What government should have done, when they engaged the nation in the vast system of inland railways, was what Pitt actually did, with such happy effect, when its currency was exposed to a similar strain from foreign expenditure, and immense engagements, in 1797. They should have provided a currency under proper control as to amount, but capable of being increased, according to the wants and engagements of society, and, above all, not liable to be withdrawn by the mutations of commerce, or the demand for gold in foreign states. The example of Great Britain during the war, when a gigantic expenditure, varying from eighty to one hundred and twenty millions yearly, was carried on for twenty years with the aid of such an expansive domestic currency—not only without any lasting distress, save from the stoppage of foreign markets, but with the utmost prosperity and happiness to all classes, although guineas had altogether disappeared from the circulation—was not only an example of what was required, but the best indication of how it was to be done. No period more loudly called for such a precautionary measure than one in which, under the sanction of government, no less than £363,000,000 was to be expended on railways in the short space of four years—a sum equal, if the change in the value of money is taken into consideration, to £500,000,000 during the war—at a time when all other branches of industry, foreign and domestic, were in an unusual state of activity, from the sudden return of prosperity after a long period of suffering. To expect that the nation, without some addition to its currency, could carry out so great an increase in its undertakings, was as hopeless as to imagine that an army, with a half added to its mouths, is to go on successfully with no addition made to its distribution of rations. And it is evident that this addition to the currency could be effectually made only by extending the paper circulation on a scale proportioned to the increase of work undertaken. By no possible means could gold, in adequate quantities, be brought to the scene of activity, the place where it was required; and even if brought there, no reliance could be placed on its continuing there for any length of time. On the contrary, nothing is more certain than that it would speedily be re-exported to other countries where it was less plentiful, and, therefore, more valuable; and thus its support would have been lost at the very time when it was most required.
The rise of prices during the war, when such a domestic currency was provided by government in adequate quantities, was really owing, not so much to the circulation having become redundant, as to its having permitted an adequate remuneration to be given to industry. This is a most important consideration, which Mr Taylor has most ably illustrated. The proof that the circulation had not, like the assignats of France, become redundant, is to be found in two things which are decisive of the point: 1. At no period of the war was there any difference between the price of an article when paid in bank notes and when paid in silver. No man ever saw the price of anything five pounds in bank notes, and four pounds ten shillings in silver. Gold bore an enhanced price, because it was required urgently for the operations of the Continental armies. 2. The increase in the paper circulation, considerable as it was, was yet not so great as the parallel and simultaneous increase in our national industry, as measured by our exports, imports, and public expenditure.[21] Prices rose, therefore, and reached, for a time, more than double their level anterior to the contest, not because too much paper had been put in circulation, but because enough had been issued to let the demand for labour keep pace with the enlarged undertakings of the nation.
Instead of imitating this great and decisive example of wise and statesmanlike policy, what did Sir Robert Peel and the Free-traders do, on the commencement of a similar period of vastly augmented national industry? Why, they did just the reverse. Not only did they make no provision for enlarging the currency of the nation at the time, when they themselves had occasioned or sanctioned so immense an increase to its undertakings, but they took the most effectual measures possible to contract the circulation, both in gold and paper, directly in proportion to the necessity for its expansion. They first passed a law which limited the circulation of the Bank of England, irrespective of the notes issued on the basis of gold in their coffers, to £14,000,000; and that of the whole banks in Great Britain and Ireland to about £32,000,000; and then they introduced a system of free trade which permitted the unlimited entrance of foreign agricultural produce at a nominal duty, and thereby sent nearly half the gold headlong out of the country. Under the influence of this monstrous system, the gold in the vaults of the Bank of England was progressively diminished, until, in the end of October 1847, it was reduced to £564,000 sterling in the banking department; at the very time that, by the same judicious law, above £8,000,000 of sovereigns were lying useless, and locked up in the issue department of the same establishment. The governor of the bank very candidly admitted, in his examination before the House of Lords, that the bank, under the existing system, might have broke while there were still £8,000,000 of sovereigns lost to them and the nation in the cellars of the issue department.[22] Of course the whole banks of the country were compelled instantly to contract their credits, and force payment of their debts, and thence the universal distress and ruin which ensued. And all this took place at the very time that the bank had eight millions of sovereigns chained up by act of parliament in its cellars, at the issue end of the building; and when the government, which so chained it up, had landed the nation, by act of parliament, in engagements requiring an expenditure on railway shares of £363,000,000 in the next four years. You may search the annals of the world in vain for a similar instance of infatuation in the rulers of a nation, and self-immolation in a people.
