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.
In 1844, the restriction year, the railway system was, so to speak,
in its infancy. No doubt many works had been constructed and much
surplus capital embarked, but the tide of enterprise or of
speculation, if you so choose to term it, had not at that time set in
nearly so vigorously as it did afterwards in the new channel. Still
there were distinct indications of what was to come. Notice had been
given of a multiplicity of works that were to be undertaken, involving
in the aggregate an enormous expenditure of capital; and Parliament
had pointedly constituted itself the censor and approver of these
projects. It was not a period of private unguided speculation. Parties
were not left as in former years to throw their capital rashly and
without guarantee into American mining and canal adventures, for the
purposes of foreign improvement and the employment of an alien
population. Each railway bill was first considered by a ministerial
body expressly constituted for that function: it then underwent the
scrutiny of committees of both Houses of Parliament; and finally, when
transformed into an act by receiving the royal assent, it bore within
its preamble an express acknowledgment that it was a work of great
advantage and benefit to the country at large. Nay more, by a notable
act, authorising the government, whenever a railway should exhibit a
certain amount of remunerative traffic, to purchase it at a statutory
rate for the profit of the nation, the ministry were as deeply pledged
as they could be to the maintenance, of the system; and if there has
been in fact any excess in the number of works undertaken, the private
promoters of these are far less chargeable with the blame than the
ministry, who, with their eyes open, and the amount of pledged capital
declared, yet suffered the system to go so far without interposing a
decided and unsurmountable barrier to its progress.
Be that as it may--and we shall have a few words to say upon the point
hereafter--it is impossible to suppose that Sir Robert Peel, or any
other competent minister, can have failed to form the conclusion that
altered circumstances must per force hereafter effect a vast change on
the surface of our monetary transactions. Indeed Sir Robert now takes
full credit for such prescience. He tells us that he foresaw what was
about to happen, and that he framed his banking measures with a direct
view to that result. A more humiliating confession, in our opinion,
was never uttered by any man laying claim to the character of a
statesman. It is in fact tantamount to an acknowledgment that he was
then legislating for the prospective benefit of the moneyed interest
exclusively, and not for that of the nation. For we hold it to be
perfectly clear, upon every principle of honour and justice, that
government, having allowed these railway bills to pass, and so far
sanctioned their commencement, were bound to interpose no artificial
impediment to their completion. Nay more--they were bound, before
introducing any act for the future regulation of the currency, to take
into consideration the changes which so vast an expenditure of capital
at home was likely to cause in the adjustment of the different
national interests, and the facilities which ought to be granted to
each in the development of their several industry. But the Banking
Acts of which we complain were framed upon a totally different
principle.
Sir Robert Peel, in 1844, was, as it were, standing upon an elevation
from which he could look backward upon the past condition of the
country, and forward to the new state of things which was now certain
to occur, and which he did not intend to prevent. On the one hand, he
saw that, for a certain average of years, not distinguished by any
great enterprise, nor shaken by any great convulsion, a certain
quantity of currency had sufficed for the wants of the nation. This
currency consisted of two things, gold and paper, for we drop the
smaller change. The gold was principally, if not altogether, confined
to England, where it circulated from hand to hand; and, issuing from
the fountain of the Mint at a fixed rate of price, it was accessible
to all parties, and always exchangeable for paper. Being exportable at
fluctuating values abroad, the amount of gold at any time in the
country could not be accurately ascertained, but it was acknowledged
as the nominal basis of the circulation.
In Scotland and Ireland the system was different. Both of these were
poorer countries than England, and had been unable either to dispense
with the smaller one-pound note circulation, or to provide gold, the
most expensive and cumbrous representative of property. The currency
of these countries, therefore, was paper, based directly upon
property; and, in Scotland at least, secured by an admirably-devised
system of interchange amongst the native banks, which effectually
prevented the possibility of any over-issue. In consequence the
circulation was extremely regular and steady, save at the two great
terms of the year, being settling days, when a large expansion of the
currency was required, to be, however, again withdrawn on the
succeeding week.
On the other hand lay the more dubious prospect for the future.
Parliament had already recognised the railway system, and numerous
projects were waiting for the imperial sanction. These necessarily and
avowedly involved an enormous expenditure of capital, and the active
and lucrative employment for several years to come of a large class of
persons throughout the three kingdoms. The railway system might indeed
be said to have created a new class, whose necessary share in the
currency would fall to be calculated in any future monetary measure.
Add to this, that the population of the empire was rapidly and
steadily increasing.
It was in this position, and with these prospects, that Sir Robert
Peel fabricated his restrictive acts, which have since wrought a total
change on the financial dispositions of the country. We do not think,
and nothing has been brought forward to prove, that there was any call
whatever for a change at that particular juncture. Certain it is, that
the change was generally unpalatable, but was yet peremptorily forced
on and effected in spite of the ominous looks of those whose
experience entitled them to a hearing. And no wonder that the veterans
of commerce should have received these measures with disapprobation.
