Commerce, in its most general sense, implies the exchange of articles of any kind for money or other articles. The earliest form of such exchanges is by barter, because the use of gold and silver is not adopted until society has made a certain progress. "The armour of Diomed," says Homer, "was plain, and was paid for by nine oxen; whilst the splendid armour of Glaucon cost a hundred." Barter being now disused in all improved countries, commerce is almost always understood to denote the exchange of commodities for money. In France and the south of Europe the words used to designate commerce are derived from the Latin; in Holland, Germany, and other northern countries, a vernacular word is more frequent; but all are alike in meaning, being applied equally to home and foreign trade.

We propose in the present essay to treat of,

I. The history of commerce, particularly in England and Holland;

II. The principles of commerce, and the evils of interfering with the free course of trade;

III. Commercial fluctuations in the present age—evils of an undue expenditure by government.

I. HISTORY OF COMMERCE.

It has been an object with many writers to ascertain in what nation of antiquity commerce was first carried to a considerable extent; but as that extent implies a previous population, the more simple inquiry would be, in what country population first acquired density, particularly in towns. The answer is, that mankind first increased their numbers in warm latitudes, especially in situations where irrigation, whether effected by the overflowing of rivers, by the descent of streams from a range of mountains, or by any other means, was so extensive as to counteract the parching effect of heat, and give to vegetation a luxuriance unknown in colder regions. It was thus that the Nile gave fertility to Egypt, the Euphrates to Chaldea, and the Ganges, in the lower part of its course, to Bengal.

The earliest written notice of commercial intercourse is in Scripture, where we read of Joseph being sold by his brethren to a company of Ishmaelites or Arabs, who were going to Egypt with spices, balm, and myrrh, conveyed on the backs of camels. These itinerant traders probably brought back corn, Egypt being, even at that remote period, an occasional granary for Syria and other adjacent countries. The conveying of goods on the backs of animals ought to be remarked as indicative of a primitive state of commercial intercourse—of that which is carried on before the forming of roads or the use of wheel-carriages. Such was the case in England two centuries ago; such at present is the case in Spanish America, and, in some degree, in Old Spain, the mountainous nature of that country making it a matter of great difficulty to form roads.

But whatever might be the inland traffic of the Arabians, Chaldeans, or Egyptians, they made very little progress in navigation; that was the province of the Phoenicians, who acted as naval carriers to the neighbouring nations, in the same way as the Dutch did during the sixteenth and seventeenth centuries to the rest of Europe. This almost exclusive possession of navigation may seem strange in the present age, but the cause was the same in both cases, namely, the difficulty in a rude age of finding men capable of conducting vessels in the open sea. Seamanship, now so familiar to the inhabitants of almost every port in Europe, was in those days understood by only a limited number, and was carried on with a degree of caution and slowness hardly credible to a modern reader. Thus the seamen of ancient times made it a rule to keep within sight of land, as if trusting for protection to a situation which the mariners of our days look on as attended with considerable risk. This arose from the great difference in the mode of propelling vessels, for which the moderns trust entirely to the wind, and navigate with comparatively few hands. The small barks of the ancients were fitted out with oars; a method which required a great sacrifice of manual labour, but was attended with Commerce, the advantage of finding a ready shelter in a bay or creek whenever the sky portended tempestuous weather.

What, it may be asked, was the chief cause of the extension of the navigation of Phoenicia? The vicinity of Egypt, and the quantity of provisions and merchandise exported from that fertile country. The navigation of the Red Sea also was conducted chiefly by Phoenicians. History is not sufficiently explicit in regard to the commodities forming the object of traffic along the Red Sea, nor have we any certain knowledge of the era at which the trade with India by that channel commenced. Bonaparte, when meditating his expedition to Egypt, was led, in his sanguine estimate of its advantages, to consider the Red Sea as the fittest line of communication with India, and to ascribe the wealth of Thebes in Egypt, one of the earliest of commercial cities, to intercourse with the coast of Malabar. But whether the navigators of the Red Sea proceeded at that early date as far as the shores of India, it is evident that an extensive traffic was carried on with Cosseir, or a sea-port on the Red Sea which communicated with Thebes. The epoch at which Homer celebrated the wealth of that city, is nearly the same as that at which Phoenician mariners navigated the Red Sea on account of the Jewish government in the reign of Solomon; but no historical investigator has been able to fix with certainty the situation of Ophir and Tarshish, the ports with which these vessels traded. Some confident calculators have considered them to have been in India; but, judging from the limited skill of navigators in that early age, it seems more likely that these harbours were near the eastern or more remote parts of the Red Sea, a part from which there probably was a direct communication with India.

Such was the traffic of the Phoenicians with the south and east; it extended also to countries less peopled and in a still more primitive state in the west. The island of Crete seems to have owed to them its early civilization; and after Crete came Attica, Boeotia, the Peloponnesus, in all of which tradition recorded the early introduction of the arts by settlers arriving from Phoenicia or Egypt. These arrivals seem to have taken place about a thousand years before the Christian era, and half of that time elapsed in the gradual attainment of that state of civilization to which Greece had arrived at the period of her political celebrity—the invasion of her territory by the Persians under Darius and Xerxes.

Greece is in several respects well fitted for foreign commerce. Her coast is greatly indented by the sea, and presents a number of inlets hardly inferior to the well-known gulfs of Argos and Corinth. Hence an early familiarity with the use of shipping, and the practice of sending forth colonies at so early a date as a century after the Trojan war. These colonies proceeded in various directions, to Asia Minor in the east, to Thrace and the Euxine in the north, to Sicily and Italy in the west. The progress made by the inhabitants of these colonial settlements was rapid, particularly at Syracuse, whose capacious harbour soon acquired it extensive commerce and a numerous population. Agrigentum, Messina, Tarentum, were likewise places of considerable importance. It was the custom of these and other colonies to maintain an alliance and mercantile connection with the parent states, such as Athens, Corinth, Argos; and a number of characters eminent in literature and the arts appeared in the colonies, at a time when their establishment might have been considered as too recent to afford more than the necessaries of life. But in a newly-settled country, such as the United States of America, various circumstances concur to increase the number and improve the condition of the inhabitants; provisions are abundant, in consequence of the extent of unoccupied land; the connection with the mother country insures a certain extent of trade; while the monopolies and other abuses natural to a long-settled community are in a manner unknown.

On the other hand, the inland territory of Greece was not well fitted for commercial intercourse. It is traversed by no navigable river; and being mountainous and rugged, it could not, even in the days of its prosperity, boast of roads, merchandise being in those days, as at present, conveyed, not in carriages, but on the backs of horses and oxen. This deficiency of communication by land was one cause of the different states of Greece so long maintaining their independence, and of the limited ascendency attained by Lacedaemon, which, in extent of military means, was so superior to the other states of the Peloponnesus. Sparta and Thebes being inland towns, and Corinth comparatively a small state, Athens was the chief commercial city of ancient Greece. Her distance from the sea, five miles, was such as to afford her security against a sudden descent from an invading armament, while it was sufficiently near to her harbour, the Peireus, for the easy transmission of merchandise. The trade and shipping of Athens, however small it might appear to a modern reader, was such as to give it an ascendency over the different islands to the eastward of Greece, and to enable it to maintain, in the Peloponnesian war, a long struggle against a strong confederacy. When overcome at last, in consequence of what may be termed an accidental cause, the capture of its fleet by Lysander, its political depression was of short duration; the activity and industry of its inhabitants revived its trade, so that Athens continued for ages the most populous and commercial place in Greece.

Tyre, though at no time a town of great extent, remained long in the enjoyment of considerable trade. From the reign of Solomon, when its commercial activity is described in Scripture, to its capture and destruction by Alexander the Great, there elapsed a period of seven centuries. The formidable resistance it made to the Macedonian arms impressed Alexander with a strong sense of the value of commerce, and of its effect in increasing the sources of national power. Though known to the world chiefly as a warrior, Alexander had considerable claims to the character of a politician. He adopted, and caused his followers adopt, to a certain extent, the manners of the nations they conquered; and by the expedition of Nearchus from the mouth of the Indus to the Persian Gulf, he discovered a commendable zeal for maritime discovery. Equal judgement was convinced by him in founding his new city of Alexandria in a position such as to command an extensive range of intercourse. The Nile brought to it on one hand the valuable products of Egypt, and afforded on the other a ready inlet to the merchandise imported from Europe. To India also the route by Alexandria and the Red Sea was preferable to that of the Persian Gulf, which involved the necessity of a considerable journey by land.

Contemporary with the decline of Athens and the rise of Alexandria, but superior to either in commercial activity, was Carthage, the destruction of which forms one of the foulest blots in the history of the Romans. The situation of Carthage was well adapted for trade; its harbour was good, its range of navigation extensive, both to east and west. Founded by a colony from Tyre, it maintained a friendly intercourse with Phoenicia; while in the west of the Mediterranean, in Sicily, Spain, and the south of France, it met with no commercial rival. These countries, at that time uncivilized, and almost uncultivated, were greatly indebted to Carthage for the introduction of intelligent settlers, and derived from her the same advantages which Greece, several centuries before, had received from Phoenicia and Egypt. In Spain the fine harbours of Cartagena and Cadiz were rendered the resort of shipping. by the Carthaginians; and without calling on our readers to believe the traditional assertions of the extent of their navigation, either to the north of Europe or the south of Africa, we may with confidence affirm, that had not this state unhappily fallen, from the jealousy of the Romans, it would have been the means of diffusing industrious habits over a great part of the west of Europe, and of advancing by several centuries the progress of the useful arts.

The policy of Carthage, though not uniformly pacific, was far less pernicious than the perpetual tendency to aggression of a military state like Rome. In navigation the Romans were at no time remarkable. During their conflicts with the Carthaginians they sustained repeated losses, chiefly from the unskillfulness of their seamen, and their inability to cope with the fury of the elements. After they had triumphed over the Carthaginians, and extended their conquests to Macedon and Greece, the Romans were no longer under the necessity of equipping fleets, because no maritime state dared to dispute their supremacy. But the extension of the Roman power was favourable, in several respects, to commerce; piracy was suppressed, and merchant vessels had free access to almost every part of the Mediterranean. Hence a gradual increase in the length of mercantile voyages, which now extended on one hand to the north of France and Germany, on the other to the Indian Ocean, to which it became easy, from the progressive improvement of navigation, to proceed either by the Red Sea or the Persian Gulf. The mariners' compass was still unknown, but the uniform direction of the wind in certain seasons enabled the navigators to and from India to complete their voyages with little difficulty.

It was towards the middle of the fifth century, about a hundred years after the removal of the seat of empire to Constantinople, that the Romans became unable to defend their frontier against the uncivilized tribes who pressed on them from the north and east. The consequence was, that the country along the Rhine, the inland provinces of Gaul, and, some time afterwards, Spain and the north of Italy, were overrun by these rude assailants. The increase in the population of towns was checked, many places being plundered, others subjected to heavy contributions, and property in general rendered unsafe. There was no longer a central or general government; the territory of the empire was divided into a number of separate states, the rulers of which had no just idea of the importance of commerce. These uneducated governors, accustomed to appeal on almost all occasions to the sword, were not sufficiently enlightened to forego the temptation of a present seizure, for the sake of the lasting advantage of mercantile intercourse.

The apprehension engendered by the approach of barbarians from the north and east, led a number of traders and manufacturers settled in the north of Italy to fix their families in the small islands near the mouths of the Po. There the surrounding waters afforded them a degree of protection against invaders, who, however formidable by land, had no means of carrying on hostilities by sea. Such was the origin of Venice, a city situated in the midst of the waters, and destined to acquire extensive trade from the security attendant on her position, and to take a lead amidst the mercantile states of the middle ages.

Next to Venice in the history of modern commerce came Pisa, a town built on the banks of the Arno, at a distance of nearly three leagues from the sea. Its trade was chiefly with the western coast of Italy, with Sardinia, Corsica, and Sicily. Its commercial importance was prior by two centuries to that of Genoa, although it never equalled the latter in extent of navigation, nor in the number of distant settlements. Pisa declined from its commercial rank, in consequence of Leghorn, which was situated immediately on the coast, being better adapted to foreign intercourse.

Genoa continued flourishing from the year 1000, until Genoa's ill-judged hostilities with Venice in the latter half of the fourteenth century. These were injurious to both, yet both recovered from the effects, so as to hold, during several centuries, a distinguished rank in trade. They were remarkable also, particularly Venice, for a variety of the finer manufactures. Neither could boast of a supply of the raw materials of almost any manufacture in their respective territories; but their numerous merchant vessels brought a variety of products from a distance, and the amount of the population of either city was such as to render practicable that division of employment which is the soul of manufacture, and which was at that time almost unknown in other parts of Europe.

Constantinople had the good fortune to remain untouched by the enemies of the empire until the middle of the fifteenth century, a time when civilization had made progress in the west of Europe, and literature was on the eve of receiving a great extension by the discovery of the art of printing. To this fortunate coincidence of the revival of the arts in the west, at the time when the east of Europe was sinking under the pressure of barbarism, we owe the preservation of much that was valuable in the ancient world; and, among other things, that of certain manufactures and branches of commerce. Constantinople had all along maintained a commercial intercourse with Venice and other ports in Italy, and, in general, with Alexandria. The same had been the case in regard to Trade with India; for when the occupancy of Egypt by the Saracens prevented the trade to India by the Red Sea, it was kept up by the Caspian and Euxine. But by far the shortest course from the east of Europe to India is by the Euphrates and the Persian Gulf. It was to the extent of intercourse carried on by this channel, some time after the Christian era, that we are to ascribe the wealth and grandeur of Palmyra, a city erected in the midst of deserts. This would have continued one of the chief routes of communication between Europe and India during the middle ages, had not the caravans been in perpetual danger from the Arabs, after the decline of the civilized governments in this part of Asia.

