"I. The natural and physical causes are the advantages of the situation of the country, on the sea, and at the mouth of considerable rivers; its situation between the northern and southern parts, which, by being in a manner the centre of all Europe, made the Republic become the general market where the merchants on both sides used to bring their superfluous commodities, in order to barter and exchange the same for other goods they wanted.

"Nor have the barrenness of the country, and the necessities of the natives arising from that cause, less contributed to set them upon exerting all their application, industry, and utmost stretch of genius, to fetch from foreign countries what they stand in need of in their own, and to support themselves by trade.

"The abundance of fish in the neighboring seas put them in a condition not only to supply their own occasions, but with the overplus to carry on a trade with foreigners, and out of the produce of the fishery to find an equivalent for what they wanted through the sterility and narrow boundaries and extent of their own country.

"II. Among the moral and political causes are to be placed the unalterable maxim and fundamental law relating to the free exercise of different religions; and always to consider this toleration and connivance as the most effectual means to draw foreigners from adjacent countries to settle and reside here, and so become instrumental to the peopling of these provinces.

"The constant policy of the Republic to make this country a perpetual safe and secure asylum for all persecuted and oppressed strangers; no alliance, no treaty, no regard for, or solicitation of any potentate whatever, has at any time been able to weaken or destroy this law, or make the State recede from protecting those who have fled to it for their own security and self-preservation.

"Throughout the whole course of the persecutions and oppres sions that have occurred in other countries, the steady adherence of the Republic to this fundamental law has been the cause that many people have not only fled hither for refuge, with their whole stock in ready cash and their most valuable effects, but have also settled, and established many trades, fabrics, manufactories, arts, and sciences in this country, notwithstanding the first materials for the said fabrics and manufactories were wholly wanting in it, and not to be procured but at great expense from foreign parts.

"The constitution of our form of government, and the liberty thus accruing to the citizen, are further reasons to which the growth of trade and its establishment in the Republic may fairly be ascribed; and all her policy and laws are put upon such an equitable footing that neither life, estates, nor dignities depend on the caprice or arbitrary power of any single individual; nor is there any room for any person, who by care, frugality, and diligence has once acquired an affluent fortune or estate, to fear a deprivation of them by any act of violence, oppression, or injustice.

"The administration of justice in the country has, in like manner, always been clear and impartial, and without distinction of superior or inferior rank, whether the parties have been rich or

1

poor, or were this a foreigner and that a native; and it were greatly to be wished we could at this day boast of such impartial quickness and despatch in all our legal processes, seeing how great an influence it has on trade.

"To sum up all: amongst the moral and political causes of the former flourishing state of trade may be likewise placed the wisdom and prudence of the administration; the intrepid firmness of the councils; the faithfulness with which treaties and engagements were wont to be fulfilled and ratified; and, particularly, the care and caution practised to preserve tranquillity and peace, and to decline, instead of entering on a scene of war, merely to gratify the ambitious views of gaining fruitless or imaginary conquests.

"By these moral and political maxims was the glory and reputation of the Republic so far spread, and foreigners animated to place so great a confidence in the steady determinations of a State so wisely and prudently conducted, that a concourse of them stocked this country with an augmentation of inhabitants and useful hands, whereby its trade and opulence were from time to time increased.

"III. Amongst the adventitious and external causes of the rise and flourishing state of our trade may be reckoned: :

"That at the time when the best and wisest maxims were adopted in the Republic as the means of making trade flourish, they were neglected in almost all other countries; and any one reading the history of those times may easily discover that the persecutions on account of religion throughout Spain, Brabant, Flanders, and many other States and kingdoms, have powerfully promoted the establishment of commerce in the Republic.

"To this happy result, and the settling of manufacturers in our country, the long continuance of the civil wars in France, which were afterwards carried on in Germany, England, and divers other parts, have also very much contributed.

"It must be added, in the last place, that, during our most burdensome and heavy wars with Spain and Portugal (however ruinous that period was for commerce otherwise), these powers had both neglected their navy, whilst the navy of the Republic, by a conduct directly the reverse, was at the same time formidable, and in a capacity not only to protect the trade of its own subjects, but to annoy and crush that of their enemies in all quarters."

The preceding extracts contain more wisdom, and present more accurately the laws that govern the acquisition and preservation of wealth, than all the books on Political Economy ever written. They contain, in fact, all that is necessary to be known to reach the highest pitch of material greatness. Patient industry, religious toleration, the acknowledgment and sense of a law higher than any of man's provision, and exact justice and good faith in dealing with others, are certain to receive the highest benediction and reward that Providence

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can bestow. Among a people by whom such virtues were cultivated, the Political Economist would have been as superfluous and as much out of place as a fortune-teller.

The strange contrast to this picture is to be equally heeded, if the true method of human progress would be fully learned. It was the want of that which raised Holland to the highest pitch of prosperity that reduced Spain to the lowest abyss of impotence and decay. The latter should have learned to correct and abate dogma by reference to the material result. The religious must be summoned to plead at the bar of the secular, as the secular at the bar of the religious. They must mutually correct the vices and excesses of each other. A nation or people who cannot do this is far gone in the downward road, to fall an easy victim to the higher powers that surround it, which are as remorseless and inexorable as the laws of nature itself.1

After leaving Mill, we come to a vast swarm of writers, all of whom repeat him with a greater or less degree of extravagance, with the exception, perhaps, of Mr. H. D. Macleod, who has erected a vast system, measured by the number of pages devoted to it, the fundamental principle of which is that gold and silver serve as money by reason of being representative of debt; that paper serves as such by reason of being the representative of transferable debt; and that whatever represents transferable debt is currency, - paper money. The italics and capitals are his own.

