The _London Gazette_, of the 3d July 1852, announced, in its weekly
report of the Bank of England, that the gold coin and bullion in the
issue department had reached the sum of L.21,742,110. It had never
reached such a sum before. But this is not all. While this vast amount
of gold already lies in the vaults of the Bank, nearly every ship from
Australia, and steamer from America, brings more of the precious
metal.
There are not wanting persons to whom this accession of treasure to
the country is a subject of panic. The annuitant dreads a depreciation
of the value of gold, equivalent, of course, to a general rise in the
price of those commodities which conduce to his comfort; or, in other
words, to a diminution of his income. The millionaire sees rivals
springing up on all sides from the mountain of gold. Many in every
class, who are at ease in their circumstances, and would fain have
things remain as they are, look with dislike on a state of things so
new, and wish that the 'diggings' in California, and the gold region
of Australia, had never been disturbed by spade or pickaxe.
If gold were not our standard of value, no such panic could exist in
any mind; but, on the contrary, the abundance of a metal so
pre-eminent in beauty and utility must be universally hailed as a
boon. Silver is now the legal tender in most countries of Europe, and
used to be so in England, till it became too abundant; but where
transactions are large, silver is too cumbrous: a man can carry L.500
in gold in his pocket, but L.500 in silver would require a horse.
The reason why these two metals form the money of the most civilised
nations, need not be gone into here at any length. 'Their qualities of
utility, beauty, and _scarcity_,' says Adam Smith, 'are the original
foundation of the high price of those metals, or of the great quantity
of other goods for which they can everywhere be exchanged. This value
was antecedent to, and independent of, their being employed as coin,
and was the quality which fitted them for that employment.'
We have printed the word _scarcity_ in italics, because that is the
point of alarm. 'If,' say the alarmists, 'gold, which has been in all
the world's annals scarce, is to become plentiful, one of the
conditions of its fitness for coin is annihilated.' To this we reply:
Scarcity is a relative term. Actual scarcity of a commodity may exist,
to all practical purposes, in the midst of an abundance of that
commodity; because scarcity is occasioned by two very different
causes--namely, limited supply and excessive demand.
An amount of gold coin which would be very large for a small
community, might be very insignificant for the use of a great and
populous nation. In August 1789, the bullion in the Bank of England
amounted only to L.8,645,860; but we think that was a larger sum for
the Bank to possess, in relation to the population and trade of
England at that period, than L.22,000,000 now.
In 1801, the population of Great Britain numbered about from ten to
eleven millions; in 1851, nearly twenty millions. Whatever quantity of
money, therefore, was necessary for the former period, a very much
larger, perhaps a double quantity--supposing an equal degree of
prosperity to exist--would be requisite in the latter.
This necessity for a larger amount of coin is obvious when regarded
only in relation to the increase of population. If population
continues at its present rate of increase, a much larger amount of
coin than we possess now, even with our L.22,000,000 of bullion in the
Bank, will be required to keep pace with its wants. But this is not
the only view of the question. The population of 1851, it must be
granted, required a larger amount of coin than that of 1801, or of any
former period in our history, supposing each period to possess an
equal amount of prosperity. But how stand the facts on this question
of prosperity? If it should appear that, while more gold is
discovered, more iron, more tin, more copper, more of every other
mineral is also found; that more wool and cotton are produced, more
corn is grown, more ships built, more houses built, more towns raised,
more countries inhabited, and last, not least, that railways begin to
intersect every country, old and new, and in combination with
steam-ships on the ocean, to facilitate the communication among them
all--then it would appear that they required a larger amount in
proportion to the population; and that if prosperity continues on the
increase, so constantly progressive will be the necessity for more
coin, that scarcity will be a term applicable to gold, in all
probability, for a long period of time.
The fact is, that the increase of commodities has been, in many
instances, far greater than the increase of population. In 1740, the
total quantity of iron made in Great Britain was 17,350 tons; in the
following hundred years, this quantity increased considerably more
than a hundredfold, being estimated at the later period at above
2,000,000 tons. In 1801, the Cornish tin-mines produced 2328 tons of
metal; it took only thirty years to double their annual amount. The
same is more than true of the copper-mines of Cornwall, which produced
in 1801, 5267 tons; and after thirty years, 11,224 tons. In 1828, the
quantity of sheep's wool imported from Australia was 1,574,186 lbs.;
in 1850, it was 39,018,228 lbs. In 1801, the coals shipped from
Newcastle were 1,331,870 tons; in fifty years more than
double--namely, 2,977,385 tons. These are only a few examples gleaned
from many of a similar description, and to them we will only add the
fact, of a kind totally new in the world's annals, that a sum
approaching to a moiety of the national debt is now invested in
railways in England alone--namely, upwards of L.350,000,000.
