Whatever, therefore, is poured into it beyond this sum cannot run in it, but must overflow.One million eight hundred thousand pounds are poured into it.Eight hundred thousand pounds, therefore, must overflow, that sum being over and above what can be employed in the circulation of the country.But though this sum cannot be employed at home, it is too valuable to be allowed to lie idle.It will, therefore, be sent abroad, in order to seek that profitable employment which it cannot find at home.But the paper cannot go abroad; because at a distance from the banks which issue 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 silver, therefore, to the amount of eight hundred thousand pounds will be sent abroad, and the channel of home circulation will remain filled with a million of paper, instead of the million of those metals which filled it before.
But though so great a quantity of gold and silver is thus sent abroad, we must not imagine that it is sent abroad for nothing, or that its proprietors make a present of it to foreign nations.They will exchange it for foreign goods of some kind or another, in order to supply the consumption either of some other foreign country or of their own.
If they employ it in purchasing goods in one foreign country in order to supply the consumption of another, or in what is called the carrying trade, whatever profit they make will be an addition to the net revenue of their own country.It is like a new fund, created for carrying on a new trade; domestic business being now transacted by paper, and the gold and silver being converted into a fund for this new trade.
If they employ it in purchasing foreign goods for home consumption, they may either, first, purchase such goods as are likely to be consumed by idle people who produce nothing, such as foreign wines, foreign silks, etc.; or, secondly, they may purchase an additional stock of materials, tools, and provisions, in order to maintain and employ an additional number of industrious people, who reproduce, with a profit, the value of their annual consumption.
So far as it is employed in the first way, it promotes prodigality, increases expense and consumption without increasing production, or establishing any permanent fund for supporting that expense, and is in every respect hurtful to the society.
So far as it is employed in the second way, it promotes industry; and though it increases the consumption of the society, it provides a permanent fund for supporting that consumption, the people who consume reproducing, with a profit, the whole value of their annual consumption.The gross revenue of the society, 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 net revenue by what remains of this value, after deducting what is necessary for supporting the tools and instruments of their trade.
That the greater part of the gold and silver which, being forced abroad by those operations of banking, is employed in purchasing foreign goods for home consumption, is and must be employed in purchasing those of this second kind, seems not only probable but almost unavoidable.Though some particular men may sometimes increase their expense very considerably though their revenue does not increase at all, we may be assured that no class or order of men ever does so; 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, considered as a class or order, cannot, in the smallest degree, be increased by those operations of banking.Their expense in general, therefore, cannot be much increased by them, though that of a few individuals among them may, and in reality sometimes is.The demand of idle people, therefore, for foreign goods being the same, or very nearly the same, as before, a very small part of the money, which being forced abroad by those operations of banking, is employed in purchasing foreign goods for home consumption, is likely to be employed in purchasing those for their use.The greater part of it will naturally be destined for the employment of industry, and not for the maintenance of idleness.
When we compute the quantity of industry which the circulating capital of any society can employ, we must always have regard to those parts of it only which consist in provisions, materials, and finished work: the other, which consists in money, and which serves only to circulate those three, must always be deducted.In order to put industry into motion, three things are requisite; materials to work upon, tools to work with, and the wages or recompense for the sake 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, consists, not in 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 must, evidently, be equal to the number of workmen whom it can supply with materials, tools, and a maintenance suitable to the nature of the work.Money may be requisite for purchasing 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 purchased with it; but only to one or other of those two values, and to the latter more properly than to the former.