credit, the exaggerated accounts of the Spanish 
writers concerning the ancient state of those 
empires. But rich and civilized nations can 
always exchange to a much greater value with 
one another, than with savages and barbarians. 
Europe, however, has hitherto derived much 
less advantage from its commerce with the 
East Indies, than from that with America. 
The Portuguese monopolized the East India 
trade to themselves for about a century; and 
it was only indirectly, and through them, that 
the other nations of Europe could either send 
out or receive any goods from that country
When the Dutch, in the beginning of the last 
century, began to encroach upon them, they 
vested their whole East India commerce in an 
exclusive company. The English, French, 
Swedes, and Danes, have all followed their 
example; so that no great nation of Europe 
has ever yet had the benefit of a free commerce 
to the East Indies. No other reason 
need be assigned why it has never been so advantageous 
as the trade to America, which, 
between almost every nation of Europe and 
its own colonies, is free to all its subjects. 
The exclusive privileges of those East India 
companies, their great riches, the great favour 
and protection which these have procured them 
from their respective governments, have excited 
much envy against them. This envy 
has frequently represented their trade as altogether 
pernicious, on account of the great 
quantities of silver which it every year exports 
from the countries from which it is carried 
on. The parties concerned have replied, that 
their trade by this continual exportation of 
silver, might indeed tend to impoverish Europe 
in general, but not the particular country 
from which it was carried on; because, by 
the exportation of a part of the returns to 
other European countries, it annually brought 
home a much greater quantity of that metal 
than it carried out. Both the objection and 
the reply are founded in the popular notion 
which I have been just now examining. It is 
therefore unnecessary to say any thing further 
about either. By the annual exportation of 
silver to the East Indies, plate is probably 
somewhat dearer in Europe than it otherwise 
might have been; and coined silver probably 
purchases a larger quantity both of labour and 
commodities. The former of these two effects 
is a very small loss, the latter a very 
small advantage; both too insignificant to deserve 
any part of the public attention. The 
trade to the East Indies, by opening a market 
to the commodities of Europe, or, what 
comes nearly to the same thing, to the gold 
and silver which is purchased with those commodities
must necessarily tend to increase 
the annual production of European commodities
and consequently the real wealth and 
revenue of Europe. That it has hitherto increased 
them so little, is probably owing to 
the restraints which it everywhere labours 
I thought it necessary, though at the hazard 
of being tedious, to examine at full length 
this popular notion, that wealth consists in 
money or in gold and silver. Money, in 
common language, as I have already observed
frequently signifies wealth; and this ambiguity 
of expression has rendered this popular notion 
so familiar to us, that even they who are 
convinced of its absurdity, are very apt to forget 
their own principles, and, in the course of 
their reasonings, to take it for granted as a 
certain and undeniable truth. Some of the best 
English writers upon commerce set out with 
observing, that the wealth of a country consists, 
not in its gold and silver only, but in its 
lands, houses, and consumable goods of all 
different kinds. In the course of their reasonings, 
however, the lands, houses, and consumable 
goods, seem to slip out of their memory; 
and the strain of their argument frequently 
supposes that all wealth consists in 
gold and silver, and that to multiply those 
metals is the great object of national industry 
and commerce
The two principles being established, however, 
that wealth consisted in gold and silver
and that those metals could be brought into a 
country which had no mines, only by the balance 
of trade, or by exporting to a greater 
value than it imported; it necessarily became 
the great object of political economy to diminish 
as much as possible the importation of 
foreign goods for home consumption, and to 
increase as much as possible the exportation 
of the produce of domestic industry. Its two 
great engines for enriching the country, therefore, 
were restraints upon importation, and 
encouragement to exportation
The restraints upon importation were of 
two kinds
First, restraints upon the importation of 
such foreign goods for home consumption as 
could be produced at home, from whatever 
country they were imported
Secondly, restraints upon the importation of 
goods of almost all kinds, from those particular 
countries with which the balance of 
trade was supposed to be disadvantageous
Those different restraints consisted sometimes 
in high duties, and sometimes in absolute 
Exportation was encouraged sometimes by 
drawbacks, sometimes by bounties, sometimes 
by advantageous treaties of commerce with 
foreign states, and sometimes by the establishment 
of colonies in distant countries
Drawbacks were given upon two different 
occasions. When the home manufactures were 
subject to any duty or excise, either the whole 
or a part of it was frequently drawn back upon 
their exportation; and when foreign goods 
liable to a duty were imported, in order to be