James Harvey
Paper Money
THE advocacy of Paper Money has been so effectually silenced in this country, that the very mention of it opens either a storm of angry invective, or an out-pour of ridicule, whilst its advocates have hitherto confined themselves to putting forth their views in pamphlets and broad-sheets.
The Author has published this book that the future inquirer may find collected together the various authorities who have advocated this unpopular subject, and in a form that will enable it to be shelved and catalogued in the various libraries to which it will be presented, including the library of the British Museum. The writer feels sure that at some future time all thinking men will read with interest these pages, where the author's opinions are enforced by such writers as Bishop Berkely, John Locke, Roger North, Andrew Yarranton, Edward Capps, John Taylor, John Ruskin, Louis Blanc, and Jonathan Duncan, and last not least, Sir John Sinclair, whose counsels prompted Mr. Pitt to try a new system of finance, a system resorted to through stern necessity, and perhaps somewhat empirically, but which proved the weapon by which the foreign invader was repelled, and ultimately driven into exile; but at the same time wonderfully stimulating internal trade. The first name in the list of writers is Bishop Berkely. His celebrated "Querist" laid down correct principles seventy years before Adam Smith, who touched on the subject in an obscure and contradictory manner, indicating a timid repugnance to forgo gold as a basis. Especial reference is made to the proposal for Consol notes, as proposed by the Liverpool Currency Reform Association. Attention is also called to the extracts from Bishop Berkely's "Querist," where the Socratic system of interrogation is resorted to, as being less dictatorial and less offensive to minds deeply infected with prejudice and that self-love which prompts most men to look upon their opinions as a sort of private property, not to be disturbed or interfered with.
It requires faith in the power of truth to attempt to stem this worship of gold, which Sir John Sinclair truly describes as a delirium and an infatuation.
JAMES HARVEY.
CHATHAM PLACE, Liverpool.
" ALL civilized nations enact certain fundamental laws. These are governing powers, and subsequent laws are intended to carry them out into practical use. The most important fundamental law in any nation is that which institutes MONEY; for money governs the distribution of property, and thus affects in a thousand ways the relations of man to man. If wrongly instituted, it cannot be rightly governed by any subsequent laws; and the wrong distribution of property consequent upon it must corrupt society in all its branches. The evils engendered can never be remedied except by altering the fundamental law. Changes in the subsequent laws, so long as they are founded on a wrong base, can only result in the exchange of one evil, for another. The proposition that wrong premises will produce wrong conclusions is often stated, yet it is seldom fully understood and properly appreciated. A simple illustration will show the governing power of a fundamental principle. A good house cannot be built except upon a good foundation. The mason-work above may be laid of the best material and by the best workmen; but if the foundation be not sound, and sink at each corner from five to twenty inches, although the house should not fall, yet this movement of the foundation will distort the floors, ceilings, roof, and rooms from their proper shape; and no propping or patching up of floors, ceilings, roof, or rooms will ever make the house a good one.
One of the chief objects for which Governments are instituted is to insure the protection of the rights of property. The security of these rights is essential to the welfare of the people. Their infringement is the cause of nearly all legal procedures. Such crimes as theft, gambling, fraud in business, bribery in courts of law, etc., which consist in unjustly obtaining property without rendering an equivalent, are violations of the rights of property.
The most sacred right of property is that of a man in the products of his own labour. It is to labour we are indebted for all the necessaries, comforts, and luxuries of life. The exaction of usury for the use of an instrument for exchanging the products of that labour is, therefore, the greatest violation of that right.
In entering upon the great controversy of Paper against Gold, no fitter introduction can be found than the eloquent exordium with which Sir Robert Peel commenced his speech in bringing forward his celebrated Bill of 1844, in which he describes the importance of this inquiry :—
" There is no contract, public or private, no engagement, national or individual, which is unaffected by it. The enterprises of commerce, the profits of trade, the arrangements to be made in all the domestic concerns of life, the wages of labour, the transactions of the highest and of the lowest amount, the payment of the national debt, the provision for the national expenditure on the one hand, and the command which the coin of the lowest denomination has over the necessaries of life on the other, are all affected by the decision to which we may come on the great question which I am about to introduce to the consideration of the committee."
In 1817, a quarter of a century before this speech was delivered, Sir Robert Peel had deserted the financial policy of Mr. Pitt, and had given in his adhesion to the opposite theory. This unfortunate decision inflicted on this country indescribable calamities. No foreign invasion could have affected all ranks so disastrously as the sudden introduction of this rash, ill-advised, and pedantic measure, acting so energetically as it did, on price. "Each succeeding year since the war," said Mr. Tierney, "made things worse. The distress, at first confined principally to our agriculture, has spread to every branch of trade and industry, and the national misery has reached a point wholly without precedent since the Norman Conquest."
Mr. Matthias Attwood thus described the effects of this measure : "The Act fell on the calm prosperity of the people, on the prosperous industry of the country to confound, disorder, and destroy. All the calamities of 1816 were renewed. The blow was first felt by the manufacturing population. Without employment, without food, they prepared for resistance; and the spirit was so hostile that the speech from the throne accused them of aiming at the subversion of the rights of property and of all order in society, and the overthrow of the political institutions of the country."
The return to cash payments was easily effected, chiming in as it did with popular prejudice. Men of all parties were for once unanimous. Mr. Horner, the principal advocate for a change, was allowed to nominate a committee of his own friends; all ingenious but speculative men, chiefly consisting of the Whig party, who, by a long banishment from office, had lost all practical acquaintance with affairs. The leaders of the people, Mr. Cobbett and Mr. Hunt, and others,[1] attributed all the distress to the one-pound notes. Last of all, under the delirium of the day, the periodical and daily press seconded the popular enthusiasm. Reviews, magazines, and journals were beginning to exercise that influence on the public mind which they have retained to this day; but being conducted by theorists and literary men unacquainted with affairs, they have too readily encouraged the popular delusion; and, moreover, the daily newspapers, being mercantile speculations in the hands of capitalists, have systematically upheld what they conceive to be their interests — unreasonably supposed to be bound up with the newly-introduced system. In fact, to have taken an opposite course would have damaged their popularity with their readers. So much is this the case, and so utterly has the advocacy been extinguished, that Professor Bonamy Price, of Oxford, is enabled to assert, in his "Principles of Currency," that "the defence of an inconvertible currency may be said to have disappeared from English literature. No public writer of any weight, for years past, has committed himself to so hopeless a cause. On the Continent, inconvertible currencies still linger in some States; but they are not defended on the ground of principle — they are excused, on the plea of an overwhelming necessity. The nations who adopt them are the objects of a certain pity, as the victims of a misfortune which vanquishes their judgment." And in this somewhat supercilious verdict his brother professors would doubtless concur. But it has always been so; and it was in this class that Galileo found his most inveterate opponents. Nevertheless, the "ground of principle" is going to be taken, and "the object of a certain pity" may perhaps be discovered where the Professor might least expect him.
The defence of a representative paper money is not so hopeless a matter, if the Professor will look across the Atlantic, where he will find the "soft-money" advocates are gaining strength, have begun an organized agitation, have succeeded in making it a hustings question, and have even had sufficient influence to get Governor Hendricks nominated as Vice-President. The chances of immediate success in that contest may be small; but when the people are instructed, and their eyes opened to the cause of their misfortunes, reform is not far off. This agitation and discussion in America must react on this country, and this inveterate tabooing of a vital question in the House of Commons must come to an end.
The Funding system, a system which compels all debtor nations to pay annual interest in gold, is showing signs of breaking up. The Times confessed the other day that there were only four States which could be considered solvent. Indebtedness is paralyzing the industry of all nations. This must attract the attention it deserves; and the time is approaching, slowly but surely, when national debts will be closely investigated, and their obligations questioned.
In spite of the dictum of the Times, which the commercial world still persists in receiving with implicit faith; in spite of the hostility of the press; in spite of the reticence of the House of Commons, the time must come when public attention will inevitably be drawn to the inquiry, "Is money to be composed of the dearest metal known, or is it to be a documentary instrument of exchange to be issued by the State ? "
There are three theories.
The first is, that money must have intrinsic value, and that as intrinsic value is concentrated in gold, thereby making transmission easy, gold is the proper commodity (it may be here conceded that if it is to be a commodity and to have intrinsic value, gold is the best); that, duly weighed, essayed, and coined by the Mint, under the supervision of the State, it shall have conferred on it by Act of Parliament a money denomination; that in this country the weight of five pennyweights and three grains shall be the weight of the sovereign, and that such coin shall be legal tender for twenty shillings of taxes, and consequently of debts, and that for convenience and to obviate the difficulty of carriage to and fro of large sums, a certificate of gold in the form of a bank-note shall be issued.
The second theory is, that gold alone shall be money, and that all paper should be abolished. This is the theory of a savage, and being impracticable in a civilized community, has few advocates.
The third theory, and the one practically carried out by Sir Robert Peel's Bill, is, that though the note carries on its face a "promise to pay gold," yet the necessities of trade require that there shall be more notes, or "promises to pay," than there is gold in the Treasury to honour them if presented.
If one commodity cannot possibly be legal tender for all other commodities, then these propositions are deemed by the advocates of documentary money totally untenable. They maintain that money, as representative of value and as the exponent of price, must, like a warehouse warrant, or a bill of lading, or even a postage stamp, be documentary, and that consequently paper as a material must be the best.
This paper document must declare on the face of it that it is issued by the State, and that it is legal tender for debts and taxes; the amount of issue to be fixed by Parliament. It is evident that this does away with the formula we are all familiar with, "I promise to pay."
The difficulty which has generally been supposed to envelop the whole question must account for the universal indisposition to look into it. A subject so important, however, as that which regulates every bargain made between man and man, cannot be neglected with impunity. Sir Robert has told us there is no contract, public or private, no engagement, national or individual, which is unaffected by it. Earlier in 1825 Sir James Graham had said, "The real difficulties of the State, and the present danger of the landed interest, will be found to lurk under the question of currency." This was said fifty years since, and the real difficulties of the State still lurk under it; and the purport of these pages is to drag those hidden dangers forth, to show that it lies at the root of the deplorable contest between labour and capital, and of that wide separation which is taking place between the propertied and the unpropertied classes.