The trade between Europe and India, though of considerable value, was not extensive enough to be productive of the wealth ascribed to it by Dr Robertson and other historians, who, unacquainted practically with commerce and its limited gains, are ready to lend an ear to the sanguine statements of early writers. Thus the wealth of Venice, commonly ascribed to its trade with Alexandria and India, was the consequence of a variety of causes, no one being of particular importance, because several centuries were passed in the gradual increase of its population and capital. Venice afforded a secure resort in ages when other countries were in danger of invasion and plunder. It had also a prudent government, in times when, in most parts of Europe, there was little idea of a free constitution, or of a regular administration of justice. Venice was in this state when, in the twelfth and thirteenth centuries, the increase of traffic, arising from conveying the crusaders, with their military stores, and the readiness of those zealous combatants to extend the sway of a Christian state, enabled that commercial republic to increase her foreign territories. In general, the foreign policy of Venice was pacific, but she found it difficult to avoid hostilities with the Turks, or to escape from taking a part in the repeated contests which took place between France and Austria for the territory of the Milanese. Those who take an interest in tracing the gradual extension of industry, will find in Venice the origin of several important commercial institutions. In that city was established the first public bank, and there also was first introduced a funded debt transferable from hand to hand. The same thing held in regard to lesser matters connected with the details of mercantile business. Bills of exchange, if not invented by Venetian merchants, were first carried by them to a great extent; and the principles of bookkeeping by double entry were there first understood and applied in practice. However familiar those principles may be to merchants of the present day, they were too refined for the rude and primitive state of most parts of Europe in the middle ages.

And here it may be well to point out the fallacy of a notion general in Spain, and not uncommon in other parts of Europe, namely, that in the middle ages Spain was a flourishing country, and possessed, in Tarragona, Tortosa, and Zaragoza, great population and wealth, each of these towns being said to have contained several hundred thousand inhabitants. This singular opinion was widely spread, in consequence of the prominent figure made by Spain in the politics of Europe, in the reigns of Charles V. and Philip II. The public did not take into account the great addition of power conferred on Spain by her possessions in Italy and the Low Countries; nor were there in these days statisticians capable of explaining the very slow manner in which either cultivation or commerce can acquire extension in a country so mountainous, and with so few means of transport, as Spain. Of roads she can boast only the few that are required for the purposes of government, the cross roads being little more than bridle paths, and the traffic of the country being in general carried on by mules. All this indicates a scanty population and a backward state of society, as has been the case in Spain in every age; for there is no truth in the traditionary opinion that her population was greatly thinned by emigration to America. The number of persons who proceeded annually from Spain to America never exceeded the tenth part of those who at present go annually from Ireland to Canada. The truth is, that the power of Charles V. and Philip II. was great only because the power of the other princes of Europe was very limited. The military establishments of that age were quite insignificant compared to those of the present times.

One of the chief features in mercantile history during the middle ages was the association of towns in the north of Europe for the purpose of giving security to mercantile property. At that time the different countries of Europe were very imperfectly governed; there were then no regular posts and very few roads, so that the means of redressing grievances, or of making communications from one part to another, were very imperfect. Too much has been said of the political power exercised by the Hanse Towns, but the association was of great use in protecting individual property. It dated from the middle of the thirteenth century, and originated at Lubeck, a sea-port, which had not in those days more population or wealth than at present, but possessed much more comparative importance, because very few places in Europe could at that time boast of 30,000 or 40,000 inhabitants. The trade between the Baltic and the west of Germany centred in the harbour of Lubeck, in ages when navigators were not sufficiently skilled to proceed to or come from the Baltic by the circuitous route of the Sound. The association of the Hanse Towns consisted first of Lubeck, Hamburg, and Brunswick, but soon extended to other places—to Amsterdam, Dordt, Cologne, on the one side, to Dantzig, Königsberg, Biga, on the other. These and many smaller towns, to the number of sixty and upwards, became members of this protecting body, which continued in a state of union during three centuries. At the end of that time it was gradually dissolved, not by any violence or exercise of authority, but by the continued progress of civilization; the different governments in the north of Europe having by that time acquired the power of protecting their mercantile subjects. It is now about two centuries since the association of the Hanse Towns ceased to exist in a comprehensive sense; and for a considerable time the name has been confined to Hamburg, Lubeck, and Bremen.

Hamburg took the lead of other trading towns of the north of Germany, by means chiefly of the extent of its river, and the consequent easy communication with the sea on the one hand, and the interior of Germany on the other. It gained also by the improvement of navigation in the fifteenth and sixteenth centuries, when vessels from the south of Europe found it no longer necessary to suspend their voyage at Bruges, but found it practicable, and even easy, to proceed at once as far as the Elbe.

The wealth and possession of the Netherlands belong, like the early opulence of Tyre, and the magnitude of the trade of Carthage, to the remarkable phenomena of mercantile history. To judge from the physical aspect of Holland, the general marshiness of the soil, the indifferent climate, and the total absence of mineral products, we should be inclined to consider it among the least favoured countries of Europe; but all these disadvantages were balanced, and more than balanced, by the possession of extensive water communication. No part of Europe equals Flanders and Holland in extent of inlets from the sea, in the breadth of navigable rivers, or in the ease with which canals may be excavated. To these advantages, much more than to civil institutions, we are to ascribe the early prosperity of the Netherlands; for these apparently unpromising countries took a lead in civilization, almost as remarkable as the more favoured regions of the north of Italy. That they were not so early in the career of improvement, was owing to the comparative barbarism of the countries in the north of Europe with which they held intercourse; while Italy had communication on one hand with Constantinople and the eastern empire, on the other hand with the south of France, the west of Italy, and various sea-ports which still preserved a portion of ancient civilization.

The soil of Flanders, without being naturally fertile, was more easily cultivated than the comparatively marshy districts of Holland. Hence the early superiority of the Flemings in agriculture and manufactures. It was in the fourteenth century that the art of weaving the finer woolens was introduced from Flanders into England, and in the sixteenth that we derived from the same quarter many useful imports in agriculture and gardening. The progress of the Dutch in navigation was equally remarkable. The Maese and Rhine enabled them to bring down the bulky produce of the interior, such as timber, corn, or cattle, to their own coast, as well as to carry up these rivers to the inland provinces, the various articles of merchandise imported from the south of Europe. Hence the increase of Dortz and Rotterdam. The rise of Amsterdam was owing to a different cause; to the extent of the Zuider Zee; to the easy access which that expanse of water afforded to vessels from the Elbe, the Weser, and the Baltic.

Bruges owed its increase to its adoption as an intermediate port for vessels from the north and south of Europe. A voyage from the Mediterranean to the Baltic was in those days a formidable undertaking; seafaring men accounted it too long to be performed out and home in one We now come to the sixteenth century, the time when commerce, the productive industry of Europe received a considerable impulse from the influx of the precious metals from America. At that time the chief trading towns of Europe were in Italy, the Netherlands, and, in a much less degree, in France, England, and Germany. In the latter countries the towns were very small, not being peopled to the extent of one third of their present numbers. Nothing shows more clearly the backwardness of manufactures in that age, the imperfect division of employment, or the limited communication between one province and another. There were in those days few lines of intercourse entitled to the name of roads, or fit for conveying corn or merchandise by wheel carriages. Even in countries comparatively level, such as the south of England, the north of France, the north of Germany, there were no carriage roads, and goods were conveyed on the backs of mules and horses, in the same manner as over the mountainous regions of the Alps. Nor were there in that time post-office establishments for the service of either governments or merchants.

An increase in town population is the best evidence of improvement in agriculture, as in commerce. In a rude state of cultivation, the labour of seventy or eighty persons is required to raise provisions for a hundred; so that three fourths of the inhabitants are obliged to live in country districts, for the mere purpose of raising subsistence. But as machinery and implements become improved, and the art of husbandry is better understood, the farmer can render more effectual the labour of himself and his assistants; there remains a greater surplus of provisions for the support of the inhabitants of towns; and somewhat more of the population are enabled to attach themselves to employments distinct from agriculture, namely, those of mechanics and manufactures. To this improved condition Europe was slowly advancing, when the discovery of the silver mines of America had the effect of materially quickening its progress. This renders it proper to make a few remarks on the supply of gold and silver in early ages.

It is somewhat singular that Egypt, a country never remarkable for mines in its own territory, should have been chosen among the first to give an example of mining on a large scale; effect. But the Egyptians had extended their conquests of their influence to the southward, where, in the mountains of Nubia, there were extensive mining districts. In these, as in the mines industry of other parts of the world, masses of ore contained only particles of silver, and the task of raising the ore to the surface was very laborious. This was performed in the Nubian mines with little aid from machinery, and chiefly by manual labour, as is still the case in many parts of Spanish and Portuguese America.

The next accounts of mining in ancient history relate to Greece, where, from the mountainous nature of the country, the mines were numerous, though not particularly productive. They were wrought in Attica, Thrace, and several of the islands. The labourers were paid partly in money, partly in provisions; and the accounts handed down to us by Greek writers show that mining, like agriculture, afforded a fair return for the capital and labour employed, but no remarkable profit. Spain in those times, as at present, was remarkable for extensive mining; as were in a less degree Sardinia, Corsica, and the small island of Elba.

Such undertakings were long carried on for the public account; but towards the fifth century of the Christian era, the Roman government withdrew from most of its mining establishments, allowing individuals to carry them on for their own account. The quantity of gold and silver in circulation appears to have subsequently decreased; but we are greatly at a loss for correct information in re- Commerce—gad either to the state of mines or the prices of commodities, as represented in money, during the middle ages.

Influx of silver from America, in particular from Mexico and Peru, amounted at first to half a million annually, and increased to one, and afterwards to two millions. This sum was such as to affect the prices of corn, labour, and merchandise generally. It caused a gradual rise of prices, carried to the greatest length in maritime districts, in parts connected with each other by navigation. The published works of the sixteenth century contain many notices of the rise in the price of commodities, and of the inconvenience resulting to the consumers from such rise; the advantages to agriculturists and producers generally were not so clearly perceived, or the humble classes enjoying them had not equal means of stating them to the public.

The supplies of gold and silver from America continued during the seventeenth and eighteenth centuries, and on a much larger scale than during the sixteenth; yet their effect was not so great for several reasons. First, the number of persons among whom silver now circulated was far greater than formerly. Gold also had become more common, and began to form the chief, or almost the sole medium for large payments; and, lastly, the use of silver for plate, jewellery, watches, and other ornamental purposes, increased greatly in consequence of the improved circumstances of the middle and upper classes. There remained thus less silver to add to the coin in circulation.

It was in the eighteenth century, particularly after 1750, that the use of bank notes became general in England, and subsequently in the United States of America. This may be compared in its effect on prices to an additional supply of gold from the mine, because its tendency to raise prices is considerable, though not so great as is vulgarly supposed; because bank paper payable in cash on demand, of which alone we speak, can never be unduly extended.

Bank notes have as yet obtained little currency on the Continent of Europe; but in Great Britain, Ireland, and North America, their effect on prices may be said to have been similar to that of the importation of the precious metals from America. In either case, the consequence was a rise in the money price of corn, and commodities generally. To comprehend the benefit of such rise, we should consider society as divided into two great parts; the producing and the non-producing classes. The latter consist of capitalists, landholders, or fixed annuitants; the former of farmers, especially tenants on lease, manufacturers, merchants, and, in general, all persons who carry on business with borrowed capital. If a tenant on lease continue to pay during twenty-one years the same rent, while the market price of his crops experiences a progressive rise, it follows that his circumstances will improve. Thus, on the augmented importation of silver from America, which began three centuries ago, there took place a slow but steady rise in prices, the effect of which was of great advantage to agriculturists, in particular to those who held land on lease. The yeoman who was cautious and persevering thus laid the foundation of a little property, the next generation added to it, and the third rose from the condition of cottagers to that of farmers. This, or something like this, was the course of circumstances in England, during the chief part of the sixteenth, seventeenth, and eighteenth centuries. If the effect was at no time very great, it was continued and progressive; for we can trace no great or general decline in the price of agricultural produce until the general peace of 1814.

The trade and navigation of England, unexampled as it now is in extent, did not by any means make an early figure in the commercial history of Europe. Of this the principal cause was the thinness of our population compared to that of the north of Italy or the Netherlands, and the consequent insignificance of our towns. Our slow progress in trade is also to be ascribed to political causes, to the civil troubles originating with the great barons, the frequent wars with France, and still more to the long and sanguinary contests in the fifteenth century, respecting the rival claims of the houses of York and Lancaster. It was not till the reign of Henry VII., little more than three centuries ago, that the advantages arising from our extent of coast and abundance of fuel began to be brought into active operation. During the reign of his successor, the progress of improvement received little patronage from the court, but a most efficient indirect aid from the introduction of Protestantism. The advantages resulting from that happy change, and the development of national industry, were strongly displayed during the long reign of Elizabeth, under the wise administration of Cecil. At that time, also, was felt the benefit arising to the productive classes, from the augmented import of gold and silver from America.

We pass over the very questionable, though popular opinion, that the adoption of our navigation laws had a beneficial effect on our shipping. They accelerated its increase; but that increase would probably have taken place to an equal extent, and on a surer foundation, had foreigners been allowed to frequent our harbours, until the course of circumstances gradually led to a preference of British vessels. In all the departments of productive industry which have as yet had a fair trial, interferences and exclusive privileges have been found detrimental to national prosperity; nor does there seem any reason for making an exception in the case of mercantile shipping. Thus, in no department have more efforts been made to cause increase by artificial encouragements, than in our fisheries. Government, desirous of extending these great nurseries of seamen, have granted large bounties, particularly on the vessels employed in the herring fishery; still the result has never been satisfactory, and bounties are now withdrawn from fishing vessels, in the same manner as from exported linens, and other articles of merchandise.

Our navigation laws date from the middle of the seventeenth century; and in the course of fifty years our mercantile shipping was increased to somewhat more than double its amount. But the great period of increase was during the eighteenth century, at the beginning of which the mercantile navy of England amounted to 270,000 tons; while in the middle (about 1750) it exceeded 600,000, and in the end of the century approached to 1,600,000. At present it may be computed at 2,500,000 tons; and the number of seamen belonging to our mercantile shipping at 150,000, being double those of the United States.

