Blackwood's Edinburgh Magazine—Volume 62, No. 386, December, 1847

by Various

OUR CURRENCY, OUR TRADE, AND OUR TARIFF.

It is no matter of congratulation to us, that the remarks which we hazarded in July last, regarding the depressed and declining state of the internal trade of the country, and the miserable prospects which were in store for us in consequence of the mischievous operation of our restrictive monetary laws, have since been tested by experience, and have been fulfilled to the utmost letter. We then stated, that Great Britain was upon the very verge of a crisis more dangerous than any to which she had hitherto been exposed—that the evil was clearly traceable to the senseless machinery of the Banking Acts, introduced by Sir Robert Peel, and adopted by his Whig successors—and we warned the latter, that "if, during the recess, and before a new parliament shall meet, the present lamentable state of matters is to continue, no British ministry ever exposed themselves to such a frightful load of responsibility." Our sentiments with regard to the monetary laws were neither singular nor unsupported. They were in unison with those of an overwhelming majority of the press, of the heads of mercantile houses, and more especially of the bankers, who in vain had pointed out to Sir Robert Peel the imminent danger of his persevering with egotistic obstinacy in his foolish and pragmatical scheme. But our forebodings as to the future, and further depreciation of property down to the present miserable point, were, we are quite aware, considered by many as too gloomy to be by possibility realised. That month, however, which may hereafter be memorable in our history as the Black October, has, we hope, dispelled the delusion even of the few who still regarded Sir Robert Peel as the infallible minister of finance. His great juggle is now exposed; his currency engine has gone to pieces—but not before it has fulfilled its predestined task of crushing and annihilating credit.

It was, we are now free to acknowledge, a vain expectation to hope that any remedial measure could be carried in the last Parliament. That body was rapidly going down to its corporate grave, with little glory, and with no regret. It, too, was an engine, working, most unfortunately for us all, according to the will of one man, whose thoughts and ways were as secret and noiseless as the pestilence. It was pledged to support agriculture, which it abandoned; to foster native industry, which it gave up to foreign competition; to lighten the burdens of the people, which it augmented; to maintain the balance of power, which it permitted to be shifted and destroyed. Whether he was in office or not, that parliament was the plaything of Peel. At each successive move, he was the Mephistophiles who drew the string. He contrived to adjust parties with such infinite address, that what in reality was the weaker section became apparently the stronger one, and "government influence" was lavishly used to tempt the frailer brethren from their old profession. True, he lost office in consequence, but he did not on that account surrender one iota of power. The new ministry felt that they were in his hands, and that his fiat might determine at any moment the period of their political existence. There have been statesmen, even of the Whig school, who would not willingly have submitted to so poor and degrading a bondage. There have been those who would not have consented to hold office even for an hour, on the condition of their adopting implicitly the measures and the schemes of their antagonist; but we live in altered times, and free will is no longer a doctrine of the Whigs. Accordingly, the same lessons of financial wisdom, the same doctrines of political economy, which flowed from the lips of the converted Sir Robert Peel, were now pompously enunciated, though far worse expressed, by Sir Charles Wood, whom the malignant star of Britain has converted into a Chancellor of the Exchequer. The cries of the country, the warnings of the press, the representations of the merchants and bankers, were passed over with an assurance of general prosperity, and Parliament was dissolved at the moment when the active interference of the legislature was most imperatively required.

At the elections the currency was made a prominent but not a vital question. This we regret exceedingly, for there never was a time when men of strong understanding, concentrated experience, and practical knowledge, were more needed in the House of Commons; and although there have been some accessions which we regard with hope, still we could have wished that more men of decided mercantile ability had been returned. The new Parliament has very great, important, and difficult functions to perform. It has to pronounce upon the fate of a monetary system which dear-bought and late experience has proved to be radically bad; and it must provide a substitute on which the nation may in future more confidently rely. It has further to decide, whether we are to persevere in a mercantile policy, which, so far as it has gone, appears most baneful to home production, and to the prosperity of our native artisans: and it will be forced in some measure to recast and remodel the system of our national taxation. All these are matters of infinite and pressing importance: they must be handled boldly, but not rashly, and discussed with temper and forbearance. Party strife must be forgotten when the great interests of the nation are so strangely and fearfully involved. We have arrived, through experiment-making and quackery, at such a point, that the best man, be his general politics what they may, must lead us on. But we must have no more experiments, lest a worse thing should happen to befall us. In our present position it would be madness to look for aid either from the flashy declaimer and rhetorician, or from the off-hand fabricator of systems, which are based upon no solid or intelligible foundation. What we want is solidity, prudence, and, above all, principle.

