CHAPTER XXI.

BRITISH EMPIRE FROM THE MONETARY CRISIS OF DECEMBER, 1825, TO THE EMANCIPATION OF THE CATHOLICS IN MARCH, 1829.

1.

pects of the

the iron districts, strikes to arrest the fall of
wages took place; and in Dublin and Glasgow
immense crowds of operatives paraded the
streets entreating relief, which was in some de-
gree afforded by munificent subscriptions, open-
by the wealthy classes, and which being
judiciously laid out in the purchase of the fab-
rics of these poor people, instead of merely giv
ing them money, relieved distress 1 Ann. Reg.
to triple the amount which it other- 1826; Chron.
wise could have done.1
49, 72, 94.

THE year 1826 opened with such universal consternation and depression in all Gloomy pros- classes, from the effect of the terrible monetary crisis at the end of nation in the the preceding year, that the conbeginning of sideration of that crisis exclusive-ed 1826. ly engrossed the public mind, and scarcely any other topic occupied the attention of Parliament in the next session. All classes were suffering alike. The banks, struck with terror from the numerous failures which had taken place, could hardly be prevailed on, on any terms, or any security, to make advances to their customers; the merchants, dreading the continued fall in the price of commodities, declined entering into speculations; the manufacturers, finding their usual orders awanting, or seriously diminished, contracted their operations; the workmen, thrown out of employment, became desperate, and vented their despair upon the machinery, which they imagined was the cause of all their suffering. The immense issue of paper without any gold to support it to the extent of £8,000,000 in three weeks in the end of December, had indeed arrested the panic, but it had not restored confidence; and Government, by refusing to issue exchequer bills, a relief which had always been afforded on similar occasions in time past, effectAnn. Reg. ually prevented for long the restora1826, 1, 2; tion of credit, or the extension of any Martineau, relief to the industrious and suffering i. 367, 369

2.

of bonded

The universal suffering attracted, as well it might, the anxious attention of 3. Government, although, unfortu- King's speech nately, they were so blind to the on the subject, real causes of the calamity that and letting out they brought forward measures grain. intended to avert, which in reality had only the effect of perpetuating it. In the King's speech the all-absorbing theme was thus alluded to: "His Majesty deeply laments the injurious effects which the late pecuniary crisis must have entailed upon many branches of the commerce and manufactures of the United Kingdom. But His Majesty confidently believes that the temporary check which commerce and manufactures may at this moment experience, will, under the blessing of Divine Providence, neither impair the great sources of our wealth, nor impede the growth of national prosperity." Yet, while the attention of all classes was riveted on this all-important subject, the only measure of relief which was afforded consisted in a bill which allowed the bonded corn in the ports, estimated at 300,000 quarters, to be sold in the country without paying the duty imposed by the Corn Law, which, after encountering considerable oppo

Houses, but afforded scarcely any 2 Parl. Deb. relief to the country. What was xv. 795, 796; wanted was not food, but money to Ann. Reg. buy food.2

1825, 3.

portion of the community.1 The general distress, as usual in such cases, led to serious acts of riot and disActs of riot- turbance in several of the manufacing in vari- turing districts. On all sides the ous places. most appalling proofs of wretchedness were afforded, and in some quarters alarm-sition from the landed interest, passed both ing disorders took place. The recent improvements in machinery were generally regarded as the main cause of the general suffering; and in Lancashire the indignation of the operatives against what they deemed an invasion of their birth-right, broke out in various and most melancholy acts of outrage. It was a woeful spectacle to see the streets of Manchester, and the chief towns in its vicinity, filled with vast crowds, sometimes ten thousand in number, whose wan visages and lean figures but too clearly told the tale of their sufferings, snatching their food from bakers' shops, breaking into factories and destroying power-loom mills, and throwing stones at the military at the hazard of being shot, rather than relinquishing an object on the attainment of which they sincerely believed their very existence depended. Serious riots took place in Carlisle, in the course of which a woman and child were shot dead; and in Norwich, where twelve thousand weavers were employed, an alarming disturbance, attended with great violence, ensued. In all

What Government should have done at this juncture was then distinctly point- 4. ed out by some of the ablest and Real causes of most experienced men in Parlia. the distress, ment, though unhappily without and its remedy. any effect. The terrible crisis which the country had just gone through was obviously owing to something wrong in the currency; but a great difference of opinion prevailed as to what that error was. The partisans of Administration, and the whole Whig party, were unanimous in holding that the mischief had all originated in the extravagant speculation of the two last years, which had been unduly fostered by the perilous and excessive issue of bank-notes by the country bankers, great part of whom had no sufficient capital to support them; and the only remedy they could devise was to suppress small notes altogether, and render the

266

HISTORY OF EUROPE.

ments.