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1 The effect of a progressive rise of prices in stimulating the productive industry of a people was first started by Mr Hume, about seventy years ago, in his Essay on Money. He had seen the effect of this rise in the war of 1740, as well as in that of 1756; and a war carried on by annual loans has the effect of raising prices nearly in the same manner as an increased supply of the precious metals. Mr Hume had also the means of observing, in some degree, the effect on prices of an augmented issue of bank paper. His remarks on these subjects, though not expressed in the language of a man of business, do credit to his reasoning powers, considering his limited means of information on a subject so foreign to his pursuits. How little were such conclusions attended to by parliament in the discussions of 1819 on the resumption of cash payments, or of 1826 on the recall of small notes! Of our national manufactures, woollen was long the most considerable; but it is now surpassed by cotton, the extension of which since the year 1770 has, like the increase of our population, been one of the wonders of the age. Another manufacture surprisingly extended during the last half century is that of iron and hardware. Our superiority in the latter, both as to quality and cheapness, is such as to give to our exporters a decided preference in foreign markets.

It is now nearly a century and a half since there has been kept at the custom-house in London a yearly register of our exports and imports. But such returns exhibit a very imperfect statement of the aggregate of our foreign trade; because remittances take place in bills of exchange, and in various other ways, which escape the notice of the official registrar. It has long been the practice of merchants to consider our exports as exceeding our imports; but this has arisen chiefly from the different mode of valuing the two. The truth is, that the sum of our imports is nearly as great as that of our exports; but this approach to equality is by no means a preventive of profit. Articles are worth more in one country than in another; and a gain is made by the mere exchange, in the same way that a nation augments its wealth by the interchange of commodities between its different provinces.

The commercial treaty with France, concluded in 1786, was entitled to particular notice, as well for the fairness of its conditions, as for being the first commercial compact, on a comprehensive scale, between two nations so long divided by political causes. The freedom of competition opened by this treaty put to the test the ability of either country to supply the great articles of manufacture. While in silk, jewellery, and ornamental work generally, the French continued to be superior, England had the advantage in such substantial articles as hardware and pottery, as well as in the rapidly increasing manufacture of cottons. This principally arose, not from the conditions of the treaty being unfair towards France, but from our advantages on the grand points of fuel, canal communication, and amount of capital. Unfortunately the operation of this judicious compact was cut short by the war of 1793. Had the peace continued longer, there is little doubt that whatever was obnoxious in the conditions of the treaty would have been gradually removed, by the mutual accommodations which insensibly take place between nations in a state of amity and free intercourse.

A striking feature in the trade of England, compared to that of France, Germany, and other continental countries, is the magnitude of its exports to distant parts, such as India, North America, and the West Indies. These different branches of trade employ a number of seamen, and make a conspicuous figure in the list of our yearly exports. They are considered by foreigners, as well as by the majority of our countrymen, as the pillars of our commercial prosperity; but those who estimate them so highly have no idea of the large sums of capital that have been withdrawn by each of these countries from England. The United States of America consumed our manufactures largely for nearly a century, but in no one year did they remit to this country the full value of the articles which we exported to them. The amount due from them to England has long exceeded the general estimate, and is known only to the merchants, who feel the deduction thus made from their pecuniary means. A similar drain has long been made by our West India colonies, but in a less degree, until within these thirty years, since which the capital drawn from England has amounted to many millions. With India our commercial intercourse was more limited; and the exports, confined to the East India Company and Commerce, to a few mercantile houses in London, were on a comparatively small scale until the present age, during which the extension of the private trade from Liverpool, and the advance of capital on indigo plantations, made our India business assume a considerable resemblance to that with North America and the West Indies.

The real and substantial benefit arising from commerce takes place at home, and shows itself in the extension of manufactures, the increase of towns, the improvement of roads, canals, and harbours. In all these England has in the last century taken a decided lead of France, the Netherlands, and every continental state. Happily the grounds of our superiority appear likely to continue, resting as they do on our abundant capital, our formed habits of business, the general subdivision of employment, and the extent of national improvements conducive to useful purposes. These substantial advantages are, it may be hoped, so great as to enable us to overcome the burdens arising from financial mismanagement, and our too ardent interference in foreign politics.

Of the course of trade in this country during the last half century, the following is a brief summary. After the peace with the United States of America in 1783, our trade suffered for some time by the transition from war to peace, but gradually improved; and in the years 1789, 1790, 1791, 1792, was decidedly prosperous. After this came the war with France, which was at first injurious to trade, but after the abundance of money consequent on the extended circulation of bank paper in 1797, assumed a very different appearance, and seemed to bring a yearly addition to the national wealth. This ostensible increase of profits was kept up during the chief part of the war, but at the peace the state of circumstances underwent a complete change; the transition was great beyond example; prices fell in every department of business, and the year 1816 was among the most gloomy in our commercial history. A revival of trade took place in 1817 and 1818, but it was succeeded by a long depression. In 1823 trade revived once more; in 1824 it became prosperous, and 1825 afforded a striking example of the abuse of mercantile prosperity. But at the end of that year a general fall of prices took place, and since then our trade has been almost uniformly in a depressed state; the profits of capital have been small, and the wages of the manufacturers much lower than before.

From the ease with which money was borrowed by the effect of government of this country during the eighteenth century, war expenses the wars we carried on were both of frequent occurrence and on a scale of great expense. The result was a continued increase of debt and taxation; but the burden did not appear beyond our means, until the unprecedented income length to which it was carried by the wars of 1793 and of individual 1803. Both took place under the ministry of Mr Pitt, and the extreme to which he allowed expenditure to be carried was the more remarkable when we consider his long experience in finance, and that from the time of his coming into office his attention was given to the state of our trade and revenue. Several of his early measures, such as the commutation of the duty on tea, and the commercial treaty with France in 1786, were entitled to great commendation. A similar opinion is not now entertained of his revival of the sinking fund; and it was in an evil hour that he allowed himself to be diverted from his pacific course by the urgency of the aristocracy and his sovereign, to take up arms against the French revolutionists. Unfortunately the atrocities of these men, the endless usurpations of Bonaparte, and, above all, the facilities afforded by the unchecked issue of bank paper, carried our expenditure to an unprecedented height. In the midst of this hazardous career, the death of Mr Pitt, and the removal from office of his immediate successors, transferred the management of our finances to the hands of men wholly unequal to the task; of men unconscious of the precarious nature of our paper currency, and of the danger of such measures as a stoppage of neutral navigation, or a war with the United States of America. The consequence was a depreciation of our bank paper during five years, an enormous waste of the public money, and a burden on the country of unparalleled amount.

A state of war is attended by a great demand for the service of individuals, as well in the army and navy as in the public offices. A great number of persons are thus withdrawn from productive employment, and the consequence is an increase of the wages and incomes of those who remain so employed, as well as bringing into activity a number of persons who in a season of peace would hardly have been accounted worthy of employment.

A rise in the price of corn and other produce is another consequence of a state of war; this leads to a rise of rent; a rise of rent to increased expenditure on the part of the landlord; and that to a general activity and continued employment of working classes. Such was the condition of this country during the twenty years from 1794 to 1814, while in the nearly equal period that has followed the peace there has unfortunately been a corresponding decline. The fall in the price of produce has lowered rents, and greatly lessened the income of the upper classes; hence a contracted expenditure, and a want of employment for the lower orders. All this exemplifies the precarious nature of such a rise of prices as took place in the late wars, and will, more than any other argument, confirm the public in an adherence to peace.

The supply of gold and silver from America continued regularly to increase until the year 1810, since which the disorders in Spanish America, particularly in Mexico, have shortened the supply by at least one half. A decrease in the supply of the precious metals is peculiar to the present age; nothing of the kind has occurred for three centuries; and it has doubtless contributed materially to the pressure on the productive classes since the general peace in 1814. Of the extent of its effect in lowering the prices of commodities, it is not possible, with imperfect data, to form an opinion. According to Mr Jacobs' lately published work on the "precious metals," the reduction of the quantity of circulating coin in the last twenty years has been very considerable, not less than twenty per cent., which, added to the suspension of government expenditure, and the reduction of bank paper, has produced all the various disadvantages which form a contrast to the cheering circumstances attendant on a rise of prices.

The present is consequently a time of distress from various causes; from contraction of the circulating medium, from the magnitude of the transition from general war to general peace, and of the continued decline of prices attendant on such transition. At what time, it may be asked, is the decline likely to come to a close? When the prices of our corn and other country produce shall have fallen nearly to a level with those of our neighbours, and shall exceed them only by a natural difference, namely, the freight and other charges attendant on importation. In manufactures the decline in our prices is already such as to enable us fully to compete with foreigners; and the eventual prospect of trade seems decidedly favourable to this country, provided we are with canals, roads, and machinery, as well as with abundant capital, intelligent merchants, and expert workmen. What a length of time will France, Germany, and the United States of America require to arrive at that point in manufactures, and productive industry generally, which we have already attained?

It may not be possible to estimate the time when a favourable re-action in our mercantile condition will take place, or the extent to which our prosperity may eventually be carried; but the statistical inquirer is perfectly justified in assuming, that when we shall have corrected certain errors, such as the restriction on the interest of money, and have removed certain inequalities in our public burdens, we may look forward to relief from our present distress, and eventually to a most gratifying increase in our population and wealth.

The prospect in this country, as on the Continent of Europe, is now altogether in favour of peace. There is no longer a preponderant power, like that of France under Bonaparte, to endanger the independence of neighbouring states, or to cherish the illusion of universal sovereignty. Besides, the extent of national loss arising from a state of war has become much more generally felt since 1814. France feels it in her population; Austria, in the slow improvement of her half cultivated territory; and if in Russia the government, like the public, is too ignorant to appreciate the evils of war or the blessings of peace, there is happily no great reason to dread a power which is so unwieldy in offensive operations. The more we study the resources of England, and become sensible of their increase, the more reason we shall find to be indifferent to those coalitions with foreign states which were formerly accounted necessary to maintain our national independence. It follows, that in forming an estimate of the future, we may safely reckon on a longer enjoyment of peace than has been the lot of this country for the last century and a half. Now, what is implied by long-continued peace in regard to the state of trade? Small profits on the capital employed, and low wages to the workmen, but steady prices in produce as in manufactures, and an exemption from the incessant fluctuations of a state of war. In France the blessings of peace, above all of peace with England, have long been duly appreciated; and it is due to the public in that country to state that, whether under the Bourbons or Bonaparte, nine tenths of their number never took part in the aggrandizing views of their government.

We shall conclude our historical sketch of commerce by a brief notice of its prominent characteristics at different periods.

The chief features of the commerce of antiquity were the early opulence of Tyre, and the great extent of the trade of Carthage, and Alexandria in Egypt. In modern times the earliest points of commercial history entitled to notice were the prosperity of Venice, Genoa, and other towns in Italy, the era of whose splendour was the fifteenth century. In the sixteenth and seventeenth the lead in commerce was taken in a remarkable degree by Holland; in the eighteenth by England. But as to the effect on commerce of an increase of circulating medium, it was felt in the sixteenth century by the influx of the precious metals from America, which caused, it is said, a great rise in prices. This rise continued during the seventeenth and eighteenth centuries with a steady but not a remarkable progress. After this came the addition to the circulating medium, arising from the use of bank paper; it became considerable only in the eighteenth century, particularly in the latter half of that period. From 1797 to 1814 the issue of bank or government paper was carried to an unexampled length in England and other countries; the sufferings of the last eighteen years have been mainly owing to the re-action proceeding from its recital. That period is the only one in the history of modern Europe in which the circulating medium has been much contracted, or the prices of commodities and the income of individuals have experienced a long-continued declin- II. PRINCIPLES OF COMMERCE.

Having treated the historical part of our subject at considerable length, it is now fit to bestow some attention on its principles or general rules. By "principles of commerce," we understand conclusions of two kinds; those deduced from the practice of merchants, and applicable to the management of trade by individuals; and those of a more comprehensive character, which, resulting from the course of productive industry generally, are entitled to the attention of a minister, a member of Parliament, or whoever is engaged in the task of devising regulations for trade. Most of those conclusions seem so plain as to admit of little question; but it is a fact that several of them have been the result of long, and, in some cases, of dearly bought experience. As a specimen we give the following:

1. Short credits and quick returns, however small the commission or profit, are eventually better than long credits and a large commission or charge.

2. The greatest mercantile profit arises from intercourse with populous and long-settled countries, such as Holland, because the inhabitants are in general possessed of capital, and punctual in their payments.

3. Recently-settled countries, like the United States of America, the West Indies, Spanish and Portuguese America, are always bare of capital. There is a perpetual tendency in them to draw it from Europe; and mercantile transactions with these countries, profitable in the outset, often become otherwise, from delays of payment, and ultimate insolvency.

4. Trade should be left as much as possible to its natural course, interference being almost always hurtful. Governments ought merely to remove obstacles and grant facilities. Privileges and monopolies were formerly very general in England; but these, if necessary in an early age, when individual capital was too scanty for distant undertakings, should be withdrawn as soon as such capital becomes sufficient.

5. Division and subdivision of employment can be carried to only a limited extent in agriculture. In manufactures they may be carried very far, and are productive of the greatest advantage. They afford employment to persons of every age, and they conduce greatly to the finished execution of work. Hence the superiority of towns, in particular of the larger towns. This was the cause of our manufacturers not going abroad after the peace of 1815, when wages fell, although provisions were still high priced.

Rules or observations like these are very seldom met with, either in printed works or in personal intercourse; and the reason is, that while few departments of industry have been followed in practice to so great an extent as commerce, hardly any other has been less an object of study in regard to its principles. While the professions of law, medicine, and the church, possess in abundance printed works for the guidance of those who intend to follow them, the case is quite different in regard to trade. There are hardly any books or written compositions for the purpose of instructing the merchant in the practical management of his business, and not many containing statistical or other information connected with trade. To no profession are written precepts considered to be so little applicable; in none is proficiency thought to depend so exclusively on practice. Hence an unacquaintance with principles or general rules, and the commission of grievous errors, as well by merchants in the pursuit of business, as by members of parliament in the enactment of commercial regulations. Of the former we may take as examples the repeated glutting of foreign markets with our goods, and the injudicious extension of sugar cultivation in the West Indies; of the latter, the oppressive duties on Baltic timber, or the letters so long imposed by act of parliament on our country banks.

