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a competition between England, and France, the state of international values affected both competitors alike, since they were supposed to trade with the same country, and to export and import the same commodities. The difference, therefore, in what their imports cost them, depended solely on the other cause, the unequal efficiency of their labour. They gave the same quantities; the difference could onl

be in the cost of production. But if England traded to Germany with cloth, and France with iron, the comparative demand in Germany for those two commodities would bear a share in deter

mining the comparative cost, in labout and capital, with which England any France would obtain German products If iron were more in demand in Gey many than cloth, France would recover, through that channel, part of her dis advantage; if less, her disadvantage would be increased. The efficiency, therefore, of a country's labour, is not the only thing which determines even the cost at which that country obtains imported commodities—while it has no share whatever in determining either their exchange value, or, as we shall presently see, their price.



§ 1. THE degree of progress which we have now made in the theory of Foreign Trade, puts it in our power to supply what was previously deficient in our view of the theory of Money; and this, when completed, will in its turn enable us to conclude the subject of Foreign Trade. Money, or the material of which it is composed, is, in Great Britain, and in most other countries, a foreign commodity. Its value and distribution must therefore be regulated, not b the law of value which obtains in adjacent places, but by that which is aplicable to imported commodities—the i. of International Values. In the discussion into which we are now about to enter, I shall use the terms Money and the Precious Metals indiscriminately. This may be done without leading to any error; it having been shown that the value of money, when it consists of the precious metals, or of a paper currency convertible into them on demand, is entirely governed by the value of the metals themselves: from which it never permanently differs, except by the expense of coinage when this is paid by the individual and not by the state.

Money is brought into a country in two different ways. It is imported (chiefly in the form of bullion) like any other merchandize, as being an advantageous article of commerce. It is also imported in its other character of a medium of exchange, to pay some debt due to the country, either for goods exported or on any other account. There are other ways in which it may be introduced casually; these are the two in which it is received in the ordinary course of business, and which deter. mine its value. The existence of these two distinct modes in which money flows into a country, while other commodities are habitually introduced only in the first of these modes, occasions somewhat more of complexity and obscurity than exists in the case of other commodities, and for this reason only is any special and sminute exposition necessary.

§ 2. In so far as the precious metals are imported in the ordinary way of commerce, their value must depend on the same causes, and conform to the same laws, as the value of any other foreign production. It is in this mode chiefly that gold and silver diffuse them selves from the mining countries into all other parts of the commercial world. They are the staple commodities of those countries, or at least are among their great articles of regular export; and are shipped on speculation, in the same manner as other exportable commodities. The quantity, therefore, which a country (say England) will give of its own produce, for a certain quantity of bullion, will depend, if we suppose only two countries and two commodities, upon the demand in England for bullion, compared with the demand in the mining country (which we will call Brazil) for what England has to give. They must exchange in such proportions as will leave no unsatisfied demand on either side, to alter values by its competition. The bullion required by England must exactly pay for the cottons or other English commodities required by Brazil. If, however, we substitute for this simplicity the degree of complication which really exists, the equation of international demand must be established not between the bullion wanted in England and the cottons or broadcloth wanted in Brazil, but between the whole of the imports of Fol and the whole of her exports. The demand in foreign countries for English products, must be brought into equilibrium with the demand in England for the products of foreign countries; and all foreign commodities, bullion among the rest, must be exchanged against English roducts in such proportions, as will, i. the effect they produce on the demand, establish this equilibrium. There is nothing in the peculiar nature or uses of the precious metals, which should make them an exception to the general principles of demand. So far as they are wanted for purposes of luxury or the arts, the demand increases with the cheapness, in the same irregular way as the demand for any other commodity. So far as they are required for money, the demand increases with the cheapness in a perfectly regular way, the quantity needed being always in inverse proportion to the value. This is the only real dif. ference, in respect to demand, between

money and other things; and for the present purpose it is a difference altogether immaterial. Money, then, if imported solely as a merchandize, will, like other imported commodities, be of lowest value in the countries for whose exports there is the greatest foreign demand, and which have themselves the least demand for foreign commodities. To these two circumstances it is however necessary to add two others, which produce their effect through cost of carriage. The cost of obtaining bullion is compounded of two elements; the goods given to purchase it, and the expense of transport: of which last, the bullion countries will bear a part (though an uncertain part) in the adjustment of international values. The expense of transport is partly that of carrying the goods to the bullion countries, and partly that of bringing back the bullion: both these items are influenced by the distance from the mines; and the former is also much affected by the bulkiness of the goods. Countries whose exportable produce consists of the finer manufactures, obtain bullion, as well as all other foreign articles, catteris paribus, at less expense than countries which export nothing but bulky raw produce. To be quite accurate, therefore, we must say—The countries whose exportable productions are most in demand abroad, and contain greatest value in smallest bulk, which are nearest to the mines, and which have least demand for foreign productions,

