Towards the middle of the nineteenth century the manufactures of Great Britain began to increase by leaps and bounds, and population, which always augments rapidly when food is cheap and abundant, kept pace with the country's unprecedented commercial activity. In 1801 the population of London was less than one million. In 1837 it had increased to about two millions; and at the present time Greater London contains over six and a half millions.
It is quite evident that the Bank of England could not alone minister to the increasing wants of London, and both in the Metropolis and in the provinces its joint stock rivals rapidly accumulated credit. In June, 1854, the new banks were admitted into the Clearing House, and since that date they have carried all before them. They shared in the almost magical increase in the volume of British trade, but they neither created nor provided the incentive to that remarkable outburst of national prosperity which was the result of Free Trade, and which made this country the workshop of the world. Since then, however, the world has filled up.
The population of the United States in 1870 was 38,500,000; in 1900, 75,500,000. In 1871 the population of the German Empire was 41,000,000. In 1901 it had increased to 56,000,000. During the same period the population of the United Kingdom increased from 31,500,000 to 41,500,000. There are more people in the world to be fed, and as the earth fills up the struggle for existence must surely become fiercer. Noticing this, people naturally inquire whether, seeing the changed environment, Free Trade is suitable to the times. Some years ago, when trade was bad, the bimetallic controversy was raging, but since 1895 its advocates have been dumb, for the simple reason that people will not listen to theorists when times are good. They are then too intent upon making money. They think they may not get the chance again.
No doubt, when the depressed portion of the cycle came round bimetallists would have been heard again. But in the place of Bimetallism we now find Protection, and, in all truth, the question is serious enough; for, when the present wave of prosperity dies out in the States, there seems every probability that the huge American trusts will endeavour to swamp our markets with their goods. Free traders make quite a profession of faith of their commercial opinion. They declare that they are free traders with the same fervour they might infuse into the avowal that they were Protestants or Roman Catholics. But modern Christianity is eminently adaptable to every fresh situation. Is Free Trade?
The worse the times become, the louder, probably, will grow the controversy between the free traders and the protectionists; and when we remember that our workshops support our credit, and upon what an amazingly small reserve of the precious metals that credit is based, it is evident that the question ought to be approached with the greatest caution; for a decision that emptied our workshops would ruin the nation.
As the savings of the country increased, the joint stock banks accumulated credit with astonishing rapidity, and the Bank of England, slow to recognise the power of the new system, which was so admirably suited to the changed environment, was compelled to receive its hated rivals into the fold. The companies possessed no vaults for the storage of the precious metals on a large scale, and they were therefore glad to avail themselves of the facilities at the disposal of the Bank, whose premises were much better protected than their own. And then, again, as the Bank's notes were legal tender, the companies could send them from the head offices to the branches cheaply, while they were a convenient form in which to keep a certain proportion of their cash in hand.
The evolution of the Bank of England, we can see, has not proceeded smoothly; but it is remarkable that an institution, which owed its pre-eminence entirely to monopoly, did not gradually begin to sink into a second-rate banking company directly its exclusive privilege of joint stock banking was abrogated and free trade in banking established in England. So conservative was the Bank's policy that it seems little short of marvellous that its joint stock rivals should have quietly endured its studied insults. The new movement was then, however, not only in its infancy, but was under a cloud as well, and through the companies grouping themselves around the Bank they enabled that institution to retain its position in the centre of the money market. The power incident to that position has been fully explained in the previous chapter.
The London private bankers, whose lack of enterprise can only be attributed to the fact that they were imbued with those narrow City traditions which make London the home of Conservatism, also quite failed to grasp the situation, and allowed the new companies to expand in every direction, confident that so sudden a change must end in disaster, and, therefore, they were content to look on, to shake their heads sadly at the unprofessional conduct of those new banks, and to soothe their feelings by ever and anon declaring, with due solemnity, that joint stock banking would ruin the country.
Certainly, the new companies did not manage well at first, and a few of them were wiped out in consequence; but, in spite of mistakes, they progressed, because their system was adaptable to the requirements of a growing England. In these times it is the fashion to apotheosise man—to picture him as a kind of demi-god; therefore, it is asserted that man makes his mark on the times. But it is surely more rational and logical to assume that the times gradually mould the particular cast of brain that is adaptable to a constantly changing environment, and that the man who chances to possess that cast of brain goes with the tide—which takes him a long way. At any rate, such was the case with the joint stock banks, which owe their success entirely to the adaptability of their system to a changing market. Moreover, that market is still changing.
The old-fashioned London bankers found, to their great surprise, that they had not read the signs of the times aright; but the orthodox seldom play the rôle of a prophet successfully, because they have lived too long in one groove, and so are apt to forget that England is not the world, which is steadily increasing in population. Instead of failing, the joint stock banks merely occupied the ground, and, by so doing, confined the business of the London private banker to the one street in which he was established and in which his father lived before him. They had no respect for age—those new companies!