Last, not least, to a vicious monetary system we owe that rapid growth of usury which is prostrating industry and overcome destroying the happiness and comfort of the people. If, then, the interests of all classes are compromised, surely the English people will, under the direction of the leading intellects of the day, master the plain principle indicated above. But as there is no "royal road to learning" of any kind, so there is no possibility of understanding this question without some attention, thought, and investigation. It certainly does require a vigorous mental effort to overcome the prejudices instilled into us from infancy, prejudices imbibed in the nursery tale, strengthened in the school, inculcated in history, and fostered by the periodical and the newspaper of the day. Against us, wealth, talent, and political influence, and, more to be dreaded, the writers of established reputation, John Stuart Mill, Jeremy Bentham, Lord Overstone, Bonamy Price, Professor Fawcett, Dr. W.B. Hodgson, and all political economists excepting John Ruskin. Even Thomas Carlyle has never applied his powerful mind to its consideration, confining himself chiefly to denunciations and jeremiads. One consolation remains. Truth, which recommends itself to the hearts and consciences of all men, will prevail; from the beginning of the world it has been slowly, but surely, forcing its way, obtaining from age to age increased and increasing numbers of worshippers. It seems, however, as though error in all its phases must be tried by mankind, and not until all its Proteus forms have been exhausted can truth be permanently established. This is ably set forth by Sir Charles Lyell in his history of the struggles of geology through every fantastic variety of error, till at last true theories were laid down never to be shaken. One source of hope lies in the fact that leading men among the working classes are bringing their intellectual influence to bear on those less advanced, whilst the prominence given to these views in the present Presidential election in America indicates progress.
This rash and daring monetary revolution took place on the close of the wars with Napoleon. It is necessary to give a rapid sketch of its introduction and consequences.
The war came to an end, and the nation justly expected that the prosperity and happiness of the community would make more progress in a time of peace. But during the war, two causes had been operating on the nation's welfare. There was the war exhausting the resources of the country and making it poor, and there was an adequate paper currency developing the energies of the country and making it rich. We had vanquished our enemy, and secured for the country, as was fondly believed, the blessings of peace. The very next step was, to turn our back upon our friend Pitt's monetary system, and deprive peace of its blessings. Immediately after the proclamation of peace, the Bank of England received an intimation that it must prepare for a return to cash payments. It contracted its issues accordingly. "Such a scene," says Sir James Graham, "both of agricultural and commercial distress, ensued as this unhappy country, till that time, had never witnessed." The Government was dismayed at the suffering which this merely contemplated measure had produced. In their distress the farmers fondly looked to the time of high prices, for as this had been coincident with a time of war, they illogically deemed the war to be the cause of their prosperity, and not the paper money circulating at the time. The circulating medium was again increased, and by 1819 all the interests of the country were in a prosperous condition. Again Peel's Bill became the law of the land, and in a few months the severest distress pervaded all classes. Again the Government of the day relented. In 1822 a small-note Act was passed, and one-pound notes put into circulation. The country recovered rapidly, and the revenue so increased that the Chancellor of the Exchequer acquired the name of "Prosperity Robinson." But it became advantageous to export gold; the circulation was contracted, the dogma of the convertibility of the note making it imperative on the Bank to cancel notes as the gold decreased. This caused the panic of 1825, with its ruinous consequences. The blow fell first on the bankers. One-eighth of the country bankers in England and six of the London banks stopped payment. They were told "that they deserved their ruin, it arose from an over-issue of notes "; that over-issue which, if it existed, the Government had done everything to encourage. The traders and manufacturers of the country speedily felt the ill effects of the panic of 1825. They were told that their sufferings arose from an over-production of commodities. They had worked too hard, risen too early, been too ingenious in increasing the produce of their industry. "Yet the poor in the manufacturing districts were starving with food in abundance staring them in their face," said Mr. Francis, and two hundred families were officially declared to have among them only four blankets.
This was a state of things again exemplified in the cotton famine. This was not a famine of food, clothes, lodging, furniture, or fuel; and yet the starving factory population passed every day the doors of warehouses and stores full of all these necessaries. A paper issued on their labour, productively exercised, say, on transferring heavy clay to light soils, on carrying the alluvium of river valleys back to the hill sides, on conveying the lime of Derbyshire on cheap railways made by themselves, on embanking and warping the estuaries of the Lune, the Kibble, the Mersey, and the Dee, and lastly on improving their towns such labour, so productively exercised, would have found them in wages, and consequently in food, lodging, clothes, furniture, and fuel. With regard to the last item, the improvement of their towns, the obvious utility of this will be made evident by the description which appeared in the Times of the state of those small cottages which either the factory owner himself or some needy speculative builder runs up in squalid and monotonous uniformity in the vicinity of the works.
To recur again to the continuous narrative. In 1829 and 1830 the agricultural distress was again extreme, whilst petitions poured in from every part of the country and from all interests, petitions which cannot now be read without shrinking from the details of misery which they record. These sufferings created political discontent, which culminated in the Reform agitation. Popular feeling was roused to such a degree that the Ministers thought it advisable to dissuade the King (William IV.) from attending the City banquet. A placard was extensively posted on the walls of London —"Stop the Duke! Go for gold!" These significant words indicated that some minds had guessed the real cause of this dreadful state of things. An extract from Mr. Francis's History of the Bank of England describes the excitement :—
" The knowledge that the great opponent of the Bill, the Duke of Wellington, was likely to be recalled to power, spread throughout the Metropolis. Staves with the tricoloured devices painted on them, and sticks with concealed swords, were sold in great quantities; while the demand for bludgeons could scarcely be supplied. A speaker of the Birminghan Political Union, amid the shouts of assembled multitudes, called on his hearers to pay no taxes till the Bill was passed; while a forest of hands sprang up in answer to his solemn but misguided appeal. A terrible excitement was exhibited throughout England. Preparations were made for a great tragedy. Warrants were prepared. The leaders of political unions were to be apprehended. Troops began to march on disaffected places. The monetary interest felt the shock. On every wall throughout the Metropolis the significant words 'Stop the Duke ! — Go for gold !' were boldly placarded. For a week the Corporation sustained a run upon its specie, which was reduced to 5,000,000. In one day 300,000 were paid. It soon became questionable whether the run for gold would not drain every banker in the kingdom; and the writing on the wall spoke to those having authority with a power far exceeding the most brilliant oratory. Lord Lyndhurst found it impossible to form a Ministry, and Earl Grey was recalled. That the demand was political was proved by the trifling nature of the applications from the country bankers. 'I never saw the hall of the Bank,' said Mr. Richards in his evidence in 1832, 'except in 1825, so crowded with applicants tendering their notes.' They had not in general the appearance of people from the country. One person, who had money with Jones Loyd & Co. to the amount of 20,000, drew it from them in the form of notes, and then went to the bank and demanded gold."
Evidence enough from the above extract of the dangers to which Sir R. Peel's Gold Bill subjects the Government. If the holders of the savings banks were to combine under any excitement, they alone could break the Bank, and scotch the wheels of Government. These new banks seem oblivious of the fact that they are under Peel's Bill, and that they are exposed to a run for gold by their depositors, who have been well described as "a mine of panic ready to explode under their feet at any moment."
The Reform Bill brought no relief, its real and only operation being to destroy the landlord's monopoly of the representation of the people, and to admit more manufacturers, merchants, bankers, and capitalists into the House of Commons. Not a voice was raised in this reformed House of Commons on the subject. In 1837, another panic, and in 1839 the Bank had to borrow two and a half millions from the Bank of France to escape bankruptcy. This disgraceful loan induced the House of Commons to appoint a committee, before which Mr. Cobden gave evidence.
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1. Thomas Payne wrote a book entitled the "Downfall of Pitt's Finance," in which he avers that "of all the varieties of base coin, paper money is the basest. It has the least intrinsic value of anything that can be put in the place of gold and silver. A hobnail or a piece of wampum far exceeds it, and there would be more propriety in making these articles legal tender than to make paper so."
William Cobbett maintained that "if any man were permitted to write a 'promise to pay' on the crown of his hat, it would require no prophet to foretell that the country would be inundated"!
IN 1843 the Government propounded the doctrine "that indirect taxation had reached its limits." The Whig party began rapidly to lose that popularity which they had acquired by their bold measure of parliamentary reform. The Conservatives came into power, and Sir Robert Peel, to cover the deficit of ten millions left by the Whigs — a deficit the result of bad money laws — imposed the Income Tax. In 1844 Sir Robert Peel introduced the Bank Charter Act, in doing which he said that "during the last twenty years four decisive proofs, at four distinct periods, had been given, namely, in 1825, 1832, 1837, and 1839, that under the present system" (a system of his own devising) "the principle of convertibility had been endangered." This was the condemnation of his favourite Bill, a Bill which he fondly anticipated would establish his fame as a financier for ever, but whose disastrous operation he only aggravated, as proved by the panic of 1847, which followed his amendment of 1844, whilst in the space of ten years ninety banks broke, with liabilities of forty-seven millions. This, the matured wisdom of bullionism, Mr. Goulborne called "a perfect system."
In October 1847 came another dreadful panic, in which the Bank was only saved from stopping payment by the interference of the Government; Lord John Russell being Prime Minister. This was remarkable as, occurring directly after the inauguration of the Free Trade system, indicating clearly that Free Trade was not the end-all and cure-all of all commercial calamities, but that the source of evil lay elsewhere. The interference of the Government consisted in the Minister writing a letter, suspending the Act passed three years before, and allowing the Bank to issue inconvertible paper, though at the same time everybody else was forced to pay in gold; so that in effect any debtor to the Bank was compelled to pay in gold, but all the creditors of the Bank might be paid in paper.
It was at this time that the merchants of Liverpool presented their memorial representing the distress they were in, and begging for advances on the credit of the country; in other words, for an issue of Exchequer Notes.
In 1857 another panic took place. In ten years, which seems to be the interval established between these commercial storms, occurred the Gurney panic, this in 1866, so-called from the failure of that great discounting house, a failure which spread consternation throughout the kingdom. This event showed plainly that the unexpected and extraordinary discoveries of gold in Australia and California could not in the least lessen the liability to panic. That the discoveries did for a time stimulate trade and confer temporary prosperity on the country is true enough. The country was gasping for more money, and more money came. To Rector Twells we owe this rapid sketch of the operation of "this great experiment," as Lord Ashburton called it, an experiment condemned by the very test Lord Overstone would judge it by, "that of affording every possible security for the effectual maintenance of specie payments." This failure under trial may be made plain by the following returns of the Bank of England on the weeks in October 1847 and 1857:—
In October, 1847.
Liabilities : Notes or promises to pay sovereigns ...... 34 millions.
Assets : Gold in the Issue departments ..... 8 millions
Balance which the Bank could not pay in gold ..... 26 million
In October, 1857.
Liabilities : Notes or promises to pay sovereigns ..... 39 millions.
Assets : Gold in the issue departments ..... 7 million
Balance which the Bank could not pay in gold ...... 32 million
It will be seen, not only from the arguments which have been used, but from facts and figures, that this "fair-weather" Bank Charter Act has on two separate occasions, when its true object, the effectual maintenance of specie payments, has been tested, most completely and disgracefully failed. It is impossible to convert the enormous indebtedness of this great nation into gold. The convertibility of the note at a fixed rate has been demonstrated to be a mere political fiction. But there is another and a novel aspect under which this question has recently been presented to the public. The Times, the organ of the bullionist party, charges the whole of the people of England with dishonesty. "Any man," it says, "who comes under an engagement to pay a certain sum on a certain given day, pledges himself to deliver so many sovereigns." No doubt, had not the Government letter appeared on Thursday, money would have been worth 20 or 30 per cent., owing to the general panic which would have been created. When we are subsequently told "the hard calculator" sees the time at hand when the gold he has prudently saved will be worth 15 per cent., the Government steps in to frustrate the results of his patient inquiry and reflection. This is the true way of putting the case. In 1857 the mask is thrown off, and the USURER stands revealed.
