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CHAPTER XIX.

DOMESTIC HISTORY OF ENGLAND, FROM THE DEATH OF LORD LONDONDERRY IN 1822 TO THE MONETARY CRISIS IN DECEMBER, 1825.

1.

Paper either a

representative

of specie or a

1 Ante, c. 16.

Ir has been already stated,' that the effect | fused general prosperity at a time when hardly of that marvelous discovery of a guinea was left in the country; but it was ismodern times, a paper currency, sued in such quantities, from the necessities of is twofold, and that the greatest Government, that it more than doubled the misfortunes which have befallen price of all the articles of commerce, and exsubstitute for it. Great Britain during the last half-posed the nation to a grievous collapse, when, century have arisen from confin- from the prospect of resuming cash payments, ing operations to one of them only. It is either the circulation was materially contracted. The a representative of gold and silver, or it is a passing of the bill of 1819, which realized that substitute for them. Considered in the first prospect, and at once rendered paper the repview, it can, of course, only be expanded or resentative of gold only, at a time when, from diminished in proportion as the supply of the the effects of the South American Revolution, precious metals for the general use of the coun- the annual supply of the precious metals for the try is plentiful or contracted; for no represent use of the globe had been reduced to a third of ative can with safety be augmented, unless the its former amount, of necessity contracted the thing represented has been proportionally in- currency so much that it sunk in England from creased. In this view, a paper currency is un- £48,278,070 in 1818, to £26,588,000 in 1822; doubtedly a great convenience, as it is so port- and, as a necessary consequence, lowered the able and easy of transference compared to gold price of all the articles of production and comor silver; but its chief effects in averting disas- merce fifty per cent. The misery produced to ter or stimulating prosperity are not to be at all the industrious classes by this prodigious tained as long as it is limited in that way. It fall of prices, when debts, taxes, and incumis when it is issued, under proper restrictions, brances of every description remained the same, by proper parties, and adequately secured, as was such as at length absolutely compelled a substitute for the precious metals, that it be- Government to give an extension to the curcomes so invaluable an element in national pros- rency, which was done by the bill of 1822, experity. When properly managed in this way, tending for ten years the period during which and sufficiently guarded against abuse, it be- small notes were to be retained in circulation. comes the greatest stimulus to industry, and This, again, by retaining the fatal principle the most valuable shield against misfortune, that paper was to be a representative of gold, which is known in pacific life; for it multiplies not a substitute for it, landed the nation in the the reservoirs by which the former is to be opposite set of dangers; and its domestic hisnourished, and fills up the void by which the tory, from 1822 to the end of 1825, is nothing latter is induced. It sustains national industry, but a development of the perilous effects of a and prevents a shock to credit during those plentiful paper currency, a representative of periods of frequent and almost periodic occur- the precious metals, not a substitute for them, rence in a commercial community, when the and based upon their retention. precious metals are in a great measure entirely drained away from the country by the necessities of war or the changes of commerce, and brings it with safety through a crisis which otherwise might prove fatal to its fortunes. If used only as a representative of the precious metals, it not only does not alleviate or avert these evils, but it aggravates them in the most ruinous manner, because it expands the paper circulation when gold and silver are plentiful; and such an addition to credit and stimulus to speculation is not only unnecessary, but dangerous, and lands the nation in a vast variety of undertakings which of necessity must be abruptly abandoned, and ruin brought on those engaged in them, when the precious metals, and with them the paper resting on their basis, are withdrawn.

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3.

As the disastrous effects of the monetary system established in 1819 arose in a great degree from the violent con- Effect of the traction of the monetary circula- South American tion of the globe, from the effects Revolution on the currency of of the South American Revolution, Great Britain. at the very time when the paper currency of Great Britain was rendered dependent on its retention, so the opposite set of dangers which were so fatally experienced in the country from the extension of the currency in 1822, was in an equal degree dependent on the extravagant ideas entertained of the boundless advantages to be derived from the emancipation of the South American colonies. Many causes conspired to bring about a revival of industry and enterprise in the end of 1822 and beginning of 1823. The very magnitude of the distress of the three preceding years tended, as it always does, to produce this result. Old clothes were worn out, new ones were required. The stringency of economy during past years had both rendered necessary a supply of articles of comfort, and provided little funds for their purchase. The price of wheat, which in the

1 Tooke on

4.

