identical) that an addition of 75,000,000l. would be sufficient to effect an elevation of our local prices equivalent to that which has occurred in Australia. Now at the present rate of production, the quantity of gold which arrives annually in Great Britain cannot fall much short of 30,000,000l. sterling; so that were we merely to retain all that we receive, we should at the end of two years and a half be in a position, so far as the augmentation of our currency is concerned, to maintain the same advance in price as has occurred in the gold countries. If, then, prices in Great Britain have not risen in the same degree, the result, it is evident, cannot be due to the difficulty of procuring the supply of gold necessary for the enlargement of our currency. It remains, therefore, to be considered how far those special facilities for procuring gold which have operated in the gold countries may come into play in other parts of the world.

The extraordinary facilities for procuring gold enjoyed by Australia and California depend, of course, on the possession of their gold mines; and this being so, it might seem as if all countries, not being like them auriferous, were by the nature of the case precluded from fulfilling this condition of the problem; but this by no means necessarily follows, as will be evident if we reflect that there are other modes of obtaining gold than by direct production, of which modes the efficiency enjoyed by different countries differs almost as much as the degrees of fertility in

* [20,000,000l. would have been nearer the mark, but, at the time this paper was written, no trustworthy statistics of gold imports existed. Either amount, however, answers equally well the purpose of the argument (1872).]

different gold mines.

Where countries do not them

Now it is a fact with reference to

selves produce gold, the mode by which they obtain it is through their foreign trade. well known to economists* that, the cost of commodities, the terms on which foreign trade is carried on differ greatly in different countries, the labour of some going much further in commanding foreign productions than that of others. According, however, to the conditions on which foreign productions generally are obtainable, will be those on which gold may be obtained. If a country possess special facilities for supplying markets where gold can be given in exchange, it will obtain its gold more cheaply at a less sacrifice of labour and capitalthan countries which do not share these facilities, and amongst such countries it will therefore occupy precisely the same position as an auriferous country whose mines are of more than the usual richness among the countries which yield gold. It is thus possible for a non-auriferous, no less than for an auriferous, country to possess exceptional facilities in the means of procuring gold, and therefore to fulfil the second of the conditions by which a divergence of local prices from the ordinary level of the world may be effected.

Now, it appears to me there are two countries which possess in an eminent degree the qualifications requisite for attaining this result I mean Great Britain and the United States: the former, as being par excellence the great manufacturer among civilized

* See Ricardo's "Works "-chap. vii., on Foreign Trade. Mill's "Principles of Political Economy," chaps. xvii., xix. Also Senior's Essay, "On the Cost of obtaining Money."

nations-the manufacturer more particularly of descriptions of goods-as cotton, woollen, linen, and iron-which enter largely into the consumption of the classes by whom chiefly the gold countries are peopled; and the latter, as the principal producer of raw material, as well as of certain commodities—as grain, tobacco, sugar, and rice-which are also largely consumed by the same classes. In these circumstances, Great Britain and the United States enjoy peculiar advantages in the markets of the goldcountries, and these advantages are extended and confirmed by other important incidents of their position. Thus they possess the greatest mercantile marine in the world, by which they are enabled to give the fullest scope to their manufacturing and agricultural superiority, while by race, language, and religion they are intimately connected with the producers of the new gold,-a connection from which spring ties, moral, social, and political, to strengthen and secure those which commerce creates. Great Britain and the United States thus possess in their foreign trade a rich mine,* worked by their manufacturers, planters, and farmers, tended by their mercantile marine, and protected by their naval power, a mine by means of which they are enabled to obtain their gold on terms more favourable than other nations. The effect of this, in ordinary times, is shown by a scale of money rates, wages, salaries, and incomes, permanently higher than that which

* "The mine worked by England is the general market of the world : the miners are those who produce those commodities by the exportation of which the precious metals are obtained."-SENIOR'S Essay "On the Cost of obtaining Money," p. 15.

elsewhere prevails; but, in times of monetary disturbance like the present, when the cost of gold having been reduced its value is falling, these advantages, it seems to me, must tell, as analogous advantages have told in the gold countries, in a more rapid realization of the results which are in store-in a quicker ascent towards that higher level of prices and incomes, which the cheapened cost of gold is destined ultimately to produce.

There is reason, therefore, on considerations of theory, to expect a repetition in England and America of that phenomenon which has been already exhibited in Australia and California, a divergence of local money-rates from the average level of surrounding countries. On a future occasion I shall endeavour to ascertain how far, in the case of Great Britain, these à priori conclusions are supported by facts-how far prices and incomes have here, under the influence of the gold discoveries, outstripped the corresponding movement in other countries.* Having settled this point, we shall be in a position to form a general estimate of the benefit which may thence accrue to us. Meanwhile, however, I may, in conclusion, point out the mode in which the advantages incident to the monetary position we shall occupy are likely to be realized. And here it may be well to call the reader's attention

* [Some evidence on the point will be found in the Appendix; but the inquiry here contemplated was never carried into effect. A very interesting and carefully prepared paper on the subject, however, was read some years later by my friend Professor Jevons before the London Statistical Society, when I had the satisfaction to find that the results of his entirely independent investigations to a very large extent corroborated the conclusions at which I had arrived, mainly by way of deduction from the general principles of the science.]

to the distinction, sometimes overlooked, between a fall in the value of gold and a rise in the price of commodities. A rise in the price of commodities, if general, implies commonly a fall in the value of money; but, according to the ordinary use of language, alike by economists and in common speech, money would, I apprehend, in certain circumstances be said to have fallen in value, even though the prices of large classes of commodities remained unaffected. For example, supposing improvements to have been effected in some branch of production resulting in a diminished cost of the commodity, the value of money remaining the same, prices would fall: if under such circumstances prices did not fall, that could only be because money had not remained the same, but had fallen in value. The continuance of prices unaltered would, therefore, under such circumstances amount to proof of a fall in the value of gold. Now when, in connection with this consideration, we take account of the fact that over the greater portion of the field of British industry improvement is constantly taking place, it is obvious that the mere movements of prices here, taken without reference to the conditions of production, are no sure criterion of changes in the value of gold.

The truth is, in a large class of commodities—in all those to which mechanical or chemical inventions are extensively applicable—even on the supposition of a very great depreciation of gold, no considerable advance in price is probable. Gold, for example, might have fallen since the beginning of the present century to the extent of 75 per cent.-that is to say, four sovereigns now might be equal to no more than