"In this sentence," says Macleod (referring to Law's commentary upon Chamberlain's plan for a bank based upon real estate), "is concentrated the whole essence of that eternal delusion, so specious and plausible, and so fatal, which we designate as LAWISM. It is, indeed, nothing but the stupendous fallacy that money represents commodities, and that paper currency may be based upon commodities. This delusion is deeply prevalent in the public mind at the present day, and probably there are few persons, except those who have studied the true philosophical principles of Political Economy, whose views are not deeply tainted with this infection. No man who does not thoroughly understand the great

1 Charles V. being, in 1550, in Biervliet, where Beukels was buried, visited his grave, and ordered a magnificent monument to be erected to the memory of one to whom his country owed so much. What would have been his emotions could the veil of the future have been lifted so as to disclose the real significance and effect of Beukels' discovery in the disaster and ruin brought upon

his house?

fundamental doctrine established by Turgot and others, that money does not represent commodities, can ever have sound ideas on this subject. MONEY DOES NOT REPRESENT COMMODITIES AT ALL,

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BUT ONLY DEBT; OR SERVICES DUE, WHICH HAVE NOT YET RECEIVED THEIR EQUIVALENT IN COMMODITIES. Now, the views of Law are much more extensively prevalent than is generally supposed. All who think that there is any necessary connection between the quantity of money in a country and the quantity of commodities in it are influenced by them. Take the case of a private individual. Is there any necessary relation between the quantity of money he retains and the quantity of commodities he purchases? The quantity of money he has is just the quantity of debt of services due to him, which he has not yet parted with for something else. It is the quantity of power for purchasing commodities he has over and above what he has already expended. And the quantity of money a nation possesses is simply the quantity of accumulated industry it possesses over and above all commodities; but they have no relation to each other. Now, money does not represent commodities; but it represents that portion of a man's industry which is reserved for future use. Whatever a man earns is the fruit of his industry, money included; and none of the separate items represent any thing else, though it may be exchanged for other things. Now, the value of money depends upon its relations to what it represents, namely, debt, and not to commodities. If money or currency increases faster than debt or services due, it immediately causes a diminution of its value. If debt increases faster than money or currency, then the value of money is raised. The infallible consequence, therefore, of an increase of currency, without a corresponding increase of debt, is to change the existing proportion between debt and currency, and to cause a depreciation of the latter commensurate to the changed proportion. The necessary and inevitable consequence, then, of issuing vast quantities of paper currency on the assumed value of property, is simply to cause a total subversion of the foundation of all value and of all property, and to plunge every creditor into irretrievable ruin.

"We must, therefore, be careful to be just to Law. He was no advocate of an unlimited inconvertible paper currency. Quite the reverse. But, seeing that a convertible paper currency could only be based upon bullion to a certain limited extent, preserving its equality in value with bullion, his idea was to base a paper currency upon some other article of value; and he thought that it might preserve its equality in value to silver on an independent basis. His idea was, that it was only necessary to have it represent some article of value. But this attempt was contrary to the nature of things. His paper currency, though avowedly based upon things of value, had exactly the same practical effects as if it had been based upon silver. It became redundant, and swamped every thing. And the reason is plain it was a violation of the fundamental principle we have obtained Where there is no debt, there can be no currency.' And the fresh quantities of currency issued

on such a principle only represent the previously existing amount of debt, and then suffer a necessary diminution in value.

"The foregoing considerations also show the complete fallacy of the theory we have been discussing, of issuing notes upon 'good bills.' In a banker's sense, a good bill' means simply a bill which is duly paid by the proper party at maturity. It is not of the smallest consequence to him whether the transaction out of which the bill originated is a profit or a loss to the person who incurred the obligation, as long as he is paid. But if the expression 'good bill' be taken in a more extended and philosophical sense to denote a bill upon which it is safe to issue currency, it is a very different matter indeed; for then a 'good bill' can only mean one generated by a successful operation.

"It is not a little remarkable that Adam Smith adopts both the theories of paper currency which have imposed so extensively on the banking and mercantile world, and that within a very few pages of each other: the one theory, that which the Bank Directors and merchants adopted in 1810; the other, which is the great currency fallacy of the present day. The two theories are utterly irreconcilable and inconsistent with each other: the one necessarily leads to the most excessive overissues and depreciation of the paper currency; the other, if carried out in all its integrity, would be utterly destructive to the business of banking.

"What, then, is the only true foundation of a paper currency? Every consideration of sound reasoning and science proves that the only true foundation of a paper currency is that substance which is the legal or the universally accepted representative of DEBT, i.e., of services due, whatever that substance may be. Now, among all civilized nations, gold or silver bullion is the acknowledged representative of debt. Consequently, gold or silver bullion is the only true basis of a paper currency. Among all civilized nations, the weight of bullion is the acknowledged measure of value; and, consequently, bullion is the only true basis of the 'promises to pay.' Many unthinking persons declaim against the absurdity of founding a paper currency upon the commodity of gold bullion, rather than any other commodity, such as wheat, or silk, or sugar. But it is not as a commodity that bullion is the basis of a paper currency, but as the substance which is the accepted representative of debt. It would be perfectly possible to make a yard of broadcloth, or a Dutch cheese, representative of debt and the measure of value. Then broadcloth or Dutch cheeses would be the only true basis of a paper currency; and to issue paper upon the basis of bullion would, in such a case, be as improper as to issue paper upon the basis of broadcloth or Dutch cheeses, under existing circumstances. But all nations are agreed that bullion is better fitted by nature for such purpose than broadcloth or Dutch cheeses; and, consequently, as it seems to be the substance pointed out by Nature herself for representing debt, it is the substance which forms the only true basis of a paper currency.

1 Macleod on Banking, vol. ii. pp. 172-174.