are those in which money will be of

lowest value, or in other words, in which prices will habitually range the highest. If we are speaking not of the value of money, but of its cost (that is, the quantity of the country's labour which must be expended to obtain it), we must add to these four conditions of cheapness a fifth condition, namely, “whose productive industry is the most efficient.” This last, however, does not at all affect the value of money, estimated in commodities: it affects the general abundance and facility with which all things, money and commodities together, can be obtained. Although, therefore, Mr. Senior is

right in pointing out the great efficiency of English labour as the chief cause why the precious metals are obtained at less cost by England than by most other countries, I cannot admit that it at all accounts for their being of less value; for their going less far in the purchase of commodities. This, in so far as it is a fact, and not an illusion, must be occasioned by the great demand in foreign countries for the staple commodities of England, and the generally unbulky character of those commodities, compared with the corn, wine, timber, sugar, wool, hides, tallow, hemp, flax, tobacco, raw cotton, &c., which form the exports of other commercial countries. These two causes will account for a somewhat higher range of general prices in England than elsewhere, notwithstanding the counteracting influence of her own reat demand for foreign commodities. am, however, strongly of opinion that the high prices of commodities and low purchasing power of money in England, are more apparent than real. Food, indeed, is somewhat dearer; and food composes so large a portion of the expenditure when the income is small and the family large, that to such families England is a dear country. Services, also, of , most descriptions are dearer than in the other countries of Europe, from the less costly mode of living of the poorer classes on the Continent. But manufactured commodities (except most of those in which good taste is required) are decidedly cheaper; or would be so, if buyers * ould be content with the same quality of material and of workmanship. What is called the dearness of living in England, is mainly, an affair, not of necessity but of foolish custom; it being thought imperative by all classes in England above the condition of a daylabourer, that the things they consume should either be of the same quality with those used by much richer people, or at least should be as nearly as possible undistinguishable from them in outward appearance.

§ 3. From the preceding considera

in error who contend that the value of money, in countries where it is an imported commodity, must be entirely regulated by its value in the countries which produce it; and cannot be raised or lowered in any permanent manner unless some change has taken place in the cost of production at the mines. On the contrary, any circumstance which disturbs the equation of international demand with respect to a particular country, not only may, but must, affect the value of money in that country—its value at the mines remaining the same. The opening of a new branch of export trade from England; an increase in the foreign demand for English products, either by the natural course of events or by the abrogation of duties; a check to the demand in England for foreign commodities, by the laying on of import duties in England or of export duties elsewhere; these and all other events of similar tendency, would make the imports of England (bullion and other things taken together) no longer an equivalent for the exports; and the countries which take her exports would be obliged to offer their commodities, and bullion among the rest, on cheaper terms, in order to re-establish the equation of demand: and thus England would obtain money cheaper, and would acquire a generally higher range of prices. Incidents the reverse of these would produce effects the reverse— would reduce prices; or, in other words, raise the value of the precious metals. It must be observed, however, that money would be thus raised in value only with respect to home commodities: in relation to all imported articles it would remain, as before, since their values would be affected in the same way and in the same degree with its own. A country which, from any of the causes mentioned, gets money cheaper, obtains all its other imports cheaper likewise. It is by no means necessary that the increased demand for English commo dities, which enables, England to supply herself with bullion at a cheaper rate, should be a demand in the mining

tions, it appears that those are greatly countries. England wish,o Ilo

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thing whatever to those countries, and yet might be the country which obtained bullion from them on the lowest terms, provided there were a sufficient intensity of demand in other foreign countries for English goods, which would be paid for circuitously, with gold and silver from the mining countries. The whole of its exports are what a country exchanges against the whole of

its imports, and not its cxports and * to and from any one country; and the general foreign demand for its productions will determine what equivalent it must give for imported goods, in order to establish an equilibrium between its sales and purchases generally; without regard to the maintenance of a similar equilibrium between it and any country singly.