It will be said that the vast importation of grain, in the course of 1847, was a matter of necessity, from the failure of the potato crops in Ireland in the preceding autumn; and that, be the consequences what they may, they cannot be ascribed to Sir Robert Peel or the Free-traders. In one sense this is undoubtedly true. It is certain that the most staunch Protectionists would never have objected to the largest importation of grain, and exportation of sovereigns, in a period such as that of severe and unlooked-for scarcity. It was the precise object of the sliding-scale to admit grain, in periods of scarcity, free of all duty. But what the Free-traders and Sir Robert Peel are chargeable with, is having established a system of currency so fettered and restricted by absurd regulations, that the exportation of sovereigns led necessarily and inevitably to a contraction of paper accommodation, and a shock to credit over the whole country; and aggravated the danger by a monstrous regulation, which exposed the bank to the risk of stopping payment when they had still eight millions in gold—enough to have enabled them, perhaps, to go on—at one end of their establishment. They are responsible for the dreadful error of having not only done nothing to extend and secure the currency from being exported or contracted, when they had added so enormously to the internal engagements of the kingdom, but done everything, by the establishment of a permanent system of free trade, and a permanently fettered currency, to secure its reappearance on occasion of every future recurrence of an indifferent harvest, or any continuance of a great importation.
It is the consciousness of this terrible calamity, impending over the nation, which terrifies all the directors of banks, and paralyses industry in so grievous a manner over the whole country. If you ask any moneyed man, what is the cause of the insecurity so universally complained of in money transactions over the country, and the reluctance of bankers to advance largely, even when their coffers are overflowing, to persons of the best credit? they will invariably answer, that they are afraid of a commercial crisis; that they do not know when it may come on: and that they must be, at all times, prepared for a storm. It is this indefinite dread, the natural result of the catastrophe of 1847, which renders them so cautious, and keeps the nation starved of accommodation, at the very time that Lombard Street is overflowing with money seeking for investment. It is no wonder they are afraid. The sword of Damocles is suspended over their heads, and thence their terror. They know that the heavy rains, and consequent importation of grain, in 1839 into the British islands, forced the Bank of England to apply for aid to the Bank of France, caused the United States Bank of America to stop payment, and rendered three-fourths of the traders in the United States bankrupt. The recollection of the dreadful crisis of 1847, brought on by the great importation of grain and exportation of sovereigns in that year, is fresh in their minds. They see the importations of food going on without intermission, in the face of exceedingly low prices, at the rate of fifteen millions of quarters a-year, being nearly quadruple that of 1839, which was four million quarters.[23] They know that the grain countries will take our gold to any amount, but not our manufactures, because they do not want them, or are too poor to buy them; and they ask, How is all this grain to be paid? In what is all this to end? How are the bills, drawn to pay for these exports, to be met? So general is this feeling of dread, from the effects of a drain on our metallic resources to pay for the vast importations of grain going forward, that when the author, in the beginning of last autumn, said to the chief officer of one of the first banking establishments in Britain, that "three weeks' rain in August would render half the merchants in England bankrupt," he replied—"Sir, three weeks' rain in August will make half the merchants in Europe bankrupt."
That it is this fatal dependence of the currency, and consequent credit of the country, on the retention of its gold circulation, under circumstances when, from the vast importation of grain going forward, it is impossible to retain it, which is the real cause of the calamitous state of the country for the last three years, and not either the potato rot or the European revolutions, to which the Free-traders ascribe it, is evident from the slightest consideration. The potato rot of 1846, which has been the sheet-anchor of the Free-traders ever since—the scapegoat which they hoped would answer for all their sins—was never, by the most determined of their party, set down as having occasioned a loss of above £15,000,000 sterling. Call it £20,000,000 to avoid cavil. The strength of the case will admit of any concession. Now, the value of the agricultural produce of the United Kingdom, prior to the free trade in grain, was generally estimated at £300,000,000.[24] A deficiency of £20,000,000, or a fifteenth part, might occasion, doubtless, the most acute local distress in the districts in which it was most severely felt; but it could never, irrespective of its action on the currency, occasion a general monetary and commercial crisis. England and Scotland exported little or nothing to the boys of Munster and Connaught, where the failure occurred. There is no more reason, had it not been for the currency laws, why a failure of the potato crop in Ireland should have produced a monetary crisis in Great Britain, than a failure in the potato crop of Norway.
