Cyclopædia of Political Science, Political Economy, and the Political History of the United States
By John J. Lalor
NEITHER American nor English literature has hitherto possessed a Cyclopædia of Political Science and Political Economy. The want of a work of reference on these important branches of knowledge has long been felt, especially by lawyers, journalists, members of our state and national legislatures, and the large and intelligent class of capitalists and business men who give serious thought to the political and social questions of the day. The present work, which will be completed in three volumes, is the first to supply that want. It is also the first Political History of the United States in encyclopædic form—the first to which the reader can refer for an account of the important events or facts in our political history, as he would to a dictionary for the precise meaning of a word. The French, the Germans and even the Italians are richer in works of reference on political science and political economy than the Americans or the English. The Germans have Rotteck and Welcker’s
Staatslexikon, and Bluntschli and Brater’s
Staatswörterbuch; the French, Block’s
Dictionnaire Général de la Politique, and the celebrated
Dictionnaire de l’Economie Politique, edited by Guillaumin and Coquelin.The “Cyclopædia of Political Science, Political Economy, and of the Political History of the United States” is intended to be to the American and English reader what the above-named works are to French and German students of political science and political economy. The articles by foreigners in our work are largely translations from the
Dictionnaire de l’Economie Politique, the
Dictionnaire Général de la Politique, the
Staatswörterbuch, and original articles by Mr. T. E. Cliffe Leslie, the eminent English economist; while the American articles are by the best American and Canadian writers on political economy and political science. The task of writing the articles on the political history of the United States was confided to one person, Mr. Alexander Johnston, of Norwalk, Connecticut, thoroughness, conciseness and the absence of repetition and of redundancy being thus secured…. [From the Preface]
First Pub. Date
New York: Maynard, Merrill, and Co.
Originally printed in 3 volumes. Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
The text of this edition is in the public domain.
- V.1, Entry 1, ABDICATION
- V.1, Entry 2, ABOLITION AND ABOLITIONISTS
- V.1, Entry 3, ABSENTEEISM
- V.1, Entry 4, ABSOLUTE POWER
- V.1, Entry 5, ABSOLUTISM
- V.1, Entry 6, ABSTENTION
- V.1, Entry 7, ABUSES IN POLITICS
- V.1, Entry 8, ABYSSINIA
- V.1, Entry 9, ACADEMIES
- V.1, Entry 10, ACADEMIES
- V.1, Entry 11, ACCLAMATION
- V.1, Entry 12, ACCUMULATION OF WEALTH
- V.1, Entry 13, ACT
- V.1, Entry 14, ADAMS
- V.1, Entry 15, ADAMS
- V.1, Entry 16, ADAMS
- V.1, Entry 17, ADAMS
- V.1, Entry 18, ADJOURNMENT
- V.1, Entry 19, ADMINISTRATION
- V.1, Entry 20, ADMINISTRATIONS
- V.1, Entry 21, AFRICA
- V.1, Entry 22, AGE
- V.1, Entry 23, AGENT
- V.1, Entry 24, AGENTS
- V.1, Entry 25, AGIO
- V.1, Entry 26, AGIOTAGE
- V.1, Entry 27, AGRICULTURE
- V.1, Entry 28, ALABAMA
- V.1, Entry 29, ALABAMA CLAIMS
- V.1, Entry 30, ALASKA
- V.1, Entry 31, ALBANY PLAN OF UNION
- V.1, Entry 32, ALBANY REGENCY
- V.1, Entry 33, ALCALDE
- V.1, Entry 34, ALCOHOL
- V.1, Entry 35, ALGERIA
- V.1, Entry 36, ALGERINE WAR
- V.1, Entry 37, ALIEN AND SEDITION LAWS
- V.1, Entry 38, ALIENS
- V.1, Entry 39, ALLEGIANCE
- V.1, Entry 40, ALLEGIANCE
- V.1, Entry 41, ALLIANCE
- V.1, Entry 42, ALLIANCE
- V.1, Entry 43, ALLOYAGE
- V.1, Entry 44, ALMANACH DE GOTHA
- V.1, Entry 45, ALSACE-LORRAINE
- V.1, Entry 46, AMBASSADOR
- V.1, Entry 47, AMBITION
- V.1, Entry 48, AMENDMENTS TO THE CONSTITUTION
- V.1, Entry 49, AMERICA
- V.1, Entry 50, AMERICAN MERCHANT MARINE
- V.1, Entry 51, AMERICAN PARTY
- V.1, Entry 52, AMERICAN WHIGS
- V.1, Entry 53, AMES
- V.1, Entry 54, AMISTAD CASE
- V.1, Entry 55, AMNESTY
- V.1, Entry 56, AMNESTY
- V.1, Entry 57, ANAM
- V.1, Entry 58, ANARCHY
- V.1, Entry 59, ANCIEN RÉGIME
- V.1, Entry 60, ANDORRA
- V.1, Entry 61, ANHALT
- V.1, Entry 62, ANNEXATION
- V.1, Entry 63, ANNEXATIONS
- V.1, Entry 64, ANTI-FEDERAL PARTY
- V.1, Entry 65, ANTI-MASONRY
- V.1, Entry 66, ANTI-NEBRASKA MEN
- V.1, Entry 67, ANTI-RENTERS
- V.1, Entry 68, ANTI-SLAVERY.