For, according to all rules of reasoning, an increased trade, an
increased demand, a new population, and a new channel of industry,
were so many additions to our former state which required additional
facilities. The same amount of currency which had sufficed in former
years to carry on our domestic arrangements, could not surely be
expected to exercise a double function, and to meet the demand
occasioned by the novel element of accretion. The money that, in
prosperous times, barely answered the calls of manufacture and
commerce, could not be converted from those streams to flow into
another, without occasioning, at the same time, the greatest pinching
and inconvenience. Yet, strange to say, Sir Robert Peel, instead of
basing his calculations upon the future imperative demand, legislated
as if no new element at all had appeared in our social position. And
he further committed, what we maintain to be a great and inexcusable
error, even had the railways not then been in actual progress, by
utterly destroying all possible expansion of the currency, so as to
bar us from the power of obviating any temporary difficulty or
accident to which commerce is constantly exposed.
Thirty-two millions, therefore, of paper, whereof fourteen was
apportioned to the Bank of England, was the bountiful allowance
counted out for the daily augmenting wants of the first commercial
nation of the world. All paper issue beyond that had to be represented
by unfructifying bullion, stored up in bank vaults and cellars, as far
away from profitable employment as if it had been buried beneath the
ruins of Nineveh, with some tutelary demon as its guard. And it is a
fact, which we do not remember to have seen stated elsewhere, but
which, nevertheless, is notorious to all commercial people, that a
vast deal of gold is constantly forced into the Bank to represent and
occupy the place of paper which is absent from the country. In the
Continent and in America, Bank of England notes are an extremely
common tender, and are often actually at a premium; and each of these
so circulating withdraws, under Peel's system, an equivalent amount of
gold from the national use.
We do not mean to assert, for the point is immaterial to our
argument, that this thirty-two millions, _plus_ the gold, might not at
one time have sufficed for the country, and it may be that it shall
again suffice. When we speak of expansion, we also give credit to the
counter-state of contraction; and our experience of Scottish banking
has gone far to prove, that a low rate of circulation is by no means
incompatible with a healthy state of trade. But then, experience
equally teaches us, that the low rate must be left to adjust itself.
Expansion is not, as is commonly supposed, an inevitable sign of
prosperity. On the contrary, it is too commonly a token of want of
commercial confidence, and all indisposition to receive that far
larger but uncalculated species of currency, by means of which the
great transactions of the country are carried on, and to which the
whole coinage and bank paper of the realm bears a mere fractional
proportion--we mean the commercial bills of exchange. The ordinary
currency of the country, the bank paper and all the gold which could
possibly be imported, even were it all thrown into circulation, would
be utterly insufficient to supply the place of that commercial paper
which has for its basis nothing more than mutual confidence and
credit; but then that paper must be realisable as it becomes due, and
it is for that purpose that a large proportion of the ordinary
currency is required.
Whenever a want of confidence is generated in the country, the
merchant and manufacturer are immediately compelled to have recourse
to the bank in order to have their bills discounted. The facility of
these discounts, of course, depends upon the amount of money in
circulation, and also very much upon the rapidity of its return in the
shape of deposits or otherwise. A banker cannot, any more than a
private person, discount without having money, and where no money is
procurable, the ultimate result must be a stoppage. And so it is, as
we know full well from the experience of the last two months, during
which we have witnessed the unparalleled spectacle of houses
suspending payment, and exhibiting at the same time a large excess of
assets beyond all their liabilities. Want of confidence, therefore,
however brought about, is the great evil against which, in this
country, we ought especially to guard, since it seems almost apparent
that, when it occurs, human ingenuity is not equal to provide a
remedy.
Let us, however, look a little more closely into the present posture
of affairs, and endeavour to ascertain whether the want of confidence
which at present undoubtedly exists is the result of external and
uncontrollable causes, or whether it is not in some way connected
with, and occasioned by these restriction acts, which are just now
affording so plentiful a harvest to the cautious and wary capitalist.
The monetary embarrassment may be said to have commenced with the
famine of last year. That event not only caused an extra expenditure
of public money at home, in the shape of subsidies to Ireland, but it
occasioned a considerable drain of bullion to America. It so happened,
that at that time America was in need of coin for her expenses in the
Mexican war, and required less manufactures than we were usually in
the habit of exporting. At least such was the statement commonly
current in the commercial circles at the time; but we cannot, whilst
calmly and dispassionately reviewing events, conceal our conviction,
that the Americans were playing a deeper and more profitable game. A
drain of gold from England must always, under our present laws, prove
an enormous advantage to the foreigner, because, by retaining bullion
for a time, and refusing manufactures in exchange, he can bring down
prices in Britain in proportion to the scarcity of money. It was
therefore clearly not the interest of the Transatlantic dealer to take
commodities in exchange for his corn, until the depression had reached
its lowest point. Be that as it may, the balance being decidedly
against us, was liquidated in gold,--a mode of payment which this
country can never refuse, since it has recognised the bullion
principle, and laid down a fixed or inflexible standard. As the result
of this, ten millions disappeared from the general circulation--that
is, the bank, in order to maintain its full issues, was compelled to
find gold from some other source, and the exchanges being palpably
against us, by reason of the famine, and from another cause to which
we shall afterwards allude, this could only be done by an increase of
the rates of interest, in other words, by turning the screw, which had
this immediate effect of causing a fall or depreciation of property.
