tunity of selling in the West Indies. When the cargo arrived in the West Indies, instead of remitting the proceeds directly home, it might very well happen that, owing to a scarcity of corn at home, it might be very high there, and cheap in Canada, so he would invest the proceeds of the hides in sugar, and despatch that to Canada, where the merchant's correspondent there would dispose of it, and purchase corn, which he would send to England.

In the case just described, we observe that there are five distinct operations, and, as we may suppose that there is a profit upon each of them, by the time the returns for the goods, which originally cost £1,000, are brought to England, it may very well be, that the corn, which forms the ultimate payment of them, may be several times as valuable as the original cargo; and, as we have supposed the charges on each operation to be deducted before investing the proceeds in other articles, it is clear that the merchant's profit upon the whole is exactly the difference in value in England between the articles last purchased and sent home and the original cargo; after deducting all the expenses of sending home the last cargo, and we also observe that no specie has been sent from one country to the other in the whole course of the extended operation.

This example is sufficient to demonstrate the utter fallacy of the old idea, which is even yet not extinguished, of the balance of trade. Nothing can be more clear, that unless the value of the cargo which comes into England, in payment of the cargo that was sent out, is sufficient, not only to defray the cost of the original cargo, as well as all charges upon it and the return cargo, and leave a profit besides, the commerce could not be carried on. No English merchant could export goods unless he receives in return others of much greather value; and the obvious consideration, that the more he gets for what he sends out, the more profitable it is to himself and the nation, is sufficient by itself to explode the old fallacy of the balance of trade. One obvious source of error is, that the value of the exports from this country is estimated at the time of their leaving the country, and before the charges for freight, &c., are incurred, which must necessarily raise their selling price in the foreign market, if they are not sold at a loss, and their value in that market is expected to be considerably higher than that. On the other

hand, the value of the imports is estimated, not according to their value when they left the foreign country, but what it is upon their arrival here, including all their charges upon them.

If we suppose that Bordeaux had but one native productwine the chances of finding the markets, both at Bordeaux and London, in a favourable state for importing produce instead of specie, would be limited to that single article. But if it had other products, such as olive oil, the chances would be increased of finding articles to suit the market, and the chances would evidently be multiplied according to the number and variety of its products.

Let us take another example, and let New York be the starting place. The staple products of America are breadstuffs and provisions. A merchant of New York sends a cargo of corn to Liverpool, and his correspondent there will endeavour to invest the proceeds of that in British goods, if he finds the state of the markets in England and New York will make such an operation profitable. Suppose that the price of corn is very high here, and British goods are also very high here, and very low in America, it is clear that nothing but specie will be sent. In cases where a great and unexpected dearth of corn occurs in England, and its price rises enormously high, the infallible result is to cause a great drain of specie for the time being, because our necessity for food is much more pressing and immediate than their necessity or capability of consuming our cotton or woollen goods. And the only way to arrest such a drain is to effect such a reduction in the prices of British goods as shall make it more profitable to export goods than specie.

In the cases we have hitherto been considering, we have described the operations as if merchants were left perfectly free to carry their goods whither they pleased, and were not met and obstructed by artificial obstacles purposely devised for interfering with their business, by the laws of different nations. But there are few nations, and our own among the rest, which have not habitually discouraged the importation of foreign goods, and imposed heavy duties for the specific purpose of excluding them, as they conceived the extraordinary idea that all foreign goods brought into the country were so much loss to it. Thus, the statute of William III. (1688, c. 24) says:-" It hath been found by long experience that the importing of French commodities.

of all sorts (enumerating them) "hath much exhausted the treasure of this nation, lessened the value of the native commodities and manufactures thereof, and greatly impoverished the English artificers and handicrafts, and caused great detriment to the kingdom in general." If we consider the effect of these laws in one place, it will equally apply to every other; thus, in the first instance, suppose that there are very high protecting duties at Bordeaux against British goods, as the consumer must ultimately pay all the expenses and charges on the goods, it will have the effect of greatly raising the market price there, and diminishing the number of persons who can afford to buy them, and hence, as the market is so limited, a smaller quantity of goods will overstock it than if it were more extended. This will cause a much less quantity of goods to be sent from London, and it will cause a much larger proportion of specie to be remitted to pay for the productions of Bordeaux. This example shews that the inevitable effect of high protecting duties between country and country is to cause a much more frequent transmission of bullion from one to the other than would be the case in an unfettered state of commerce; unless, indeed, the smuggler steps in, who is the corrector provided by nature against this commercial insanity. The effect, then, of prohibitive duties is to cause an inflow of bullion; but we must carefully guard against supposing that this inflow is a favourable sign, as it is certainly the least profitable import a merchant can receive for his goods; and there is this very marked difference between an inflow of bullion under the Protectionist system and under a Free Trade system, that the former is accompanied with a great dearth of foreign commodities, but the latter is an infallible sign of great abundance of them, as bullion is never imported when men are allowed to follow their own interests, until our markets are already so overstocked that every other article has ceased to be profitable.