Causes which augmented the

beginning of 1822 had been 48s. 6d., fell, from the effects of a good harvest, before the end of that year, to 38s. 10d., being the lowest point it had reached in the preceding twenty years. Though this great fall bore hard Prices, ii. 115. upon the agricultural interest, it proportionally relieved the manufacturing, and let loose a considerable portion of the earnings of the working classes, hitherto absorbed in the purchase of food, for the acquisition of humble conveniences. This gave a stimulus to the home market for manufactures; and at the same period the foreign market was greatly extended, chiefly in consequence of vast shipments to South America, to the extent of which market it was thought no limits could be assigned. The exports to South America, which in 1818 had been £2,376,000, rose in 1822 to £3,166,000, in 1823 to £4,218,893, and in 1825 to £6,425,715. The result was a very great increase in the quantity of manufactures produced in the year, though, from the fall in the cost of production, and consequent declared value of exports, it did not appear to the same extent in the parliamentary returns till the effects of the expansion of the currency began to appear in the general results. When these circumstances were preparing an increase of activity and industry in the manufacturing districts of the country, two circumstances of paramount importance occurred at the same time to enlarge the currency, in such a way as poured a flood of prosperity over the nation, but resting on so insecure a basis-the retention of gold-as involved it in the end in the most unheard-of calamities. The first of these was the Small Note Bill, passed in July, 1822, which extended the period during which small notes were to be issued, which was to have terminated in 1823, for ten years longer. The second was the virtual establishment, in the close of 1822, of the independence of the South American republics, which took place in 1822 by the general triumph of the arms of the insurgents, and the express recognition of their independence by Great Britain in July, 1823. It is hard to say which of these events contributed most powerfully to enlarge the currency, and with it to raise prices and stimulate industry throughout the country; for the first continued that admirable and convenient medium of exchange which is so suited to the wants of the community, that wherever it is allowed to exist it invariably banishes gold from the circulation; the second diffused the most boundless ideas of the endless supplies of the precious metals which would flow into the country when the inexhaustible mineral treasures of South America were worked by

currency in 1823.

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xii. 9 101.

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British enterprise and capital, and their produce brought direct to the Bank of England. The belief was universal, and most of all among practical sagacious men, that the supplies of specie would never again fail, now that South America had become independent. The El Dorado which was realized in 1852, by the discovery of the gold mines of California and Australia, was confidently anticipated thirty years earlier from the establishment of those republies; and that essential element in commercial prosperity, general confidence, was established from the very circumstances which rendered it most insecure.

through ex

The effect of this expansion of the currency, of course, did not take place immedi- 5. ately, nor for a considerable time The change after the causes which induced it of prices had come into operation. This is a tension of very important observation, and af- currency is fords the answer to many erroneous not immeideas which prevail on this subject. diate, but gradual. When a monetary panic arises, or a sudden contraction of the currency takes place, the effect is often instantaneous; the whole industrial undertakings of the country may be thrown into difficulties, or ruined in one week. But the vivifying influence of an expansion of the currency is much slower in developing itself; it is the work of time, and generally does not become apparent for six months or a year after the change has come into operation. The reason is, that refusals to continue advances by bankers at once suspend or ruin the most important undertakings; but the extension of their accomodation does not immediately set these in motion, and till this takes place the change of prices does not appear. There is no immediate or necessary connection between the expansion of the currency and a change of prices; the result takes place slowly and gradually by the extension of credit by bankers, and its effect on the undertakings and industrial enterprise of the country. The one is analogous to the destruction of life, which may be accomplished in an instant; the other to its creation or growth, which can be effected only by the lapse of time. The change of prices, accordingly, and stimulus to industry produced by the extension of the currency in July, 1822, did not come into operation till the spring of 1823, and continued through the whole of that and the succeeding year. The low prices of the close of 1822 were the effect of the contraction of the circulating medium in the three years preceding. In like manner the change of prices and stimulus to industry which resulted over the world from the discovery of the mines of California and Australia in 1850, did not take place in that year, or even the next, but came into full operation in 1852 and 1853.

6.

currency

monstrated by the expansion of the The truth of these principles was fully decurrency, and corresponding rise of Effect of prices and stimulus to industry dur- the expaning the course of the year 1823. The sion of the average of bank notes in circulation, on prices in which in 1822 had been £17,862,890, 1823 and rose in 1823 to £18,629,540, and in 1824. November of that year was as high as £20,406,564. The increase in country bankers' notes was still more considerable; judging from the

