The greater number of people and their greater industry are serviceable in all cases—at home and abroad, in private and in public. But the greater plenty of money is very limited in its use, and may even sometimes be a loss to a nation in its commerce with foreigners.
There seems to be a happy concurrence of causes in human affairs which checks the growth of trade and riches, and hinders them from being confined entirely to one people, as might naturally at first be dreaded from the advantages of an established commerce. Where one nation has got the start of another in trade it is very difficult for the latter to regain the ground it has lost, because of the superior industry and skill of the former, and the greater stocks of which its merchants are possessed, and which enable them to trade for so much smaller profits. But these advantages are compensated, in some measure, by the low price of labour in every nation which has not an extensive commerce, and does not very much abound in gold and silver. Manufactures, therefore, gradually shift their places, leaving those countries and provinces which they have already enriched, and flying to others, whither they are allured by the cheapness of provisions and labour, till they have enriched these also and are again banished by the same causes. And, in general, we may observe that the dearness of everything, from plenty of money, is a disadvantage which attends an established commerce, and sets bounds to it in every country by enabling the poorer states to under-sell the richer in all foreign markets.
This has made me entertain a great doubt concerning the benefit of banks and paper-credit, which are so generally esteemed advantageous to every nation. That provisions and labour should become dear by the increase of trade and money is, in many respects, an inconvenience; but an inconvenience that is unavoidable, and the effect of that public wealth and prosperity which are the end of all our wishes. It is compensated by the advantages which we reap from the possession of these precious metals, and the weight which they give the nation in all foreign wars and negotiations. But there appears no reason for increasing that inconvenience by a counterfeit money, which foreigners will not accept in any payment, and which any great disorder in the state will reduce to nothing. There are, it is true, many people in every rich state who, having large sums of money, would prefer paper with good security, as being of more easy transport and more safe custody. If the public provide not a bank, private bankers will take advantage of this circumstance; as the goldsmiths formerly did in London, or as the bankers do at present in Dublin; and therefore it is better, it may be thought, that a public company should enjoy the benefit of the paper-credit which always will have place in every opulent kingdom. But to endeavour artificially to increase such a credit can never be the interest of any trading nation; but must lay them under disadvantages, by increasing money beyond its natural proportion to labour and commodities, and thereby heightening their price to the merchant and manufacturer. And in this view, it must be allowed that no bank could be more advantageous than such a one as locked up all the money it received,[13] and never augmented the circulating coin, as is usual, by returning part of its treasure into commerce. A public bank by this expedient might cut off much of the dealings of private bankers and money-jobbers; and though the state bore the charge of salaries to the directors and tellers of this bank (for, according to the preceding supposition, it would have no profit from its dealings), the national advantage, resulting from the low price of labour and the destruction of paper-credit, would be a sufficient compensation. Not to mention that so large a sum, lying ready at command, would be a great convenience in times of public danger and distress; and what part of it was used might be replaced at leisure, when peace and tranquillity were restored to the nation.