p>Blackwood's Edinburgh Magazine, Volume 69, No. 423, January 1851
THE CURRENCY EXTENSION ACT OF NATURE
Whoever has examined with attention the past annals of mankind, must have become aware that the greatest and most important revolutions that have occurred in human affairs have originated in the variations which from time to time have taken place in the supply of the precious metals which could be obtained for the use of man. As they constitute, by the universal consent of the world, the common medium of exchange and measure of value among nations, their plenty or scarcity has an immediate and powerful influence upon the remuneration of industry and the activity of the working-classes in all countries. According as they are increasing or diminishing, abundant or awanting, is the condition of the people prosperous or calamitous – the national prospects bright or gloomy. No amount of human exertion, no efforts of human patriotism, can sustain the national fortunes for any length of time, or diffuse general and enduring prosperity among the people, if the existing medium of exchange is below what their numbers and transactions require; because, in such a case, prices are constantly declining, credit is liable to periodical and ruinous contractions, and industry, on an average of years, ceases to meet with its due reward. No calamities are insuperable, no dangers insurmountable, when a currency is provided adequate to the wants of men, and capable of extension in proportion to their necessities; because, in such a case, prices are rising or remunerative, and individual effort, stimulated by the prospect of an adequate return, becomes universal, and acts powerfully and decisively upon the general welfare of society and the issue of the national fortunes.
The two greatest revolutions which have taken place in the annals of the species, and which have for ever left their traces on the fortunes of mankind, have arisen from the successive diminution and increase in the supply of the precious metals for the use of the world. There can be no doubt that the decline and fall of the Roman empire – so long and falsely ascribed to its latter extension, plebeian slavery, and patrician corruption – was in reality mainly owing to the failure in the mines of Spain and Greece, from which the precious metals in ancient times were chiefly obtained, joined to the unrestricted importation of grain from Egypt and Libya, which ruined the profit of the harvests and destroyed the agriculture of Italy and Greece, at once paralysing industry, and rendering taxes overwhelming.1 We know now to what the failure of these mines, attended with such portentous results, was owing. It was to the exhaustion of the auriferous veins in Spain and Greece near the surface, from long-continued working, and the extreme hardness of the rock in which they were imbedded farther down, which seems to be a general law of nature all over the world,2 and which rendered working them, to any considerable depth, no longer a source of profit. On the other hand, the prodigious start which Europe took during the sixteenth and seventeenth centuries, and which has implanted the European race for ever in the new hemisphere, is well known to have been mainly owing to the discovery of the mines of Mexico and Peru, and the continual rise of prices during nearly two centuries, which took place all over the world, from the constant and increasing influx of the precious metals drawn out of their rich strata.
The greatest and most momentous contests which have taken place among nations, have been in a great degree determined by the discovery or use, by one of the belligerents, of an expansive currency, to which the other was for a time a stranger. The most memorable strife in antiquity, that between Rome and Carthage, on which depended whether Europe or Africa was to become the mistress of the civilised world, was in reality determined by a great extension of the Italian circulating medium during the second Punic war; and that dreadful contest was less brought to a successful issue by the firmness of the senate or the arms of Scipio, than by the wisdom of a decree which virtually, at the crisis of its fate, doubled the currency of the Roman republic.3 The Transatlantic revolution was brought to a successful issue in the same way; and the independence of the United States is less to be ascribed to the imbecility of British counsels, or the wisdom of American generalship, than to the establishment of a paper currency, which sustained the efforts of the insurgent states when they had no other resources wherewith to maintain the contest. It was the assignats, as all the world knows, that set on foot those prodigious armies which, amidst the destruction of all private fortunes, enabled France, during the Reign of Terror, to repel the assault of all the European powers; and the coalition which at last overturned the empire of Napoleon was sustained by a vast system of paper currency, issued in 1813 in Germany, which, guaranteed by the four Allied powers, passed as gold from the Atlantic Ocean to the wall of China, and arrayed all the armies of Europe in dense and disciplined battalions on the banks of the Rhine. Of what incalculable importance it was may be judged of by the dreadful straits to which Wellington, for five previous years, had been reduced by its want. Great Britain emerged victorious from the strife, chiefly from the powerful influence of the same omnipotent agent. Vain would have been the constancy of Pitt, the genius of Nelson, or the wisdom of Wellington, if the paper currency, established in 1797, had not given her people the sinews of war, and the means of illimitable industry, when the Continent was shut to her commerce, and the whole precious metals were drained away by the necessities of Continental warfare. Nor have the effects of the opposite system, pursued since the peace, been less striking and momentous; for the contraction of British currency to one half of its former dimensions, by the bills of 1819 and 1844, has brought about the dreadful panics of 1825, 1837, and 1847, induced by the decline of prices and the sufferings it occasioned. The English revolution of 1832 transferred power in the British islands exclusively to the inhabitants of towns, and spread such misery through the rural population, that three hundred thousand emigrants now annually leave the British islands for Transatlantic or Australian shores.
As the expansion or contraction of the circulating medium is thus an agent of such prodigious power and irresistible weight, both upon the fortunes of particular states and the general progress of the species, so it will be found upon examination that it is by a withholding or letting loose the fertilising flood, that Providence appears often to act most directly and decisively upon human affairs. When a nation has performed its mission, and is to make room for other actors on the great stage of the world, if its power has rendered conquest by a foreign enemy impossible, a contraction of its domestic currency paralyses its internal strength, and renders dissolution, at no distant period, a matter of certainty. If a great start is prepared for human industry, if new continents are laid open to its energies, and an unusual impulse communicated to its activity by the development of social and democratic passions, a vast addition is suddenly made to its metallic resources, and the increased numbers or enhanced efforts of mankind are amply sustained by the newly opened treasures of the reserves of nature. Rome, impregnable to the assaults of undisciplined barbarians, yielded, at the appointed season, to the contraction of its domestic currency, which rendered the maintenance of armaments adequate to the public defence a matter of impossibility in the later days of the empire; and when the discovery of the compass, of the art of printing, and of the new hemisphere, had at once given a vast impulse to European activity, and provided new and boundless fields for its exertion, the mines of Potosi and Mexico were suddenly thrown open, and nature provided a suitable reward for all this enhanced effort by the continually rising price of its produce.
That a period of equal, perhaps greater activity, than that which followed the discoveries of Columbus, would succeed the outbreak of the social passions that occasioned the French Revolution, has long been familiar to the thinking part of men, and unequivocal proofs of the reality of the change may be seen in every direction around us. But sufficient attention has not hitherto been paid to the extraordinary encouragement which this increased mental energy has received, from the facilities which have been placed at its disposal by the mechanical discoveries of the last half century. Yet are they such as to throw all past discoveries into the shade, and give an impulse to human affairs which has scarcely been exceeded since the first separation of the dwellers in cities and the sojourners in the fields. The steam-engine has wrought these prodigies. Applied to mechanical invention, and the moving of machinery, it has multiplied tenfold the powers of urban industry, elevated the districts possessing the necessary fuel to the clouds, cast down places once the seats of commercial greatness, but destitute of that essential element in modern manufacturing energy, to the dust. Applied to the propelling of vessels, it has more than