By a late police report, it appears that 60,000 houses have been added
to the metropolis of England in the last ten years. These would alone
form a large city, requiring much gold and silver for money and
luxury; and in this question of gold, the requisitions of luxury must
not be forgotten; they form an important item, and are commensurate
with the necessity for coin.
'When,' said Adam Smith, 'the wealth of any country increases, when
the annual produce of its labour becomes gradually greater and
greater, a quantity of coin becomes necessary, in order to circulate a
greater quantity of commodities; and the people as they can afford it,
as they have more commodities to give for it, will naturally purchase
a greater and greater quantity of plate. The quantity of their coin
will increase from necessity, the quantity of their plate from vanity
and ostentation, or from the same reason that the quantity of fine
statues, pictures, and of every other luxury and curiosity, is likely
to increase among them. But as statuaries and painters are not likely
to be worse rewarded in times of wealth and prosperity than in times
of poverty and depression, so gold and silver are not likely to be
worse paid for.'
It may, indeed, be predicted with tolerable certainty, that the
qualities of 'beauty and utility' possessed by gold will be for a long
time guarantees for its 'scarcity' whatever be its abundance. Its fine
colour and brilliancy are not its only beauties. No metal is so
ductile, so malleable, so indestructible by fire or chemical tests. It
does not rust, it scarcely tarnishes, and it admits of the most
exquisite workmanship. India alone would absorb the results of many
years' digging; and when direct steam communication commences between
it and Australia, gold will begin to flow into that great country,
with its hundred million of people, in one continued stream, to supply
their insatiable desire for it. They habitually invest their savings
in gold ornaments, which they wear on their persons; and at this day,
it is not uncommon to see the wife of a native under-secretary, whose
salary and property altogether do not amount to much more than L.300 a
year, wearing gold in this manner to the value of L.500. The treasure
of this kind possessed by the rich natives is probably extraordinary;
and so great is their desire to accumulate it, that it is impossible
to keep up a gold-currency in the country: the coin is immediately
melted down, and made into ornaments.
But whatever amount of gold is absolutely required at present as a
circulating medium, and whatever amount is likely to be absorbed by
the requirements of luxury, an amount far greater is likely to be
needed to keep pace with the increasing prospects of prosperity in
this country. Now that the restrictions on trade are nearly all
removed, Britain may become the centre of the world's commerce:
situated as she is in a temperate climate, between the Old and the New
World, her harbours never closed by ice, there is nothing to limit the
extent of her markets, nothing to check the development of her
resources, nor the division of her labour. The extraordinary impetus
given to emigration by the discovery of the gold-fields, has already
begun to create new and great countries; and every emigrant that
leaves our shores becomes a source of wealth and strength to the
mother-country, which has cast off the fetters that so long restrained
its enterprise, and is open to trade with all the world; while the
discovery of rich coal-mines in most parts of the globe, favours the
communication by steam-power between both hemispheres, and almost from
pole to pole; and while we hear of new discoveries that may make the
air a motive power instead of steam, and thus render railway transit
possible in arid deserts; and while the electric telegraph not only
connects us with the continent of Europe, but is about to cross the
Atlantic. With all these powers at command, men will not long be
confined to the narrow boundaries in which they are at present
congregated; and in comparison with future improvements in every
branch of industry, the present time may come to be regarded as one
when they were bunglers in industrial art, and mere scratchers of the
soil instead of cultivators.
And not the least important among the elements of national prosperity,
will be found an abundance of the circulating medium. ''Tis certain,'
says Hume, 'that since the discovery of the mines in America, industry
has increased in all the nations of Europe, except in the possessors
of those mines; and this may justly be ascribed, amongst other
reasons, to the increase of gold and silver. Accordingly, we find that
in every kingdom into which money begins to flow in greater abundance
than formerly, everything takes a new face--labour and industry gain
life; the merchant becomes more enterprising; the manufacturer more
diligent and skilful; and even the farmer follows his plough with
greater alacrity and attention.'
The exception of Spain alone is a curious example and warning to
nations, as shewing how the best gifts may be abused and converted
into a curse instead of a blessing; for, believing the possession of
gold and silver to be the only true wealth, they attempted to
accumulate these metals by preventing the exportation of them by
absurd restrictions; and this policy, added to her bigotry and
persecution, has left Spain to this day an example of the results of
restriction, powerless and poor, a haunt of the robber and the
smuggler.
