International Barter Taxation

⁷⁹ It has been said that:

• the Americans have no gold or silver money.
• Their interior commerce is done by a paper currency.
  • Its gold and silver are all sent to Great Britain for the British commodities that they import from us.

Without gold and silver it is impossible to pay taxes. We already get all their gold and silver.

How can we draw from them what they do not have?

⁸⁰ The current scarcity of gold and silver money in America is not the effect of the inability of the Americans to buy gold and silver money.

• Wages in America are much higher than in England.
• The price of provisions is much lower.

Most of the people must surely have the means to buy more of what they need. Therefore, the scarcity of those metals must be from choice, not necessity.

⁸¹ Gold and silver money is necessary or convenient for transacting domestic or foreign business.

⁸² Book 2 has shown that the domestic business of every country may be transacted through paper currency as conveniently as by gold and silver money, at least in peacetime.

It is convenient for the Americans to save as much as possible the cost of using gold and silver for currency.

• They can always profitably employ more stock in their land improvements, than they can easily get.
• They would rather employ their surplus produce for buying the tools, raw materials, furniture, and ironworks needed for building and extending their settlements and plantations, instead of using their surplus to buy gold and silver.

In this way, they buy active and productive stock, not dead stock.

The colony governments find it for their interest to supply the people paper money more than sufficient for transacting their domestic business.

• Some of those governments, particularly that of Pennsylvania, derive a revenue from lending this paper money to their subjects at an interest.
• Others, like that of Massachusetts Bay, advance this kind of paper money on extraordinary emergencies for defraying the public expence.
  • Afterwards, it redeems this money at a depreciated value, when it suits the colony’s convenience.
  • In this way in 1747, Massachusetts Bay paid most of its public debts with 10% of the metal money for which its paper bills were granted.

It is convenient:

• for the planters to save the cost of using metal money in their domestic transactions, and
• for the colony governments to supply them with a medium that enables them to save that cost, though with some very big disadvantages.

The redundancy of paper money banishes gold and silver from the colonies’ domestic transactions, for the same reason that it banished those metals from most of Scottish domestic transactions.

• In both countries, this redundancy of paper money was created by the people’s enterprising and projecting spirit, not their poverty.
• It is their desire of employing all the stock they can get, as active and productive stock.

In their exterior commerce with Great Britain, gold and silver are used exactly as they are needed.

• Where those metals are not necessary, they seldom appear.
• Where they are necessary, they are generally found.

Sometimes, It’s Better to Pay in Kind

⁸³ In the commerce between Great Britain and the tobacco colonies, the British goods are generally advanced to the colonists at a pretty long credit.

• They are afterwards paid for in tobacco at a certain price.
• It is more convenient for the colonists to pay in tobacco than in gold and silver.

It would be more convenient for any merchant to pay for his suppliers’ goods with some of his other goods than in money.

• Such a merchant would then have no stock unemployed.
• He would not need ready money for answering occasional demands.
• He could:
  • have more goods in his shop or warehouse at all times.
  • deal to a greater extent.

The British merchants who trade to Virginia and Maryland prefer receiving payment in tobacco than gold and silver because they expect to make a profit by selling the tobacco.

• They could make no profit by selling gold and silver.

Gold and silver very seldom appear in the commerce between Great Britain and the tobacco colonies.

• Maryland and Virginia have as little need for those metals in their foreign and domestic commerce.
• Accordingly, they are said to have less gold and silver money than any other American colony, yet they are as thriving and rich as their neighbours.

⁸⁴ In the northern colonies, the value of their own exports to Great Britain is more than the value of their imports.

A balance must be paid to Great Britain in gold and silver. They generally find this balance. The northern colonies are:

• Pennsylvania
• New York
• New Jersey
• the four governments of New England, etc.

⁸⁵ The difficulty and irregularity of payment from the different colonies towards Great Britain does not correlate with the size of the balances due from them.

Generally, the payments have been more regular from the northern colonies than from the tobacco colonies.

• The northern colonies have paid a large balance in money.
• The the tobacco colonies have either paid no balance, or a much smaller one.

The difficulty of getting payment from our sugar colonies is caused by the temptation which the planters have of overtrading.

• They see a lot of uncultivated land.
• So they borrow money to develop it beyond the capability of their capitals.

Jamaica still has much uncultivated land.

This is why its returns have been more irregular and uncertain than those from the smaller islands of Barbadoes, Antigua, and St. Christophers.

• These islands have been completely cultivated for many years and so have afforded less field for the speculations of the planter.

The new acquisitions of Grenada, Tobago, St. Vincents, and Dominica have opened a new field for speculations of this kind.

• The returns from them have recently been as irregular and uncertain as those from Jamaica.

⁸⁶ Therefore, it is not the poverty of the colonies which creates the present scarcity of gold and silver money.

Their great demand for active and productive stock:

• makes it convenient for them to have as little dead stock as possible
• disposes them to content themselves with a cheaper though less commodious instrument of commerce than gold and silver.

They are thereby convert the value of that gold and silver into:

• the instruments of trade
• the materials of clothing
• household furniture
• the ironwork for building and extending their settlements and plantations

They can always find the necessary metals in businesses which cannot be transacted without gold and silver money.

• If they do not find it, their failure is the effect of their unnecessary and excessive enterprise, not of their necessary poverty.

It is not because they are poor that their payments are irregular and uncertain, but because they are too eager to become excessively rich.

The colonies can acquire the gold and silver needed to pay taxes to Britain.

However, this would convert their active and productive stock [money for trade] into dead stock [money for tax payments].

In transacting their domestic business, they would shift to using a costly instrument of commerce instead of a cheap one.

• The expence of purchasing this costly instrument might dampen economic activity used in developing the land.

But it might not be necessary to remit American taxes in gold and silver.

It might be remitted in bills drawn on and accepted by merchants in Great Britain who receive American products.

Those merchants would then pay into the treasury the American taxes in money, after receiving their value in goods.

The whole business might frequently be transacted without exporting a single ounce of gold or silver from America.