number of stamps issued, it was, as compared | gree. They were emphatically dwelt on in the with 1821, a third, and a ninth as compared speeches from the throne at the opening of with 1822.* The effect on prices fully appear- Parliament in both these years. In February, ed in the course of the year: wheat, which was at 38s. 11d. in the end of 1822, rose in 1823 to 52s. 8d., and in 1824 to 64s. 3d. All these effects took place in a still more remarkable degree in 1824, when, in addition to the expansion of the currency, a general fever of speculation had set in upon the country. The Bank of England notes rose at the end of autumn in that year to £20,177,820, and the country bank-notes to £9,920,071;† and the paper under discount at the Bank, which in 1821 had been only £2,722,587, rose in 1823 to £5,624,693, and in 1824 to £6,255,343. This great addition to the paper circulation was rested on a corresponding addition to the store of bullion in the coffers of the Bank of England, which increased to such a degree that in January, 1824, it had reached the enormous amount of £14,200,1 Tooke on 000, from 3,595,360, which it had Prices, ii. been in 1819, and £10,097,000 in 133, 382. 1822.1

7.

prosperity in the royal speeches in 1823 and 1824.

The effect of this great addition to the circulation, both paper and metallic, of Notice of the country in 1823 and 1824, apthe general peared in the most decisive manner in the prices of articles of commerce of all kinds. Wheat rose from 38s. in 1822 to above 60s. in 1824, an addition of above 50 per cent. All other kinds of agricultural produce, as well as the principal branches of manufacture, rose in a similar proportion. The consequences were immediate, and encouraging in the highest de

1823, the King said: "Deeply as his Majesty
regrets the continued depression of the agri-
cultural interest, the satisfaction with which
his Majesty contemplates the increasing activi-
ty which pervades the manufacturing districts,
and the flourishing condition of our commerce
in most of its principal branches, is greatly
enhanced by the confident persuasion that the
progressive prosperity of so many of the inter-
ests of the country can not fail to contribute to
the improvement of that great interest which
is the most important of them all." And in the
corresponding speech in February, 1824, his
Majesty said, in words still more emphatic and
strong: "Trade and commerce are extending
themselves both at home and abroad.§ An in-
creasing activity pervades almost every branch
of manufacture. The growth of revenue is
such as not only to sustain public credit, and
to prove the unimpaired productiveness of our
resources, but to evince a diffusion of comfort
among the great body of the people. Agricul-
ture is recovering from the depression under
which it labored, and, by the steady operation
of natural causes, is gradually reassuming the
station to which its importance entitles it among
the great interests of the nation. At
no former period has there prevailed
1 Royal
throughout all classes in this island Feb. 1823
a more cheerful spirit of order, or a and 1824;
more just sense of the advantages Ann. Reg.
1823,5;
which, under the blessings of Provi- 1824, 3, 4.
dence they enjoy.1 In Ireland, which

Speeches,

* STAMPS FOR COUNTRY BANK-NOTES ISSUED ON 10TH OCTOBER, AND AVERAGE PRICES OF WHEAT.

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BANK AND BANKERS' NOTES IN CIRCULATION, THE PAPER UNDER DISCOUNT AT THE BANK, AND PRICE OF WHEAT AND COTTON, FROM 1815 TO 1825.

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has for some time past been the object of his | duced that the best measure was derived of the Majesty's particular solicitude, there are many indications of amendment.”

*

employment afforded to the different classes of the community. In the year from 5th January, 1819, to 5th January, 1820, the export of the country fell off no less than £11,000,000; and in looking at that part of it which was more completely only of British or Irish manufacture, he found that the difference in four years was £8,414,711; and that in the year from 5th January, 1820, to 5th January, 1821, there was a decrease of £8,929,629. Nobody, therefore, could be surprised that, at that period, the industry of the country appeared to be in a state of the utmost depression; that our manufacturagriculturists were many of them embarrassed; and that the country, to use the phrase of a friend of his in presenting a petition from the merchants of London, exhibited all the appearances of a dying nation. Though the condition of the agricultural interest was not as favorable as he could wish, still it was most satisfactory for him to state, that not only did the exports of last year (1822) exceed those of all the years to which he had been alluding, but also those of the most flourishing year which had occurred during the continuance of the war. In all the material articles there had been a considerable increase. The export of cotton had increased 10 per cent., and hardware 17 per cent.; of linens 12 per cent., and of woolens 13 per cent.; and the aggregate exports of 1822 exceeded those of 1820 by 20 per cent., and of 1821 by 7 per cent.-notwithstanding a deduction was to be made from the exports of one great article, sugar, owing to a prohibitory de- 1 Parl. Deb. cree of Russia, amounting to 35 per viii. 100, cent."

