see which could draw to itself most gold and silver from the others. According to this theory, the gain of one party was the loss of the other; every article produced in another country, and imported into this one, was considered to be a direct loss to the country. This was what was called the mercantile or commercial system. According to this theory, the leading maxim which governed the Legislature was, to make the exports to exceed the imports; and the conclusion drawn was, that the difference, or balance, must be paid for in cash by the debtor nation. When two nations traded with one another, the difference of debts between them was called the "balance of trade," and, when this was in favour of England, the exchange was said to be favourable, because bullion had to be paid to her; on the contrary, when, on the result of trade, payments had to be made by her, the balance of trade was said to be against her, and the exchange unfavourable, and then gold was sent out of the country. According to this theory, the prosperity, or the contrary, of the country, and the profit, or loss, of foreign commerce was exactly measured, according as gold had to be received or paid, or as the exchange was favourable, or the reverse.

The admirable chapter of Adam Smith on the Principle of the Mercantile System, is a masterly exposition of the fallacy of this theory, and is certainly one of the soundest and best written in his whole work, from the more than usual consistency of its ideas, and the lucidity of its style. There are, however, some things relating to the subject which require further enforcement and illustration.

So far from the principle of the mercantile theory being true, that gold and silver are the most profitable and desirable objects of import, the direct reverse is unquestionably true, that gold and silver are, of all objects of commerce, the most unprofitable; and it is a certain axiom of commerce in a state of freedom, that bullion will not be imported until it has become unprofitable to import any other article. There are no class of traders who derive so little profit, in proportion to the capital invested in their business, as dealers in bullion and money of all sorts, whether they be bullion merchants or bankers. Although the opinions we have alluded to above were the prevalent ideas of the age, there were not wanting a few sagacious thinkers, who discovered the truth of what we have last said, and maintained

the unprofitable nature of gold and silver; but, like others who are before their age, their voice was unheeded, and the general object of commercial ambition and legislation was to accumulate treasures of gold and silver.

There is no expression in commerce of more frequent occurrence than the "balance of trade," and it may be as well to give the interpretation of it generally received during the last century, and which is not yet wholly extinguished. Mr. Irving, InspectorGeneral of Imports and Exports in 1797, defined it thus:-"The common mode of considering that question has been to set off the value of the imports, as stated in the public accounts, against the value of the exports, and the difference between the one and the other has been considered the measure of the increase or decrease of the national profit." And Mr. Hoare, a banker of eminence for twenty-two years, said: "I consider the only proper means of bringing gold and silver into this country to arise from the surplus of our exports over our imports, and that ratio or proportion which is not imported in goods, must be paid for in bullion. In the year 1796, the imports of this country appear to be £19,788,923, and the exports appear to be £33,454,583, which ought to have brought to this country bullion to the amount of that difference, or £10,665,660."

We have made these extracts because they convey, in the fewest words possible, the whole ideas on the subject, and they are made by persons of great commercial eminence before the Committee of the House of Commons. It is true that Mr. Irving, who was Inspector-General of the Exports and Imports of Great Britain and the British Colonies, expressly states that the application of this principle to the whole of the British trade would, in his judgment, be extremely erroneous. We, therefore, do not bring him forward as approving of the theory, but only as stating distinctly and authoritatively what it was. But Mr. Hoare, a banker of eminence and long experience, adopted it; and we believe that this theory of the balance of trade still retains a hold on the minds of great numbers of persons who do not give themselves the trouble to sift it thoroughly. Nevertheless, there never existed a more complete chimera and pernicious delusion than this said doctrine of the balance of trade, nor one which has exercised so disastrous an influence on commercial legislation.

It appears that the simplest way of arriving at an accurate conclusion on the subject is, to consider that the dealings between nation and nation are only made up of the aggregate of dealings between individuals of the nations, and we have only to consider the variety of methods in which an individual merchant may trade, to have an accurate and comprehensive idea of the commerce of the nation. Instead of dealing with figures of vast amount, which make no definite impression on the mind, and which are produced by a number of complex causes, we shall now proceed to consider in how many different ways an individual merchant may trade with foreign countries, and we shall shew, by considering the dealings of an individual, how utterly erroneous it is to suppose that an influx of bullion is, ipso facto, a proof that commerce is flourishing and profitable to the country, and that whether it is so or not depends very much as to where it comes from, as well as a number of other circumstances.