7.

Continued.

currency not only in all its parts dependent on | after the Bank should have resumed cash payAnd yet during the whole of this pethe retention of gold and silver, but below £5 The friends of the riod, from 1777, manufactures had flourished to consist entirely of it. country bankers, on the other hand, maintained notwithstanding the absence of the small notes, "The alarm felt on this subject, if founded in that nothing could be imagined so perilous, as at this time, when the country had so recently reason at all, must be grounded on the come through a severe monetary crisis, to tam-idea that the circulation will be diper with the currency, and, in endeavoring to minished by the whole amount of the put it on a more stable footing, in a great meas- notes withdrawn; and, doubtless, if that were ure to extinguish it altogether. The debates to be the case, a very serious check to industry are of the highest interest, for they relate to and the operations of commerce might be anone of the most momentous and decisive changes ticipated. But nothing is clearer than that no recorded in English history, and which was at- such danger is to be apprehended. During the tended with the most important results; and three years ending with 1822, twenty-five millthey are extremely curious and instructive, as ions of gold sovereigns had been coined, and affording an example of the ease with which a of these £7,200,000 were shown by the returns powerful party can succeed in deluding the to have been exported, and perhaps £10,000,000 public mind, and conducting a nation, amidst in all had left the country. Of these £1,000,000 universal applause, to the very measures most had returned in the close of last year; so that destructive to its prosperity, and in the end the gold circulation might fairly be taken at £16,000,000. The country bankers' circulation, subversive of its institutions. as measured by the stamps issued in 1825, had been £6,000,000 in that year; and supposing double that number to be the amount of notes actually in circulation, the amount will be only £12,000,000-considerably within the gold which has been coined during the three years succeeding 1819. The present amount of country bank-notes in circulation does not probably exceed £4,000,000; while the bank-notes of the Bank of England, in the end of 1825, had risen to £25,000,000. It is chimerical, therefore, to apprehend any undue contraction of the currency from the suppression of small notes; is only exchanging a perilous and unstable for a firm and secure circulation.

5.

support of the

notes.

On the part of Government it was argued by Lord Liverpool, the Chancellor of Argument by the Exchequer, Mr. Huskisson, and Ministers in Mr. Canning: "The monetary crisis bill suppress- which this country has recently uning small dergone is evidently owing to the mad speculation of the last two years; and that speculation has been mainly fostered by the vast increase in the issues of country bankers' notes which took place during that period of delusive prosperity. In 1822, before the mania of speculation began, the stamps issued for country bank notes were about £4,200,000 annually; in 1824, when the mania set in, it rose to £6,000,000; and in 1825, when the mania was at its height, it amounted to no less than £8,000,000 annually. This was the amount of stamps usually issued for new notes: the amount actually in circulation was in general about 50 per cent. more at each period, and in 1825 amounted to £14,000,000. The notes of the Bank of England had also increased during the same period, but in a much less degree: the increase in that quarter was only £3,000,000-from £19,000,000, in round numbers, to £22,000,000. The great increase in the currency, therefore, has been in the country bankers' notes; and they are chargeable with all the disasters which have ensued. The only way to prevent a repetition of the evil is to lay the ax to the root of the cause from which it sprung. "Such a measure is no innovation; on the contrary, it is the opposite system 6. which is an innovation. In 1775 an Continued. Act passed prohibiting the issue of bank-notes for a limited time, and in 1777 another passed, which permanently prohibited the issuing of notes under £5. This continued to be the law until 1797, when, amidst the necessities of the French war, the suspension of cash payments took place until two years after a general peace, and it became necessary to legalize and reissue small notes, as the gold had all been withdrawn. This suspension was not founded on any belief that the small-note system was at all connected with the prosperity of agriculture, commerce, or manufactures; on the contrary, all parties were agreed that they should be withdrawn as soon as possible, and no one contemplated their continued circulation

8

it

Continued.

