The Romans amassed the treasure by which they administered their Empire, through the plunder and enslavement of the world. The Empire cemented by that treasure crumbled when adverse exchanges carried the bullion of Italy to the shore of the Bosphorus. An accelerated movement among the semi-barbarians of the West caused the agony of the crusades, amidst which Constantinople fell as the Italian cities rose; while Venice and Genoa, and with them the whole Arabic civilization, shrivelled, when Portugal established direct communication with Hindostan.
The opening of the ocean as a highroad precipitated the Reformation, and built up Antwerp, while in the end it ruined Spain; and finally the last great quickening of the age of steam, which centralized the world at London, bathed the earth in blood, from the Mississippi to the Ganges. Thus religions are preached and are forgotten, empires rise and fall, philosophies are born and die, art and poetry bloom and fade, as societies pass from the disintegration wherein the imagination kindles, to the consolidation whose pressure ends in death.
In 1688, when the momentum of England suddenly increased, the change was equivalent to the conquest of the island by a new race. Among the family of European nations, Great Britain rose as no people had risen since the Punic Wars. Almost instantly she entered on a career of conquest unparalleled in modern history. Of the hundred and twenty-five years between the Boyne and Waterloo, she passed some seventy in waging ferocious wars, from which she emerged victorious on land and sea, the mistress of a mighty empire, the owner of incalculable wealth, and the centre of the world’s exchanges. Then, from this culminating point of expansion by conquest, she glided subtly, and almost imperceptibly, into the period of contraction, as Rome went before her under the Cæsars.
Although abundant metallic currency does not, probably, of itself, create mercantile prosperity, such prosperity is hardly compatible with a shrinking stock of money; for when contraction sets in and prices fall, producers and debtors are ruined, as they were ruined in Italy under the later emperors. Toward the close of the seventeenth century Europe appeared to be on the brink of such a contraction, for though Peru had lavishly replenished the supply of the precious metals a hundred years previously, the drain to Asia and the increasing demands of commerce had been so considerable, that the standard coin had generally depreciated. From the reign of Augustus downward, commerce between Europe and Asia has usually favoured Asia, and this was particularly true of the seventeenth century, when the value of bullion fell in the West, and therefore encouraged lavish exports to the East, where it retained its purchasing power. According to Adam Smith, “the banks of Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to have been all originally established” to provide an ideal currency for the settlement of bills of exchange, and the money “of such banks, being better than the common currency of the country, necessarily bore an agio, which was greater or smaller, according as the currency was supposed to be more or less degraded below the standard of the State.”[324] Smith estimated the depreciation at Hamburg at fourteen per cent, and at Amsterdam, early in the previous century, at nine per cent; in short, all European countries suffered, but in England the evil reached a climax through the inertia of the new aristocracy.
In England, silver had always been the standard, and by the third year of Elizabeth the coin had been restored to its proper fineness, which thenceforward was scrupulously maintained. But though the metal was not degraded by the government, the stock of bullion, if not constantly replenished from without, tended to diminish in proportion to the growth of the country and the export of specie to Asia. After the discovery of America, the value of silver in relation to gold fell, in Europe, to about fourteen or fifteen to one, while in China or India it stood pretty steady at from ten to twelve to one. Consequently from 1600 downward, silver remained the most profitable cargo which could be sent round the Cape of Good Hope, and, unhappily for British prosperity, at the very moment when the East India Company came into being, piracy ceased. The chief supply of bullion being thus cut off, the strain of the export trade fell upon the coin, and within a little more than a generation the effect become apparent in a degeneration of the currency.
To make good her position as a centre of exchanges, England had no choice but to supply her necessities by force. Cromwell understood the situation perfectly, and had hardly assumed the office of Protector when he laid plans to cut the evil at the root by conquering Spanish America, and robbing Spain of her mines. To this end he fitted out his great expedition against Saint Domingo, which was to serve him as his base; but for once his military genius failed him, his commanders blundered, the attack miscarried, and the island of Jamaica was all that came of the campaign.
Meanwhile, however, that no time might be lost while fighting for the mines themselves, Cromwell sent Blake to intercept the treasure ships off the coast of Spain. At first Blake also had ill-luck. In 1655 the plate fleet escaped him, but the next year, though forced himself to go to port for supplies, he detached Captain Stayner, with six sail, to cruise off Cadiz, and on September 19, General Montague was able to report that his “hart [was] very much warmed with the apprehension of the singular providence of God,” who had permitted Stayner to meet, “with the Kinge of Spain’s West India fleete,” and take among other prizes “a gallion reported to have in her two million pieces of plate.”[325] If the “plate” were Mexican “pieces of eight” at four shillings and sixpence, the cargo was worth £450,000, or considerably more than the whole annual export to the East at the beginning of the eighteenth century. Had the Protector lived, there can be little doubt that, by some such means as this, he would have fostered British resources, and maintained the integrity of British coin; but in less than two years from the date of Montague’s dispatch, Cromwell was dead, and the inertia of the Tory landlords paralyzed the nation for another generation. No foreigner was robbed, and the stock of domestic silver dwindled from year to year, until at the Revolution the golden guinea, which, from its first issue in 1662 down to the accession of William and Mary, had been nominally current for twenty shillings, actually sold in the market for thirty shillings of the money in use.
“This diminishing and counterfeiting the money was at this time so excessive, that what was good silver was worth scarcely one-half of its current value, whilst a great part of the coins was only iron, brass, or copper plated, and some no more than washed over.”[326]
One of the first acts of the new government was a complete recoinage, which was finished in 1699; but the measure failed of its purpose, for the reason that the exports of silver regularly exceeded the imports.
In 1717, a committee of the House of Lords considered the condition of the currency, and Lord Stanhope then explained very lucidly the cause of the scarcity of silver. Among other papers he produced a report from the Custom House, by which it appeared that, in the year 1717, “the East India Company had exported near three million ounces of silver, which far exceeding the imports of the bullion in that year, it necessarily followed that vast quantities of silver specie must have been melted down, both to make up the export, and to supply the silversmith.”[327] For the decade from 1711 to 1720 the annual export of bullion by the East India Company averaged £434,000.[328] At the accession of George III., in 1760, Lord Liverpool estimated that shillings had lost one-sixth, and sixpences one-quarter of their original weight, while the crown-piece had almost wholly disappeared.[329] Even Adam Smith admitted that because of this outflow silver had risen in value, and probably purchased “a larger quantity both of labour and commodities” than it otherwise would.[330]