§ 1. WE have thus far considered the precious metals as a commodity, imported like other commodities in the common course of trade, and have examined what are the circumstances which would in that case determine their value. But those metals are also imported in another character, that which belongs to them as a medium of exchange; not as an article of commerce, to be sold for money, but as themselves money, to pay a debt, or effect a transfer of property. It remains to consider whether the liability of gold and silver to be transported from country to country for such purposes, in any way modifies the conclusions we have already arrived at ; or laces those metals under a different aw of value from that to which, in common with all other imported commodities, they would be subject if international trade were an affair of direct barter. Money is sent from one country to another for various purposes: such as the payment of tributes or subsidics; remittances of revenue to or from dependencies, or of rents or other incomes to their absent owners; emigration of capital, or transmission of it for foreign investment. The most usual purpose, however, is that of payment for goods. To show in what circumstances money actually passes from country to country for this or any of the other purposes mentioned, it is necessary briefly to state the nature of the mechanism by

which international trade is carried on, when it takes place not by barter but through the medium of money.

§ 2. In practice, the exports and imports of a country not only are not exchanged directly against each other, but often do not even pass through the same hands. Each is separately bought and paid for with money. We have seen, however, that, even in the same country, money does not actually pass from hand to hand each time that purchases are made with it, and still less does this happen between different countries. The habitual mode of paying and receiving payment for commodities, between country and country, is by bills of exchange.

A merchant in England, A, has exported English commodities, consigning them to his correspondent B in France. Another merchant in France, C, has exported French commodities, suppose of equivalent value, to a mer. chant D in England. It is evidently unnecessary that B in France should send money to A in England, and that D in England should send an equal sum of money to C in France. The one debt may be applied to the payment of the other, and the double cost and risk of carriage be thus saved. A draws a bill on B for the amount which B owes to him : D, having an equal amount to pay in France, buys this bill from A, and sends it to C, who, at the expiration of the number of days which the bill has to run, presents it to B for ayment. Thus the debt due from rance to England, and the debt due from England to France, are both paid without sending an ounce of gold or silver from one country to the other. In this statement, however, it is supposed that the sum of the debts due from France to England, and the sum of those due from England to France, are equal; that each country has exactly the same number of ounces of old or silver to pay and to receive. #. implies (if we exclude for the present any other international payments than those occurring in the course of commerce,) that the exports and imports exactly pay for one another, or in other words, that the equation of international demand is established. When such is the fact, the international, transactions are liquidated without the passage of any money from one country to the other. But if there is a greater sum due from England to France, than is due from France to England, or vice versá, the debts cannot be simply written off against one another. After the one has been applied, as far as it will go, towards covering the other, the balance must be transmitted in the precious metals. In point of fact, the merchant who has the amount to pay, will even then pay for it by a §. When a erson has a remittance to make to a oreign country, he does not himself search for some one who has money to receive from that country, and ask i for a bill of exchange. In this as in other branches of business, there is a class of middlemen or brokers, who bring buyers and sellers, together, or stand between them, buying bills from those who have money to receive, and selling bills to those who have money to pay. When a customer comes to a broker for a bill on Paris or Amsterdam, the broker sells to him, perhaps the bill he may himself have bought that morning from a merchant, perhaps a bill on his own correspondent in the foreign city: and to enable his correspondent to pay, when due, all the bills he has granted, be remits to him all those which he has

bought and has not resold. In this manner these brokers-take upon themselves the whole settlement of the pecuniary transactions between distant places, being remunerated by a small commission or percentage on the amount of each bill which they either sell or buy. Now, if the brokers find that they are asked for bills on the one part, to a greater amount than bills are offered to them on the other, they do not on this account refuse to give them; but since, in that case, they have no means of enabling the corré. spondents on whom their bills are drawn, to pay them when due, except by transmitting part of the amount in gold or silver, they require from those to whom they sell bills an additional price, sufficient to cover the freight and insurance of the gold and silver, with a profit sufficient to compensate them for their trouble and for the temporary occupation of a portion of their capital. This premium (as it is called) the buyers are willing to pay, because they must otherwise go to the expense of remitting the precious metals them selves, and it is done cheaper by those who make doing it a part of their es: pecial business. But though only some of those who have a debt to pay would have actually to remit money, all will be obliged, by each other's competition, to pay the premium; and the brokers are for the same reason obliged to pay it to those whose bills they buy. }. reverse of all this happens, if on the comparison of exports and imports, the country, instead of having a balance to ay, has a balance to receive. The o: find more bills offered to them, than are sufficient to cover those which they are required to grant. Bills on foreign countries consequently fall to a discount; and the competition among the brokers, which is exceedingly active, prevents them from retaining this discount as a profit for themselves, and obliges them to give the benefit of it to those who buy the bills for the purposes of remittance. Let us suppose that all countries had the same currency, as in the progress of political improvement they one day ill have; and, as the most familiar to

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