Inequality of Circulation
The majority of the produce of the country flows into the city. The third paid as rent to landowners residing in the city goes there directly; the third that is the profit of the farmer is often spent on goods from the city; and even the third paid for the maintenance of the farm and its laborers is often spent ultimately in the city. That is to say any product of the farm that is not consumed on the farm goes elsewhere.
The farmer is not impoverished by the outflow of his product, but is compensated in equal measure by the goods he receives in exchange. But on the farm there are two fundamental exchanges of currency: once when the farmer sells his crop, and again as he spends the proceeds in small increments.
Meanwhile in the city, much circulation of currency takes place: the trader who fetched wheat from the farm sells it to a miller, who grinds it into flour and sells it to a baker, who bakes it into bread and sells it to an innkeeper, who sells the bread to patrons as part of a meal. In this example alone there are four trades in the city and one in the country as wheat makes the course from field to table.
The same can be said of the relationship between cities and their capital. The taxes paid to the state, the tuition paid to colleges, the fees paid for settlement of dispute in the courts, and the price paid for goods that are procured from the capital is all spent back to the towns and the countryside as those residents of the capital consume goods.
There is also the observation that goods are the more dear the further they are purchased from the source. To buy eggs from a farm requires compensating the farmer for the cost of raising his hens, to buy them in town must still compensate that cost, plus the cost of the carriage to bring them to the city and the cost of the upkeep of the merchant's shop. To buy them in the city is similar, though the cost of transportation over a longer distance is greater and the rent of the merchant's shop is higher.
It's noted that the location of manufacturing often provides profit that would be consumed by distance: the cost to bring metal harvested from a distant mine would make it uncompetitive priced, but if the raw material is wrought into finished goods in a factory near the mine, their higher value might cover the cost of carriage.
Some manufacturing operations require a great deal of capital to set up, and a high level of confidence that the goods produced would be in sufficient demand to return the cost of establishing a factory. Even then, if another operation can be established to some advantage, such as proximity to a richer or cheaper source of materials or transportation, it could underprice the original producer and sap the income he had hoped to achieve.
There is additional expense in transporting a good, or in providing for the profit of dealers and brokers who handle it, such that local goods are cheaper than imported ones - and unless local customers are willing to give enough to cover these costs, they cannot be profitably sold.
It is often considered in foreign exchange, but is also true of the exchange between localities within a given state, that the movement of product produced in one location for consumption in another creates a higher demand of labor and materials in the place of production than the local community would otherwise generate by its own demand of goods, which makes prices more dear in the producing location. Additionally, when these goods are paid for with money, it creates an excess of money in the producing community, which also increases local prices. In the purchasing community, meanwhile, there is a surplus of labor and a shortage of money.
To the degree that each is offset by the gross amount of transactions in the vicinity (the producing community spends some of the money importing different goods from the consuming community), the equation balances out. But to the degree it does not, it will create a create a need of currency in the location in which goods are short and money is abundant.