So it seems the aim of the Bill was, not to supply the people with a sufficiency of money to meet the demands of taxation, state and local, to pay debts and supply the till and the purse, to pay wages and to meet domestic expenses, but to put money in the purse of "hard calculators," stock-jobbers, and "watchers of the turn of the market." Here the Usurer stands revealed in the face of day. It is not the maintenance of specie payments alone, but such a maintenance of specie payments as may command an usurious rate of interest which the "hard calculators" require. Notice the open avowal, the cool adoption of the opprobrious name without a symptom of shame ! The Times went on, all candour and ingenuous frankness, with its confessions, which must have been written by the same Sampson who in 1875 was repudiated and dismissed in an article of withering rebuke. (Unfortunately, the repudiation and the dismissal came after an exposure in a court of law.) Not only did the "hard calculator" calculate on his 20 per cent., but, confessed the Times, he expected he should be able also to buy sugar, silk, and all sorts of articles at a vast reduction. But his expectations were disappointed, "thanks to the Government." According to this oracle of the mercantile world, the producer ought, as a matter of course, to be sacrificed to the consumer. Put the case of the farmer. A farmer, in prosperous times, commonly makes the land his bank, a fact, be it observed, not entirely lost sight of by his landlord. Whatever capital he can, by persevering industry and the results of "patient inquiry and reflection," accumulate, he invests in the improvement of his land, in better management, better cultivation of the soil, and the improvement of his stock. He naturally expects this will secure to him, if his landlord is not too exacting' on the renewal of his lease, the quiet possession of the fruits of his industry. But how mistaken is he in his expectation! There has been another man at work; that is, the "hard calculator." He has improved his understanding of Peel's Bill, and cultivated an acquaintance with the operation of the money market. A monetary crisis comes. Gold goes out of the country; the Bank raises its discounts and reduces the circulation, and the prices of all things fall. And thus the farmer is deprived for years of the fair remuneration for all his industry, and of the interest of the capital which he has invested in the land. The same thing applies to the manufacturer, for he has been building new mills, enlarging his works, extending his trade and employing more hands. Peel's Bill puts a stop to all this. And when the farmer and manufacturer are suffering, and all the country with them, and Government at the eleventh hour steps in to save the country from utter ruin, the usurer complains that prices are not suffered to fall still lower; that he, the consumer, is defrauded of wheat at thirty shillings a quarter, and all other things in proportion; and that he cannot get 20 or 30 per cent, according to his calculation. "Is there among these writers of the Times one word of heart-felt regret," wrote that eloquent and indefatigable yet temperate assertor of right principles, the late lamented Rector Twells, "any relenting for the anguish and privations, the broken fortunes and the broken hearts which the Bank Charter Act is at this moment causing ? Do they say anything of the distress and poverty of the people, thrown by thousands and tens of thousands out of work without any fault of their own ? Have they shown the least feeling of commiseration for the working men by whose humble firesides, sufferings, destitution, and starvation are taking up their winter abode ? No ! Is it so nominated in the bond ? Is there one feeling of pity for the victims of this iniquity ? No, not one. The whole tenor of their writings is, 'Perish the people of England ! but let the hard calculator grasp his 15 per cent.' "
Mr. John Taylor, of the London University, thus puts the question as between the producer and the consumer :— "Cheapness has been cried up as a blessing to the labourer; yet it is difficult to conceive how any one could think that the labourer would be benefited by low prices. A moment's reflection would have served to undeceive him. A poor man produces five times as much as he consumes; a rich man consumes (say) five times as much as he produces. Low prices, therefore, are in favour of the rich consumer as five to one, and high prices are in favour of the poor producer as five to one. These numbers are used by way of illustration; it is immaterial what the real proportions are; every one who produces more than he consumes is benefited by high prices more than by low; and every one who lives on property, every one who consumes more than he produces, is benefited by low prices more than high. Yet there are many persons professing to be friends of the labourer, who gravely try to persuade him that low prices are for his special advantage. Having forced down prices by the Currency Acts of 1819 and 1844, they wished the people to believe that low prices are preferable to high prices." This puts the question between the producer and the consumer in a very clear point of view, and it must be remembered that the well-being of the working man is involved in that of the producer.
To illustrate this further. The late rise of prices in the years 1871, 1872, and 1873 had an injurious effect on all living on fixed incomes. Let us take the fund-holder. He went into the market to purchase the necessaries of life, and with the surplus to purchase luxuries. He found all articles doubled in price. His three pounds in the hundred, only brought him in half of what he secured in the period of low prices. "What, then, was the effect on the producer ? He, with higher wages for the range of price affected labour found the market more plentifully supplied by the lessened demand of the fixed income or annuitant class. So great was the change that the butchers in some of the manufacturing towns found that their prime joints were no longer purchased by their former customers in the middle ranks of life, but were monopolised by working men, especially by skilled artizans. The sovereign had lost some of its purchasing power. This, in effect, had lessened the burthen of the national debt, and calculating results, not in money, but in commodities, the burthen of taxation was lightened at least one-third, and in actual operation the debt was reduced from 800,000,000 to 550,000,000, the annual taxation to meet the interest being reduced from 28,000,000 to 19,000,000 in real burthen, i.e., estimated in food, clothes, lodging, and fuel.
At the time Sir Robert Peel introduced his Bill, the quantity of gold produced year by year hardly sufficed to replace the wear and tear. Its scarcity and the supposed difficulty of adding to its quantity was in his eyes its chief recommendation. Had he lived long enough, however, to see the extraordinary discoveries of California and Australia, he would have been filled with gloomy forebodings, for it was no part of his philosophy to believe that money ought to increase with population and wealth. He would have imagined that the addition of 150,000,000 to our stock of sovereigns, which his Act had made our only money, would disturb the relation of debtor and creditor; especially to the detriment of the latter, always the object of his especial care. The rise of prices would have filled him with dismay, and the relief to the debtor, which is only another word for the workers, would not compensate for the loss to the propertied and annuitant classes. The resulting prosperity he would have attributed to free trade.
But this prosperity was soon destroyed. Production, aided by machinery, now extended to agriculture as well as manufactures, soon overtook this additional supply; and the present year, 1876, sees us landed in the old social quagmire of bad trade, strikes, increasing poverty, and the consequent rise of a spirit of discontent. This, with increasing pauperism and the rapid development of a dangerous class, makes the lookout anything but cheerful.
A new feature has revealed itself. Though the bullion in the Bank of England stands now (1876) at the unprecedented amount of 34,000,000, trade has not revived, and in this present July, 1876, the rate of discount is only two per cent., because the demand for money is languid. In fact, trade has been so harassed, and the energies of the country so overweighted with rent or the monopoly of land, and with interest of money (the other giant monopoly), the burthen of taxation, state and local, being added, that production in all its branches is rapidly succumbing.
SUCH is a rapid sketch of events in the last fifty years. In direct contrast, let us compare it with Mr. Pitt's system, inaugurated by the celebrated Bank Restriction Act, an Act perhaps empirically resorted to, but whose wonderful action for good showed that a right principle had been hit upon.[2] And here it will not be out of place to put on record the courage and public spirit of the merchants of London, who met and passed resolutions that they would receive those notes in payments. This was the more praiseworthy as, only a short time previously, the French Directory, by their insane and profligate issue of assignats, had thrown discredit on all issues of paper. Sir John Sinclair gives an account of the first Exchequer Notes, the immediate and beneficial effects of which he thus describes :—
" In the year 1793, soon after the commencement of the war, commercial difficulties to an alarming extent began to prevail throughout the country. A general paralysis appeared to seize the country ; the number of bankruptcies exceeded all that ever happened in the most calamitous times. An immense number of families were reduced to beggary and ruin. The manufacturers in several of the most flourishing towns were reduced to desperation ; several emigrated, numbers enlisted in the army.
" The evil to be remedied was a sudden deficiency in the circulating medium. Mr. Pitt proposed a Select Committee of the House of Commons on Commercial Credit, which recommended,—
" That His Majesty should be enabled to direct that Exchequer Bills to the amount of £5,000,000 be laid out for the assistance of such persons as might apply."
This recommendation was acted upon.
Those Exchequer Notes gave immediate relief. Seventy thousand pounds were issued, with an actual profit to the nation of four thousand pounds.
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2 As an indication of the timidity with which Mr. Pitt entered on this experiment, Sir John Sinclair gives the following anecdote: "Having remitted £70,000 to Manchester and Glasgow on loan before the Exchequer Notes could be prepared, he met Mr. Pitt in the House, who expressed his regret that the pressing wants of those two towns could not be supplied as soon as the occasion demanded. The money will not be ready for some days," said Mr. Pitt. "It is already gone ; it left London by this evening's mail," was the triumphant answer. Sir John used to add, "Pitt was as much startled as if I had stabbed him." —Sir John Sinclair's Memoirs, vol. i., p. 214.
The immediate results of this unprecedented innovation on all preconceived notions, this bold leap in the dark, were as notes in payments. This was the more praiseworthy as only a short time previously, the French Directory, by their insane and profligate issue of assignats, had thrown discredit on all issues of paper. Sir John Sinclair gives an account of the first Exchequer Notes, the immediate and beneficial effects of which he thus describes:—
" In the year 1793, soon after the commencement of the war, commercial difficulties to an alarming extent began to prevail throughout the country. A general paralysis appeared to seize the country; the number of bankruptcies exceeded all that ever happened in the most calamitous times. An immense number of families were reduced to beggary and ruin. The manufacturers in several of the most flourishing towns were reduced to desperation; several emigrated, numbers enlisted in the army.
" The evil to be remedied was a sudden deficiency in the circulating medium. Mr. Pitt proposed a Select Committee of the House of Commons on Commercial Credit, which recommended,—
" That His Majesty should be enabled to direct that Exchequer Bills to the amount of £5,000,000 be laid out for the assistance of such persons as might apply."
This recommendation was acted upon.
Those Exchequer Notes gave immediate relief. Seventy thousand pounds were issued, with an actual profit to the nation of four thousand pounds.
The immediate results of this unprecedented innovation on all preconceived notions, this bold leap in the dark, were as extraordinary as unexpected. Trade revived with a sudden bound, and the country was enabled to put forth all its energies in the prosecution of the war with France.