"There are two ways of effecting this withdrawal; and the only question really for consideration is, which of the two is safest, and likely to occasion least inconvenience to the community. The one is, by enacting that no more small notes should be stamped after a certain future period; the other, to allow those already in circulation to run a certain course till a fixed period, and prohibiting any new ones to be created. GovNo ernment, after mature deliberation, have determined upon the last of these methods. new notes are to be henceforth allowed to be stamped; those already in circulation are to be allowed to circulate for three years, but no longer. In consequence of certain differences between the banking systems of Ireland and Scotland, particularly the latter, it is not proposed, in the mean time, to extend the Act to. either of these countries; though it is difficult to see any good reason, on principle, on which such a difference is to be long continued.

9.

"By cautiously and gradually, in this manner, withdrawing the small notes from circulation, one inestimable blessing Continued. will be attained-the poor will in a great measure be saved from the pressure and ruin consequent on a monetary crisis. Who are the persons among whom, in the first place, these small notes circulate? The poorer classes of the community-those to whom the possession of a one-pound note is comparative riches, And when, from the scanty earnings of hard labor and persevering economy, they have amassed three or four pounds, how can they now lay it by but in that kind of money? We

have been told, and told truly, that in many districts these notes constitute the whole circulating medium. In what, therefore, must the poor man put his trust but in that paper; and if it fails him, what becomes of his savings? The necessary consequence of such a state of things is, that when an alarm begins, when he hears of failures, the poor man rushes forward to the bank to get his notes exchanged for specie, and the bank, overwhelmed with demands, is obliged to stop payment. He follows the torrent, he increases the difficulty, he adds to the distrust; and to the universality of these feelings may be traced a great portion of the late disastrous events. It is evident, therefore, that the power of issuing these notes is the chief source at once of the insecurity of country bankers, and of the wide-spread misery which their failure occasions among the poor. The resumption of cash payments in 1819 was unanimously agreed to by the Legislature; but the work was incompletely done, as long as small notes were allowed to remain in circulation. Now is the time to carry it fully out, and avoid all the dangers we have encountered, by establishing the currency upon a safe and lasting foundation.

10.

savings of the working classes will be laid by
in specie; and as it will form the chief medium
of circulation, the greatest panic can not pro-
duce a run. Let the Bank of England retain
in its coffers as much gold as may be necessary
for the ordinary circulation of the country, for
the exigencies of Government, and to enable it
to adjust an unfavorable state of foreign ex-
changes. Let every country bank be governed
by the same rules, and compelled to keep an
amount of gold proportioned to its operations;
and this will not only give them security,
but occasion a sensitiveness to occurrences
likely to cause a pressure on the country
banks, which will tend to the secu-
rity of the whole kingdom. The is- xv. 170, 174,
sues will be kept within due bounds, 218; An. Reg.
and the gold will be kept within the 1626, 9, 11,
kingdom."
13, 15.

1 Parl. Deb.

12.

measure.

