead of 1000; is it not obvious, that there would be in that case 500 lying by in the reposito- ries quite useless, and that the owners of them, rather than suffer their value to lie dormant, would undersell each other, and even smuggle them abroad if it were practicable, in the hope of turning them to better account? In vain would the government conclude commercial treaties for the encourage- ment of their import= in vain would it expend its efforts in stimulating the export of other commodities, for the purpose of getting returns in the shape of carriages; the more the pub- lic authorities favoured the import, the more anxious would individuals be to export.

They argued that it is better to export consumable articles, as, for instance, manufactures, and to keep at home those products not liable to consumption, or, at least, not to quick consumption, such as specie.

Yet objects of quick consumption, if more in demand, are more profitable to keep than objects of slower consumption. It would often be doing a producer a very poor service, to make him substitute a quantity of commodities of slow consumption, for an equal por- tion of his capital of more rapid consumption.

If an ironmaster were to contract for the delivery to him of a quantity of coal at a day certain, and when the day came the coal could not be procurable, and he should be offered the value in money in its stead, it would be somewhat difficult to convince him of the service done him by the delivery of money; which is an object of much slower consumption than the coal he contracted for.

Should a dyer send an order for dying woods from abroad, it would be a positive injury to send him gold, on the plea, that, with equal value, it has the advantage of greater durability. He had no occasion for a durable article whatever; what he wanted was a substance, which, though decomposed in his vats, would quickly re-appear in the colours of his stuffs. 157

As it is with carriages, so is it with specie likewise. The demand is limited; it can form but a part of the aggregate wealth of the nation. That wealth can not possibly consist entirely of specie; for other things are requisite besides specie.

The extent of the demand for that peculiar article is proportionate to the general wealth; in the same manner, as a greater number of carriages is wanted in a rich than in a poor country.