Sir John Sinclair, in his Memoirs, gives an animated description of these results in a speech delivered in the House of Commons on the 13th May, 1810, when the Bullion Committee Mr. Horner, chairman issued a report recommending the resumption of cash payments within two years. It is a significant fact that the publishing of this Report spread consternation throughout the kingdom; banks began everywhere to lessen their issues, panic raised its terrific head, mercantile credit was shaken, the Gazette was crowded with insolvencies, all to overthrow results described as follows:—
"Perhaps the world never witnessed such a scene as Great Britain has lately presented; with the one hand we have been spreading cultivation over our own soil and carrying on the commerce of the universe; whilst with the other we have fought successfully against the Tyrant of the Continent and all his millions of subjects. Our empire of the sea we have confirmed; we drove the French out of Egypt; Portugal has been rescued; the emancipation of Spain is, I trust, at no great distance: every possession belonging to the enemy in both the Indies has been subdued; and shall we throw away all these advantages, arising from abundant circulation for on that they depend ? Shall we dismiss a fleet that has ruled the ocean ? Shall we disband an army, the terror of its opponents ? Shall we destroy those resources, which, if properly applied, may yet humble Napoleon to the dust ? And shall we submit ourselves to a ferocious and to a conquered enemy, merely to please a band of speculative politicians, the Midases of modern times, who wish to convert everything they touch into gold; who seem to care but little what experiments they try with the prosperity of the country, provided they can gain a petty triumph by effecting a reduction in the price of their favourite metal, or by diminishing by a few groats or stivers the rate of our exchange; who, contrary to the evidence brought before them, and in opposition to the knowledge and to the conviction of so large a proportion of their fellow-subjects, ventured to report to this House some months ago that our currency was depreciated, and still persist in maintaining so groundless an assertion ? But how does it appear that our currency is depreciated ? Is it not received as value in all pecuniary transactions ? Will it not procure every necessary, every comfort, and every luxury of life ? With a sufficient quantity of notes of the Bank of England, cannot the holder of them purchase the most magnificent mansion-house that can be erected, with all its furniture and decorations ? Or will they not be received in exchange for the finest, the largest, and the best conditioned estate that the kingdom boasts of ? And yet our currency is depreciated !" —Sir John Sinclair's Memoirs, vol. ii., p. 269.
But Sir John Sinclair found himself opposed to a majority backed by popular feeling, and he offers the following explanation of the causes which operated to bring about such a change of opinion; for it was only nine years before that Mr. Horner and his followers were defeated by a majority of 144; the numbers being, Ayes 45; Noes 189; whilst in 1819 the House of Commons supported Sir Robert Peel by overwhelming majorities.
" Mr. Horner, the principal advocate for a change, induced Mr. Perceval to allow him to nominate a committee consisting of his own friends, able and ingenious, but speculative men; who commenced their inquiries under a firm and immovable conviction that no country could flourish with a paper currency not convertible into coin, and they published a report recommending the resumption of cash payments. The immediate effect was to spread a general alarm throughout the kingdom. Bank of England Stock fell from 276 to 229½; banks began everywhere to lessen their issues; mercantile credit was shaken, and the Gazette crowded with insolvencies. These speculative politicians continued their assaults; they were a skilful, numerous, powerful, and above all a united party. Mr. Pitt was no more: Lord Liverpool and Mr. Huskisson were favourable; Mr. Peel unexpectedly became a convert, commencing his career of always conceding to his opponents. Whigs and Tories and Radicals were for the first time united — 'when they do agree their unanimity is wonderful.' Last of all, 'under a delirium' the periodical and daily press inculcated opinions unfavourable to the paper system. Reviews, magazines, and journals began more and more to influence the public mind; and being conducted by theorists and literary men, unacquainted with affairs, they encouraged the popular delusion." —Sir John Sinclair's Memoirs, vol. ii., p. 299.
What greatly tended to strengthen the hands of the bullionists was the wording of the bank-note. "The note," they urged, ran, "I promise to pay" —to pay what ? why, gold. And is this promise to be broken when the promise is on record "that two years after peace is proclaimed cash payments shall be restored "?
It was argued in vain that the one-pound note was estimated in what it would buy, and not in the quantity of gold which it could command; that it had carried on the home trade successfully; that it had always been received and paid as quittance for twenty shillings of debts and taxes; that the contraction of the currency would alter the present relations of debtor and creditor; that all fixed charges, settlements, and fixed payments would be aggravated to the gain of the creditor and the loss and ruin of the debtor; that the national debt would be converted from a paper obligation, incurred as it was under the paper system, into an obligation to find six thousand tons in gold, or in default of that, to pay in annual interest one hundred tons of gold ; that the promise must not be taken to the letter, but was merely an engagement that the note should have a purchasing power to secure to the holder so much of the necessaries and luxuries of life. The parliament in both Houses, and the nation, looked upon all this as special pleading. "It is not so nominated in the bond." The people enthusiastically bowed their necks to the yoke, and entered immediately on such a career of misery and social disruption as had not been seen "since the Conquest." Prices fell. Corn which had sold at eighty shillings per quarter fell to forty. All other commodities fell in nearly the same proportion. In the year 1812 the average price of wheat was actually one hundred and twenty-two shillings and eightpence per quarter. This price could not have been given had not the nation possessed an abundant circulating medium to give the price. Here, then, was a revolution in price, a revolution more nearly affecting all classes than could any political revolution or even foreign invasion. Sir Robert Walpole had said, eighty years before, that if ever the national debt of this country amounted to one hundred millions, the country would be bankrupt. At the close of the war we had a debt exceeding eight hundred millions we had expended more than a hundred millions in a single year; we had contracted this debt principally in paper, with a high scale of prices; and our statesmen thought it a primary duty to take steps to compel the people to pay this debt in gold and with low prices. "Never was there a national act of such infatuated ignorance," continues Rector Twells in one of his clear and convincing pamphlets. "The bank reduced its issues; the circulation, which was at its highest in 1813 and 1814, was reduced nearly one-half in 1816 and 1817. In 1815 the average price of wheat fell to sixty-three shillings and eightpence per quarter. The distress was extreme. The great Corn Law of 1815, protecting wheat up to eighty shillings a quarter, was passed. But it failed in securing anything like that price; for how can you by law force men to give more money than they have to give ? 'Our Corn Law,' said the late Lord Western to Mr. Attwood, 'was to have secured us eighty shillings a quarter, but it does not.' 'How can it ?' was the reply; 'you have passed another law to take away the shillings.' Here lies the gist of the currency question; but the country gentlemen of those days, like the country gentlemen of the present day, whom the late John Stuart Mill irreverently called the 'Stupid Party/ could not understand it. 'It was declared as intricate in its nature, and too abstract for their taste.' "
From 1815 to 1842 there were two systems fighting against each other — Peel's Bills, restricting the supply of money, and making things cheap; and corn laws, passed in the expectation that they would secure a high price, that is, a remunerative price, for corn. The Bill of 1815 was to give eighty shillings a quarter; the average during the eight years it was in operation was sixty-nine shillings and one penny three-farthings. This attempt to secure a high price of corn, when the action of the law was to force cheapness and low prices on manufactured articles, caused an enthusiastic movement against the corn laws, a movement organized by the great Anti Corn Law League, creating an excited state of public feeling only equalled by the Reform agitation of 1832. It was a struggle to make corn, like everything else, cheap. But low prices are not remunerative prices. In a highly taxed country, prices, in justice to the producer, ought to rise. He ought to be able to add taxation to price. If twenty shillings represent the price at which the producer can sell an article, and he has taxes to pay amounting in effect to five shillings more, he must sell the article for twenty-five shillings, or he fails to secure the just reward of his labour.
The vital principle, then, is, to preserve the convertibility of the bank-note; which means, that no note shall be issued unless there be in the coffers of the bank sovereigns to honour it when presented. Good or bad, here is a principle; but how carried out ? Sir Robert Peel stumbled at the threshold. He issued £14,000,000 of paper beyond his basis. A grand principle, truly; to maintain which hundreds of thousands, under the influence of periodical panics, have been hurled down from the station in life which long years of patient industry had procured for them, and plunged into misery and distress. For this the poor by millions have been reduced to the bread and water of affliction. The plain fact is, that the vast commercial and industrial transactions of this country cannot, by any ingenious contrivance, be carried on securely for any length of time with a circulation based upon or even nominally convertible into gold. There is not gold enough in the world. Especially is this the case when Germany, Holland, and the United States are following our example and resorting to specie payments. Every expedient is resorted to. The London bankers' clearing house liquidates £1,500,000,000 a year by a comparatively small amount of bank-notes. But all will not do. With a gold standard, all the energies of the country are circumscribed and overpowered.
It may be worth while here to show what a panic is, and what its effects. No one has described them more vividly than Professor Bonamy Price, of Oxford, who, however, remains a strenuous bullionist, in spite of the dire operation of his theory in producing these panics. That this theory is the one in favour with the mercantile body is evidenced by the fact that the Professor, on coming down to lecture in Liverpool, was entertained at a public breakfast by the Chamber of Commerce, when he was complimented on the ability with which he defended the principle of convertibility:—
" I propose to inquire into the nature, the causes, and, if any there be, the means of prevention of commercial crises in England. A graver or a more important inquiry can scarcely arise in the commercial sphere. The symptoms and the effects of these fearful occurrences are, unhappily, but too familiar. It makes men shudder to recollect the agonies which convulse trade at these dreadful seasons the crash of falling houses; the paralysis and distrust which arrest commerce; the danger hanging over the heads of eminent banks and distinguished firms; the difficulty, or even impossibility, of discount; the sleepless fear of being crushed by the fury of a tempest too violent to be controlled by the wisest or the most experienced. Nor is it merely the memory of the past which gives interest to a question which might seem to belong solely to history. Who among merchants does not quail at times under a dim consciousness of a mysterious law of periodical recurrence which broods over these trading pestilences ? Who is not haunted by a misgiving that the past may repeat itself in the future; that the anxieties and calamities which have marked bygone years revolve in recurring cycles, and may even now be approaching laden with distress and ruin ?" —Lecture delivered to the Liverpool Chamber of Commerce, in October 1870.