- V.1, Entry 69, APPORTIONMENT
- V.1, Entry 70, APPROPRIATION.
- V.1, Entry 71, APPROPRIATIONS
- V.1, Entry 72, ARBITRAGE
- V.1, Entry 73, ARBITRARY ARRESTS
- V.1, Entry 74, ARBITRARY POWER
- V.1, Entry 75, ARBITRATION
- V.1, Entry 76, ARCHONS
- V.1, Entry 77, AREOPAGUS.
- V.1, Entry 78, ARGENTINE CONFEDERATION
- V.1, Entry 79, ARISTOCRACY.
- V.1, Entry 80, ARISTOCRATIC AND DEMOCRATIC IDEAS.
- V.1, Entry 81, ARITHMETIC
- V.1, Entry 82, ARIZONA
- V.1, Entry 83, ARKANSAS
- V.1, Entry 84, ARMISTICE
- V.1, Entry 85, ARMIES
- V.1, Entry 86, ARMY
- V.1, Entry 87, ARTHUR
- V.1, Entry 88, ARTISANS
- V.1, Entry 89, ARYAN RACES.
- V.1, Entry 90, ASIA
- V.1, Entry 91, ASSEMBLY (IN U. S. HISTORY)
- V.1, Entry 92, ASSESSMENTS
- V.1, Entry 93, ASSIGNATS
- V.1, Entry 94, ASSOCIATION AND ASSOCIATIONS
- V.1, Entry 95, ASYLUM
- V.1, Entry 96, ATELIERS NATIONAUX
- V.1, Entry 97, ATTAINDER
- V.1, Entry 98, ATTORNEYS GENERAL
- V.1, Entry 99, AUSTRALIA
- V.1, Entry 100, AUSTRIA-HUNGARY
- V.1, Entry 101, AUTHORITY
- V.1, Entry 102, AUTHORS
- V.1, Entry 103, AUTOCRAT
- V.1, Entry 104, AUTONOMY.
- V.1, Entry 105, AYES AND NOES
- V.1, Entry 106, BADEN
- V.1, Entry 107, BALANCE OF POWER
- V.1, Entry 108, BALANCE OF TRADE
- V.1, Entry 109, BALLOT
- V.1, Entry 110, BANK CONTROVERSIES
- V.1, Entry 111, BANKING
- V.1, Entry 112, BANK NOTES.
- V.1, Entry 113, BANKRUPTCY.
- V.1, Entry 114, BANKRUPTCY, National.
- V.1, Entry 115, BANKS.
- V.1, Entry 116, BANKS, Functions of.
- V.1, Entry 117, BANKS OF ISSUE
- V.1, Entry 118, BANKS, Advantages of Savings.
- V.1, Entry 119, BANKS, History and Management of Savings,
- V.1, Entry 120, BAR
- V.1, Entry 121, BARNBURNERS
- V.1, Entry 122, BARRICADE
- V.1, Entry 123, BARTER.