The belief that it is for the advantage of a nation to manufacture almost every article it consumes, has been the cause of the most serious inconvenience and loss. It is thus that in France the making of sugar from beet-root, and the more serious error of erecting blast furnaces for making iron in districts unprovided with coal fuel, has placed a large amount of capital in a situation where it is subject to reduction year by year, and whence it cannot be withdrawn without heavy loss. In like manner, the privileges so long conferred by act of parliament on the silk manufacture in England, have all tended to produce embarrassment, because they interfered with the natural course of trade. No branch of industry can be of permanent advantage to a nation, unless it can support itself without indirect or artificial aid. Were merchants and manufacturers left to themselves, the natural course of things would point out the branches of productive industry likely to succeed or not in a particular country; and capital would not then be advanced on an insecure foundation. Plain as this appears, it is quite at variance with the creed of our ancestors; a creed which, under the name of "mercantile system," still retains an influence over our traders, and, in some degree, over members of the legislature.

The basis of that system was, that "wealth consisted in the precious metals; that what is gained in trade must be lost by another; and that our greatest object in receiving returns for our exports should be to get money instead of merchandise." It followed from such notions, that of all possessions, a mining country, such as Mexico and Peru, was the most desirable; and hence in a great measure our rupture with Spain in 1740, which led to our unfortunate expedition to Cartagena, involved us in a contest with France, and caused us in the course of eight years an immense waste of blood and treasure. The return to a state of peace in 1748 obliged us to desist from attempts on Spanish America, but the influence of the mercantile system continued, and was singularly favoured by the annual custom-house returns. These returns exhibit an apparent excess of exports above imports, and give rise to the notion that the balance is sent to this country in the shape of money. Supposing the exports of England to the Continent of Europe to amount for any given year to £20,000,000, and the imports to £14,000,000; the difference, or £6,000,000, is, according to this absurd notion, the amount of profit paid to us in money. It is clear, however, that the custom-house returns take no notice of some very important items, such as the export of public money for our foreign garrisons, the transmission of bills of exchange to foreign merchants, or the import of smuggled goods. Besides, if the quantum of our circulating medium remain, as it probably does, very nearly on a par, what becomes of the supposed importation of money? Were England in possession of all the annual balances which the advocates for this system suppose her to have received in money during the last century, our metallic stock would not be below £400,000,000 sterling; that is, ten times its actual amount!

When a merchant exports goods, the sale, of course, takes place abroad, and a remittance is made, either by bill or by the return of other merchandise. It hardly ever enters into the contemplation of the exporter that he would find an advantage by obtaining a return in coin or bullion. Money owes the reputation it has acquired, as an object of national interchange, to its convenience in supposed other respects; to its being the commodity with which we constantly go to market, and to its fitness for the smallest silver. Commerce purchases, by the minuteness of its subdivisions. But this recommendation, however important in private business, should have no weight in the intercourse of nations; merchants can be at no loss to dispose of a remittance made in the shape of goods, nor is it any object with them to multiply the means of petty purchases.

The interest of a commercial country is not to increase the amount of its currency, but to quicken its circulation; the same sum performing double and triple duty when passed expeditiously from hand to hand. Now nothing promotes circulation so much as exemption from arbitrary interferences, were the effect nothing more than the general preservation of credit. In France, the monstrous abuse made of the paper system in the beginning of the Revolution has long prevented the use of any other circulating medium than coin; the result is an annual loss of three millions sterling to the public, such being the difference between the cost of paper and the precious metals, even after making an allowance for the retention of a portion of the latter sufficient for the purposes of banking. Some people, however, imagine that, to increase the amount of the circulating medium, is to increase the capital of a country. These persons should recollect that capital is by no means limited to money, but embraces all that mass of property which is devoted to reproductive consumption. When we wish to lend capital, or to employ it in business, we begin by selling the various articles at our disposal; the amount is then in our hand in the shape of money; but this is very transient; the money disappears as soon as we make payment for the new purchases. The public not having time to enter into all this reasoning, judge from first impressions, and take for granted that money is capital, because its agency is required to put capital in motion. Governments, however, might have saved themselves much trouble in providing supplies of metallic currency, since the natural course of business will invariably provide them for itself.

The plenty or scarcity of the precious metals depends on considerations altogether different from the imagined balance of trade. Specie was so scarce in England in 1809 that government was not a little embarrassed to find L200,000 for the Walcheren expedition; yet in that year our custom-house returns presented an apparent balance of above L7,000,000 in our favour.

No country has suffered so much from the errors of the mercantile system as England; partly on account of the influence of traders and manufacturers in our legislature; partly from the temporizing policy of our ministers, who have seldom scrupled to buy the consent of any great body of the community to a new tax, by the grant of some injurious preference. Hence a variety of pernicious regulations in favour of the landed, the shipping, and the manufacturing interests; hence, also, a number of unfortunate measures in our foreign policy.

Our ancestors laid it down as a fundamental rule, that there could be no profit on the one hand, without a corresponding loss on the other. They considered trade as a game of mere transfer, and had no idea how a country could derive wealth by an intercourse between its own inhabitants. Charles II. entered on the war of 1672 with high hopes, imagining that, by destroying the commerce of Holland, we should not only increase our own, but in a manner absorb that of the world. Political reasons led us afterwards into close alliance with Holland, and prevented the ebullitions of our jealousy in that direction; but the alarming power of Louis XIV. and the prospect of his acquiring the crown of Spain, led us to a closer connection with Portugal, and particularly to the well-known Methven treaty, concluded in 1703, the object of which was to favour the consumption of port wine, in return for a similar preference to our manufactures. The result has been, that we have not scrupled, for more than a century, to punish our palates and injure our health for the sake of an imaginary political advantage; we say imaginary, because France would evidently have agreed to take our manufactures in return for her produce; and if the increase of her trade had, on one hand, the effect of augmenting, to a certain extent, her national power, it would, on the other, have increased her dependence on us, and have rendered a war with us extremely impolitic and unpopular.

Our attachment to Portugal arose, in a great measure, from her not being a manufacturing country, and likely, in the opinion of the calculators of the day, to be so much the more advantageous to us in the capacity of a customer. This notion has prevailed in our councils to a very recent period; the administration of 1808 and 1809 not scrupling to give encouragement to the export of merchandise, on a large scale, to the unproductive occupants of Brazil and Spanish America. Now, the fact is, that the means of extending our trade, and consequently our profits, with a foreign country, are to be estimated by a quite opposite rule; they depend on the productive power of that country, on its means of affording equivalents for our commodities; in other words, on its capability of paying for that which it suits us to sell to it. Now, what country was ever wealthy without industry? The mines of Mexico and Peru, the richest the world ever saw, fail, in point of annual produce, far short of the annual value of the cotton, the tobacco, the flour, and other less tempting products of the United States. In like manner, the cochineal, the cocoa, the barilla, and even the indigo of Spanish America, form a small amount when put in competition with the exchangeable commodities possessed by the industrious nations in our own neighbourhood, such as France, the Netherlands, or the north of Germany.

If from our own favourite policy we turn our attention to that of continental states, we find Holland steering a course of impartiality, and guarded from an imitation of our trespasses, not indeed by superior knowledge, but by the characteristic moderation of her government. The northern kingdoms deserve comparatively little attention, their rulers having in general given their thoughts much more to war than to discussions of internal policy. The same thing was long true of a country where the commercial interest has at no time been very considerable; the personal will of the sovereign, and the influence of the noblesse, having afforded the grand raisons determinantes for public measures. Still the history of France is noted without traces of the effects of mercantile prejudices. Among other regulations of the kind, there formerly existed several for the purpose of favouring linen manufactures instead of cotton, because flax was a home product, whilst the purchase of cotton carried money out of the country.

At last it was found out by some Frenchmen of greater sagacity than the rest, that cotton might be safely admitted to entry, the money required to buy it proceeding necessarily from the employment of French industry in some shape or other. But the extent of popular prejudice was most singularly exemplified at the time when it was proposed to permit the unrestrained use of toiles peintes, or printed calicoes; every town that had a chamber of commerce remonstrated against it. A deputation sent from Rouen affirmed, that "the proposed measure would throw

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1 Appendix to the Report of the Bullion Committee, 1810. its inhabitants into despair, and make a desert of the surrounding country?" Lyons, the centre of the silk manufacture, declared that "the news had spread terror into all its workshops;" Tours "foresees a commotion likely to cause a convulsion in the body politic;" Amiens asserted "that the proposed act would become the tomb of the manufacturing industry of France;" and Paris declared, "that her merchants came forward that they might bathe the throne with their tears." The government, however, stood firm; the duty on printed calico was withdrawn, and the inspector-general of manufactures ventured some time afterwards to challenge the authors of those elegant effusions to compare their predictions with the result. "Will any of you," he said, "deny that the manufacture of printed calico has been the cause of giving a vast extension to the industry of the country, by employing a number of hands in spinning, weaving, bleaching, and printing? Look only to the branch of dyeing, and say whether this change has not done more for it in a few years than other manufactures would have accomplished in a century."

In some countries government go much farther, and still act in a commercial or manufacturing capacity, notwithstanding all the admonitions of political economists, or the more home-feel lessons of experience. The Austrian government conducts the gold and silver mines of Hungary so little account, that the profit realized from these splendid establishments does not exceed a few thousands a year. In the year 1817 the French government, desirous of laying in a stock of corn for Paris, obtained a loan of money, with which they made purchases in various markets both in and out of the kingdom. The result was most distressing: the price of corn rose from 90s. to 120s. per quarter. The people in the provincial towns became apprehensive of a scarcity, and, though in general submissive to a fault, attempted at Rouen and other places to impede the course of the market, and to prescribe a limit to the price of corn. The alarm, once given, extended through great part of Europe, and gave occasion to a sudden rise, as may be seen by reference to the corn prices at the time in London, Amsterdam, and Hamburg. Nothing is, therefore, more impolitic than the interference of the public treasury with markets, however good the motive; a truth which has been so thoroughly felt in England as to prevent any thing of the kind during the last forty years, government having confined itself in seasons of scarcity, as 1800, 1810, 1816, to permitting the free import of corn.

We are next to advert to the mercantile system in its most limited sense, in the shape which it now bears, after all the modifications of the experience of a century and a half. The predilection for the importation of "hard dollars" has disappeared among a portion of the public, particularly since making the discovery that bank paper can be made to answer the purposes of gold and silver. But even these persons are far from admitting the doctrines of political economists in all their extent; they still cling to the notion that we should discourage the import of a foreign article whenever a corresponding commodity can be raised at home; that we should impede, or even prohibit, all foreign manufactures; and that we should not scruple to encourage certain fabrics of our own by bounties. Such is still the creed of the great majority of our merchants and manufacturers; such was, twenty years ago, the creed of our ministers and presidents of the board of trade. It proceeds on the plausible idea, that we cannot provide too much employment, and that our people would be in danger of falling short of work were we to purchase finished articles at the hands of foreigners. But there is not in the natural course of things any such deficiency of labour as to make it necessary, or even expedient, for us to turn things out of commerce, their regular order for the sake of giving employment to our population. Providence has evidently ordained that industry should be at no loss for objects; the interruptions to its peaceful course arise from our own wayward policy; from our restraints, prohibitions, and, above all, from our sudden changes from war to peace, and from peace to war. These are the true causes of such scenes of embarrassment and bankruptcy as we witnessed in 1793, at the close of profound peace, and as we have unhappily witnessed since the end of the war in 1815.

Equally erroneous is the notion, that it is more for our interest to send abroad manufactures than raw produce or money. If you grant a bounty on an export, you do nothing more or less than bribe a foreigner to make a purchase from you; you withdraw from its natural destination a portion of your capital and labour; for the sake of extending one branch of business, you weaken your means of competition in others. The money so long paid in the shape of bounties on one of our most popular exports, we mean British linen under 1s. 6d. a yard, is a public loss not only to the extent in question, but to twice or three times that extent in indirect injury; it has withheld the industry of our countrymen from other lines, which they might have prosecuted without a premium, and in which they would have no occasion to dread the rivalryship of their neighbours. Mr. Hume has justly remarked, that in a question of personal right, the perception of a half-educated man may be sufficiently sound; but that the case is very different in regard to matters of general policy, where the real is often different from the apparent result. Now, this state of half knowledge has been the origin of almost all our mercantile miscalculations; we have listened to first impressions, and have not scrupled to give them a practical operation by acts of parliament, without ever considering that the remote consequences would be injurious to ourselves.

To what fatality is it then owing, that in this great Cause of commercial country the public should still be so far behind false views in a knowledge of the principles of trade. Unfortunately these doctrines, though closely connected with the national prosperity, have never formed an object of attention at the English universities, and but indirectly and imperfectly in those to the northward of the Tweed. Add to this, that most of the works hitherto published on political economy are written in an abstract, unattractive style, fatiguing the attention of the reader by a long series of reasoning, and seldom relieving him by diversity of subject, or by the introduction of practical illustrations. The public is still in want of a work which should convey the liberal doctrines of the philosopher in the plain language of business, and support the course of reasoning by an appeal to facts familiar to the mind of the merchant. Our limits do not by any means admit of our supplying this deficiency, or of bringing forward the arguments necessary to erect a structure of conclusive reasoning; they enable us only to state some of the more important results, to which we shall now make a few additions.