Panic is the inevitable concomitant of gold, for, being a scarce metal (and its scarcity is its chief recommendation), it cannot keep pace with the immense powers of production evolved by machinery. Every year more and more commodities are produced to be measured against gold, which, though it increases every year, yet becomes relatively scarcer and dearer. It is, in fact, the race between the hare and the tortoise; but coined gold, having a fixed denomination, cannot be said to rise or fall. It is by the rising or falling in price of the commodities estimated in it that dearness and cheapness are expressed; in other words, dear commodities indicate money to be plentiful, cheap commodities indicate money to be scarce. This is well illustrated by Dr. Johnson on his visit to the Isle of Skye,[3] when told that twenty eggs might be bought for one penny. "Sir," said the Doctor, "I do not gather from this that eggs are plentiful in your island, but that pence are few." It is evident, then, that the free trader's dogma, that cheapness is the synonym of plenty, requires modification. To put an extreme case. Reduce the quantity of sovereigns one half, and to what would the price of everything fall ? The converse was proved to be true by the influx of Australian gold doubling prices. Indeed, price is all that, in common life, men attend to, and any disquisitions on value, so much indulged in by political economists, are beside the mark. If any one is in doubt whether labour is the actual producer of the wealth, let him consider what would be the situation of this or any other civilized nation, if the labourers should cease their toil for the brief term of five years, letting the earth for that period bring forth only her spontaneous productions. Let man neither sow nor reap, let manufacturing cease, commerce be suspended, and what would be the condition of our country at the end of five years ? Would not a large proportion of the people have sunk into their graves from starvation; and would not many who were living be almost naked like the barbarians ? If the earth should open her chasms and spew out pure and malleable gold and silver, as plentiful as the rocks in the mountains, it would afford no relief. But if she should cast out wheat, corn and vegetables, beef, pork, mutton, poultry, besides garments, houses, furniture, and so forth, the people would be supplied with the means of subsistence. In such a case we might do without the labour of man. But if we had all the gold and silver money and all the paper obligations that have been made from the creation of the world to the present day, they would not be the least substitute for the productions of labour; and yet our laws make these legal instruments in the hands of the few to trample in the dust the rights of the labourer, on whom we depend for every morsel of food that we eat, for the clothing we wear, the houses we live in, and in fact for every comfort and luxury of life.
That paper money is to be the money of the future is evident from the various steps through which nations advance in their progress in the paths of civilization.
Bishop Berkeley asks, in the motto on the title page, "whether, in the rude original of society, the first step was not the exchange of commodities; the next, the substitution of metals by weight, as the common medium of circulation; after this, the making use of coin; lastly, a further refinement, by the use of paper with proper marks and signatures; and whether this, as it is the last, so it be not the greatest improvement ?"
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3 Tour to the Hebrides, 1785.
SIR JOHN SINCLAIR, in his Memoirs, declares that "it was a great discovery when a metallic medium was substituted for barter; it was also a great discovery when paper convertible into coin was substituted for gold and silver; but a third discovery was reserved for our own times, namely, that with an inconvertible paper currency, agriculture, commerce, and manufactures might advance in a career of unexampled prosperity."
What will chiefly aid in forcing a paper money on the attention of the civilized world, will be the break-up of the Funding system; the first symptoms of which have already been shown by the bankruptcy of the Turkish and Egyptian Governments, who find themselves totally unable to meet the interest on their debts; whilst the tottering credit of some other States indicates that this liability to pay in gold debts owing chiefly to foreigners, is coming to be questioned. These public debts, if looked into closely, are only a machinery for mortgaging the labour of generations unborn, adding to the constantly increasing power of the monied or creditor interest. This is not only evident in England, but on the Continent, and in recent times in the United States, and should be a matter for serious reflection to all not totally absorbed in the personal battle of life. To use a vulgar phrase, the English nation — leaving out the millionaires, the monied men, and the wealthy — is "on the penny." Everything is calculated in money. Even the tithes, which a few years back were taken in kind, are now commuted into a money payment. The first great item in this stupendous system of indebtedness is that of national obligation, our own debt mounting up to £800,000,000. If to this we add the debt of the United States, £600,000,000, and those of the Continental States, which Haydn's Book of Dates gives at £2,500,000,000, and the Indian debt, £40,000,000, it will be seen that the nations of the civilized world are labouring under a burthen which must in time be simply unbearable. That this borrowing system is breaking up becomes apparent when we find that, like a chain cable with a failing link, it has broken down in its weakest part. Egypt and Turkey have failed to pay their creditors a dividend, and as the United States have resolved to carry on their internal trade on the gold basis, it is simply impossible that they will have any to spare for the foreign fundholder. Their repudiation is only a question of time, for, however willing to keep faith, they cannot perform impossibilities. At this very time Germany has resolved on specie, that is, gold payments, as also has Holland; and there is not the quantity of this metal on the face of the earth to meet all these requirements. Nor are we quite secure. "We have taken a bond of fate, and nothing can touch us," our newspapers and Chancellors of the Exchequer tell us. But this cloud in the East may burst. We may find ourselves involved in a war sooner or later, and then our expenditure, if the Crimean campaign is to be taken as a guide, will add £50,000,000 a year to our debt. The public attention will be directed to the means of raising this additional taxation; but for this where must we look ? Obviously to the land. But the House of Commons will strenuously resist a land tax, and then it is to be feared there will be a letting out of waters — that then will be the beginning of troubles.
So much for national debts. But let us look at private indebtedness. Is there a young man beginning a trade or opening a shop who is not in debt to some monied man ? Nearly all the trade of the country is carried on by credit. Then comes the vast system of mortgage. It is not too much to say that one-third of the land and houses in this country are mortgaged, and as the mortgager is at certainties and the mortgagee at uncertainties, Lord Bacon assures us that "at the end of the game the money will be found in the money bag." The municipal corporations are in debt £40,000,000. This implies heavier rates. What the rate-payers in London have to pay for their "vast improvements," as Cobbett called them, is something appalling, and a crisis is at hand nearer than is generally supposed. The local taxation in this town (Liverpool), is assuming formidable dimensions. Gas-works, water-works, insurance companies, and limited liability companies, are so many associations whose claims add to the indebtedness of the community, and whose dividend generally runs up to 10 per cent. As to limited liability companies, they are a new machinery for any man who can save his hundred sovereigns to join the annuitant class, and in time to get out of trade or productive industry. But as some of them are non-paying, the evil is somewhat mitigated. In fact, trade and the productive energies of the country are so loaded with rent, interest of money, and taxation, that they are beginning to succumb; and this accounts for the wretched state of the iron, coal, cotton, and other trades. Universal depression is the rule in this year of our Lord 1876, and we have indicated the cause.
Gold money must be scarce money, scarce money must be dear money, and dear money is only another name for usury. The first step in this complication of error is the diversion of labour from the useful occupations of tilling the ground, constructing railways, laying out good roads, building more roomy and commodious cottages, to that of digging, crushing, riddling, and washing quartz reefs in Australia. It is there that we see this absurd waste of that most sacred of all things, labour, withdrawing more than £50,000 men from adding to their own and the community's stores of food, clothing, and lodging, from contributing to the comforts and even elegancies of life, and devoting themselves to a degrading and precarious occupation, reduced to a state of primitive barbarism, and experiencing all the privations of savage life.
The demoralising effects of this search are beginning to make themselves felt in these colonies. A complete lottery of a few great prizes and of many blanks fosters a spirit of gambling. The despair of the losers, and their regrets over a life of wasted labour, drive them to forget their troubles in intoxication; while the sudden acquisition of wealth by the more fortunate adventurers finds them totally unprepared by education and early association to spend it with judgment or taste. The extraordinary spectacle is thus presented to the world of a "navvy aristocracy."
This search for the precious metal is stimulated by the price — £4 an ounce, as fixed by law; that is, the Bank of England must buy all bullion offered to it. It might be a matter of curious speculation what the price would be if the nations of the earth were wise enough to demonetise it.
And yet, much as California and Australia have added to our stock, production, stimulated by this supply of its great want money, still asks for more. It is still relatively scarce, and usury, the scourge of nations and the crying sin of the age, is still ravaging industry and inflicting incalculable evils on mankind.
A SHORT review of what usury effected in ancient times is thus described by Sismondi, who attributes the decline of the Roman Empire to this insidious and cursed concomitant to metallic money :—
"As nations advance in what is popularly called civilization, there has ever been a tendency to concentrate riches in the hands of a few; and as the idle classes increase, they who produce most consume least. It is this injustice, through its prime agent, usury, that led to the downfall of all the great nations of antiquity; for if labour builds up a State, labour alone can sustain a State; degrade labour, and you sap the foundations on which the superstructure rests. So it happened in ancient Rome in what are deemed its palmiest days of civilization.
"During the entire ages of Trajan and the Antonines, a succession of virtuous and philosophic emperors followed each other; the world was at peace ; the laws were wise and well administered; riches seemed to increase; each succeeding generation raised palaces more splendid, monuments and public edifices more sumptuous than the preceding; the senatorial families found their revenues increase; the treasury levied greater imposts. But it is not on the mass of wealth, it is on its distribution, that the prosperity of States depends; increasing opulence continued to meet the eye, but man became more miserable; the rural population, formerly active, robust, and energetic, were succeeded by a foreign race; while the inhabitants of towns sank in vice and idleness, and perished in the midst of riches they themselves had created."
Such is a picture of Rome under the Emperors; but usury was a crying evil even in the simpler times of the Republic, and though struggles between the patricians and the plebeians seemed ostensibly to turn on land, yet the money-lender was at work, and frequent allusions are made to his influence on the condition of the people.
Lord Macaulay brings forward, as one of the grievances of the plebeians, their being ground down to the dust by the barbarous and unjust legislation touching pecuniary contracts. "The ruling class was a monied class; and it made and administered the laws with a view solely to its own interest. Thus the relation between the lender and the borrower was mixed up with the relation between sovereign and subject. The great men held a great portion of the community [he might be talking of England] in dependence by means of advances at enormous interest. The law of debt, framed by the creditors, and for the protection of creditors, was the most horrible known among men. The liberty, and even the life, of the insolvent were at the mercy of the patrician money-lenders."
Not only had whole provinces become the property of an individual, but usury existed in so frightful a form that even the virtuous Brutus, when Pro-Consul of Sicily, received 60 per cent, for the loan of money (this is vouched for by his friend Cicero); whence we may form some idea of the extortions of those who were less scrupulous. What must have been the income of Agrippa, who, at his own expense, built the Pantheon, and supplied Rome with one hundred fountains, all ornamented with marble columns and statues ? The colleague of Cicero was proprietor of the whole island of Cephalonia, on which he built an entire city. In the time of Nero it was ascertained that six Romans were in possession of half of Africa, and it would be easy to mention the names of many others enjoying colossal fortunes. Now, Pliny expressly says that these immense agglomerations of wealth, which he also declares ruined Italy and the provinces, were due to the concentration of estates, which he terms "latifundia," and to usury. The words are "Foenus hoc fecit, et nummus percussus."
Here we see the evils of concentrated wealth; and as this wealth accumulated, men decayed, — not because wealth accumulated, but because it was inequitably distributed.
The legislation of Sir Robert Peel and Mr. Jones Loyd (made Lord Overstone by Lord John Russell), tends to realize in these days the same injustice and consequent ruin which occasioned the downfall of Rome.
Usury was equally rampant in Greece, if the representations of Aristophanes and the denunciations of the orators and moralists may be believed. It was owing to the infatuated belief, so prevalent in half-civilized nations, that gold and silver should be money, that Athens maintained her supremacy over the other States. It was the mines of silver at Laurium which, by making her the source of money, and that supplied on her own terms to her neighbours, made this insignificant district the supreme power. This is entirely overlooked by Grote, Mitford, and Gillies, for thus far all history has been in the hands of writers imbued with the prejudices of their times. Even Gibbon holds forth frequently on great stores of gold, silver, and precious stones, as indicative of abounding wealth. In fact, history will have to be written over again, with the aid of lights thrown on it by a sound financial theory.
