"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 denomi"nated 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

66

are actually goods to be circulated. They are, in "fact, portions of what is reserved for consumption.) 66 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 com“modities 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 with"drawing from any society that part of its capital "which is employed in conducting the circulation of

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 shoe"maker 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 shoe"maker 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 &

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 after"wards meant to acquire his shoes.

"Tedious as this process may appear, it is one of "the simplest cases that could be stated for the purpose 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 part"ing 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 ano"ther 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 usually 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

happened that neither the farmer had antecedently "exchanged wheat for beer, nor the brewer beer for "wheat, they would be at a loss to fix the quantity "of wheat that should be given for a gallon of beer. "If, indeed, each had luckily procured already a leg "of the same sheep, in exchange for the commodity "they respectively possessed, they might then dis"cover the relative value of the wheat and the beer; "because two things equal to one and the same thing 'are equal to one another: but as it would probably happen, that the farmer and brewer had never exchanged wheat and beer for the same commodity, they could not have`recourse to this easy mode of deciding the portion of wheat that ought to be "parted with for the acquisition of a given quantity "of beer. The course, therefore, the farmer would "have to pursue, even after he had undergone the "labour necessary to discover a brewer who wanted "wheat, might be infinitely laborious, before he "could trace out, through the medium of various

exchanges, some one interchange, that afforded a "point of comparison betwixt the value of the wheat "and the beer.

"If this, however, could not be discovered, he "would be obliged, as the only means of ascertaining "the terms of the exchange, to institute an inquiry "into the proportion betwixt the demand for and the

66

quantity of the beer, and also into the demand for "and quantity of the wheat; these being the cir "cumstances on which the relative value of all com"modities depends.

"The beer being procured, it is plain he might be "under the necessity of repeating the same opera“tion in negociating the exchange for the shoes.

"Thus it is obvious, that the portion of a capital "of a country employed in conducting circulation, "is not only profitably employed, by saving the la"bour of man, in its character of an instrument for conducting exchanges, but also in its capacity of "a standard for measuring the value of commodi<ties.

"It is hot, perhaps, at first sight so apparent, that circulating capital is profitable to mankind from the *" circumstance of abridging labour, as it is that the

profit of a machine is derived from that source: but "there is in reality no part of the capital of a nation "that abridges a greater portion of labour, certainly "none the benefit of which in abridging labour is "more universally enjoyed.

"The labour of the manufacturer fixes and realizes "itself in some vendible commodity. Its existence, as productive labour, is therefore more easily discernible, than the labour of the menial servant, "whose services generally perish at the instant of performance. The labour of a manufacturing machine, in like manner, fixes itself in some vendible "commodity, which makes the origin of its profit "more apparent than that of circulating capital, "whose services, like that of the menial servant,

466

perish at the instant of their performance; but "which, like his too, remain, at all times, prepared "to abridge the necessity of another portion of