- V.1, Entry 124, BASTILLE
- V.1, Entry 125, BAVARIA
- V.1, Entry 126, BELGIUM
- V.1, Entry 127, BELL
- V.1, Entry 128, BELLIGERENTS
- V.1, Entry 129, BENTON
- V.1, Entry 130, BERLIN DECREE
- V.1, Entry 131, BILL
- V.1, Entry 132, BILL OF EXCHANGE
- V.1, Entry 133, BILL OF RIGHTS
- V.1, Entry 134, BILLION
- V.1, Entry 135, BILLS
- V.1, Entry 136, BI-METALLISM.
- V.1, Entry 137, BIRNEY
- V.1, Entry 138, BLACK COCKADE
- V.1, Entry 139, BLACK CODE.
- V.1, Entry 140, BLACK REPUBLICAN.
- V.1, Entry 141, BLAINE
- V.1, Entry 142, BLAIR
- V.1, Entry 143, BLOCKADE
- V.1, Entry 144, BLOODY BILL
- V.1, Entry 145, BLUE LAWS
- V.1, Entry 146, BLUE LIGHT
- V.1, Entry 147, BOARD OF TRADE.
- V.1, Entry 148, BOLIVIA
- V.1, Entry 149, BOOTY
- V.1, Entry 150, BORDER RUFFIANS
- V.1, Entry 151, BORDER STATES
- V.1, Entry 152, BOURGEOISIE
- V.1, Entry 153, BOUTWELL
- V.1, Entry 154, BRAHMANISM.
- V.1, Entry 155, BRAZIL
- V.1, Entry 156, BRECKENRIDGE
- V.1, Entry 157, BROAD SEAL WAR
- V.1, Entry 158, BROKERS
- V.1, Entry 159, BROOKS
- V.1, Entry 160, BROWN
- V.1, Entry 161, BUCHANAN
- V.1, Entry 162, BUCKSHOT WAR
- V.1, Entry 163, BUCKTAILS
- V.1, Entry 164, BUDDHISM
- V.1, Entry 165, BUDGET
- V.1, Entry 166, BULL
- V.1, Entry 167, BUNDESRATH
- V.1, Entry 168, BUREAUCRACY
- V.1, Entry 169, BURGESSES
- V.1, Entry 170, BURLINGAME
- V.1, Entry 171, BURR
- V.1, Entry 172, BUTLER, Benj. F.
- V.1, Entry 173, BUTLER, William Orlando
- V.1, Entry 174, CACHET
- V.1, Entry 175, CÆSARISM
- V.1, Entry 176, CALENDAR
- V.1, Entry 177, CALHOUN
- V.1, Entry 178, CALIFORNIA
- V.1, Entry 179, CANADA
- V.1, Entry 180, CANALS
- V.1, Entry 181, CANON LAW
- V.1, Entry 182, CAPITAL
- V.1, Entry 183, CAPITAL
- V.1, Entry 184, CAPITULATION
- V.1, Entry 185, CARICATURE
- V.1, Entry 186, CARPET BAGGERS
- V.1, Entry 187, CARTEL
- V.1, Entry 188, CASS
- V.1, Entry 189, CASUS BELLI
- V.1, Entry 190, CAUCUS
- V.1, Entry 191, CAUCUS SYSTEM
- V.1, Entry 192, CAUSE AND EFFECT IN POLITICS.
- V.1, Entry 193, CELIBACY, Clerical
- V.1, Entry 194, CELIBACY, Political Aspects of.
- V.1, Entry 195, CELTS.
- V.1, Entry 196, CENSURE.
- V.1, Entry 197, CENSURE OF MORALS.
- V.1, Entry 198, CENSURES
- V.1, Entry 199, CENSUS.
- V.1, Entry 200, CENTRALIZATION and DECENTRALIZATION.
- V.1, Entry 201, CEREMONIAL
- V.1, Entry 202, CHAMBER OF COMMERCE.
- V.1, Entry 203, CHARGÉ D'AFFAIRES.
- V.1, Entry 204, CHARITY, Private.
- V.1, Entry 205, CHARITY, Public.
- V.1, Entry 206, CHARITY, State.