We may safely discharge from our minds all that has been said, and all that has been written, in regard to the principles greater relative advantage attendant in trading in this or of that particular commodity; we may feel satisfied that profits are much more on an equality than is commonly supposed; that no one would long be a dealer in that which did not afford him advantage, or remain a stranger to that which was throwing an extra gain into the pockets of his neighbour. The same rule is applicable in a national sense, the traffic in one commodity being either directly or indirectly as productive of profit as in another. Even foreign articles of luxury should not be discouraged, since the money required to pay for them must be pre- Commerce viously raised by the employment of British industry in some useful manner. This affords a new proof of the fallacy of first impressions, and leads to the grand practical conclusion of allowing people to "buy commodities wherever they can be got cheapest, without seeking to favour home produce above colonial, or colonial above foreign."

Trade

Merchants should possess unrestricted freedom, not only ought to be in regard to the articles they deal in, but in respect to the time of keeping them back or bringing them to market; and this not only from the general title which every one has to the management of his own property, but from a conviction that whatever benefits the individual will be productive of corresponding benefit to the public. This is a point of the last importance, as reconciling the lower orders to a variety of unpopular employments of capital, such as buying up goods to be warehoused, and not brought to market till prices are advanced. Take, for instance, the capitalist who buys a thousand hogsheads of sugar on its arrival from the West Indies in August, for the purpose of selling it in the succeeding March or April. Such a transaction is of use to all parties, affording, in the first instance, a customer for the planter or planter's correspondent; a depository for the public during the season that the article ought in great part to be stored up; and finally a seller, at a time when, without such deposits and such forthcoming of supply, the price might have become exorbitant, and might have continued so until the arrival of the next year's crop. How applicable are these arguments to the most obnoxious of all traders, the engrosser of corn?

The more we study the natural progress of commerce, the more we shall be satisfied of the expediency of leaving all its various agents to their uncontrolled management. Business then divides itself, particularly in a large city, into a variety of separate branches, each of which may be carried on to a surprising extent by separate establishments. The commission charged by such persons is small, their dispatch extraordinary; capital does not remain locked up in their hands, and goods find their way to the market whenever prices are encouraging, that is, whenever the consumers are in want of them; they are withheld only when the market is glutted, and when to force sales would be productive of eventual injury to the buyers themselves. The doctrine of the happy medium is nowhere more applicable than in commerce; if you reduce prices for one season below what is necessary to indemnify the producer, you discourage production for the next, and you expose yourself to the hazard of a dearth.

Evil of monopolies.

Monopoly is now generally admitted to be highly impolitic. No new grants of the kind have been issued among us for many years, and every renewal of the charter of our principal existing association, the East India Company, has been marked by a diminution of its restrictive character. The public are now aware that a privileged company cannot make its purchases abroad on better terms than individuals, and that the chief operation of the privilege is to enhance the sale prices, or, in other words, to put money into the hands of a few at the expense of the nation. They are further aware that the concerns of a large corporation cannot be managed with the minute economy and vigilance of the private merchant, and that its grand advantage lies in the intelligence and dexterity acquired by the transaction of business to a large extent by one establishment; an advantage of great importance, but which has nothing to do with the possession of exclusive privileges.

It is now about fifty years since the conclusion of Mr. Pitt's well-known commercial treaty with France; a treaty which many on both sides of the channel were inclined to think particularly advantageous to us, and which certainly afforded a grand object of declamation to Bonaparte. The fact, however, is, that such treaties are good only in as far as they give general confidence to the merchants of both countries; whenever they go farther, and interfere by specific provisions, they are infallibly pernicious, and not the least so to the apparently favoured nation. It is a symptom of some promise in the present age that, though backed by all Europe, our ministers did not, in the treaties of either 1814 or 1815, go the length of imposing any restraints on the trade of France, but left things to their free course, subject only to such restrictions as might be deemed indispensable by either government for the protection of particular branches of manufacture.

The final conclusions to be drawn from the principles of commerce are of the most comprehensive and beneficent nature. They teach us that every nation finds its account in the prosperity of its neighbours; that it would experience a corresponding suffering from their decline; that to aim at engrossing more trade than naturally falls to our share, is sooner or later injurious to ourselves; and that war, even when successful, is attended with the most serious losses. War turns to waste a large portion of our productive means; it leaves us oppressed with a ruinous burden in peace; it impedes the future extension of our exports, for the injury done to our neighbours recoils on ourselves; in short, it is so replete with evil to the public and individuals, as to be justifiable only in an extreme case, such as the defence of national independence, or the overthrow of a tyrannical usurper.

Division and subdivision of employment forms the great distinction between a backward and an improved state of productive industry. It increases the efficiency of the mechanic or manufacturer to an extent of which no one who has not studied the subject can have an adequate conception. Now, the degree to which employment is subdivided depends mainly on the size of a city or town; and in estimating the state of civilization in a particular country, we cannot have a better guide than the proportion of the inhabitants of towns to those of the open country. Flanders and Holland were long the most improved part of the north of Europe, and had the greatest number of towns on a given extent of territory. This they still have, with the exception of the counties (Lancashire and the West Riding of York) which are the chief seats of our manufactures. After the Netherlands in town population come the north of Italy and north-east of France, along with the western part of Germany. Prussia and Austria have each a comparatively small number of towns; Poland has still fewer, and Russia is the most deficient of any country in Europe. In England the increase of town population has been progressive during the last sixty or seventy years, and bids fair to go on in an equal or greater ratio.

The division of employment is the result of commerce and of increased population. It is of two kinds; that among individuals, by which a specific task is appropriated to each, and that among nations, by which particular kinds of products are raised to a greater extent in one country than in another. The latter is as yet only beginning to claim the attention of public men, for it has been a frequent error with governments to establish, in their respective territories, a variety of manufactures, without sufficiently weighing the local obstacles or disadvantages. Of this France furnishes some striking examples, particularly in the case of iron. The abundance of coal in England, and the ease in conveying it, and other bulky goods, by canals, give to our manufactures of iron and hardware an advantage which France in vain endeavours to equal. Her true policy would be to repeal the very heavy duties on the import of our iron and hardware, and to trust to In point of knowledge of the great doctrines of political economy, Germany, or, to speak more properly, the protestant part of Germany, particularly Saxony, may be said to take the lead of other countries on the Continent. The Dutch, however, exemplary in their practical legislation, have little turn for speculative reasoning; the French have not patience to follow through its various links a chain of philosophical deductions; but their admiration of whatever is humane or liberal makes them wonderfully delighted with the brilliant conclusions of the science. They have the advantage of possessing, in the work of the late J. B. Say, the best arranged general treatise that has hitherto appeared on the subject; and they are by no means ill prepared for a very extensive application of political improvements, such as the abolition of privateering, the repeal of all heavy duties on foreign goods, and the substitution of inland taxes for those custom-house imposts which impede the free communication of nations. The rest of Europe is so much in the dark in regard to the great truths of political science as to see merely through the medium of local governments. Such is the case even in Italy, although that country can boast individuals of some note among the writers on the principles of commerce, and the reflecting turn of the people is favourable to such investigations. Unfortunately the condition of most countries, but particularly of Britain, is adverse to the unrestricted application of these simple and beneficent principles. Particular branches of trade are loaded with taxes which cannot be for some time removed; since to throw open our ports to the unrestrained import of foreign merchandise might lead to a serious derangement of industry. It was admitted by all parties in parliament, in a memorable debate (13th March 1817), that "unbounded freedom in trade was our true policy," but it was urged that, to resort to such a course, would overthrow too many private interests, and raise too general a clamour, to be practicable for a number of years. All that could then be done was to acknowledge the true system, to approximate to it gradually but surely, to renounce the errors of our ancestors, and, in point of taxation, to impose duties merely for the purpose of revenue, never with the view of encouraging any particular branch at the expense of another. Such, happily, has been the course pursued by government since the period in question; and we are now (1833) considerably advanced towards a state which may admit of the adoption in practice of the free trade doctrines.

Having thus briefly stated the principles of free trade, we shall proceed to the practical topics which we proposed to discuss; beginning with the consideration of the average profit of capital employed in trade.

1. It was common during the war to estimate the emolument of a wholesale business in Britain, in a well-established concern, at ten per cent. on the capital. Moderate calculators qualified this by calling it between eight and ten per cent.; but they who were at great pains to take every thing into the account, and to enumerate a variety of petty deductions which escape the sanguine reckoner, found that, in a large concern, seven per cent. was in general the extent of the clear earnings, leaving only two per cent. above that which was the current rate of interest during the war.

Mercantile profits are subject to a variety of unforeseen deductions, originating partly in an accumulation of petty expenses; but more, at least in business of long credit, from deficient payments. The latter are technically called bad debts, and almost always exceed the anticipated amount, in consequence both of the sanguine temper of our countrymen, and of the actual capital of the buyers being much inferior to its appearance. Secrecy both as to capital and annual profit is considered as a first-rate point amongst mercantile men. To the latter there can be no objection; but the concealment of the amount of capital, and the almost invariable consequence, its exaggeration, are productive of very pernicious effects. It is founded partly on the general vanity, and more perhaps on an expectation of advantage from a command of credit. But were the practice of transacting with ready money to become general, a merchant would have no greater motive to be thought in affluence than an individual in any other line. But be this as it may, the fact is, that the clear profits of trade, whether home or foreign, whether mercantile or manufacturing, whether retail or wholesale, are greatly below what the world imagines. Many hold a contrary language with regard to trade in general; but few do so in respect to their own particular business. "Ours," say they, "is of limited emolument; but other lines are very different, inasmuch as they admit of speculation and of higher charges." Whoever takes the trouble to question men in almost any business or profession may reckon on receiving a succession of such answers; answers not suggested by a wish to deceive or to conceal the profits of the individual, but originating in the general disposition to take the ignotum pro magnifico. We dwell on this point from a desire to correct, as far as our influence goes, the prevalence of existing errors, and prepare our countrymen for the adoption of that patient and painstaking course which was the basis of the prosperity of our ancestors, and which alone can extricate us from our present embarrassments. During the war such language would not have been listened to; our minds were kept in a ferment by incessant fluctuations; property, whether in land, houses, or merchandise, had obtained an unexampled value; the majority of the possessors considered themselves as men of assured fortune, and never doubted that the general rise of prices was an evidence of augmented national wealth. Now that a long interval has elapsed, and that we know to our cost how far we are from enjoying national prosperity, we are more disposed to give attention to the monitor who recalls the almost antiquated maxims of industry and economy, and who tells us that, though we surpass our neighbours in activity and combination, we have much to learn from them, both in point of caution in enterprise, and of moderation in expenditure.

Let us next see how far these opinions are supported by official documents. The returns for the property-tax during the war afforded considerable means of ascertaining the circumstances of persons engaged in trade. If it be objected that many persons did not make a fair return, it may be rejoined, on the other hand, that a number chose to conceal their disappointments from the world, and to pay the tax on an income which they had not realized. The total number of families deriving an income from trade, manufacture, and professions in England, Wales, and Scotland, is about 160,000. 120,000 of these returned their incomes under L.150 a year. 40,000 were above L.150 a year; and of these, 3800 declared their income to exceed L.1000 a year. Now, let any of our readers compare this statement with their previous ideas of the mercantile wealth of Great Britain, and they will bring to mind, if we are not much mistaken, an impression that the number of rich merchants throughout the empire greatly exceeded 3800. The total sum paid as property-tax under the head of the "profits of trade, manufactures, and professions," for 1814, was somewhat under three and a half millions, a sum certainly not to be paralleled in any other country, but falling Commerce considerably below the anticipation of Mr Pitt when he first introduced the income tax, so long ago as 1798.

We have naturally a strong disposition to contemplate the past or the distant through a magnifying medium, and to believe whatever the confident assertions of others, or the love of wonder in ourselves, suggests with regard to reported wealth. Hence the allegations so confidently brought forward in regard to the riches of ancient cities, and the notion generally entertained with respect to the rapidity of fortune-making in our foreign settlements. India was long proverbial in this respect; and it requires much more than the usual stock of information to discover, that if we make allowance for deaths, and disappointments from various causes, the proportion of those who succeed in that country is not greater than at home; and that a fortune, when it does happen to be made, is the result of the length of time, of a habit of saving favoured by exemption from the expense of a family, of rare political contingencies, or, finally, of unusual opportunities consequent on the mortality of competitors. In point of trade few countries are more limited than India. In support of these assertions, we appeal not to the young beginner, entering with sanguine hopes on his career, nor even to him who is advanced half-way in the eager pursuit, but to all who have passed a number of years in that country, and who possess sufficient reflection to make a deliberate survey between the mother country and her settlements. Particular instances may be given of the acquisition of mercantile fortunes even in the last ten or twelve years in India; but these have been rare, and the result of peculiar circumstances.

Another point in which delusion prevails, relates to the effects of war, particularly that of 1798; a war in which we still believe ourselves, and are believed by foreigners, to have engrossed and absorbed the commerce of the world. A reference, however, to official documents will show that the exports and imports of the most boasted years of the war in question were below those of our late years of suffering. The flag of our enemies was indeed expelled from the ocean, but the greater proportion of trade passed into the hands of neutrals; and when, in 1808, we took it out of their possession, we were taught, by dear-bought experience, that war, under any circumstances, is adverse to commerce.

These observations must be understood not as intended to depreciate the value of commerce, or to damp in the individual the hopes of eventual success. They show, indeed, that the ratio of profit is generally small, but they afford the consolatory assurance that mercantile concerns may be carried to a great extent, and that the amount of gain may, in process of time, be rendered very considerable. This leads us to advert to a matter of great interest to us as we now stand relatively to the rival countries of the Continent. It is a maxim, that commercial establishments, whether in the mercantile or manufacturing line, should be confined to a few objects, and conducted on a large scale. It is by this only that the task of individuals can be simplified, that employment can be subdivided, that work can be put quickly through bands, or that we can provide on the spot a supply of the various and indispensable requisites of business. A large establishment affords the means of employment to every kind of capacity; in fact, the duty is so facilitated as to become, in many cases, a mere routine; while the more intelligent and attentive workmen act as superintendents, the mass of the unambitious and unthinking are occupied with the detail. It is owing to this process of subdivision, and to the relative magnitude of the London workshops, that many articles can be supplied in our metropolis as cheaply as in the provincial towns, where labour is 40 per cent lower. The same rule accounts for the charge on the transaction of business by merchants, accountants, attorneys, notaries, and agents, being less heavy than might be apprehended from the greater expense of living in London. Similar results take place in regard to manufacture in such towns as Birmingham, Sheffield, Manchester, Leeds; and it is to this, more than to any other cause, that we owe our ability to compete with the cheaper labour of the Continent.