On the other hand, it was argued by Mr. Baring, Mr. Heygate, and Mr. Gurney, all great mercantile men-“The Argument proposed measure is alike inadequate against the to meet the evils complained of, and proposed ill suited to the present state of the country. What is the cause of the embarrassment now so generally felt by all classes? Is "Till small notes are suppressed, this most it not the sudden contraction of the currency, desirable result never can take place. and consequent destruction of credit at the close Continued. Experience has proved that, howev- of last year? And what remedy does Governer plausible in theory that pari passu ment propose for the evil? To contract it still eirculation of notes and specie may be mutually more. Taking the currency at £20,000,000, exchangeable, in practice it can not exist. The and the chasm produced by the recent failone inevitably destroys the other. People allures in it at £3,500,000, the proposed measure prefer notes to coin; for what reason it is diffi- will produce a further chasm to the extent of cult to say, but the fact undoubtedly is so. If £7,000,000, with which it will be impossible to crown notes and half-crown notes were issued, carry on the commerce of the country. The crowns and half-crowns would disappear; and postponement of the suppression of small notes if one-pound notes are to be allowed to continue for three years is no alleviation, but rather an to circulate, sovereigns will speedily become a aggravation of the evil, for it is the nature of rarity. There never was a gold circulation in the human mind to exaggerate impending evils: general use in the country, except in Lanca- nothing is so bad in reality as it appears in shire, where no country notes existed; and prospect. The country bankers, having the when, in 1822 and 1823, the Bank of England suppression of small notes hanging over their was most anxious to supply the country with heads, must, as a matter of necessity, contract gold, the sovereigns sent down by one coach their issues, and this can only be done by rereturned by another. Great sacrifices had al- fusing accommodation to their customers, and ready been made to effect the introduction of calling up such advances as they have already even a partial metallic currency in the country, made. This will of necessity stop industry in and these sacrifices had been made in vain. A numberless channels. This stoppage is what is large supply of gold had been obtained at a now going on, and the proposed measure will great expense, and it was got only that we seriously tend to aggravate it. The extent to might see it depart, and be compelled to pur- which this evil is spreading no man living can chase it again at a double expense. The cur- estimate, and it will probably lead to conserency of the country can never be placed on a quences which none can contemplate without solid basis unless country banks are prohibited horror. How is the gap which is to be made from issuing notes, except such as are of a con- in the circulation to be filled up? and if it is siderably higher denomination than the current not supplied, how is the industry of the councoin, so as to save it entirely from the competi- try to be supported? As a measure of present tion of the paper currency. relief, the proposed measure is unwise and inappropriate; as a measure of prospective security it will be nugatory.

Concluded.

13.

"The principle of the measure, therefore, can be resisted only by those who 11. maintain that the pecuniary interests "The country bankers, of whose improviwill be best secured by proscribing a dence and mad speculation so much metallic currency. Its necessary effect will be is said, are in truth the only persons Continued. to give solidity to the banks themselves, by who have not speculated, and who compelling them to maintain a portion of their have exerted all their influence to arrest the circulation in gold instead of worthless paper, spirit of speculation among their customers. A and thus avoid those ruinous runs which have prudent regard for their own safety forced this proved fatal to so many of the most respectable course of conduct upon them. Where did the establishments. It will prevent the wide-spread extravagant speculation which has been atmisery which such failures now induce, for the I tended with such ruinous consequences origin

268

HISTORY OF EUROPE.

15.

Concluded.

ate? In Manchester and Liverpool, a district | far from their having had any share in bringin which, as well as all Lancashire, no small ing it about, they were its first victims; and notes at all were in circulation. Where did it the real cause is to be found in the monetary next spread, and assume its most dangerous as-operations of the metropolis, where their notes pect? In the Stock Exchange of London, a city did not circulate, and with which they had no in which, and for sixty-five miles around, no concern whatever. bankers' notes can be issued. In 1720, the only year in which wild speculations at all similar to those of the last year prevailed, there were no country banks or bankers' notes; and in 1797, when the run took place upon the banks, which rendered the suspension of cash pay ments a matter of necessity, there were not only no country small notes, but no Bank of England small notes in circulation. It was the failure of the seven great bankers in London, in whose hands the bills of more than a hundred country bankers had been placed, which occasioned the greater part of the country failures; and had it not been for the solidity of the country bankers, the catastrophe would have been far greater than it actually was. So far from the country bankers having begun the mischief, and their notes having been the means of spreading it, it was the merchants and capitalists of Liverpool, Manchester, and London, without small notes, who began it, and the small notes of the country bankers were only brought in at the close of the day to arrest its devastation.

14.