It was no wonder the speeches from the throne 8. during these years made such Symptoms of in- special mention of the increasing creased general prosperity of the nation, for the prosperity. symptoms of it were universal. The manufactures produced during the last six months of 1822 surpassed those of the preceding so much, that the average of that year considerably exceeded that of the preceding year by fully a fifth. During the whole of 1823 and 1824, the same progress was still more conspicuous; although, from the increase being chieflyers were most of them unemployed: that our in the home market, the exports and imports gave no adequate indication of its real amount. Yet, such as it was, it was very considerable; and the great increase of the imports, in particular, indicated the increased prosperity of the people. The revenue exhibited the same symptoms of elasticity; for, notwithstanding a reduction of taxation in the years 1822 and 1823, amounting to £7,000,000 sterling, it exhibited an increase of £4,000,000 in 1824 compared with 1822, and £5,000,000 compared with 1820. Agricultural distress, indeed, the sad bequest of the contracted currency of the three preceding years, was still very prevalent, especially in the commencement of 1823; and numerous county meetings were held, in which the general distress of the landed interest, and the necessity of the most unflinching reduction of expenditure, were emphatically urged. At one in Norwich, Mr. Cobbett proposed, and carried against the united Whig aristocracy of the county, resolutions declaratory of the necessity of a great reduction of the standing army, a sale of the whole Crown-lands, an abolition of all sinecures, an equitable adjustment of the national debt, and a sweeping measure of parliamentary reform. But the rise in the value of agricultural produce, arising from the extension of the currency, ere long extinguished these ill humors by removing their cause; and the 1 An. Reg. landed interest, during 1824 and 1825, 1824, 2, 3, as they shared in the general prosperMartineau, ity, participated in the universal con

1. 341.

9.

1815 to 1823.

tentment.1

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101.

These favorable circumstances enabled Government to make considerable reduc- 10. tions of taxation during the years Budget of 1823 and 1824, and to exhibit a very 1823. flattering, though, as it proved, fallacious view of the public finances to the nation. The Chancellor of the Exchequer stated the revenue of the nation, in 1823, at £57,000,000 in the first of these years, and the expenditure at £49,852,786; leaving a surplus of £7,147,214. Of this large surplus he proposed to set aside £5,000,000, conformably to the resolution of 1821, for the reduction of debt, and the residue was to be devoted to the remission of taxation. This reduction was, on truly wise principles, to be effected on the direct taxation; and the duties selected for remission were the assessed taxes. They were lowered at once 50 per cent. -a reduction which, on the window-tax, was estimated at £1,205,000; and on the whole assessed taxes, £2,200,000. The whole assessed taxes of Ireland, amounting to £100,000, were repealed, and the window-tax taken entirely away from the ground-floor of shops and ware£180,000 houses, though connected with houses. The 1,400,000 last reduction deserves to be noted as the first 1,295,000 indication of the growing influence of that nu2,300,000 merous body, the shopkeepers, who, in the end, 100.000 acquired a very powerful influence Ann. Reg.

Mr. Wallace, the able President of the Board of Trade at this period, gave the Mr. Wallace's following picture of the state of picture of the the country under the action of country from the monetary measures in progress, from 1815 to 1823. On 12th February, 1823, he said in his place in Parliament: The general export of the country, in the four years from 1815 to 1819, had decreased £14,000,000 in official value; and he took the official value in preference to the declared, because it was from the quantity of goods pro

* TAXES REPEALED FROM 1821 TO 1823. Agricultural horses-1822.

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300,000

160,000 in the direction of the State. This 1823, 108,

380,000

180,000 budget, the most favorable which 109; Chan310,000 had been laid before Parliament for £6,935,000 many years, was received with loud cheers from both sides of the House.2

cellor of Exchequer's Budget, Feb. 21, 1823.