- V.1, Entry 207, CHASE
- V.1, Entry 208, CHECKS AND BALANCES.
- V.1, Entry 209, CHEROKEE CASE
- V.1, Entry 210, CHESAPEAKE CASE.
- V.1, Entry 211, CHILI.
- V.1, Entry 212, CHINA
- V.1, Entry 213, CHINESE IMMIGRATION.
- V.1, Entry 214, CHIVALRY.
- V.1, Entry 215, CHRISTIANITY.
- V.1, Entry 216, CHURCH AND STATE
- V.1, Entry 217, CHURCH
- V.1, Entry 218, CHURCH
- V.1, Entry 219, CHURCH
- V.1, Entry 220, CHURCHES AND RELIGIONS
- V.1, Entry 221, CHURCHES
- V.1, Entry 222, CINCINNATI
- V.1, Entry 223, CIPHER DISPATCHES AND DECIPHERMENT
- V.1, Entry 224, CIRCULATION OF WEALTH.
- V.1, Entry 225, CITIES
- V.1, Entry 226, CITIES AND TOWNS.
- V.1, Entry 227, CIVIL ADMINISTRATION
- V.1, Entry 228, CIVIL LIST.
- V.1, Entry 229, CIVIL RIGHTS BILL
- V.1, Entry 230, CIVIL SERVICE REFORM
- V.1, Entry 231, CIVILIZATION
- V.1, Entry 232, CLAY
- V.1, Entry 233, CLEARING, AND CLEARING HOUSES
- V.1, Entry 234, CLERICALISM
- V.1, Entry 235, CLIENTÈLE AND CUSTOM
- V.1, Entry 236, CLIMATE
- V.1, Entry 237, CLIMATE
- V.1, Entry 238, CLINTON
- V.1, Entry 239, CLINTON, George
- V.1, Entry 240, CL�TURE
- V.1, Entry 241, COASTING TRADE
- V.1, Entry 242, COCHIN CHINA
- V.1, Entry 243, COINAGE
- V.1, Entry 244, COLFAX
- V.1, Entry 245, COLONIZATION SOCIETY
- V.1, Entry 246, COLORADO
- V.1, Entry 247, COLOMBIA
- V.1, Entry 248, COMMERCE.
- V.1, Entry 249, COMMERCIAL CRISES
- V.1, Entry 250, COMMISSION
- V.1, Entry 251, COMMITTEES
- V.1, Entry 252, COMMON LAW
- V.1, Entry 253, COMMONS
- V.1, Entry 254, COMMUNE
- V.1, Entry 255, COMMUNISM
- V.1, Entry 256, COMPETITION.
- V.1, Entry 257, COMPROMISES
- V.1, Entry 258, COMPULSORY CIRCULATION
- V.1, Entry 259, COMPULSORY EDUCATION
- V.1, Entry 260, CONCESSION
- V.1, Entry 261, CONCLAVE.
- V.1, Entry 262, CONCLUSUM
- V.1, Entry 284, CONSTITUTION OF THE UNITED STATES
- V.1, Entry 301, CONVENTION
- V.1, Entry 375, DISTILLED SPIRITS
- V.1, Entry 384, DOMINION OF CANADA
- V.2, Entry 7, EDUCATION
- V.2, Entry 18, EMBARGO
- V.2, Entry 33, EXCHANGE
- V.2, Entry 35, EXCHANGE OF PRISONERS
- V.2, Entry 37, EXCHANGE OF WEALTH
- V.2, Entry 121, GREAT BRITAIN
- V.2, Entry 130, HABEAS CORPUS
- V.2, Entry 180, INDUSTRIAL ARBITRATION AND CONCILIATION
- V.2, Entry 225, JUSTICE, Department of
- V.2, Entry 246, LAW
- V.2, Entry 364, NEW GRANADA
- V.2, Entry 379, NULLIFICATION
- V.3, Entry 4, OCEANICA
- V.3, Entry 29, PARIS MONETARY CONFERENCE
- V.3, Entry 32, PARLIAMENTARY LAW.
- V.3, Entry 116, RACES OF MANKIND
- V.3, Entry 137, REPUBLICAN PARTY
- V.3, Entry 155, ROMAN CATHOLIC CHURCH.
