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useful and acquired abilities are not fixed and realized in a permanent object, it is evident that they have been improperly comprised in the fixed capital by Adam Smith. Or if, as I flatter myself to have made manifest, any labour is productive of the stock that pays for it, and ought, on that account, to be comprised in the fixed capital ; then it is evident that Adam Smith was mistaken when he denied productiveness to labours which do not fix and realize themselves in any permanent object. The alternative is unavoidable, and helps to corroborate the reasons which induced me to oppose Adam Smith's opinion on this head. That part of capital stock, which Adam Smith denominates the circulating capital, is nearly the same with that which Dr. Quesnay calls annual advances. Both destine this part of the capital stock of a country to provide for the divers wants of agriculture, manufactures, and commerce; they only differ in so far as Adam Smith admits the metallic currency of the country into the circulating capital, which is not mentioned at all by Dr. Quesnay. We ought, however, to be little surprized at this omission, on the part of Dr. Quesnay, and the French economists. The theory of circulation, of which a metallic currency is the principal instrument, had made but small progress at the time they wrote, and its benefits could not easily be foreseen, nor its extent, resources, and results, calculated. But is it true, as Adam Smith has taught, that the metallic currency of a country forms part of her circulating capital, and is not only of no benefit to wealth, but even burthensome to it as an object of expence 2 Many writers on subjects connected with political economy have not adopted this part of Adam Smith's theory. On the contrary, they think that money operates in the same manner as other machines employed in agriculture, manufactures, and commerce; and tends, like them, to shorten and facilitate labour, and is, of course, productive of whatever the exchange of commodities costs less than what it would have cost without the assistance of money.* But none has placed this truth in a more luminous point of view, than the Earl of Lauderdale. Though the demonstration of the noble Earl be rather long, I am yet convinced the reader will thank me for transcribing it entire ; because it explains, in a novel and truly ingenious manner, the operation of money in the interchange of the produce of labour. “ In considering how that portion of the national “ capital, employed in conducting circulation, pro“duces a profit, it is necessary,” says the Noble Lord, “ clearly to distinguish what forms circulating “ capital, from the goods that are circulated by “ means of capital; and this becomes the more so, “ because we are accustomed to see these two things,

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‘ however different, almost uniformly confounded by “ those who have treated on the subject.”

*

* Traité d’Economie Politique, par Jean Baptiste de Say. Paris. 1803, vol. i. page 12.

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“ From the manner in which the circulation of most European countries is at present conducted, the circulating capital may be properly regarded as composed either of the coin or of the substitutes for coin, which banking and the modern facilities of conveying credit have created. To these, therefore, we confine our views; conceiving them to form what may, with strict propriety, be denominated the circulating capital of a country. (The other three articles of which the author of the Wealth of Nations imagined circulating capital to be composed are not employed in circulating, but are actually goods to be circulated. They are, in fact, portions of what is reserved for consumption.) And a little examination will suffice to shew that gold and silver, as coin, are alone estimated by men for their utility in abridging labour, as well as that the advantage, which the public derives from the improved method of circulation by means of banks, is founded on the same principle.

“ Money is of use to mankind in two different capacities ; as an instrument of exchange, and as a practical standard, by which the value of all commodities is measured and expressed. To convey a clear idea how the portion of the national capital employed in executing these two duties, is profitable merely from the circumstance of its supplanting labour, perhaps no better method can be followed, than to consider what would be the effect of withdrawing from any society that part of its capital which is employed in conducting the circulation of

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goods, and in forming a practical standard by which the value of commodities is measured and expressed. - “ The moment this portion of the national capital is abstracted from any society, the exchange of those things which nature or art enables one man to produce with greater ease, or of better quality, for those things which similar circumstances enable another to produce with greater advantage, must be conducted by barter. “A farmer, for example, who had in his barn a quantity of wheat, much greater than the consump

tion of his family, and who destined the overplus to

supply the other articles necessary for their clothing and nourishment ; if he wanted a pair of shoes, would be obliged to proceed with a quantity of his wheat to a shoemaker to endeavour to negociate an exchange : but as it might probably happen that the first shoemaker he accosted, had already, in return for shoes, obtained all the wheat he meant to consume, he would be under the necessity of remaining without shoes, till he could find a shoemaker who wanted wheat.

“ If, unfortunately, the whole profession were already supplied with wheat; to obtain a pair of shoes, he would be under the necessity of endeavouring to discover what was the article the shoemaker wished to procure ; and if, on inquiry, it appeared that beer was the commodity with which the shoemaker wished to be supplied, the farmer must then endeavour to procure from the brewer a

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quantity of beer in exchange for his wheat, as a preliminary for his future negociation with the shoemaker. “But the brewer might also be supplied with wheat; which would oblige the farmer, in the first instance, to endeavour to exchange his wheat for some commodity the brewer wanted, that with it he might purchase the beer, with which he afterwards meant to acquire his shoes. “ Tedious as this process may appear, it is one of

the simplest cases that could be stated for the pur

pose of pointing out and explaining the laborious path which every man, if the circulating capital of a country were obstructed, would be obliged to tread, in endeavouring to supply his wants by parting with his superfluities: for it is plain that the course would often be infinitely more tedious and intricate before the goods of one man could be repeatedly bartered, till they at length became exchanged for the particular commodity which another wanted. “ Neither is this the sole source of the labour that would be imposed on man, by withdrawing the capital employed in the conduct of circulation. As there would then exist no general standard by which the value of commodities was usuallv estimated, an inquiry must of necessity take place in settling the terms of every particular exchange, to ascertain the relative value of commodities. * For example, if the brewer, to whom the farmer applied, wished to have some wheat, and it so

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