2. This analysis of the profit of trade leads us to say a few words on a topic which has hitherto been very generally misunderstood, we mean the profits of speculation in trade. Among men of business this expression is applied to incurring extensive hazards in the hope of extensive emolument; in short, to whatever is foreign to the proper business of the individual, or beyond the control of common rules. It is to such undertakings that vulgar credulity ascribes extraordinary profits; and even well-informed men are apt to give way to the assertions so confidently made, of vast occasional gains in this line of business. Dr Smith himself, after remarking (Wealth of Nations, book i. chap. 10) that to make a fortune in a regular line commonly requires a long life of industry and frugality, adds, no doubt on the faith of repeated assurances from mercantile friends, that there are many examples of fortunes realized by speculators in the course of a few years. Now, the men who embark in speculation are, in general, very loose accountants; their estimate of profits applies to the gross, never to the net return; besides, they are almost always adventurers, and adventurers are seldom noted for the observance of truth. Their favourite season of activity is a time like that of 1808, when the sudden stoppage of ordinary intercourse caused a rapid fluctuation in the price of commodities, and when the regular merchants withdrew from the scene. Now, what sober estimate can be formed of loss or gain in such a chaos? Add to this, that these men trade almost always on credit, and are in need of all the support which flattering representations, and rumours of sudden profits, can give them. All these reasons seem to justify a deliberate inquirer in doing what is seldom done on such occasions, we mean in withholding his belief from the confident allegations of speculators, so long as they are not supported by collateral evidence.

Our opinion is, that instead of the large profits commonly ascribed to this course of trade, the individuals concerned in it experience little else than disappointments, and maintain a perpetual struggle to keep up a fair appearance to the world. This opinion is founded partly on a knowledge of the actual career and circumstances of speculators, but more on the well-known fact, that almost every line of business is in the hands of established merchants, who, of course, are too vigilant to overlook the opportunity of emolument, and who have much better means of information than temporary interlopers. Still, should there remain doubts as to the accuracy of our opinion, the question may be brought to a point by reference to the account-books of any given number of celebrated speculators; their affairs end almost always in bankruptcy; their papers continue open to access for years in the hands of their solicitors or assignees; and we are much mistaken if an inspection of them would show in one case out of ten, that the parties had at any period succeeded in realizing their boasted profits.

We have been induced to dwell the more on the boasts of speculators, because they are productive of great mischief in unsettling persons in business, particularly young men, and in making them look on their proper line with comparative indifference. It would be endless to attempt an enumeration of the various ways in which the rage for Commerce speculation has brought misfortune on merchants and manufacturers. The opening of a new country, such as Buenos Ayres, Brazil, or Caracas, led to the export not only of a prodigious overstock of merchandise fitted for the country, but of many articles totally unsuited to the climate and habits of the people. Again, in 1814, when the war with France was drawing to a close, goods both colonial and manufactured, were poured into the Continent of Europe, as if the compass of the markets was unbounded, and as if the calamities of war had produced no decrease of disposable capital. In 1825, our speculations abroad were most unfortunate, while at home vast sums were lavished in buildings, in mines, in manufactories, and other establishments, which never had a fair prospect of success, and owed their origin to the sanguine imagination of one projector, and the credulity of another.

The result of all this is, that hitherto our trading concerns have been very much mismanaged; that a great deal of property has been wasted by the inexperienced and over-sanguine; and that those who really expect to succeed in business must lay their account with submitting not only to a deal of labour, but of self-denial in resisting the temptation of projects out of their own line. What a beneficial result would be produced were young merchants to adopt it as a rule not to listen to the ardent suggestions of persons of their own time of life, but to recur on every question of importance to the advice of their seniors; of men who have had to make their own way in the world, and who perhaps, without possessing the advantage of education, or the talent of moulding their reasoning into the form of general principles, will still be found safe counsellors in the practical parts of business. If the results of their admonitions be to abridge some of the pleasing illusions of the mercantile beginner, is it not better that the true nature of his prospects should be made known to him in the early part of life? A deduction from anticipated enjoyment is a trifling sacrifice in comparison with the distress produced by failure in more advanced years, when the individual is less able to contend with difficulty, and has probably to provide for a family. Let any one extensively acquainted with mercantile men call to recollection the situation of the majority of his personal friends during the last twenty years, and say whether any degree of self-denial would not be preferable to that succession of disappointments, anxieties, and losses, which have baffled the exertions and broken the spirits of so many meritorious persons.

Holland: The country in which trade shone forth in all its splendour, where it was cultivated without the support of arms or prohibitory regulations, where, in short, it developed its beneficial tendency in all its extent, was Holland. If we look to the early enterprises of the Dutch, we find them enabled, by the power of their productive industry, to assert their independence at home, and to assail their enemies in the remotest part of their empire. The Portuguese in the east, and the Spaniards in the west, were each found unequal to the task of resisting these republicans. A proud stand was made by them against the navy of England, and they did not fall into despair even when assailed by our forces in conjunction with those of France. Afterwards, when happily restored to our alliance, and when they co-operated with us in the great struggle against Louis XIV., it is surprising how large a proportion both of troops and subsidies was furnished by this apparently inconsiderable state. "No country," says Sir William Temple, "can be found where so vast a trade has been managed, yet the inhabitants have no native commodities towards building vessels, and hardly any that are considerable for traffic with their neighbours. Holland is grown rich by force of industry, by improve-

ment and manufacture of foreign growths." Proceeding to specify more particularly the causes of this mercantile prosperity, Sir William enumerates "the easy communication of water, particularly by the Rhine and Maese; the security of property; the undisturbed liberty of conscience, and the progressive influx of people persecuted for their religious opinions in Flanders, England, France, and Germany." Such were the original causes; those of subsequent operation were the "general habit of industry and economy; the formation of canals; the institution of banks; the low interest of money; the appropriation of particular towns to particular branches of business; application to the fisheries, and, what he regrets much should not exist in England, the practice of keeping an official register of all purchases of land or houses;" a practice introduced into Holland and Flanders in the reign of Charles V. to the incalculable convenience and security of money transactions.

3. We are now to say a few words on a different topic, namely, the effects of trade in forming the character of individuals; a matter of no little importance in a country like ours, where merchants both constitute so large a portion of the community, and exercise such influence on the proceedings of government. The mercantile character has a number of good points, being exempt from the vacuity and indecision so frequent in fashionable life, as well as from the various vices consequent on idleness, and which are so strikingly exemplified in the gambling and libertinism of the French metropolis. Whatever good is produced by continued activity, and by a pointed attention to the specific objects of one's occupation, may be confidently looked for among commercial men; with the farther advantage, in large concerns, of an exemption from petty jealousies and invidious interferences. In such cities as London and Amsterdam, merchants are aware that the field is ample for all; that the prosperity of one is very far from impeding that of others; and that when disappointment and failure occur, their origin is to be sought in a very different cause from competition. Here, however, we must close our encomium, and, in the spirit of impartiality, proceed to exhibit the opposite side of the picture. The merchant's knowledge is particular, not general; he obtains a habit of understanding individual character, and a dexterity in managing his own affairs; but to him has not, and cannot, from his course of occupation, acquire the power of reasoning comprehensively on the interests of trade. He is accordingly a very unfit adviser, or even referee, for a minister or legislator, being accustomed to draw his deductions from his own particular branch of business, or apt, if he go out of it, to form a hasty judgment from first impressions. If he observe in war a tendency to raise prices, or to invigorate particular lines of trade, such as ship-owning or insurance, he will probably be led to the general inference, that, to a maritime country, war is advantageous. Our last contests having been attended with the undisputed command of the ocean, nothing more was required to satisfy the majority of traders that our mercantile marine was in a state of equal ascendancy. They took au pied de la lettre the custom-house reports of our annual exports, without observing how much was to be deducted on account of the depreciation of our bank paper, or how surely we were laying the foundation of future distress, by submitting to enormous taxation. Again, when in 1807 the long continuance of war had given a serious wound to our trade and navigation, a majority of the merchants ascribed it, not to the true cause, but to the undermining competition of the Americans. Their range of reflection was not such as to enable them to perceive that, by overturning the prosperity of the latter, we should sap the foundation of ours. Commerce own; and that every million which we prevented our Transatlantic neighbours from adding to their capital, was so much withdrawn from a fund devoted to the increase of the productive industry of Britain. Hence our unfortunate orders in council, the main cause of the overthrow of our exchanges with the Continent, of the increase of our expenses in Spain and Germany, of our war with the United States, in short, of the long continuance of our sufferings since the peace. Can it be necessary to add more to demonstrate the impolicy of being guided in general questions by mercantile men? Let them confine themselves to the sphere of practical action; a sphere sufficiently wide to gratify the most actively ardent, assured as they well may be that it is not only the road to individual wealth, but the means of furnishing a substantial addition to the national resources.

Bad effect. 4. Nothing would, in our opinion, conduce more to the prosperity of trade than the adoption of the plan of doing all wholesale business for ready money, and the relinquishment of that habit of long credit which prompts to unguarded enterprise, and has for so many years been the principal cause of crowding the columns of our Gazettes. Hopes of a change in this respect may now be confidently entertained, partly from the greater plenty of money consequent on continued peace, more from the general conviction of the impolicy of limiting the rate of interest by law. The effects of a repeal of the usury laws have been little anticipated, but we venture to predict that the extent of beneficial change will far outrun the expectations of the supporters of the measure.

To show the results of long credit, it is necessary to go at some length into practical illustration, and to apprise our readers of the real situation of the majority of our manufacturers and export merchants. A manufacturer on the present footing receives orders in the course of the year from twenty or thirty mercantile houses; the goods to be exported probably to the West Indies, the United States, the Spanish Main, or Brazil; the understood term of credit twelve months. The manufacturer does not receive the orders from abroad; he has an intermediate guarantee, that of the exporting merchant. Still the risk is considerable; but he naturally hopes for the best, and is unwilling to decline an order when it comes to him from a quarter of respectability. Now by mercantile respectability our readers are to understand integrity, and the intention of acting up to engagements; but the power of doing so, especially at a remote date, is a very different question, and is, in general, possessed in a much smaller degree than the public imagine. The trader whose capital is £30,000 will not scruple to ship goods to the value of £40,000, first in the hope, so general among merchants, of reaping a handsome profit; and next in the confidence that should the foreign market be dull, and should delays occur in obtaining returns within the given time, his credit will procure him indulgence for several months, at the end of which the expected remittances can hardly fail to arrive. He may, and in general does go on for several years without much embarrassment, receiving indeed less than he sends out, but informed that all has been well sold, and cannot fail to be soon realised. He thus goes on pleasing himself at every balance of his books with the seeming profit, and only regretting that hitherto that profit has not been tangible, since it exists in the shape of a debt due by his Transatlantic correspondents. He continues, however, under a favourable expectation of their making up for past deficiencies, and flatters himself that the delay has resulted from partial or temporary causes. He begins to find himself straitened for funds, but has as yet little difficulty in obtaining relief from a munied friend, or a prolonged credit from the manufacturers. His correspondents continue to write in a strain of confidence, and to call for more goods, which, if he be of a confiding character, will lead him to extend the annual amount of his shipments; but at all events he is obliged to continue a certain supply, for the sake of keeping up the assortment of stock. Still he finds that year after year a larger portion of his capital remains on the other side of the Atlantic, and that his correspondents, however desirous (for we by no means put an extreme case), are unable to prevent an accumulation of debt, because they are in like manner left unpaid by the inhabitants of the country. To go to law would be of no avail, since it is the policy of almost every government in a recently-settled country to favour the debtor, and to give him the means of retaining capital in his hands. Affairs now begin to be serious with the exporter; the manufacturers and other creditors cannot or will not give further time, and demand an explanation of his circumstances. This explanation takes place, and serves to show that their debtor is a man of honour, with more assets than debts, but the latter are certain, while the former are at a distance of 3000 miles. The consequence is a grant of time, an allowance to the debtor of two, three, or four years, to act under letter of license, in the hope of accomplishing that which, it is evident, cannot be performed sooner. This is, in general, both the wisest and most liberal course; still it is not often found to succeed, because the foreign debts can seldom be realised in climates where life is held by so uncertain a tenure, where respectable agents are so rarely found, where buyers of goods have so little capital, and, above all, where the law allows them such a length of time for payment. A few of the promised instalments are probably made good, but in general the merchant recognises the impracticability of fulfilling the remainder, and finds it eventually necessary to submit to bankruptcy. Such has been the case of a very large proportion of the mercantile establishments in our exports, and even in London, during the last twenty years. Distressing indeed has been the catalogue as exhibited in the Gazette, particularly in 1810, 1816, 1819, 1826; but even at present the public are not aware of the real extent of the failures, because in very many the arrangements are private. Add to this, that the attention of the public is seldom so long directed to one object as to lead to conclusions of the general nature now mentioned. The fact, however, is, that old establishments, we mean houses that go back for half a century or more, are almost the only ones which escape insolvency. Among houses of recent origin, what a succession of failures have taken place in Liverpool, Glasgow, Manchester, Birmingham, and even in London! But we forbear to enlarge on this distressing picture, and turn for relief to countries which have been exposed to considerable shocks, but which have never conducted business on the system of long credit.

If we begin with Holland, we find that bargains in that country were, in its better days, almost always made for ready money, or for so short a date as six weeks or two months; profits were small in their ratio, but the quickness of returns made them eventually large; failures were rare, even in so distressing an era as the occupation of their country by the French, which began in 1795, and involved, from the outset, a stoppage of maritime intercourse with all their possessions in India and America. The consequence of this stoppage was a decay of trade, a suspension of various undertakings, a scarcity of work, a miserable dulness in the sale of goods; all leading, in the first instance, to diminished income, and eventually to encroachment on capital; but, amidst this distress, the failures were surprisingly few, fewer indeed than occur in Britain in any ordinary season. Another example, equally replete with instruction, was the state of France after the There prevailed at that time a general discouragement among the upper ranks, and a great deal of wretchedness among the lower trade being at a stand, and stocks of goods lying unsold in shops or warehouses for years; still bankruptcy was exceedingly rare. All this shows what a satisfactory prospect we may anticipate when we adopt the plan of transacting the greater part of our business for ready money.