If we pursue our inquiry into the Middle Ages, we shall find that this besetting and yet little noticed sin has attracted the attention of the Church more than the State.
The ancient Fathers speak of it in no measured terms; but they had no idea of a true representative or certificate of labour. However much mistaken in matters of doctrine and discipline, on this they were correct; and though they cannot be acquitted of pride, and undue authority, there were manifest honesty, sincerity, and good intentions. Merchandise, as they saw it practised, was a series of frauds; indeed, it is not much better in these days. But the principle of equivalents, as clearly stated by Mr. Ruskin, would enable merchants and traders to pass goods from producer to consumer with honour and credit to themselves, and without violating the sacred laws of justice in the operation.
Amongst these Fathers may be named St. Thomas, Ambrose, Tertullian, St. Gregory of Nyssa. Mr. Bentham sets their invectives down to superstition, but it may be doubted if the charge of superstition might not be retorted.
The Councils of Terracon, also, anno 516; of Nice, anno 325; of Lyons, anno 1273; of the Lateran, anno 1179; of Pope Martin, anno 572, — all denounce this curse, and forbid all ranks, especially the clergy, to indulge in these practices. One example must suffice :—
" Nothing exceeds this modern system of usury; indeed, these usurers traffic in other people's misfortunes; taking gain through their adversity; under the appearance of compassion they dig for the distressed a pit of misery; under the appearance of giving to the indigent, extending the hand to relieve him who harbours from the storm, by alluring him only to be shipwrecked upon the shoals and shallows of an unforeseen whirlpool. A dreadful disease, my dearest brethren, affects the Church; a disease calling loudly for a speedy remedy. Commanded not to lock up our money, even the product of our honest industry, and to hold our house ever open to receive the poor, we collect riches through their wants; nattering ourselves that we have discovered an excusable system of avarice and rapine. Your riches were given you to relieve the poor, but not to plunge them into misery. Why have you abandoned your God in order to follow horrid riches ? Are you not aware that this practice is forbidden in the Old Testament also ? ... Should you consult also the dispositions of temporal laws on the matter, you will find that usury has been always considered a mark of the most barefaced impudence." —St. Chrysostom, in his Homily on St. Matthew.
The Church of England denounces usury, classing it with the most odious of vices. For in the Canon 109 the following occurs: "If any offend their brethren either by adultery, whoredom, incest, or drunkenness, or by swearing, ribaldry, or USURY, or any other uncleanness, the churchwarden shall present them, that they shall be punished, and not admitted to the Holy Communion." This is little attended to by men in holy orders, and no class is more ready to invest in foreign loans, tempted by high and usurious interest, than the curates and vicars and rectors of the Church of England. Their names frequently occur in lists of bank shareholders, and of investors in insurance companies. Who ever heard a sermon holding forth usury as a sin ? Are they not too ready to pay court to the richer members of their congregations, without any reference to the equivocal modes in which those riches are acquired ? Nor can dissenting ministers be acquitted of passing over the crying sin of the age in silence, though well aware that "the chief places in the synagogue" are chiefly held by men indulging in these iniquitous transactions.
The greatest usurers in the Middle Ages were the Jews, whose extortionate claims were the principal cause of the popular hatred which too often found vent in massacres and persecutions; and these not discouraged by kings, emperors, and princes, embarrassed by the demands of their unscrupulous creditors. Mr. Carlyle in his graphic way describes relations which subsisted between King and Jew:
" Parchments ! yes, parchments are venerable, but they should at all times represent, as near as they can, the writings of the Ehadamanthine tables, otherwise they are not so venerable. Benedict the Jew in vain pleaded parchments his usuries were too many. The King said, 'Go to: for all thy parchments, thou shalt pay just debt; or observe this tooth forceps.' "
And Sir Walter Scott, in his Ivanhoe, brings out their usurious practices in his picturesque way. Advancing to later times, we have the Greshams, the Fuggers, the Guys, the Hopkins (immortalized by Pope), and the Medici. The name of a street in London tells us whence banking and scrivening were introduced. Lorenzo de Medici, the Magnificent, derived his enormous riches from loaning and banking, for we are told by Mr. Roscoe that the immense revenues of this family were derived from the banks which they had established in all the trading cities of Europe, and which were conducted by agents in whom they placed great confidence. At a time when the rate of interest frequently depended on the necessities of the borrower, and was in most cases very exorbitant, an inconceivable profit must have been derived from these establishments. Sovereigns might be found among their debtors, and in the list occurs the name of our Edward the Fourth.
Historians have been too much occupied with the intrigues of courts, with campaigns and the fate of battles and the vicissitudes of war, to watch closely and take note of the insidious encroachments of this social canker. The tyranny of the government, the contests of party and faction, the privileges of the nobles, are sufficiently dwelt upon, but the exactions of the monied class are passed over. In the histories of France, the oppressions of the noblesse, and of the farmers of the taxes, are duly noted, but the exactions of money-lenders, scriveners, and mortgagers of land and house are passed over. Erckman Chatrian, in his Histoire d'un Paysan, tells us how farmer and peasant are ground to the earth by their inevitable and law-protected demands:
" On parle quelque fois de maladies que vous rongent le coeur, que vous dissechent le sang:— mais le vrai maladie des pauvres, le voila ! Ce sont les usuriers, ces gens qui se donnent encore l'air de vous aider, et qui vivent sur vous jusqu a ce que vous soyez sous terre. Alors ils tachent de se retrapper sur la veuve et les enfans."
One sometimes hear of diseases that gnaw your heart, that dry out your blood: -- but the true disease of the poor, here it is! They are the usurers, these people who pretend to help you out, and who live off you until you are on the ground. Then they try to make up for it off the window and the children.
John Law, with his Mississippi scheme, is held up as a warning to future generations of the dangers of paper money; but a candid consideration of his proposal will show that his prophetic visions of the future New Orleans, and of the boundless fertility of that immense valley of which it was to be the port, were founded on a sure basis. Like all great men, he was before his time. The Duke of Orleans, and the profligate courtiers, made this daring but, as a century has shown, not absurd speculation, into a mere excuse for stock-jobbing. Bishop Berkeley asks in his Querist, "Whether the ruinous effects of the Mississippi, South Sea, and such schemes, were not owing to an abuse of paper money, or credit, in making it a means of idleness and gambling, instead of a motive and help to industry ?" As to the South Sea Bubble, Australia and New Zealand have shown that reality will sometimes outstrip the wildest speculations. Even El Dorado had some foundation in fact. These were all of them too early anticipations of what maritime discovery afterwards revealed.
The same causes produce the same effects. Other countries of Europe could tell their tale of robbery under cover of law, though perhaps Poland, under the iron grasp of the dominant race, the Jews, may be emphatically cited, since under this race, so devoted to the pursuit of gain, that country has never been able to emerge from a state of semi-barbarism.
In the county Galway, in the region of Connemara, lies an immense tract of country, consisting of unreclaimed bog. This was the estate of the late John Martin. The tourist enters on this desolate district by Martin's Gate, and travels through this wilderness by means of Bianconi cars for twenty miles, when he arrives at Ballynahinch. Mr. Martin died hopelessly in debt, chiefly through the cessation of the demand for kelp; and his sister sailed to America in a state of great destitution. His estates are now in the hands of a London Insurance Company, who are more at home in financing than in improving lands. We have here square miles of bog, and a population who, under the stimulus of constant employment and good wages, would find the labour. As bog is only excess of vegetable matter, the correctives, clay-marl, and sand, with arterial drainage, would fertilise this barren waste; but all is stopped for want of money. Now for a proposal which will make the hair of every politico-economical professor stand on end. MAKE MONEY ! Issue a paper based on the prospective labour brought into play by this constituent of wealth.
The large estates in the north of Ireland are, on the contrary, carefully cultivated. They are under the London City Companies, who, by liberal treatment of their tenants, diffuse comfort and happiness around. As has been pithily expressed, the City Companies, being easy landlords, "manure the land with rent." The difference between the north and west of Ireland is obvious to the most careless observer.
As a contrast to this account of Connernara, the following extract from the Glasgow Herald shows a wise expenditure, on the part of the Duke of Sutherland, of capital, as the Times would call it, but which is really an expenditure of money. Here would be a legitimate basis for an issue. The waste land is there, and the labour. All that is wanted is—money. The Duke does not apparently agree with the political economists in their dogma, "Don't cultivate inferior soils":—
" A remarkable experiment, the result of which will have an important bearing upon a great question of the day, has been going on in the far north during the last four years. The Duke of Sutherland, who makes up for his silence in the arena of public life by a good deal of practical wisdom exhibited in other directions, is carrying to a successful issue an undertaking which cannot fail to bring honour to his own name and advantage to his country. He has proposed to bring under cultivation by steam power 2,000 acres of wild and useless moorland, lay it out in farms of considerable size, erect farm buildings, and, on the success of the experiment, continue the operation wherever waste and barren land exists on his property. It is satisfactory to know that the Duke's efforts have succeeded almost beyond expectation. The land reclaimed has now yielded a second crop. We hear of an average crop of oats, a fair crop of barley, more than an average growth of turnips, an excellent crop of hay, and good fields of potatoes. These results have not been reached without a very considerable outlay both of money and labour."
In the Times of the 31st October appears an interesting letter from Mr. Mitchell Henry, M.P. for Galway, who, stimulated by the example of the Duke of Sutherland, has taken a large tract of bog-land in hand, and is bringing it into cultivation.
Here we see Manchester money at work. The capital will be the labour embodied in fencing, draining, liming, etc.
This contrast between Scotland and Ireland makes it plain that on no people would a sufficient supply of money confer more benefit. There we see land and labour divorced, and this owing to scarcity of money. The ring is wanted that should marry these two essentials to the production of Ireland. England, by her manufactures, is constantly draining Ireland. The rents of the landlords, mostly absentees, are drawn in gold.
The particular feature which distinguishes Ireland is the extent of the bogs. Advances of Exchequer notes might be made, did the law permit it, on the landlords engaging to devote themselves to their cultivation. Of course precautions would have to be taken that they were not diverted to claret, hunters, or trips to Paris.