Again, the revolutions in Europe in 1848, of which so much has been said to account for the distress, are equally inadequate to explain the phenomenon. They could, of course, affect the European market for our export goods only; and they, taken altogether, only amount, to the countries affected by the revolutions, to £13,000,000—little more than a fourth part of our exports, which vary from £51,000,000 to £60,000,000. Supposing a half of this export, or £7,000,000, had been lost, during the year 1848, by the French, German, and Italian revolutions; what is that amidst the mass, thirty-fold greater, of our total manufactures, which some years ago were estimated at £133,000,000 for the home market, and £50,000,000 for the foreign. They are now unquestionably above £200,000,000 annually. But let it be supposed that the whole defalcation of our exports, from £60,000,000 in 1845, to £53,000,000 in 1848, was owing to the European revolutions, and none at all to the paralysis of domestic industry by the effects of free trade and a fettered currency—seven millions deficit, out of £200,000,000 annual produce of manufactures, is only a twenty-ninth part. Is it possible that so trifling a deficit can have been the cause of the terrible calamity which overtook the country in 1848 and 1849, the more especially as the harvest of 1847 was so good, that, by orders of government, a public thanksgiving was returned for it? That calamity was unparalleled in point of extent, and has, in two years, swept away at least one half of the whole commercial and manufacturing wealth of the kingdom. The thing is perfectly ridiculous. The failure of an eighth part of our annual export, and a twenty-ninth part of our annual creation of manufactures, might occasion considerable distress in the particular places or branches of manufacture principally affected, but it could never explain the universal paralysis, affecting the home trade even more than the foreign, which followed the monetary crisis of October 1847.
Again, as to the European revolutions of 1848, although, undoubtedly, they largely contributed to interrupt the commerce of this country with central Europe, and may fairly be considered as the principal cause of the decline in the exports of that year, yet it may be doubted whether the influx of wealth, from the distracted monarchies of Europe, which they occasioned, did not more than counterbalance that disadvantage. England, during the convulsions of France, Germany, and Italy, became the bank of Europe. Wealth flowed in from all quarters, for investment in the only capital left which held out the prospect of security. The solid specie which then was brought to London for purchase into the British funds, in the course of 1848, has been estimated, by competent authorities, at £9,000,000 sterling. Beyond all doubt, this great influx of the precious metals from continental Europe—at a time when it was so much required, in consequence of the enormous exportation of specie which free trade was inducing, and the monstrous monetary laws which contracted the paper circulation in proportion as it was withdrawn—had a powerful effect in counteracting the evils we had brought upon ourselves, and sustaining the currency and national credit, which the Free-traders had done so much to destroy. And as this was an alleviation of the evil at its fountain-head, it is next to certain that the European revolutions of 1848, so far from having occasioned the distress in Great Britain in that year, had a material effect in abating it.
It is vain, therefore, for the Free-traders to push forward extraneous and separate events, as the cause of the dreadful calamities which have overtaken the country since October 1847; calamities which all the witnesses examined in both Houses of Parliament, in the committees on commercial distress, described as altogether unparalleled. They arose, evidently, not from the failure of crops in a particular place, or the temporary stoppage in the foreign vent for a particular branch of manufacture—causes which only touched the extremities—but from some great cause affecting the heart of the empire, and which through it paralysed all its members. And when it is recollected that, after having landed the nation in extra domestic engagements, for the next four years, to the amount of £360,000,000, the government adopted the most decisive and effective measures to contract the currency, and, after making it mainly dependant on the retention of gold in the country, they took steps which sent that gold headlong abroad—in exchange for enormously increased importations, the fruit of free trade—it is not difficult to discover what that cause was.
But all these evils, it is said, are over. We have passed through the desert, and arrived at the promised land. Free trade, disjoined from the extraneous circumstances which have hitherto concealed its real effect, is at length beginning to appear in its true colours. The Continent is pacified; the trade to France and Germany has revived; the revenue is improving; the exports in September were £2,000,000 more than in the corresponding month of last year: wait a little and we shall soon be in Elysium, and free trade and a fettered currency will realise all their promised advantages. We are not unaware of the Io Pæans which are already sung from the Liberal camp on this subject, and it is precisely for that reason that, when FREE TRADE IS AT ITS ZENITH, we have taken the opportunity to examine its effects. We have seen that the prosperity from 1842 to 1845 arose from extraneous causes, with which the tariff of the first of these years had nothing to do; and that the disasters from 1847 to 1849 were not in any sensible degree owing to external or separate calamities, but were the direct and inevitable effect of the establishment of a system of free trade, at the very time when the industry of the nation was manacled by the restriction of absurd and destructive monetary laws. Let us now examine our present condition, and see whether or not we are in an enviable position at home or abroad; whether the industry of the country can possibly survive, or its revenue be maintained, under the present system; and whether the seeds of another catastrophe, as terrible as that of 1847, are not already spread in the land.