The budget of 1824 exhibited appearances | Dissentients were allowed six months to notify 11. not less favorable. The Chancellor their dissension, in which case they were to be Budget of of the Exchequer, on this occasion, paid in full. A very small proportion of the 1824. had the satisfaction of announcing the holders of stock gave notice of their desire to agreeable intelligence, that the Emperor of Aus- be paid up; in consequence of which, the sav tria had agreed to pay £2,500,000 in satisfac- ing effected to the nation amounted to £375,000 tion of loans of £6,000,000 made to him in 1795 a year. This sum bore a small proportion to and 1797. This unexpected windfall, which the whole interest on the debt, which was was not inaptly called a "godsend," enabled £28,000,000; but it was a step in the right Government to exhibit a more favorable state- direction, and illustrated the extreme improvment of the public finances than could have been idence of the system of borrowing adopted by anticipated even from the very prosperous state Mr. Pitt during the war, of giving a bond for of the nation. The total revenue was taken at £100 for every £60 advanced-a system which £57,385,000, including the repayments to ac- precluded the possibility of paying off the 3 count of the Austrian loan, and the expenditure per cents, or reducing the interest on that stock at £56,332,924; leaving a surplus of £1,052,076, till the funds had been for a considerable time after applying £5,134,458 to the reduction of above 100, which they have only been for a debt. This statement, however, was so far fal- few weeks during the last half-century. Had lacious, as, by the arrangement regarding the the stock all been borrowed in the 4 per cents, Dead Weight, as it was called, or military and the reduction now effected would have been, naval pensions, two millions now figured in the not on £75,000,000, but on above 1 Parl. Deb. surplus which were in reality obtained by hav- £750,000,000, and the saving effect x. 313, 314; ing made permanent, during forty-five years, ed to the nation, not £375,000, but Ann. Reg. an item of charge which otherwise would al- nearly £4,000,000 a year.1 most have disappeared by the progressive death of the recipients before that time; so that the surplus, but for that shifting of present burdens on posterity, would only have been £3,000,000. This surplus of £1,052,078 the Chancellor of the Exchequer took advantage of to remit to 1 Budget, the nation part of the duty on 1824; Ann. rum, coals, wool, silk, and law Reg. 1824, proceedings, amounting in all to £1,262,000.1

86, 88.

12.

The favorable state of the finances, and the high range of the public funds, Conversion which rose progressively to 84 in of the Dead December, 1823, and to 96 in OctoWeight. ber, 1824, enabled the Chancellor of the Exchequer to carry through two measures which contributed, in a material degree, to relieve the pressure on the exchequer. The first of these was the carrying out the arrangement proposed in the preceding year for equalizing, as it was called, the weight of the military and naval pensions, by transmuting them into a fixed charge on the nation for forty-five years. No purchasers had been found for these annuities during the distressed state of the money market in the preceding year; but the affluence of circulation, produced by the extension of the currency, now induced the Bank of England to take part of it, which they did by a contract which was to last five years. By this means there was a present saving, on the part taken, of £585,000 a year effected: but a more delusive scheme never was proposed; for it was nothing but shifting the burden of present debt on posterity, and purchasing present relief by increasing future embarrassment. Such, however, was the pressure on the treasury, that the bill sanctioning this arrangement Reg. with the Bank was passed in the Commons by a majority of 140 to 91.2 The next measure which was carried was one of a very different character, and to which, neither on the ground of pubof the 4 per lic faith or financial economy, could cents to 31. any objection be stated. This was the reduction of the interest on the 4 per cent. stock to 34. The amount of this stock was £75,000,000, and its annual charge £3,000,000.

1823, 110.

13. Reduction

1824, 85, 86.

tional Debt

permanent

A third important change was effected in the finances of the country in the 14. year 1823, which might have con- Simplifying ferred incalculable benefits upon the of the Nanation, had it been steadily adhered accounts, to in subsequent times. Hitherto and provi the public accounts connected with sion for the the National Debt had been so mys- reduction of tified, by issues of exchequer bills and the National other temporary devices, that it re- Debt. quired no small effort of attention on the part of those professionally trained to the subject to understand them; and to the great majority of persons they were altogether unintelligible. To remedy these evils, Mr. Robinson, the Chancellor of the Exchequer, adopted the manly course, worthy of the chief finance-minister of a free country, of so simplifying the accounts connected with the public debt that they might be intelligible, not only to the members of the legislature, but to every one who paid attention to the subject throughout the country. With this view he placed, by Act of Parliament, the reduction of the debt on its true footing; namely, the annual issue from the treasury of a certain sum for its reduction. To effect this, a bill was brought forward, founded on resolutions of the House, which provided, among numerous details calculated to simplify the public accounts, that for the future there should be set apart, and issued out of the consolidated fund, to be placed to the account of the commissioners of the public debt, the annual sum of £5,000,000, to be applied to the reduction of the National Debt-which sum was to be charged upon the consolidated fund, to be issued by equal quarterly payments, the first beginning on 5th April, 1823. There can be no doubt of the wisdom and propriety of these enactments; and happy would it have been for the nation, if, now that it had attained majority, and been intrusted with the direction of its own affairs, it had shown more wisdom and foresight than its guardians had done during its long minority. But the result has been just the reverse. It was shown by the Chancellor of the Exchequer in the debate on this subject, that during the seven years which had elapsed from

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