- V.3, Entry 195, SLAVERY
- V.3, Entry 278, UNITED STATES OF AMERICA
- V. 2, List of Writers
- V. 3, List of Writers
- V. 3, List of American Writers
BALANCE OF TRADE
BALANCE OF TRADE, in commerce, the term commonly used to express the difference between the value of the exports from, and imports into a country: the balance used to be said to be favorable when the value of the exports exceeded that of the imports, and unfavorable when the value of the imports exceeded that of the exports. And in many countries this was long believed to be the case, and to a late period they were annually congratulated by their finance ministers on the excess of exports over the imports.
—The attainment of a favorable balance was formerly regarded as an object of the greatest importance. The precious metals, in consequence of their being used as money, were long considered as the only real wealth that could be possessed either by individuals or nations. And as countries without mines could not obtain supplies of these metals except in exchange for exported products, it was concluded, that if the value of the commodities exported exceeded that of those imported, the balance would have to be paid by the importation of an equivalent amount of the precious metals; and conversely. A very large proportion of the restraints imposed on the freedom of commerce during the last three centuries grew out of this notion. The importance of having a favorable balance being universally admitted, every effort was made to attain it; and nothing seemed so effectual for this purpose as the devising of schemes to facilitate exportation, and to hinder the importation of almost all products, except gold and silver, that were not intended for future exportation. But the gradual though slow growth of sounder opinions with respect to the nature and functions of money, showed the futility of a system of policy having such objects in view. It is now conceded on all hands that gold and silver are nothing but commodities; and that it is in no respect necessary to interfere either to encourage their importation or to prevent their exportation. In Great Britain they may be freely exported and imported, whether in the shape of coin or in that of bullion. The truth is, however, that the theory of the balance of trade was not erroneous merely from the false notions which its advocates entertained with respect to money, but proceeded on radically mistaken views as to the nature of commerce. The mode in which the balance was usually estimated was, indeed, completely fallacious. But had it been correctly ascertained, it would have been found, in opposition to the common opinion, that the imports into commercial countries must, speaking generally, exceed the exports; and that a balance, whether on the one side or the other, is but rarely cancelled by a bullion payment.
—I. The proper business of the wholesale merchant consists in carrying the various products of the different countries of the world from the places where their value is least to those where it is greatest, or, which is the same thing, in distributing them according to the effective demand. It is clear, however, that there could be no motive to export any species of produce, unless that which it was intended to import in its stead were of greater value. When an English merchant commissions a quantity of Polish wheat, he calculates on its selling for so much more than its price in Poland, as will be sufficient to pay the expense of freight, insurance, etc, and to yield, besides, the common and ordinary rate of profit on the capital employed. If the wheat did not sell for this much, its importation would obviously be a loss to the importer. It is plain, then, that no merchant ever did or ever will export, but in the view of importing something more valuable in return. And so far from an excess of exports over imports being any criterion of an advantageous commerce, it is directly the reverse; and the truth is, notwithstanding all that has been said and written to the contrary, that unless the value of the imports exceeded that of the exports, foreign trade could not be carried on. Were this not the case—that is, were the value of the exports always greater than the value of the imports—merchants would lose on every transaction with foreigners, and the trade with them would be speedily abandoned.
—In England the rates at which all articles of export and import are officially valued were fixed so far back as 1696. But the very great alteration that has since taken place, not only in the value of money, but also in the cost of by far the greater number of the commodities of that and other countries, long ago rendered the official valuation of no use whatever, either as a means of learning the values or the quantities of the exports or imports. In so far, however, as respects the former, this defect was unintentionally remedied in 1798, when the “convoy duty,” being an ad valorem tax laid on the exports, furnished the means of ascertaining their amount. And the importance of the information so obtained was such, that, whether articles of export have or have not been charged with duties, exporters have since been made to declare, in every case, the
real value of the articles which they export.
