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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 tranf acted 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, firft, purchase fuch goods as are likely to be confumed by idle people who produce nothing, fuch as fo-. reign wines, foreign filks, &c.; or, fecondly, they may purchase an additional ftock of materials, tools, and provifions, in order to maintain and employ an additional number of industrious 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 eftablishing any permanent fund for fupporting that expence, and is in every refpect hurtful to the fociety.
So far as it is employed in the fecond 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 those 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 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 purchasing foreign goods for home confumption, is and must be employed in purchafing those 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 increafe 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 class or order. But the revenue of idle people, confidered as a class or order, cannot, in the smallest degree, be increased by thofe operations of banking. Their expence in general, therefore, cannot be much increased by them, though that of a few individuals among them may, and in reality fometimes is. The demand of idle people, therefore, for fo. reign goods, being the fame, or very nearly the fame, as before, a very fmall 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 idlenefs.
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. In 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, confists, 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 thofe two values, and to the latter more properly than to the former.
When paper is fubftituted in the room of gold c HAP. and filver money, the quantity of the materials, tools, and maintenance, which the whole circulating capital can fupply, may be increased by the whole value of gold and filver which used to be employed in purchafing them. The whole value of the great wheel of circulation and diftribution, is added to the goods which are circulated and diftributed by means of it. The operation, in some measure, resembles that of the undertaker of fome great work, who, in confequence of fome improvement in mechanics, takes down his old machinery, and adds the difference between its price and that of the new to his circulating capital, to the fund from which he furnishes materials and wages to his workmen.
What is the proportion which the circulating money of any country bears to the whole value of the annual produce circulated by means of it, it is, perhaps, impoffible to determine. It has been computed by different authors at a fifth, at a tenth, at a twentieth, and at a thirtieth part of that value. But how fmall foever the proportion which the circulating money may bear to the whole value of the annual produce, as but a part, and frequently but a small part, of that produce, is ever deftined for the maintenance of industry, it must always bear a very confiderable proportion to that part. When, therefore, by the fubftitution of paper, the gold and filver neceffary for circulation is reduced to, perhaps, a fifth part of the former quantity, if the value of only the greater part of the other four-fifths be added to
BOOK the funds which are deftined for the maintenance
of industry, it must make a very confiderable addition to the quantity of that industry, and, confequently, to the value of the annual produce of land and labour.
An operation of this kind has, within these five-and-twenty or thirty years, been performed in Scotland, by the erection of new banking companies in almost every confiderable town, and even in fome country villages. The effects of it have been precisely thofe above defcribed. The bufinefs of the country is almost entirely carried on by means of the paper of thofe different banking companies, with which purchases and payments of all kinds are commonly made. Silver very feldom appears, except in the change of a twenty-fhillings bank note, and gold ftill feldomer. But though the conduct of all thofe different companies has not been unexceptionable, and has accordingly required an act of parliament to regulate it; the country, notwithstanding, has evidently derived great benefit from their trade. I have heard it afferted, that the trade of the city of Glasgow doubled in about fifteen years after the firft erection of the banks there; and that the trade of Scotland has more than quadrupled fince the firft erection of the two public banks at Edinburgh, of which the one, called The Bank of Scotland, was established by act of parliament in 1695; the other, called The Royal Bank, by royal charter in 1727. Whether the trade, either of Scotland in general, or of the city of Glafgow in particular,