II. BOOK fhould, at the fame time, be carried on by many different banks and bankers, the whole circulation may thus be conducted with a fifth part only of the gold and filver which would otherwise have been requifite. Let us fuppofe, for example, that the whole circulating money of fome particular country amounted, at a particular time, to one million fterling, that fum being then fufficient for circulating the whole annual produce of their land and labour. Let us fuppofe too, that fome time thereafter, different banks and bankers iffued promiffory notes, payable to the bearer, to the extent of one million, referving in their different coffers two hundred thousand pounds for anfwering occafional demands. There would remain, therefore, in circulation, eight hundred thousand pounds in gold and filver, and a million of bank notes, or eighteen hundred thousand pounds of paper and money together. But the annual produce of the land and labour of the country had before required only one million to circulate and diftribute it to its proper consumers, and that annual produce cannot be immediately augmented by thofe operations of banking. One million, therefore, will be fufficient to circulate it after them. The goods to be bought and fold being precifely the fame as before, the fame quantity of money will be fufficient for buying and felling them. The channel of circulation, if I may be allowed fuch an expreffion, will remain precisely the fame as before. One million we have fuppofed fufficient to II. to fill that channel. Whatever, therefore, is CHAP. poured into it beyond this fum, cannot run in it, but muft overflow. One million eight hundred thousand pounds are poured into it. Eight hundred thousand pounds, therefore, muft overflow, that fum being over and above what can be employed in the circulation of the country. But though this fum cannot be employed at home, it is too valuable to be allowed to lie idle. It will, therefore, be fent abroad, in order to feek that profitable employment which it cannot find at home. But the paper cannot go abroad; because at a distance from the banks which iffue it, and from the country in which payment of it can be exacted by law, it will not be received in common payments. Gold and filver, therefore, to the amount of eight hundred thousand pounds will be fent abroad, and the channel of home circulation will remain filled with a million of paper, inftead of the million of thofe metals which filled it before. But though fo great a quantity of gold and filver is thus fent abroad, we must not imagine that it is fent abroad for nothing, or that its proprietors make a prefent of it to foreign nations. They will exchange it for foreign goods of fome kind or another, in order to supply the confumption either of fome other foreign country, or of their own. If they employ it in purchasing goods in one foreign country in order to fupply the confumption of another, or in what is called the carrying trade, whatever profit they make will be an ad[FF 3 dition II. BOOK dition to the neat revenue of their own country. It is like a new fund, created for carrying on a new trade; domeftic bufinefs being now tranfacted by paper, and the gold and filver being converted into a fund for this new trade. If they employ it in purchafing foreign goods for home confumption, they may either, first, purchase fuch goods as are likely to be confumed by idle people who produce nothing, fuch as foreign wines, foreign filks, &c.; or, fecondly, they may purchase an additional stock of materials, tools, and provifions, in order to maintain and employ an additional number of induftrious people, who re-produce, with a profit, the value of their annual confumption. So far as it is employed in the firft way, it promotes prodigality, increases expence and confumption without increafing production, or establishing any permanent fund for fupporting that expence, and is in every respect hurtful to the fociety. So far as it is employed in the second way, it promotes industry; and though it increases the confumption of the fociety, it provides a permanent fund for fupporting that confumption, the people who confume re-producing, with a profit, the whole value of their annual confumption. The grofs revenue of the fociety, the annual produce of their land and labour, is increased by the whole value which the labour of thofe workmen adds to the materials upon which they are employed; and their neat revenue by what remains of this value, after deducting what is ne ceffary ceffary for fupporting the tools and inftruments CHAP. of their trade. That the greater part of the gold and filver which, being forced abroad by thofe operations of banking, is employed in purchafing foreign goods for home confumption, is and must be employed in purchafing thofe of this fecond kind, feems not only probable, but almoft unavoidable. Though fome particular men may fometimes increase their expence very confiderably, though their revenue does not increase at all, we may be affured that no clafs or order of men ever does fo; because, though the principles of common prudence do not always govern the conduct of every individual, they always influence that of the majority of every clafs or order. But the revenue of idle people, confidered as a class or order, cannot, in the fimalleft degree, be increased by thofe operations of banking. Their expence in general, therefore, cannot be much increafed by them, though that of a few individuals among them may, and in reality fometimes is. The demand of idle people, therefore, for foreign goods, being the fame, or very nearly the fame, as before, a very finall part of the money, which being forced abroad by thofe operations of banking, is employed in purchafing foreign goods for home confumption, is likely to be employed in purchafing thofe for their ufe. The greater part of it will naturally be deftined for the employment of industry, and not for the maintenance of idleness. II. BOOK II. In When we compute the quantity of industry which the circulating capital of any fociety can employ, we must always have regard to thofe parts of it only which consist in provisions, materials, and finished work; the other, which confifts in money, and which ferves only to circulate thofe three, muft always be deducted. order to put industry into motion, three things are requifite; materials to work upon, tools to work with, and the wages or recompence for the fake of which the work is done. Money is neither a material to work upon, nor a tool to work with; and though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, confifts, not in the money, but in the money's worth; not in the metal pieces, but in what can be got for them. The quantity of industry which any capital can employ, muft, evidently, be equal to the number of workmen whom it can fupply with materials, tools, and a maintenance fuitable to the nature of the work. Money may be requifite for purchafing the materials and tools of the work, as well as the maintenance of the workmen. But the quantity of industry which the whole capital can employ, is certainly not equal both to the money which purchases, and to the materials, tools, and maintenance, which are purchafed with it; but only to one or other of those two values, and to the latter more properly than to the former. When |