It will not do merely to extricate the nation from its immediate dilemma, for which task we observe there is already a sufficient number of volunteers; but we must absolutely see our way before us, a little more clearly than our political guides have hitherto been in the habit of permitting. We cannot suffer them to remain as solitary sentinels on the peaks of an imaginary Pisgah. The promised land, which they have discerned in the distance, has turned out, when we reached it, to be a mere mirage of the desert—a phantom which has disappeared, and left us in the arid sand. We are, as far as ever—nay, even farther—from our inheritance; and assuredly it would be a desirable thing for us if we could discover the true road by which we are to walk in future. We have deserted, unnecessarily and foolishly, as experience has shown us, the beaten track which we had hitherto pursued: if we cannot regain it, let us at least be diligent in our endeavours to find, but wary in our selection of a new one. It is in this temper that we venture to make a few observations upon our present position and prospects.

First, then, let us see how the Banking Act of 1844 has worked. All the world knows that by that preposterous measure, the free circulation of the paper money of the Bank of England was limited to £14,000,000 beyond the amount of bullion which was stored in the coffers of that establishment—that no loophole or device for expansion was given—and that the Scottish, Irish, and provincial banks were put into similar fetters, and compelled to provide and retain gold for every pound note which they might issue beyond the amount of their average circulation as taken at that period. We were told by the individual who was then kind enough to act as our Lycurgus, that this restriction was necessary for the safety of the trading community—that, in other words, it was intended to prevent the customer from being defrauded by his banker, and to keep the circulation of the country within proper bounds. Also, that it was intended to discourage undue and unwholesome speculation, which, according to the modern theory, is at the root of every evil. We believed him—that is, some of us did—and the measure was passed into a law.

Subsequent experience has shown us, that this very measure has become an engine of destruction to the trading community—that it has not defended the customer from loss by the failure of his banker—and that it has not discouraged speculation, whether that be unwholesome or not. It has certainly kept the circulation of the country within such bounds, that money is at a minimum rate of eight and a half per cent; and the measure is itself suspended and virtually abrogated by the Whig ministry, who, with an inconsistency and stupidity which appear absolutely miraculous, pin their faith, in the very document which removed it, to the soundness and integrity of its principle!

Now, it is here proper to remark, that the principle to which the ministry have so needlessly committed themselves is not, strictly speaking, that of the convertibility of paper into gold at a fixed rate, but that of permanent restriction of the issues. The bullion principle may or may not be justly assailable upon other grounds, but it does not necessarily enter as an ingredient into the question of the present difficulty, and we are anxious, therefore, to keep it separate. The great alteration which the Act of 1844 effected in the monetary system of England, was the positive limitation of the unrepresented paper issues of the government to fourteen millions, and the contraction of the currency of the provincial banks. It thus left the directors of the Bank of England no option or power to move to the assistance of the public in time of emergency, and besides restricting them, it made the provincial banks in England wholly dependent upon the leading establishment in London. The Acts of 1845 which were applicable to Scotland and Ireland, were in many respects a much greater innovation. The amount of paper circulation in these countries was calculated on the average of the preceding year, and the issue restricted accordingly. It was provided that every note which might be put out beyond that amount, should be represented by bullion, and we shall immediately show that this measure has proved in its operation most injurious to the interests of the English public, by causing a large drain of bullion to countries where it is neither asked for, nor employed as a circulating medium at all. We, therefore, drop for the present the convertibility question, and Sir Robert's reiterated disquisitions as to the nature and character of a pound; and shall apply ourselves solely to the point of restriction, which we hold to be the leading cause of the present monetary distress.

A vast change has taken place in our social condition since the year 1844. This alteration has been produced by both natural and artificial causes. In the first place, we have had a famine and a failure of the potato crop, which has borne very heavily upon the population of the British islands, and has caused a large export of bullion for the necessary supply of food. In the second place, we have had a multiplicity of gigantic works going on at home, which, while they have afforded high wages to an important section of the community, and so tended in a great measure to ward off and counteract the more disastrous effects of the famine, have nevertheless undeniably caused an unusual absorption of capital, which must remain unproductive until those works are completed. In the third place, we have altered altogether our relation to the foreigner, and have admitted him to competition with our own producers in the home market, without securing that reciprocity without which free trade is a phantom and a delusion. The first and the third of these causes have led to a steady drain of bullion from the country; and although the famine may now be considered as over, and that drain stopped for the present, the other still continues and must continue in full operation, and the adverse rate of exchange as against Britain can only be overcome by a general decline of prices, in consequence of which men of every class, but especially the manufacturer and the artisan, must be serious and permanent losers. But the railway system on the whole has effected the most important change upon our position, and it is now indisputably necessary to find out in what way it has acted upon the money market.