—It has been alleged, and apparently with some probability, that merchants have not unfrequently been in the habit of exaggerating the value of articles entitled to drawbacks on exportation. But the extension and improvement of the warehousing system, and the diminution of the number of drawbacks, have materially lessened whatever fraud or inaccuracy may have arisen from this source. So long, indeed, as the greater number of articles were charged with an ad valorem duty of 10s. per cent. on exportation, it may be presumed that their value was rather under than overrated. But since the repeal of that duty (5 and 6 Vict. c. 47, s. 40), their declared value is believed to come very near the truth: at least, sufficiently so for all practical purposes.
—But until very recently no authentic information was obtained in regard to the value of the imports
In 1848, however, the board of customs having approved a plan suggested by Mr. Messenger, inspector general of imports and exports, for ascertaining the value of the former, it was submitted by them to the treasury. And its advantages having been fully appreciated by Mr. James Wilson, M. P., then secretary to their lordships, it was carried into effect in 1854. It is needless to enter into any minute details with respect to the mode of computing the values of the imports. It is sufficient to state that it is effected by ascertaining the current prices of imported articles from price-currents, mercantile circulars, etc., and from these deducing the aggregate value of each. It would be idle to suppose that results derived from a process of this sort should be altogether exact; but the errors it involves are of no great moment, and for statistical purposes it may be reckoned quite correct and most valuable.
—We venture to say that, though we have no means of comparing the real values of the imports with those of the exports, we have no doubt that the former very considerably exceed the latter. It can hardly, indeed, be otherwise. The value of an exported commodity is estimated at the moment of its being sent abroad, and
before its cost is increased by the expense of transporting it to the place of its destination; whereas the value of the commodity imported in its stead is estimated
after it has arrived at its destination, and, consequently, after its cost has been enhanced by the expense of freight, insurance, importers’ profits, etc.
—To measure, therefore, the advantage of commerce by the excess of the exports over the imports is a proceeding false alike in fact and principle. The value of the imports, in all but anomalous and extremely rare instances, invariably exceeds that of the exports. And it is plain that this excess, whatever it may be, forms the only fund whence the expenses and profits of the merchants can be derived. The larger, consequently, it becomes, the more will it be for their advantage.
—In the United States the value of the imports, as ascertained by the custom-house returns, has usually exceeded the value of the exports. And, although the English politicians were in the habit of considering the excess of the former as a certain proof of a disadvantageous commerce, “it is nevertheless true,” says Mr. Pitkin, “that the real gain of the United States has
been nearly in proportion as their imports have exceeded their exports.” (
Commerce of the United States, 2nd edit. p. 280.) The excess of American imports has in part been occasioned by the Americans generally exporting their own surplus produce, and, consequently, receiving from foreigners not only an equivalent for their exports, but also for the cost of conveying them to the foreign market. “In 1811,” says the author just quoted, “flour sold in America for
nine dollars and a half per barrel, and in Spain for
fifteen dollars. The value of the cargo of a vessel carrying 5,000 barrels of flour would, therefore, be estimated at the period of its exportation at $47,500; but as this flour would sell, when carried to Spain, for $75,000, the American merchant would be entitled to draw on his agent in Spain for $27,500 more than the flour cost in America; or than the sum for which he could have drawn had the flour been exported in a vessel belonging to a Spanish merchant. But the transaction would not end here. The $75,000 would be vested in some species of Spanish or other European goods fit for the American market: and the freight, insurance, etc., on account of the return cargo, would probably increase its value to $100,000; so that, in all, the American merchant might have imported goods worth $52,500 more than the flour originally sent to Spain.” It is as impossible to deny that such a transaction as this is advantageous, as it is to deny that its advantage consists entirely in the excess of the value of the goods imported over the value of those exported. And it is equally clear that America might have had the real balance of payments in her favor, though such transactions as the above had been multiplied to any conceivable extent.