"The embarrassments which have been experienced are always ascribed to overContinued. trading; but there is a great deal of injustice in this imputation. By far the greater part of it is to be ascribed to the fluctuations in the currency, which no prudence on the part of the mercantile classes could In 1823 and avert, and no wisdom foresee. 1824, the Bank had accumulated a very great treasure, amounting at one time to £14,000,000, in their coffers; and their circulation was proportionally extended, which, as a matter of course, led to a proportionate increase of the country bankers' issues, which always increase with those of the Bank of England. In consequence of the quantity of money thus thrown into the market, interest fell to 4 and 3 per cent.; and of course, as it could be got on such easy terms, speculations of all sorts were This ere long led proportionally extended. to a run, as such a state of things must always in the end do, on the Bank for gold to carry on the immense undertakings thus set on foot, great part of which were in distant countries, and could be conducted with nothing else; and then the Bank, in its own defense, was compelled suddenly and violently to contract its issues. The banks were compelled to do so, for the first duty of the directors is to look after their own interests; but still the The London consequences were the same. bankers, hard pressed themselves, called upon their correspondents in the country, who again called upon their customers, and soon every creditor came to take his debtor by the throat. Then came the panic, which in such circumstances was inevitable, and the Bank was too much fettered by its engagements with and advances to Government to be able to afford the public any relief. That is the simple account of the whole catastrophe, and what had the country bankers to do with inducing it? So

"The distress which the crisis produced, and which was much more serious than Government seemed to be aware, will be increased rather than diminished by the proposed change. The very exertions of the country bankers to prepare for the intended change had already most fearfully augmented the general distress. They were indeed preparing; but they were preparing by screwing, almost to destruction, every farmer, manufacturer, or other customer in the country, from whom they could get their money. Was this the way to relieve a country already Unless Parliament allowed suffering under a shortening of credit and a want of money? them more time to meet the new order of things, utter ruin to all the small shop-keepers, manufacturers, and farmers in the country must The question is not, what is theoreticalensue. ly best, but what, in the circumstances, is most expedient?-and the general distress which pervades the country districts is the first thing to which, in discussing questions of this nature, Parliament is bound to attend. The present measure can be productive of nothing but evil. What is really required, and would relieve the distress, is to establish joint-stock banks on such principles as to induce persons of capital to enter into them, to introduce silver as a standard of currency as well as gold, and to relieve the Bank of England from those incumbrances connected with Government which at present render it impossible 220; Ann. 11, 14. for it to come forward on a crisis to Reg. 1826, relieve the public distress."

1 Parl. Deb.

XV. 198.

16.

both Houses.

Ministers carried their measure by an overwhelming majority, Mr. Baring's amendment, that "it is not expedi- The bill is carent, in the present disturbed state of ried by a large public and private credit, to enter majority in upon the consideration of the banking system of the country," having been lost by a majority of 193, the numbers being 232 to In the House of Lords the preponderance 39. was equally great, the numbers being so deeisive that the matter was not pressed to a division. The prohibition to issue £2 and £1 notes was at the same time extended to the Bank of England, by a majority of 66 to 7-in the face of a protest by Mr. Gurney, that "if Government destroyed all the country bankers' notes, and at the same time stopped the issue of small notes by the Bank of England, they would leave the country in a state of destitution of which they could form no adequate conception." This observation produced no sort of impres sion, and it passed into a law that stamps for £2 and £1 notes should no longer be issued either to the Bank of England or country banks, and that, at the expiration of three years from March, 1826-that is, in March, 1829, 2 Parl. Deb. their circulation should be pro- xv. 352, hibited altogether in England.

2

353.

Mr. Canning said, upon this question being brought to a vote, that "he hoped the decision of it would be regarded as decisive of the prin

* AMOUNT OF PAPER IN CIRCULATION, THE EXPORTS, IMPORTS, REVENUE, PRICE OF WHEAT AND COTTON, WITH THE GREAT POLITICAL CHANGES IN GREAT BRITAIN IN EVERY YEAR FROM 1818 to 1839, BOTH INCLUSIVE.

31,875,785
28,551,480
25,881,220 3,622,151 36,650,039 30,500,094
Small Notes prolonged for 10 years, July 7, 1822.
29,151,314 5,624,693 36,375,342 35,798,707

Sniall notes limited to 3 years, February 26, 1826.

1826 21,563,560 8,656.101
1827 22,747,600 9,985,300
1828 21,357,510 10,121,476 | 31,478,986 3,322,754 36.483,328

Catholic emancipation passed April 13, 1827.-Small notes extinguished February 26, 1829.

-PORTER, third edition, p. 475, 350, 360, 356. TOOKE On Prices, vol. ii. p. 382, 383, 387, 389.

Reform Bill passed July, 1832.