Yet we are far from recommending any law or measure to enforce that object; the evident advantage of the plan will not fail to secure its adoption, whenever we succeed in obtaining the removal of the grand legal impediment. What, it may be asked, do we mean by this impediment? We answer, that law which imposes a forced limitation on the rate of interest. By that law, a capitalist is not permitted to take more than five per cent. interest for the loan of money, whatever may be the risk. If he exceed that limit he renders himself liable to the ruinous penalties of the laws, or to all the hazards attendant on a mercantile partnership—hazards which may affect not merely the sum advanced, but the whole of his fortune. He is consequently obliged to seek other means of employing his money; vesting it in the public funds, confining it to the discount of the best mercantile bills, lending it on mortgage, and not unfrequently sending it out of the country, tempted by the higher interest given in France and other parts of the Continent. Now there are in all mercantile cities, and particularly in London, a body of capitalists, who are too well aware of the hazards of trade to expose their whole property to them, but who would gladly bring forward a fourth, a third, or even a half of it, in the hope of realizing an increased income, and for the sake of enjoying that gratification which attends active employment, and the indulgence of hope and prospect. Men of business are ill fitted for absolute retirement; the object of their latter years is to lessen anxiety, not to withdraw entirely from the scene of activity. Their habits, their calculations, their attachments, all keep them in connection with their early friends, and with the scene of their exertions; the point, therefore, should be not to urge them, as the law has hitherto done, to an abrupt dereliction of mercantile chances, but to enable them to continue them in a greater or lesser degree, as may suit their circumstances or individual character.

Such would be the effect of a repeal of the usury laws in regard to the lender of money. Let us next advert to the situation of the borrower. There is a general disposition in merchants to carry their business beyond the extent of their personal capital, a disposition which has, doubtless, frequently been carried to excess, but which ought by no means to be subjected to unqualified censure. No one can pretend to draw a general line of distinction between laudable enterprise and sanguine speculation; it must be left to the decision of the individual, and of the connections who support him. Often will it happen that a man of talent and judgment finds his personal funds inadequate to enter on the field of fair and legitimate enterprise, or to procure him an adequate share in an established business. We are perfectly aware that in London men of this description frequently succeed, in the middle or latter part of life, in becoming partners in well-established concerns; but it is equally true that many of them are doomed to a different lot, and pass their life in unproductive routine. Counting-house occupation is carried on in comparative retirement; it presents no opportunities of public appearance, as the profession of the law; and years pass away without bringing an individual into notice with others than his employers and immediate connections. Hence the importance of removing a great impediment imposed by our usury laws, which prevent the capitalist from coming forward to the aid of a promising beginner.

Let us next say a few words on the situation of our manufacturers. As a disposition to enterprise exists strongly among our export merchants, the result is, that business facturer, must be done; and, if not for money, for credit. On whom then shall the responsibility fall? "Not," says the law, "on the capitalist; if he take more than five per cent. he shall subject himself to the penalties of usury, or he shall risk his whole fortune by a partnership." The spirit of adventure is not, however, to be restrained; orders arrive, and goods must be supplied; the burden of credit is then made to devolve upon the furnishers of these goods, whether manufacturers or wholesale venders. It would be in vain for these persons, particularly the former, to urge that it is entirely out of their line to judge of the stability of the exporting merchant, residing, as he generally does, in a different quarter, and connected with people to whom they are strangers. The case is peremptory, "if you do not give credit, we must apply to others who will." The alternative of the manufacturer or wholesale vender is then to make such additional charge on his goods as may prove an indemnity for his average loss; a charge amounting to ten, twelve, or fifteen per cent., and which, besides its magnitude, has the unfortunate effect of pressing equally on the solvent and insolvent buyers. How different will be the case when the capitalist shall find himself at liberty to stipulate a rate of interest proportioned to his risk! He will look around the circle of his mercantile friends for a man of honour and prudence, offer to supply his deficiency of pecuniary means, receive such security as the case admits of, and bargain, not for a share in the adventure, but for an extra interest, and the repayment of his money at a remote date. This important point once adjusted, what does the merchant do? He goes to the manufacturer, not as at present, to ask credit for twelve or fourteen months, but with ready money in his hands. What a surprising difference does this make to the manufacturer! Instead of adding, and being in fact obliged in self-defence to add, the large sum mentioned above, he sells, and sells cheerfully, at so trifling a profit as two and a half, two, or one and a half per cent. for ready money. Nothing can be more erroneous than to suspect a real man of business of aiming at a high profit; security, quick returns, and exemption from perplexed accounts, are his objects; and, when paid in cash, he is saved so much trouble and uncertainty, that his demand becomes extremely moderate. The manufacturer looks for no other indemnity than, first, a reimbursement of his outlay for the raw material, next a small consideration for the expense of his establishment in rent and salaries, and, finally, a still smaller for his personal trouble. An enlarged income is no doubt his eventual hope; but that, he is conscious, must arise, not from swelling his charge, but from extending the scale of his business. Observe the admirable effects of the ready money plan on the progressive ramifications of business—it affords the manufacturer the power of purchasing the raw material for ready money; he obtains it at a reduced price, exactly as the merchant obtains the finished article from him; accounts are greatly simplified; a briskness is given to mercantile transactions in all their stages; an important reduction takes place in the price of export goods; and we become much more able to stand the competition of foreign manufacturers. It is, moreover, no insignificant advantage that our traders are thus enabled to know their real situation, and to be aware of the limits of their income, while assured of the security of the principal. They thus become better calculators, and avoid those expenses which steal so naturally on the mind of a person accustomed to view Commerce his profits through a magnifying medium, and which are one of the great causes of bankruptcy being so much more frequent among merchants than in the other classes of society.

Among other advantages resulting from the adoption of such a plan, would be that of saving a heavy expense incurred at present by many houses in the collection of debts. A travelling clerk can hardly cost less than £400 or £500 a year; and, in the metropolis where such collections are made by a partner or principal clerk, a great deal of precious time is lost in repeated calls on the one hand, and on the other in expedients to postpone the day of settlement. We should no longer see new establishments seeking to procure orders by outbidding their neighbours in offers of prolonging credit; and we might hope to witness the gradual abandonment of certain very costly, and by no means effectual methods of courting business. We allude to the habit of expensive living as a proof of property, and as a means of attracting connections. All such expedients are flattering in the eyes of the inexperienced beginner, but their inefficacy is well known to the veteran merchant, who will not hesitate to declare, that were his career to be renewed, he would make a point of avoiding them, as well as almost all the steps so frequently embraced for the sake of pushing business. In the mercantile, as in other lines, the means of success are few and simple; not easy of attainment, indeed, and requiring, above all, long-continued perseverance; but less varied and complicated than a youthful mind is apt to imagine. Analyze the true qualities of a man of business, and you will find them reduce themselves to fairness, vigilance, and steadiness; fairness, exemplified in declaring his terms at once, and in never deviating from an engagement; vigilance in superintending his assistants, his clerks, and his workmen; and steadiness in following up his proper line, year after year, without turning to the right or left in pursuit of speculative advantages. These, plain as they are, form the true virtues of mercantile life; the man who is known to possess them will be at no loss for connections, and may safely leave to others the task of seeking a reputation for hospitality by their mode of living, of activity by the frequency of their solicitations, or of liberality by an unusual prolongation of credit.

In reasoning with such confidence on the good effects of so simple a measure as that of laying open the rate of interest, we may be charged with going too far, and with indulging in sanguine anticipations; but no one can pretend to foresee or to limit the extent of good arising from restoring business to its free course. Again, if we are thought to lay too much stress on the degree of aid to be derived by a supply of capital to the mercantile body, our answer is, that merchants are in general much shorter of capital than the public imagine. Finally, it may be objected, that money will not unfrequently be lost by the capitalist from his being pressed to join in cautious speculations. All enterprise is necessarily exposed to hazard; but the probability is, that the loss will be much less to the capitalist than it at present is to the manufacturer, the latter being wholly in the dark as to the circumstances of his various debtors, while the former has evidently good means of information as to the one or the two persons whom he may choose to intrust with his money.

It may be useful to compare, in a commercial view, an old and a recently-settled country, taking for the former a nation in the condition of Holland or England, for the latter the United States of America. In the former, capital is abundant, and communications, whether by land or water, comparatively easy; while in the lately-settled country capital is necessarily scarce, and roads or canals are in their infancy. Corn, rice, cotton, and other agricultural products, are the proper objects of attention in the new country, on account of the extent of unoccupied soil; while manufactures, requiring a numerous population, belong properly to the old. Labour is high priced in the one, because the lower orders are comparatively independent; that is, they are reluctant to work for a master when not pressed by poverty, and when they can support themselves by employing their time and labour for their own account. Under such circumstances, how much is it to be regretted that the United States of America should have aimed prematurely at the extension of such manufactures as woollens, cottons, or hardware! They will find the disadvantage of scanty capital and high wages too great to be balanced by any artificial support from government, such as the high duties imposed on foreign goods. The Americans have now been taught, that their prosperity during the wars of the French Revolution was owing mainly to their neutrality, and to the high prices obtained for their exports, such as corn, timber, tobacco, rice, in consequence of the general hostilities in Europe, and the abstraction of labour and capital from productive employment. But with the return of general peace, the high prices in Europe came to a close, and brought with them a decline in the value of the products of the United States. The dissatisfaction thence arising led the Americans to the attempt of counteracting the decline, by excluding foreign manufactures, and raising the requisite supplies within the territory of the Union; an attempt as illiberal and as unlikely to succeed as that of the British government in 1807 to stop American navigation. Already it has been found necessary to make several modifications in the tariff of 1828; but if it is not further and materially altered, the result cannot fail to be productive of great eventual embarrassment to the commerce of America. It has caused general discontent in the southern states of the Union, where manufactures have never been attempted, and where it is consequently the wish of the inhabitants to supply their wants by an unrestrained intercourse with England, and the countries which purchase their cotton and other products.

III. COMMERCIAL FLUCTUATIONS IN THE PRESENT AGE; EVILS OF AN UNDUE EXPENDITURE BY GOVERNMENT.

The present age has been remarkable beyond all others for fluctuations in the state of trade, and in the value of property as represented in money. During the twenty years of war, from 1794 to 1814, there was a continued rise of prices; while a decline, almost equally great and long continued, has taken place since the peace. The public long flattered themselves that individual property in this country had received during the war an increase unexampled in our history; but they now find that we are about to fall back to the prices, the wages, and the incomes of 1792. The visions inspired by high prices have disappeared, and the computation of our augmented wealth seems to have no solid foundation except in so far as we have outstripped other countries in two important points, increase of population and improvement in the useful arts.

This re-action in the money value of income and property has been productive of great embarrassment and distress. The causes of it are and have long been a subject of anxious consideration, but they have not as yet been satisfactorily explained. To this we shall now appropriate a few pages, premising that the subject is rather intricate, and will call for the close attention of the reader.

The rise in the price of commodities in the late wars with France was steadily progressive, and reached eventually a great height. If we compute the degree of enhancement in provisions, wages, rents, and almost everything except manufactures, we shall find it to have been at the close of the war sixty or seventy per cent, on the prices of 1792; in other words, in the year 1812, L160 or L170 were required to make the purchases which in 1792 might have been made for L100.

This great advance is commonly ascribed to our bank paper, in particular to its increased issue and inconvertibility into cash in 1797. Admitting these to have been the main causes of the rise, it may be well to explain the mode in which they operated, and to endeavour to give a definite form to what is generally brought forward as vague allegation. This is a nice question, and will require a reference to our expenditure in former years.

It is now nearly a century and a half since this country adopted the funding system, or the plan of carrying on war with borrowed money. The result was both a great increase of yearly expenditure, and a continuance of that increase for a number of years. That a state of war enhances the price of commodities is generally admitted; the point is, to define in what manner it produces that effect. It does so chiefly in three ways:

1. By increasing taxes. 2. By withdrawing capital from productive to unproductive purposes; from agriculture, manufactures, and trade, to the maintenance of fleets and armies. The manner of doing this is by public loans, and the result is a rise generally very considerable in the rate of interest. 3. By withdrawing several hundred thousand men from productive to unproductive employment; that is, from agriculture, manufactures, and the work of mechanics, to service in the army and navy, or to preparing arms, clothing, and the various naval and military stores required by government. The number of men thus withdrawn from productive employment in the late wars was on an average 600,000, or fifteen per cent of our able-bodied population.

These causes of enhancement have operated powerfully in every war since the time of William III.; but in the military contests of the present age there were two additional causes of great importance, viz.

4. The repeated insufficiency of our crops, and the necessity of importing large quantities of corn. 5. The inconvertibility and eventual depreciation of our bank paper.

The effect of an insufficient crop in raising prices is easily understood; that of our bank paper requires some explanation. What then was the consequence of our bank paper becoming inconvertible, or no longer payable in cash? It was not so much an increase in the amount of our circulating medium, as a certainty of a continued supply. During the first years of the war, 1793, 1794, 1795, 1796, and the early part of 1797, our financial difficulties had been serious, and the expenditure of government had been repeatedly checked by remonstrances from the bank, founded on the state of foreign exchanges, and the drain, or apprehended drain, of gold from its coffers. But after the exemption of the bank from cash payments there was an end of such apprehensions, and government possessed an uninterrupted command of money, because the checks on its supply were removed.