—II. In the second place, when a balance is due from one country to another, it is but seldom that it is paid by remitting bullion from the debtor to the creditor country. If the sum due by the British merchants to those of Holland be greater than the sum due by the latter to them, the balance of payments will be against Britain; but this balance will not, and indeed can not, be discharged by an exportation of bullion,
unless bullion be, at the time, the cheapest exportable commodity; or, which is the same thing,
unless it may be more advantageously exported than anything else. To illustrate this principle, let us suppose that the balance of debt, or the excess of the value of the bills drawn by the merchants of Amsterdam on London, over those drawn by the merchants of London on Amsterdam, amounts to £100,000 it is the business of the London merchants to find out the means of discharging this debt with the least expense; and it is plain, that if they find that any less sum, as £96,000, £97,000, or £99,900 will purchase and send to Holland as much cloth, cotton, hardware, colonial produce, or any other commodity, as will sell in Amsterdam for £100,000, no gold or silver will be exported. The laws which regulate the trade in bullion are not in any degree different from those which regulate the trade in other commodities. It is exported only when its exportation is advantageous, or when it is more valuable abroad than at home. It would, in fact, be quite as reasonable to expect that water should flow from a low to a high level, as it is to expect that bullion should
leave a country where its value is great, to go to one where it is low! It is never sent abroad to destroy, but always to find its level. The balance of payments might be 10 or 100,000,000, against a particular country, without causing the exportation of a single ounce of bullion. Common sense tells us that no merchant will remit £100 worth of bullion to discharge a debt in a foreign country, if it be possible to invest any smaller sum in any species of merchandise which would sell abroad for £100 exclusive of expenses. The merchant who deals in the precious metals is as much under the influence of
self interest as he who deals in coffee or indigo; and what merchant would attempt to extinguish a debt by exporting coffee which cost £100, if he could effect his object by sending abroad indigo which cost only £99?
—The argument about the balance of payments is one of those that contradict and confute themselves. Had the apparent excess of exports over imports, as indicated by the British custom-house books for the hundred years down to 1853, been always paid in bullion, as the supporters of the old theory contend is the case, there should at this moment be some 500,000,000 or 600,000,000 of bullion in the country, instead of 80,000,000 or 100,000,000, which it is supposed at most to amount to! Nor is this all. If the theory of the balance were good for anything—if it had not been a mere idle delusion—it follows, as every country in the world has had its favorable balance, that they must have been paid by an annual importation of bullion from the mines corresponding to their aggregate amount. But it is certain that the entire produce of the mines, great as it is, though it were increased in a
fivefold proportion, would be insufficient for this purpose! This
reductio ad absurdum is decisive of the degree of credit that should be attached to conclusions respecting the flourishing state of the commerce of any country drawn from the excess of the exports over the imports!
—Not only, therefore, is the theory with respect to the balance of trade erroneous, but the very reverse of that theory is true. In the
first place, the value of the commodities imported by every country which carries on an advantageous commerce (and no other will be prosecuted for any considerable period) invariably exceeds the value of those which she exports. Unless such were the case, there would plainly be no fund whence the merchants and others engaged in foreign trade could derive either a profit on their capital, or a return for their outlay and trouble; and in the
second place, whether the balance of debt be for or against a country, that balance will neither be paid nor received in bullion, unless it be at the time the commodity by the exportation or importation of which the account may be most profitably settled. Whatever the partisans of the doctrine as to the balance may say about money being a preferable product, or
merchandise par excellence, it is certain it will never appear in the list of exports and imports while there is anything else with which to carry on trade, or cancel debts, that will yield a larger profit, or occasion a less expense to the debtors.
—It is difficult to estimate the mischief which the absurd notions relative to the balance of trade have occasioned in almost every commercial country. It is principally to the prevalence of prejudices to which they have given rise, that the restrictions on the trade between Great Britain and France are to be ascribed. The great or rather the only argument insisted upon by those who prevailed on the legislature, in the reign of William and Mary, to declare the trade with France a
nuisance, was founded on the statement that the value of the imports from that kingdom considerably exceeded the value of the commodities exported to it. The balance was regarded as a
tribute paid by England to France, and it was sagaciously asked, what had England done, that she should be obliged to pay so much money to her natural enemy? It never occurred to those who so loudly abused the French trade, that no merchant would import any commodity from France, unless it brought a higher price in England than the commodity exported to pay it; and that the profit of the merchant, or the national gain, would be in exact proportion to this excess of price. The very reason assigned by these persons for prohibiting the trade affords the best attainable proof of its having been a lucrative one; nor can there be any doubt that an unrestricted freedom of intercourse between the two countries would be of the greatest service to both.
J. R. M’CULLOCH and HUGH G. REID.