As for gold and silver themselves, their export was either altogether forbidden or was subject to heavy duties. By these different devices the Government was reasonably assured of being able to put its hand on the money required as it was wanted; and it is evident that in no other way but by this restriction of the full freedom of the individual to trade as he pleased could the supreme end of the State, its independence and self subsistence, in those unquiet times have been secured. But difficulties arose almost from the very outset. For owing to the small bulk of gold, the ease of its concealment, and the high duties which had to be paid on its exportation, the smuggling carried on in it was so great that the Government lost almost as much by leakage in one way as they gained by their regulations in another. And this was not all. For the other nations, driven to it by the same political necessity, were also more anxious to obtain gold and to keep it in their own hands than to part with it to each other. For trading merchants, therefore, gold in hand to be expended on purchases abroad had an immense advantage in every bargain, but the duties on taking it out of the country were so great that the facilities for foreign trade were being everywhere seriously curtailed.

At last the complaints of the merchants became so loud and sustained that governments everywhere were obliged to think of other means for keeping in the country the gold that was so necessary to them. They began by trying what a modified form of free trade in gold would do, and permitted at first the exportation of foreign coin and bullion free of duty; Holland going so far even as to allow the free export of national coin as well. But the result was what might have been foreseen. The coins like shy and untamed creatures when allowed to escape, disappeared as by magic from the landscape, and taking refuge in holes in the ground could not be recaptured; accumulating there in hoards, and disappearing as completely from circulation as they do in the East to-day. The Governments accordingly baulked in their efforts to get the gold they wanted either by standing beside each party to a bargain and collecting it by force, or by letting it pass freely in and out of the country to find its level as it would, were now obliged to try another device, which marked the first stage of evolution of the Mercantile System. For in the meantime these Governments were every day becoming more settled and centralised, and were extending the strong arm of authority over larger and larger groups of their recalcitrant subjects; their industrial and financial assets were more secure, calculable, and regular, and their international good faith more assured.

They were prepared, accordingly, for a larger scheme of national housekeeping. Instead of keeping their eye on individual transactions to make sure that the balance of each bargain was in their favour, they now made an effort to secure that the total balance of all the trade, export and import, between them and foreigners should be in their favour; in other words, it had now become an international commercial struggle, in which nation was to be pitted against nation, and no longer individual against individuals Now it is evident that in the absence of a system of international banking and exchange in which balances only are paid in gold, a balance in gold in a nation's favour could only be secured by its keeping its eye on the imports, and reducing them as much as possible, as otherwise the country might on the occurrence of bad harvests or other deficiency of the necessaries of life be emptied of its coin altogether. And accordingly, as the only way in which you could be sure of your gold and at the same time get all the imports needed in times of dearth, was by taking care that the exports as a whole should always be greater than the imports, the policy of governments was naturally to artificially encourage these exports at all hazards and by every species of device - by drawbacks and bounties on exportation which gave privileges to certain favoured trades, and especially by commercial treaties which gave privileges to those countries from whom we had hitherto imported little but of whose products we were in future to take more, in return for their allowing us to send them still more of our own to balance and overtop them.

In this way by securing that the exports should always exceed the imports, the nation was sure at any point of time of having a balance of gold in its favour.

Now the first point to be noted is, that this was not a trade policy as such, not a protective policy in our sense of the term, but was purely a State policy, a policy for securing the revenue necessary for carrying on the work of government, and to insure the independence and stability of the nation, - its defence against its enemies whether from within or from without. And the proof of this is to be found in the fact that the restriction of imports (or their overbalance by exports) included all imports whatever, provided they came from countries where the balance of trade was against us; and was not confined to goods of the same character as those made at home and with which they might come into competition, as in modern systems of Protection. But as the centuries advanced and Governments became settled; as the baron robbers and pirates were put down, and transport was made safe and easy; as private debts were secured by the law courts, and the assets of nations in general could be estimated with a sufficient approximation to accuracy; it became at last possible to establish private and international systems of banking and exchange on a basis both of individual and national credit and good faith; systems in which balances in private and public ledgers took the place of actual gold and silver in making the exchange of wealth possible.