Again, the direct causes of rise of prices in war are increase of taxation, and the withdrawing of men and capital from productive employment. Now to these causes, which in former times were restricted both in their duration and extent, the exemption from paying bank paper in cash gave a scope almost unlimited. The uninterrupted supply of money consequent on the exemption was felt in every department; among agriculturists in the payment of rents, among merchants in the discount of bills, and in the community at large by a silent acquiescence in the rise of wages, salaries, and the price of commodities; a rise which the war rendered necessary, but which had been strongly resisted until 1797. Hence a power in the commerce public of paying taxes and making loans to an unexampled amount. Facilities so many and so great went far to persuade the public that the successive additions to the sums of money paid for rents, wages, and the purchase of commodities, were proofs of increasing wealth. Few persons could perceive that this increase was, in a great measure, nominal; and still fewer could foresee the distressing extent of a re-action on the return of peace. Had our ministry been at all aware of that re-action, their scale of expenditure would have been very different.

Such were the causes of the rise of prices during the war; the fall has been almost as great since the peace, because circumstances have been altogether different. Government have needed less both of men and money, and have left both to be employed productively by the public. Many persons imagine that, had there been no such act as that of 1819, and had the exemption from cash payments been continued, prices would have been kept up, and the public would have been saved a great part of the distress that has taken place since 1819. In this, however, they go too far; their argument holds good only to a limited extent. During the war the exemption from cash payments had a most powerful effect on the prices; in peace its operation would have been temporary and partial, because the circumstances of the country were entirely altered. The causes of enhancement arising from war no longer existed; our men and capital were restored to productive employment; both served to augment our yearly supply of commodities, and consequently to furnish them at a cheaper rate. We were, besides, in open intercourse with the Continent, and in that case there is a continued tendency to a reduction of prices. Every year our markets felt the lowering effects of imports from countries less heavily burdened.

This was in a manner proved by experience. During no less than five years of peace, from 1814 to 1819, our bank notes were exempt from payment in cash, yet our prices progressively declined. All this shows that our prices would have decreased greatly after 1819, by the mere operation of peace, had there been no return to cash payments. It suggests also a consideration of considerable importance at the present moment, namely, that we ought to form a very moderate estimate of the effect that a return to small notes would produce on prices. That measure would tend to arrest the progress of distress, by preventing a further fall of prices; but it would be too much to expect that it could cause them to be reinstated, or to rise in any material degree.

It is a remarkable fact, that the difference in value between gold and bank paper was very slight for a length of time after the bank notes had ceased to be payable in cash. During no less than twelve years after 1797, the depreciation of our bank paper seldom reached five or six per cent, and that only at intervals when the import of foreign corn, as in 1801, or the payment of large subsidies, as in 1805, brought down our exchanges with the Continent. At last, in 1809, the fall of the exchanges, and the depreciation of bank notes, became very serious, and continued to be so during the remainder of the war. The causes were, the expense of the war in Portugal and Spain, which could not be defrayed by bills or bank notes, but required a great deal of specie; and the stoppage, by our orders in council, of the trade of America with the Continent of Europe, and of the large remittances to England arising from that trade.

These facts ought to be carefully considered, for they enable us to make a distinction of great importance in regard to bank paper when not convertible into cash. Irregular as such paper is, it may, when issued by so respect- Commerce—able an establishment as the Bank of England, and received and circulated freely for the purposes of sound money, such as paying taxes, making purchases, and discharging debts, maintain the value of coin for many years. It falls only when large sums are required abroad, and the payment of them must of course take place in gold and silver. It was thus that our bank paper, after so long maintaining its value, fell so suddenly and to so great an extent after 1809. From that time forward it proved a most unprofitable mode of paying on the Continent; while in this country it continued to circulate without any perceptible loss.

This difference in the local value of our notes, their depreciation abroad while their value was maintained at home, was long unperceived by the public. The want of this distinction accounts for a great part of the contradiction that prevailed on the bullion question. Of the various witnesses examined before the committee in 1810, a number insisted positively, and without qualification, that our bank paper was depreciated, and an equal number that it was not. The writers of the report maintained the former, and alleged that the depreciation arose from over-issue; but they were wholly unable to reconcile their opinion with facts, for it was contradicted by the official returns from the bank, which showed that there was no necessary connection between the amount of the notes in circulation and the degree of their depreciation. What was the result of this singular discrepancy? Each opinion had its advocates, and perhaps in equal number, until 1815, when, on the return of Bonaparte from Elba, an apprehension by the public of immediate war caused our exchanges with the Continent, and consequently our bank notes, compared with specie, to fall ten per cent. in one week. A few months afterwards, on the close of the war, the exchanges and bank paper were promptly reinstated, and all without altering the quantity of notes in circulation; for it had neither been increased at the time their value fell, nor contracted when it recovered.

These remarkable facts were observed by the late Mr Horner, and led his candid mind to review its former impressions. He then felt that in the bullion report he had carried too far the charge of over-issue by the bank, and made an admission to that effect before his death to Mr William Blake, the author of two very able pamphlets on subjects connected with the currency.

It appears, therefore, that the depreciation of our bank paper, compared to coin, though eventually great, was local and temporary. It applied strongly to foreign parts, but at home its effect was far from being general, and affected chiefly the articles which we were in the habit of importing from the Continent. Of these, corn was by far the most important; it happened unfortunately that the crops of 1809 and 1811 were both deficient, and that large imports were indispensable. Hence a rise in our corn markets to a degree which would certainly not have taken place had not our currency been greatly depreciated on the Continent.

We are thus enabled to perceive the great defect in the report of the bullion committee in 1810; a defect which was productive of very general perplexity. It consisted in making no distinction between two things which were very different: the rise of prices in consequence of the war, and the rise from the depreciation of our bank paper. The bullion report implied a belief that the two were coincident in point both of time and amount; whereas with regard to time, the rise of prices from the war had begun in 1795, before our bank paper could be depreciated; and as to amount, it (the rise of prices) had reached the height of thirty or forty per cent., compared to the prices of 1792, at a time (1805, 1806) when the inferiority of our paper to coin was not above five or six per cent. In short, the rise of prices began soon after the war, and lasted twenty years without intermission, whilst the depreciation of our bank notes was slight and temporary until 1809, and prevailed to a serious extent during little more than five or six years.

The losses incurred by speculation since the peace, however heavy, have only been occasional; the great feature of distress has been a continued decline of prices; and this decline has been felt in a variety of ways: in agricultural produce, in manufactures, in machinery, in every thing almost except funded property. From year to year the persons suffering under this decline cherished the hope that it had reached its limit, but in vain; prices have continued to fall, and it is not, even at present, possible to say where the downward progress will stop. Various causes have been assigned for this continued fall, such as the competition of foreigners, the resumption of cash payments, and the diminished supply of the precious metals from the mines. Each of these has, doubtless, borne its part in the decline; but the main cause is of a more comprehensive character, and is to be sought in the great difference of production in a state of war and a state of peace; that is, in the far greater amount of capital and labour applied to productive purposes in peace than in war.

How much is it to be regretted that the operation of this great cause of reduced prices should not have long since been understood! Had it been so, parliament, in enacting the return to cash payments, would have accompanied it with conditions very different from those of the law of 1819; and the committee of that year would probably have passed and adjourned the proposition of a bill till the ensuing session. The grounds for postponing such a bill were ample; the evidence was voluminous, the opinions of the witnesses were at variance with each other, and the subject was in a great measure new to most of the members of the committee.

In like manner, the following parliament, had it been aware of the real causes of the decline of prices since the peace, would have carefully avoided the recall of the small notes of country bankers. That recall was voted under an impression that the small notes had been issued to excess, and that the bankers alone were to blame for the losses occasionally sustained by the public, from their occasional insolvency. Both assertions were plausible, but neither was made good by proof. No allowance was made for the chief cause of insolvency among country bankers, namely, the law which so long limited the number of partners in an English country bank; nor was sufficient attention given to the security conferred on Scotland, by merely allowing a bank to extend the number of its partners. The enormous losses incurred in England from money panics in such years as 1793, 1810, 1816, and 1825, have almost all been the result of that most unfortunate law. Had it not existed, banks would have been constituted on a large scale; and panics would no more have occurred in England than in Scotland. After a season of overtrading, losses might, and probably would have been incurred by the partners in a bank, but not by the public; because, from the extent of their means, the banks would have been equal, and more than equal, to their engagements.

The act for the recall of the small notes was passed by parliament without a committee of inquiry, and without a knowledge of several very essential circumstances. The gold and silver required to replace the notes were expected from the American mines; but the dilapidated state of these mines was not known in England, still less was it apprehended that the yearly supply of gold and silver was unequal, and likely to continue unequal, to the co- Nor did parliament at all anticipate the continued depression of trade and agriculture, of which so large a part has been ascribed to this act.

Seven years have now elapsed since the recall of small notes in England, and since a similar measure was proposed in regard to Scotland. The latter will not, it is to be hoped, be renewed, for surely enough has occurred to show the expediency of parliament avoiding whatever may produce a further fall of prices. The objections felt to small notes, when our country banks were under a defective constitution, will hardly be entertained, after their stability shall have been placed beyond doubt; and that may be confidently expected, as soon as men of property shall find their liability confined within a safe limit by charters or otherwise. From establishments of such wealth there will be no cause to apprehend either loss from insolvency or issues to an undue extent.

There prevails with some persons an opinion, or rather an impression, that the re-issue of small notes might make money too abundant, and reduce our paper currency below the value of coin. In support of this impression, these persons cite the year 1824, when there took place a general rise in prices, our paper issues were enlarged, and our gold was sent abroad. But that remarkable state of things arose from causes not likely to recur again. A very large sum of gold had been brought into the Bank of England; on this the bank lowered its rate of discount, and government reduced the interest on the public funds. Hence a general abundance of money, a consequent rise in prices, and that spirit of speculation which such a rise never fails to engender. Our paper currency gave facilities to the speculative mania, but did not originate it, for it took place to a considerable degree in France, where there was comparatively but little paper.

The Bank of France is in the habit of making periodical reports to its stockholders, and of stating in each of them the amount of cash and bullion in hand. In this country a different course has been followed; and that the secrecy by the Bank of England has been productive of very heavy losses, will be apparent from the following statement:

The amount of gold in the Bank of England was very great during the years 1822, 1823, and part of 1824; but in the summer of 1824 the exchanges with the Continent began to turn against us, though the decline was so slight as hardly to fix the attention of the public. The consequence was a continued drain of gold for export, so that by the end of the year (1824) the amount in the coffers of the bank was materially lessened. Of this neither the private bankers nor the merchants had any idea; they, like the public in general, had been long accustomed to abundance of money, and still acted under the impression that the bank treasure was large, and likely so to continue. Hence the various speculations of 1825, the earliest of which were to a certain extent justifiable, whilst those which followed were in the highest degree absurd. The most pernicious of them were, not those carried on between persons in this country, as these took nothing out of the kingdom, but the extravagant purchases of foreign goods—of wool, cotton, timber, and other articles requiring to be paid in specie, and causing a drain of gold to the extent of half a million or a million sterling a month.

How different would have been the result had the bank directors thought fit to give notice to the principal houses in Lombard Street, that a very considerable drain of gold had taken place, and might, for ought they knew, continue. Had that been done at the end of 1824, the private bankers would have conveyed a caution to their customers, and taken some steps suitable to the circumstances, such, perhaps, as that of raising the rate of discount by one per cent. This would, doubtless, have been in some degree a check on trade, but the inconvenience to the public would have been slight, for the bank treasure was still large, and much more than equal to any demand in the regular course of business. A notice given in the end of 1824 would have been perfectly in time, for the extravagant part of the speculations did not begin till January 1825; and as the projectors all took for granted a continued abundance of money, not one in ten would, after such an intimation, have been carried into effect. Unfortunately no warning was given till the autumn of 1825, and then it came too late: goods ordered from abroad in vast quantities were by that time on the passage, or landing in our ports.

But this is not the only example of loss consequent on the public being kept in ignorance of the amount of cash in the bank. The over-trading of the year 1818, and the subsequent re-action, are to be traced to the same cause. The circumstances were briefly these: the favourable exchanges of 1816 and 1817 had brought large sums of gold into the country; money became plentiful, and a rise took place, first in the funds, afterwards in the price of almost all kinds of merchandise. This led to very imprudent purchases in 1818, which were followed the year after by a great and general fall of prices, and a long list of failures. Now in this case also a warning from the bank directors, given after they felt the re-action, would have been perfectly in time to prevent the mania of purchasing; for the gold in their coffers began to be lessened so early as July 1817.

The inference is, that a degree of publicity as to the amount of the treasure in the Bank of England would be of great importance to our merchants. It would aid them in fixing the extent to which they might purchase foreign goods, and in all engagements for which it is requisite to form an opinion of the probable course of the exchanges, or the state of the money market, at a distance of one, two, or three months.

The late parliamentary committee on the charter of the Bank of England gave rise to the expression of an opinion by several merchants on the law which limits the rate of interest on money. All who were questioned on the subject were in favour of its repeal. Such laws were at one time general throughout Europe, though seldom enforced on the Continent so strictly in this country. Unfortunately the restriction on the rate of interest was viewed favourably by the illustrious author of the Wealth of Nations; but since its pernicious tendency was clearly pointed out forty years ago by Mr Bentham, most of our statesmen and political economists have regarded it as highly impolitic, though, from their unacquaintance with the practice of trade, they are not aware of one tenth part of the injury it causes. Sergeant Onslow made repeated attempts in parliament to obtain a repeal of these laws, but in vain; the landed interest were adverse, and ministers, unwilling to alarm them, declined to support the repeal.

At last, in the session of 1830, Mr Poulet Thomson brought in a bill for a modified repeal, leaving the restriction in force whenever a borrower gave security on land or houses, but permitting a higher rate than five per cent. when there was no such security. This bill was well received in the House of Commons; but dropped in consequence of the dissolution of parliament on the demise of the late king. Let us hope that it will ere long be passed into a law, and that cautious capitalists will be enabled to come forward to the aid of persons in business, in a manner in which the result would, in our opinion, be more generally beneficial than the public are aware of.

A further and still greater benefit would arise from modifying certain taxes; from reducing those which press of taxes.