If next we turn to India, we find those immense populations ground to the earth. There the Schroff (the native money-lender), the Armenian, and the Parsee reign supreme. The rates of interest prevailing are so shamefully exorbitant that no labour the ultimate source from which all interest must be derived can possibly meet its demands. The prevailing rates are from 10 to 20 per cent. Such immense profits arising from such flagrant usury is too much even for British virtue, for one of our best Governors felt himself bound to bear the following testimony:—
" Sir Charles Metcalfe, it will be seen, was witness to the same nefarious doings as those of Hastings, Clive, Impey, and Benfield, denounced so eloquently by Edmund Burke. It is evident that, under the rupee system, these cruel exactions are still as barefaced and extortionate as ever. He found not merely the normal state of affairs in the Nizam's court and country — corruption, extortion, the most atrocious mismanagement and consequent anarchy, for all of which, of course, he was prepared beforehand; he found what was far worse — British subjects, and those not solely persons unconnected with the public service, engaged in the illicit and unrighteous trade of the Hyderabad money-lenders, exacting from a miserable people interest at the rate of 25 per cent., and backed to a lamentable extent by the highest authority in India." —Edinburgh Review, July, 1855.
And by a happy coincidence, a means of extrication from this lamentable state of things presents itself in the extraordinary influx of silver from California. And yet under the influence of inveterate prejudice, this accession fills the authorities of Calcutta with perplexity and alarm, for they see no way to extricate themselves from the consequences. Yet here is presented to them a relief from the great oppression which afflicts the Hindoo population, their dependence on the Schroffs, the native money-dealers. Coin this superabundance of silver into rupees. Confer on each disc of silver the money denomination, making it a legal tender for debts and taxes. Silver is at once preserved from depreciation. The poor Hindoo would at once be furnished with the means of paying his debts, and he would be released from the fangs of these merciless exactors. India is indeed a notable example of the cruelty and insanity of rulers exacting taxation and not giving the taxpayer the wherewithal to pay it in.
The late James Wilson, who was promoted from the editorship of the Economist to be the financial minister of India, was so impressed by what he saw, that, according to the late Jonathan Duncan, who had it from good authority, he was seriously resolved to endeavour to introduce taxation paper money. It would have been a stupendous task to have carried this reform to a successful issue in the face of the opposition of the officials, alluded to in Sir Charles Metcalfe's Memoirs, backed by the power of the native money-dealers and the Parsees.
The Times, which cannot at all times control the outspoken opinions of its correspondents, inserted in an unguarded moment the following exposure of the miserable laissez faire notions prevailing:—
" We have left the zemindar and the usurer to reduce this people to positive slavery. The zemindar and his amlah (underlings) take 10-16ths of the ryots' crops imagine that ! — and the usurer steps in and takes the other 6-16ths, and the people live upon the advances of the latter from one year's end to the other. Growing the most magnificent harvests of wheat, rice, opium, indigo, they themselves starve on the coarsest millets, and are as poor and miserable as can be conceived. In these circumstances I have urged privately, but with all the force I could command, the only counsels that can save us from a very awful calamity, viz., the empowering the ryot to take the crops now in the field and the cold-weather crops, suspending all claims upon him for rent, advances, revenue, etc., for twelve months. If the customary misappropriation of these crops between zemindar and usurer takes place this year, nothing will save the people, I am persuaded, from perishing by millions."
If from India we turn to the Colonies, we find the same cause still at work no provision made for supplying them with this the life-blood of trade. They are indebted for what they have to the sums brought by emigrants and to what balances of exchange may be in their favour in trading with foreigners; and if the British sovereign is not forthcoming, the Spanish dollar is welcome. Australia must be excepted. More fortunate than her sister Colonies, she found the coveted treasure at her feet, and with the aid of her Mint supplied herself with what has conferred upon her a prosperity in remarkable contrast to the others.
CHAPTER VI.
How can Paper Money Increase the Wealth of a Nation ? --Answered.
We must now come to the most striking instance of the opposite results of the two systems, as furnished by the United States of America. We can trace their workings in this now powerful nation from its origin as British plantations to the present year (1877), when the controversy between "Hard Money and Soft Money" has become a leading hustings question. But as no one has put this in a clearer light than the late lamented Rector Twells, brother to the Member for London, the following extract from his pamphlet is now given :—
" To many persons it appears impossible that bits of paper inscribed with certain characters can promote the prosperity of a nation, or increase its wealth. But if the prosperity of a country be promoted by the facility afforded to its inhabitants to exchange what each possesses for what he requires, a medium of exchange inexpensive in itself and capable of expansion with the wants of the country, and with its increasing population, must be highly beneficial. The question proposed shall not, however, at present be answered by explaining the true theory of money, but by an appeal to facts. Land and labour being admitted to be the primary sources of a nation's wealth, let facts show how Paper Money assists land and labour to create wealth.
" Look, first, at the great fact of the prosperity and wealth of the United States of America. As a testimony to their growing prosperity, let us take a short extract from a speech of Edmund Burke, on American Taxation, delivered in the House of Commons so far back as the 14th of April, 1774. Alluding to the Americans, he says:—
" 'Nothing in the history of mankind is like their progress. For my part, I never cast my eye on their commerce, and their cultivated and commodious life, but they seem to me rather nations grown to perfection through a long series of fortunate events, and a train of successful industry accumulating wealth in many centuries, than the colonies of yesterday than a set of miserable outcasts, a few years ago, not so much sent as thrown on the bleak and barren shore of a desolate wilderness, three thousand miles from all civilized intercourse.'
" Such is the recorded opinion of this distinguished statesman.
" And how was this miracle effected ? David Hume the historian shall answer that question. Here is an extract from his correspondence with the Abbe Morellet:—
" 'In our colony of Pennsylvania, the land itself, which is the chief commodity, is coined, and passes into circulation. A planter, immediately he purchases any land, can go to a public office and receive notes to the amount of half the value of his land, which notes he employs in all payments, and they circulate through the colony by convention. To prevent the public being overwhelmed by this representative money, there are two means employed: first, the notes issued to any one planter must not exceed a certain sum, whatever may be the value of the land; secondly, every planter is obliged to pay back into the public office, every year, one-tenth of his notes. The whole is of course annihilated in ten years, after which it is again allowed him to take out new notes, to half the value of his land.'
"This was the monetary system under which the American colonists prospered to such an extent that Burke said of them, 'Nothing in the history of the world is like their progress.' It was a wise and beneficial system, and its effects were most conducive to the happiness of the people. Take the case of a family industrious and enterprising, driven by persecution or misfortune to seek a refuge in the wilds of the new world. With their scanty means they purchased a tract of land. Many years of hard labour, privation, and anxiety would have been necessary to bring that family into a state of decent competency, had they been required to purchase gold and silver by labour and by the produce of labour, before they could effect other improvements of their property. But half the value of his land was advanced to the head of the family in notes, which circulated as money. With these notes he could hire labour, and purchase implements of husbandry, and cattle; and thus where without these notes one acre could be cleared, cultivated, and stocked in a year, ten would, by the assistance of the paper money advanced, be reclaimed from the forest and rendered productive. Thus hope entered the dwelling of the poor emigrant. Ten years found him, with the whole of his debt to Government discharged, the proprietor of a happy home. And the kind hand of a paternal Government was stretched out still, to advance to him again one-half of the increased value of his land, and thus enable him to clear more of the forest, and to settle his children in new homes. Such was the system by which 'a set of miserable outcasts' were converted, in a short space of time, into happy, contented, and prosperous colonists.
" A prosperous people are generally well satisfied with the form of government under which they live.
" When, in 1776, Dr. Franklin was examined before a Committee of the whole House of Commons, he was asked, 'What was the temper of America towards Great Britain before 1773 ?' He answered, 'The best in the world. They submitted willingly to the government of the Crown, and paid in all their courts obedience to Acts of Parliament. Numerous as the people are in the several old provinces, they cost you nothing in forts, citadels, garrisons, or armies, to keep them in subjection. They were governed by this country at the expense only of a little pen, ink, and paper. They were led by a thread. They had not only a regard but an affection for Great Britain, for its laws, its customs, its manners, and even a fondness for its fashions that greatly increased its commerce. Natives of Britain were always treated with particular regard; and to be an Old England man was, of itself, a character of some respect, and gave a kind of rank among us.'
" In an evil hour, the British Government took away from America its 'representative money;' commanded that no more paper 'bills of credit should be issued, that they should cease to be a legal tender,' and collected the taxes in hard silver. This was in 1773. Now mark the consequences. This contraction of the circulating medium paralyzed all the industrial energies of the people. Ruin seized upon these once flourishing Colonies; the most severe distress was brought home to every interest and every family; discontent was urged on to desperation; till at last 'human nature,' as Dr. Johnson phrases it, 'arose and asserted its rights.' In 1775, the American Congress first met in Philadelphia. In 1776, America became an Independent State.[4]
" Again, Sir A. Alison, the able and indefatigable historian, bears this testimony to the power and superiority of Paper Money. 'When sixteen hundred thousand men were engaged in active warfare, on the two sides, in Germany and Spain alone, where nothing could be purchased but by specie, it is not surprising that guineas went where they were so much needed, and bore so high a price. In truth, such was the demand for the precious metals, owing to that cause, that at length all the currency of the world, attracted to Germany, as a common centre, could not supply it; and by a decree on September 30th, 1813, from Peterswaldau in Germany, the allied sovereigns issued paper notes, guaranteed by Russia, Prussia, and England, which soon passed as cash from Kamtchatkha to the Rhine, and produced the currency which brought the war to its successful issue. There was an instance of the manner in which a paper circulation, based on proper security, supports credit, and supplies the want of specie at the decisive moment. Whereas, according to the present system, the paper would of necessity have been contracted, when the specie became scarce credit would have been ruined at the critical period, and the vast armaments of the allies would have been dissolved for want of funds for their support.' —England in 1815 and 1845, p. 76, 77.
" And in a recent edition of the history of Europe, he gives this additional evidence of the important advantages which EXPERIENCE HAS DEMONSTRATED to result from a paper currency. 'To the suspension of cash payments by the Act of 1797, and its power, in consequence, vested in the Bank of England, of expanding its paper circulation in proportion to the abstraction of the metallic currency and the wants of the country, and resting the national industry on a basis not liable to be taken away either by the mutations of commerce or the necessities of the war, the salvation of the empire is beyond all question to be ascribed. It is remarkable that this admirable system, which may be truly called the MOVING POWER OF THE NATION during the war, became towards its close the object of the most determined hostility on the part of both the great capitalists and chief writers on political economy in the country. Here, however, as everywhere else, EXPERIENCE, THE GREAT TEST OF TRUTH, HAS DETERMINED THE QUESTION. The adoption of the opposite system of contracting the paper in proportion to the abstraction of the metallic currency, by the Acts of 1819 and 1844 (followed as it was necessarily by the monetary crises of 1825, 1839, and 1847), has demonstrated beyond a doubt that it was in the system of an expansive currency that Great Britain, during the war, found the sole means of its salvation.' —Alison's "History of Europe," vol. xx., p. 79-80.
"And, moreover, the fact that, from 1797 to 1815, commerce, manufactures, and agriculture advanced (in spite of all the evils of war) with a rapidity greater than they had previously done in centuries, proves still further the power of Paper Money to increase the wealth of a nation.
