The greatest extension in the use of credit, however, came from the establishment of the Bank of England. In 1691 the original proposition for the Bank was made to the government by William Patterson. In 1694 a charter for the Bank was finally carried through Parliament by the efforts of the ministry. The Bank consisted of a group of subscribers who agreed to loan to the government £1,200,000, the government to pay them an annual interest of eight and one-half per cent, or £100,000 in cash, guaranteed by the product of a certain tax. The subscribers were at the same time incorporated and authorized to carry on a general business of receiving deposits and lending out money at interest. The capital which was to be loaned to the government was subscribed principally by London merchants, and the Bank began its career in the old Grocers' Hall. The regular income of £100,000 a year gave it a nucleus of strength, and enabled it to discount notes even beyond its actual deposits and to issue its own notes or paper money. Thus money could be borrowed to serve as capital for all kinds of enterprises, and there was an inducement also for persons to save money and thus create capital, since it could always bring them in a return by lending it to the Bank even if they were not in a position to put it to use themselves. Along with the normal effect of such financial inventions in developing all forms of trade and industry, there arose a remarkable series of projects and schemes of the wildest and most unstable character, and the early eighteenth century saw many losses and constant fluctuations in the realm of finance. The most famous instance of this was the "South Sea Bubble," a speculative scheme by which a regulated company, the South Sea Company, was chartered in 1719 to carry on the slave-trade to the West Indies and whale-fishing, and incidentally to loan money to the government. Its shares rose to many fold their par value and fell to almost nothing again within a few months, and the government and vast numbers of investors and speculators were involved in its failure.
The same period saw the creation of the permanent national debt. In earlier times kings and ministers had constantly borrowed money from foreign or native lenders, but it was always provided and anticipated that it would be repaid at a certain period, with the interest. With the later years of the seventeenth century, however, it became customary for the government to borrow money without any definite contract or expectation as to when it should be paid back, only making an agreement to pay a certain rate of interest upon it. This was satisfactory to all parties. The government obtained a large sum at the time, with the necessity of only paying a small sum every year for interest; investors obtained a remunerative use for their money, and if they should need the principal, some one else was always ready to pay its value to them for the sake of receiving the interest. The largest single element of the national debt in its early period was the loan of £1,200,000 which served as the basis for the Bank; but after that time, as for a short time before, sums were borrowed from time to time which were not repaid, but became a permanent part of the debt: the total rising to more than £75,000,000 by the middle of the century. Incidentally, this, like the deposits at the goldsmiths and the Bank, became an opportunity for the investment of savings and an inducement to create more capital.
Fire insurance and life insurance both seem to have had their origin in the later decades of the seventeenth century.
Thus in the realm of finance there was much more of novelty, of actually new development, during this period than in agriculture, manufacturing, or commerce. Yet all these forms of economic life and of the social organization which corresponded to them were alike in one respect, that they were quite minutely regulated by the national government. The fabric of paternal government which we saw rising in the time of the Tudor sovereigns remained almost intact through the whole of this period. The regulation of the conditions of labor, of trade, of importation and exportation, of finance, of agriculture, of manufacture, in more or less detail, was part of the regular work of legislation or administrative action. Either in order to reach certain ulterior ends, such as government power, a large navy, or a large body of money within the country, or simply as a part of what were looked upon at the time as the natural functions of government, laws were constantly being passed, charters formulated, treaties entered into, and other action taken by government, intended to encourage one kind of industry and discourage another, to determine rates of wages and hours of labor, prescribe rules for agriculture, or individual trades or forms of business, to support some kind of industry which was threatened with decay, to restrict certain actions which were thought to be disadvantageous, to regulate the whole economic life of the nation.
It is true that much of this regulation was on the books rather than in actual existence. It would have required a much more extensive and efficient civil service, national and local, than England then possessed to enforce all or any considerable part of the provisions that were made by act of Parliament or ordered by the King and Council. Again, new industries were generally declared to be free from much of the more minute regulation, so that enterprise where it arose was not so apt to be checked, as conservatism where it already existed was apt to be perpetuated. Such regulation and control, moreover, were quite in accord with the feeling and with the economic and political theories of the time, so there was but little sense of interference or tyranny felt by the governed. A regulated industrial organization slowly expanding on well-established lines was as characteristic of the theory as it was of the practice of the period.
54. BIBLIOGRAPHY
Gardiner, S. R.: The History of England, 1603-1642, ten volumes.
Many scattered passages in this work and in its continuations, like those in Froude's history, referred to in the last chapter, apply to the economic and social history of the period, and they are always judicious and valuable.
Hewins, W. A. S.: English Trade and Finance, chiefly in the Seventeenth Century.
For this period Cunningham, Rogers, and Palgrave, in the books already referred to, are almost the only secondary authorities, except such as go into great detail on individual points. Cunningham's second volume, which includes this period, is extremely full and satisfactory.