An abundance of the circulating medium will always be found to be an
important element in national prosperity; and so great has been the
conviction of this fact, that a whole school of political economists
have advocated a paper-currency, in order to escape from the danger of
restriction. 'Give us,' say they, 'paper-money, the basis of which
shall be, not this scarce, restrictive gold, but the real wealth of
the country in commodities of every kind.' It was Sir Robert Peel who
explained the danger of these views, by shewing that paper-notes
issued against commodities would tend to increase the fluctuations of
the prices of those commodities. By the act of 1819, therefore, he
established that a pound sterling, or the standard, by reference to
which the value of every other commodity is ascertained, and every
contract fulfilled, should be itself fixed to be a piece of gold of a
certain weight and fineness, and that whatever paper-notes were
issued, the holder should be entitled to demand standard coined gold
in exchange for them at the Bank, at the rate of L.3, 17s. 10-1/2d. of
notes per ounce. Undertaking always to pay in coin when demanded, the
Bank was allowed to use its own discretion in the amount of notes it
might issue. Such discretion, however, was found to work badly, for
the trading community in particular; and therefore, by the act of
1844, the issue of bank-notes was limited to the certain amount of
L.14,000,000 against securities; and it was enacted that any further
issue must vary with and be equal to the amount of bullion deposited
in the coffers of the Bank. The reason why L.14,000,000 in notes
against securities was the sum fixed on, was partly that this was the
smallest sum that had been known to be in the hands of the public for
a very long period; and it is probable that numbers of these notes
will never appear again, so many being perpetually lost by fires,
shipwrecks, or carelessness. However, it is said, that only the other
day a bank-note was presented for payment, bearing the date of 1750.
'To what end,' it is sometimes argued--'since even the advocates of
gold-currency resort to paper-money as more convenient for practical
purposes--is the accumulation of treasure in the vaults of the Bank of
England? Why, after all the labour of digging it out of the earth in
the antipodes, is it buried again here? Why not coin it, and lend it
out at interest?' The remark is, of course, not unnatural, but has a
ready reply. The gold in the vaults of the Bank of England belongs,
not to the Bank, but to the holders of the bank-notes. They prefer
notes to gold to carry in their pockets, but these rags of notes have
no value in themselves; their sole value is as representatives of a
certain portion of gold. People cannot have notes and the gold
represented by the notes at the same time: they may have either that
they like. If they prefer to have gold spoons, or gold candlesticks,
or gold watches, or gold anything else; or if, as traders, they
require to make purchases in any parts of the world where their notes
would not pass current, or where those from whom they buy do not
require any commodity manufactured in this country, then they can have
their gold at the Bank any day by presenting their notes. As,
moreover, the holder of every bank-note has an equal claim, _pro
tanto_, on the bullion in the Bank coffers, the more gold there is in
them, the more will his note represent. In short, the act of 1844,
above alluded to, established the security of the Bank-of-England-note
in a way that seems perfect.
On the whole, therefore, it appears that a condition requisite to
national prosperity is in prospect for our country. Individual
exceptions there may be in the persons of annuitants, but even here
counteracting circumstances are continually at work. By improvements
in machinery, and facility of communication, the cost of production is
so much reduced as, in a greater or lesser degree, to balance the rise
of price consequent on an abundance of gold, should any such condition
of things actually occur; and an abundance of gold would undoubtedly,
as we have shewn, be favourable to all these improvements. Already,
the cost of production, or small amount of labour with which
commodities can be produced, compared with former periods, is an
important fact in all questions of income. The quantity of cotton
wool, for example, taken for consumption in the United Kingdom in
1814, was 53,777,802 lbs., and in 1849 was 775,469,008 lbs.; but its
value, which in 1814 was L.20,033,132, had only increased in 1849 to
L.26,771,432: so that fifteen times the quantity at the latter period
cost only about a third more money than the much smaller quantity in
the former. The price of cotton-yarn was 8s. 9d. per lb. in 1801, and
only 2s. 11d. in 1832, owing to improved machinery. Such examples
might be multiplied, and would increase in accelerated ratio in times
of increased prosperity. Other compensations would not be wanting. If
the actual income of an annuitant should be lowered, his taxes would
be lightened, his poor-rates perhaps abolished, his sons and daughters
able to find openings in every direction. He would not be called on
for charity; he might become enterprising and successful like his
neighbours. It is scarcely possible that individual adversity should
long co-exist with national prosperity.
A period may indeed arrive, discoveries may be in store, which may
render a change in the standard of value an absolute necessity. Such a
period, however, must be remote, and must be met by wise legislation
as it gradually approaches. Meanwhile, we see nothing to stop the
development of our resources, nor the increase of our wealth, so long
as we use our good gifts and do not abuse them.