" The monetary policy of England since the termination of the war in 1815 is a warning to all nations. The greater part of the national debt had been contracted in what was called a 'depreciated' paper currency, with a high scale of prices. Our legislators determined to make the people pay this debt in gold, with a reduced scale of prices. In this manner from 30 to 50 per cent, was added to the burden which the people of England had to endure. And not only so, but, by the contraction of the circulating medium, the productive industry of the country was checked and enterprise impeded. The burden of the people was made heavier by the monetary system, which simultaneously diminished their strength. The distress, privation, confusion, and ruin which in 1816, 1819, 1825, 1837, 1839, 1847, 1857, and 1866 this fatal mistake entailed on this nation are ascertained and undeniable.
" The monetary legislation of 1819 was a step backwards. Peel had not the power of destroying the system of Paper Money. Had he been able to do so, and had he done it, the nation would have retrograded as speedily as it had advanced. But Peel's Bill crippled the monetary system which Mr. Pitt had introduced. Peel went as far as he dared in restoring an exclusively metallic money the money of the early ages of barbarism. Nor shall we ever permanently prosper as a nation till we return to a representative Paper Money the money of civilization and progress money which is capable of expanding with expanding wealth and increasing population money based upon the great truth that a nation's wealth consists not only in the precious metals which are drawn out of the mine, but that there is wealth lying hid in the nerves and sinews of the labourer, the enterprise of the merchant, the skill of the artizan, the discoveries of science; which, therefore, gives to every wealth-producing power of man, to land, and to labour no less than to gold and silver its representative, as well as its actual value money provided by the Government for the use of the people, in which debts can be discharged and taxes paid money neither of intrinsic value, nor convertible into any fixed amount of any commodity whatever, and which is therefore secured from undue inflation when gold is brought into the country, and undue contraction when gold is withdrawn from the country; — ENGLISH MONEY FOR THE ENGLISH PEOPLE; and, obviously, American money for the American people." —Rector Twells's Pamphlet.
The same results have manifested themselves in America which we experienced in (England) 1819. Nor is it America or England alone that feel themselves compelled to resort to this expedient in a time of war. Other nations invariably betake themselves to this efficacious alternative; which, however, will prove its wonderful power in a time of peace as well.
The swamp has to be drained, cultivation has to creep up the sides of the hills, roads have to be levelled, railways peace, require cuttings and embankments, water has to be brought to the towns from distant lakes, harbours of refuge established, bogs to be reclaimed, arterial drainage to be engineered, sewerage to be carried to the land instead of poisoning the rivers, towns and cities to be rebuilt, and the whole country to be made into a garden.
Why should not these peaceful contests with nature be carried on with energy and sustained efforts ? There is the labour, and there is the raw material. Bring these into combination, and you have wealth, or, to use the Saxon root, wellth — everything conducing to well-being. There are thousands of men able and willing to work. Nay, if need be, take your criminals and paupers, who would soon assume new characters if they had organized work before them on the plan sketched by Mr. Carlyle.
What stops the way ?
WANT OF MONEY.
There is the simple remedy — make money under State supervision and under parliamentary control. Affix to your State-document the signature of the Chancellor of the Exchequer, engaging to recognise such issue as legal tender, like Mr. Pitt's one-pound note, and the thing is done.
Both ancient and modern history tell the same tale. America has already been referred to as a great country, which was advancing in a career of unexampled prosperity, and suddenly arrested in her course, as testified by one of her citizens (vide page 77), who has drawn a picture of her state a picture which must have wrung his heart — of bankruptcy, distress, and fiscal demoralization. That the tale is true, the ebbing tide of immigration tells us. The model republic is no more a land of promise. There, as with us, wealth in abundance avails not where the distribution is unjust and imperfect.
Political economy has hitherto confined its inquiry to the production of wealth, but the distribution of wealth is the more important, and the instrument of distribution must be taken into account, and an attempt must be made to rescue it from illogical and confused speculation.
" What can be more heartless," writes Jonathan Duncan, "than the following extract from Adam Smith's 'Wealth of Nations,' in which the leading idea seems to be that the wealth produced by labour must be appropriated by the money lord, the landlord, the fund-holder, and the annuitant or the leisure class, and only enough left to the labourer to maintain him and find him in sustenance enough to give him strength to continue his labour ? This is in direct opposition to the principle that the labourer is worthy of his hire, and that the reward of his industry should be secured to him with as few deductions as possible that he shall receive the total amount of that reward — that, labour being the source of all wealth, to the labourer's share, if possible, all the wealth should come; and by labour is meant all well-directed industry in the highest branches of intellect and skill, as well as in mere manual labour; and that the claims of landlord and money lord should be .severely looked into.
" But let us hear what Adam Smith says:—
" ' The produce of labour constitutes the natural recompense or wages of labour.
" ' In that original state of things which precedes both the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer. He has neither landlord nor master to share with him.
" ' Had this state continued, the wages of labour would have augmented with all those improvements in its productive powers to which the division of labour gives occasion; all things would gradually become cheaper. They would have been produced by a smaller quantity of labour; and as the commodities produced by equal quantities of labour would naturally in this state of things be exchanged for one another, they would have been purchased likewise with the produce of a smaller quantity.
" ' But this original state of things, in which the labourer enjoyed the whole produce of his own labour, could not last beyond the first introduction of the appropriation of land and the accumulation of stock.[5] It was at an end, therefore, long before the most considerable improvements were made in the productive powers of labour, and it would be to no purpose to trace farther what might have been its effects upon the recompense or wages of labour.'
" The passage underlined is the condemnation of Adam Smith's work. He commences by truly describing the just relations which once existed between the producer and products; and what is just ought to be permanent. If the appropriation of land and the accumulation of stock necessarily wrought injustice, and robbed the labourer of his fair recompense, they ought to have been condemned; nevertheless, had these two processes not come into existence, what is termed civilization would not have been known. Adam Smith, as a teacher, ought to have solved the industrial problem, instead of declaring that 'it would be to no purpose to trace it to its ultimate consequences.' To solve this and other industrial problems was the end, aim, and purpose of his work.
" In another sentence Adam Smith writes thus:—
" ' What are the common wages of labour, depends everywhere upon the contract usually made between those parties whose interests are by no means the same. The workman desires to get as much and the master to give as little as possible.' Here he indicates a perpetual antagonism of classes, without making the slightest effort to harmonise interests which are really identical.
" 'No society,' continues he, 'can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people should have such a share of the produce of their own labour as to be themselves tolerably well fed, lodged, and clothed.'
" The equity of the case," continues Mr. Duncan, commenting on this word tolerably, "is indisputable, especially as in the natural state of things, according to Adam Smith, the whole produce of labour belongs to the labourer, who then has neither landlord nor master to share with him. And what a mighty boon does Adam Smith confer upon those who feed, lodge, and clothe the people, when he simply insists, in his narrow view of equity, that they who perform this great work should themselves be tolerably well fed, clothed, and lodged ! "
Mr. Duncan quotes another passage, which he truly describes as absolutely revolting:—
" ' The wear and tear of a slave, it has been said, is at the expense of his master; but that of a free servant is at his own expense. The wear and tear of the latter is, however, in reality, as much at the expense of his master as that of the former. The wages paid to journeymen and servants of every kind must be such as may enable them, one with another, to continue the race of journeymen and servants, according as the increasing, diminishing, or stationary demand of the society may happen to require. But though the wear and tear of a free servant be equally at the expense of his master, it generally costs him much less than that of a slave. It appears, accordingly, from the experience of all ages and nations, I believe, that the work done by freemen comes cheaper in the end than that performed by slaves.'
" Sentiments so heartless merit unqualified reprobation; but Adam Smith does not accompany them with a single word of censure. He accepts them as expressing an inevitable condition of society. Journeymen and servants are permitted, in this system of political (political certainly, but not social) economy to multiply a race of operatives sufficient to minister to the wants and luxuries of the rich that is, those living on rent and interest of money; but that limit they must not overstep. In point of industrial reward, the free labourer is worse off than the slave; for though he produces more, he receives less, so that his nominal liberty is a mere delusion.
" ' It deserves to be remarked,' says Adam Smith, 'that it is in the progressive state, while society is advancing to the further acquisition, rather than when it has acquired its full complement, of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest and most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is in reality the cheerful and the hearty state to all the different orders of society. The stationary is dull; the declining melancholy.' Here it may be asked, What is to be understood by the full complement of riches ? Surely the term is vague, if not meaningless. This 'fulness' is a point to which society is ever tending, but never reaches. If every man, woman, and child had a constant command over all that they desired to possess if all were well fed, well clothed, well lodged, and well educated and if the labouring classes were relieved from the excessive toil they are compelled to endure, and had leisure to cultivate their minds and invigorate their bodies it might be said, and yet only in a hypothetical sense, that a 'full complement of riches' had been realized; but the phrase would still be loose and imperfect, for were such an advance in social progression attained, it would only be a new point from which to start in a new race.
"David Hume had a deeper insight, for he points out the true condition on which alone society is enabled to make ceaseless progress from epoch to epoch.
" 'In every kingdom into which money begins to flow in greater abundance than formerly, everything begins to take a new face: labour and industry gain new life; the merchant becomes more enterprising, the manufacturer more skilful and diligent, and even the farmer follows his plough with greater alacrity and attention. The good policy of the magistrate consists only in keeping it, if possible, still increasing; because by that means he keeps alive a spirit of industry in the nation, and increases the stock of labour in which consists all honour and riches.'
" The comments made on Adam Smith's chapter on wages have been introduced for the purpose of pointing out the wide difference that exists between the science of political economy economy and the science of society. The former simply calculates the product and forgets the producer; the latter proclaims that the labourer is worthy of his hire, lifts him from the degradation of being a mere hewer of wood and drawer of water, recognises the dignity of manhood in every class, and insists on the equitable distribution of wealth. The school of Adam Smith, solely intent on material things, and forgetting persons, has vainly endeavoured to establish a social equilibrium; and though it has taught many useful truths in reference to the division of labour and the production of wealth, it has done nothing to elevate the standard of humanity. It does not profess to take any heed of morals, or of the feelings and affections. Its philosophy dwells on insentient matter, not on sentient beings. Certainly this utilitarian school has a right to adopt its own course, and if it did not venture beyond the sphere of accountants and statisticians, no fault could be found with its teachings ; but when it succeeds in infusing its false and heartless precepts into practical legislation, it becomes dangerous to society. This school forgets that wealth, rightly understood, is not an essence but an attribute, and that its nature changes with the persons and the things to which it is attributed. To accumulate riches and place them beyond the reach of producers, is simply to realize the fable of Tantalus." —Jonathan Duncan, The Bank Charter Act.
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4 This, the real cause of the disaffection of the American Colonies, is passed over by most historians.
5 Adam Smith in this day would have added machinery; but when he wrote, its wonderful powers were not developed.