The foregoing cases comprehend the different varieties of commercial transactions between this and any other country, and we gather from them the following results respecting the inflow or outflow of bullion :

I. The cause of bullion being imported is either when the price of goods is so low in England, and so high in the foreign market, as to tempt foreigners to send here to buy goods, or the

price of goods is so high in the foreign market, and so low in England, that nothing but specie can be sent in payment of goods exported from England.

II. The cause of bullion being exported from England is that there is some great and pressing demand for some article in this country, and other commodities are so scarce and dear that they cannot be exported with a profit, or that the article is required in such great quantities that the foreigner cannot consume our goods which we should prefer to send in payment fast enough, and so specie must be sent, and the greater the difference in price the greater will be the drain of bullion or that other markets are already overstocked with our productions, which are depressed below their usual market value there. This is what is meant by overtrading; and, from this circumstance, we see that overtrading is a sure precursor of a drain of bullion from the country. When there has been a great failure of the crops in this country, so as to cause a famine price, the demand for corn is so immediate and urgent that it necessarily causes a great drain of specie and it is then of the greatest possible consequence that the prices of other commodities should be as low as possible, to enable them to be sent in payment of the necessary supplies of food, and prevent such a drain of bullion as may disturb the whole monetary system of the country.

Overtrading, and a failure of the cereal crops of this country, are each of them sure causes of a drain of bullion. The most disastrous event for the commerce of this country is when both these circumstances happen concurrently. It is like a spring tide of disaster. The most terribly disastrous commercial crisis this country ever experienced was preceded by some years of overtrading, followed by successive failures in the staple support of the people of England and Ireland. These two adverse events together produced the calamities of 1847. We shall see that the intended effect of the Bank Act of 1844 is to provide a remedy for such a state of things, by causing such a reduction in the price of home commodities, in the event of a drain of specie taking place, as to render it more profitable to export them than bullion, and so stop the drain. Whether the Act is effective for this purpose is another question, which it is not the proper place to discuss here.

There are some countries from which we draw articles of

great necessity, but to which, from different circumstances, we do not expect to remit goods in payment. Russia was the great source of our supply of hemp, tallow, and flax, and we used to import these products to the value of £12,000,000 yearly, but, owing to the prohibitive character of her tariff, we were unable to send our own products in payment of these goods to anything like a similar amount in value. To such a country the difference must be remitted in cash, to the mutual loss of both parties; and, unless there were other means of equalising the exchanges with different countries, the exchange with Russia would always be unfavourable to England. The chief export trade from Ireland to England was in articles of food-pigs, cattle, oats, butter. Great quantities of these came from Ireland, but the inhabitants of that country were much too poor to be able to consume an equivalent amount of English goods; in consequence of which the difference had to be remitted in specie, and so the exchanges between England and Ireland were almost uniformly favourable to Ireland. Now, if Ireland had been sufficiently wealthy to have consumed English goods instead of specie, it is evident that it would have been far more advantageous for both countries; for English industry would have been promoted, and Ireland would have gained a more valuable import. These two examples offer a further illustration of what we said before, that the frequent transmission of bullion between countries which do not produce it, is a symptom of a less profitable trade than it would be if goods were transmitted.

In the operation first described above, we have supposed it to originate with the English merchant who remits his goods to his correspondent abroad, and who reaps the profits, and the proceeds must be remitted to him after deducting the freight, charges, and commission of the agent there. But it is also probable that there will be native merchants at Bordeaux, who will send wine to England on their own account to their correspondents here, and then the whole transaction will be reversed. The English correspondent will endeavour to purchase English goods as low as he can, and if he can get them low enough to realise a profit in the Bordeaux market, he will send goods out; but if the English goods are too high for that purpose, he must send specie. It is also evident that, even if the goods be at no unusual height in England, still, if the market at Bordeaux be