With respect to those countries in which bullion is a native product, and to which we trade for the express purpose of obtaining it, we have already shewn, that unless the quantity obtained in exchange for our goods exceeds a certain amount, the commerce is not a profitable one, and that the simple fact of bullion being remitted from them, and, therefore, though the exchanges with them must always be in our favour, it is no proof whatever of prosperity or profit.

Next, with respect to countries which do not produce bullion, it is easy to shew the extreme fallacy of the opinion that our exports should exceed our imports, and that the difference will be the profit of the country; in many cases the precise reverse is true, that our imports should exceed our exports, and the profits are measured by the exact sum by which the imports exceed the exports, or the excess of what we receive over what we give.

To prove this, let us take a simple case. Suppose a merchant in London sends out £1,000 of goods to Bordeaux, by the time they arrive there, the mere addition of freight, insurance, and other charges, will probably have increased their cost of protion, or the expense of placing them where they are, to £1,050, supposing them to be sold without any profit at all. But, as the merchant would never have sent them to that market unless he expected to realise a good profit, we may assume that the

market is favourable, and that they sell for £1,500, and he would probably draw against his agent for £1,200, His correspondent at Bordeaux, instead of remitting the money to England, would find it far more profitable to invest the proceeds of the goods in some native product, which would fetch a good price in England. The chief native product of that country is wine, so the agent would invest the proceeds of the goods, after deducting all charges for freight, commission, &c., in Bordeaux wine, and send it to England. This wine would probably be sold at a considerable profit in the English market, say it would fetch £2,000; and, after deducting all the charges of every description on the cargoes both ways, the difference would be the merchant's profit. In this case it is quite clear that no bullion would pass between the countries, and the merchant would apparently import more than he exported, and it is also clear that his profits are exactly estimated by the excess of the value of the inward cargo above that of the outward one, after deducting all charges both ways, and just as this difference is the greater so is his gain greater. In this case, as no bullion would pass from either country to the other, there would be no question of exchanges.

It is clear that the London merchant's agent at Bordeaux would be governed by several considerations as to whether he would remit specie or wine to London, and he would be chiefly governed by the state of the wine markets, both at Bordeaux and London. For, supposing the goods to be sold at a good profit at Bordeaux, he must next consider the price of the wine at Bordeaux, and also what it might be expected to fetch in London. If some great disaster had happened to the vines so that there was a failure of the crops, the price of wine at Bordeaux might rule excessively high, but at the same time there might be a large stock of wine in London, and the price might not be unusually high; so that if he were to purchase wine at Bordeaux, and send it to London, it might be a loss. In such a case as this, if there were no other native product to send, he would find it more advantageous to remit specie, whatever he could sell the goods for, and then the exchange would be in favour of London; but, before the London merchant could reckon his profits, he would have to deduct the freight, insurance, &c., on the specie.

Whether the transaction was profitable or not to the London merchant would entirely depend on the amount of specie he received after deducting all charges; and if he had purchased the goods he sent out from England cheap, and there was a scarcity of them at Bordeaux, he might realise high prices there, which might leave him a good profit. It would be very improbable that he could realise so much profit on that single operation as in the double one of exporting goods and importing wine. So that the import of the specie would be less profitable to him, and the nation at large, than the import of the wine.

The reasons which caused the export of specie from Bordeaux, and the import of it into England, in this case, are very plain, they were the scarcity and dearness of the native products at Bordeaux, and the abundant supply of them already in the London market. Hence, we gather that the scarcity and dearness of native products is an infallible cause of the export of specie from a country; on the contrary, an already existing abundant supply of foreign products of all sorts is a certain cause of its import into a country. On the contrary, when native products are cheap and abundant, it will cause an importation of bullion, and when foreign products are scarce and dear, it will cause an export of bullion.

We have before observed that the exchange being in favour of a country means nothing more than that bullion has to be remitted to it. In the case above described, the exchange at Bordeaux would be in favour of London; but this simple case is as good as a thousand to shew the extreme and dangerous fallacy of drawing any conclusion as to the advantage of the trade to England, from the simple fact of the exchange being favourable to her, and an inflow of bullion taking place.

The example given above is of the simplest description, and a merchant of eminence, who has correspondents in several different parts of the world, might easily multiply these operations, so as to visit many markets before the returns of his cargo were brought home. Thus, instead of having the wine sent home from Bordeaux, his correspondent might find it more profitable to send it to Buenos Ayres, and dispose of it there. The chief native product of that place is hides, and we may suppose that his correspondent there might invest the proceeds of the cargo of wine in hides, which there might be a favourable oppor