Consequently the funds began to decline, but after a little, some
temporary relief was afforded by the appearance of a new and
unexpected customer in the stock-exchange.
The Russian system of banking is rather remarkable. That country,
which has lately become one of the greatest gold producers of the
world, employs for its own internal use a paper circulation, but the
basis upon which that circulation rests, is commonly reported to be a
sum of from thirty to forty millions in gold, lodged in the hands and
at the disposal of the Emperor. This large amount of bullion had
hitherto remained unemployed, but Nicholas, observing that the French
funds had, like our own, very much declined, and that bullion was the
great _desideratum_ in both countries, determined, with much apparent
generosity, to step forward to their rescue. No one save the Czar had
any control over the keys which could open this hidden hoard, and with
a discernment which does credit to his abilities, he set at liberty
"the imprisoned angels," and in return for his unprofitable gold,
purchased at most advantageous rates, a deep interest in the national
securities of England and of France. The immediate result of that
measure is a large accretion of revenue to the Emperor, who is now one
of our chief creditors, for whom the manufacturer is bound to toil:
the ultimate tendency is yet in the womb of time, but no thinking man
will contemplate without alarm the power, which so gigantic and
ambitious a state as Russia has thereby gained within the very
fortress of our strength.
If we continue in a blind and obstinate adherence to the system of the
bullionist party, we shall give the Russian government such
opportunities of enriching itself at our expense, as no foreign
potentate has ever possessed before. It is quite well known that large
purchases of national stock have already been made with the gold of
the Muscovite; and therein the autocrat has acted wisely for
himself--far more wisely than our enlightened rulers have thought
proper to act for us--for he has put out the money to usury, and the
basis of the Russian circulation, instead of being profitless gold, is
now composed of British and French securities, bought in when the
market was at its lowest ebb, and yielding a large return. If our
monetary laws should still remain unaltered, and trade should
notwithstanding revive, it will be the interest of the Russian, so
soon as the funds have reached their culminating point, to sell out
largely, and by forcing the gold from the Bank of England, create an
artificial scarcity of the precious metal, which, followed as it must
be by an immediate contraction of our paper currency, would cause a
second panic, and a second prostration of the funds. By buying cheap
and selling high--the favourite maxim of the free-traders--he would
thus realise an exorbitant profit, and be enabled, should he choose
it, to replace the bullion basis of the Russian circulation. But this,
as a matter of course, he would not do. The low state of the funds
would again offer an irresistible temptation. Fresh purchases of
stock, this time made with our own money, would revive public
confidence in Britain, and so things would go on, alternately rising
and falling without any obvious external cause, but in reality
according to the will of a huge foreign fundholder, who, with each
successive movement, must be the gainer, whilst we deny ourselves the
means of securing the equilibrium of our own monetary transactions at
home. Under our present system, the sale or purchase of national
securities to the extent of a few millions, has a wonderful effect
upon the market. Add the further elements of gold exportation and
paper contraction, or the reverse, and the effect becomes prodigious.
The purchases already made on the Emperor's account, are reported to
have been most heavy, and the process, at the moment when we write, is
being again repeated.
This is, in reality, a subject of the gravest nature, and it should
not be passed over by the legislature without remark. The Whigs, in
all probability, hail such successive importation of Russian bullion,
as so many pledges of returning prosperity, not seeing nor
understanding the frightful price which we may hereafter be called
upon to pay, nor the perils of that artificial fluctuation to which we
may be exposed. We have put ourselves, as the experience of the last
few months has shown, at the mercy of gold, and consequently at the
mercy of any foreign power who can supply us with that coveted
commodity; and so we must remain, if the plain sense of the nation
does not rouse itself to sweep away the formula of our currency
practitioners.
Our advantage from the Russian transaction was only temporary. Again
the bullion decreased, and again the screw was tightened. Money was
the universal demand, but money became scarcer every day, and the
rates of interest increased. Hopeful people, notwithstanding, still
adhered to the belief that the pressure was only temporary. The
corn-law abolitionist pointed to the luxuriant harvest which was
waving plentifully on the fields, and forgetting, with characteristic
selfishness, the dogmas which he had so lately enunciated, prophesied
a return of manufacturing prosperity from the well-being of that
class, which, two years ago, he would ruthlessly have consigned to
ruin. But when the plentiful harvest was gathered in, and all fear of
another famine, and further bullion drain on that account, was
removed, it appeared, to the disappointment of every one, that matters
were not likely to mend. The screw was still revolving in the wrong
way--prices went down, like the mercury in the barometer before a
storm--the man who was rich even in April found himself worse than
nothing in October--bills became stationary--the banks were besieged
until they closed their doors in despair--and then came the Gazette,
with its daily record of disaster.
In truth, we do not envy the situation of ministers during that
period; and yet, we hardly know how to pity them. They alone, while
the nation was writhing, around them, maintained an attitude of calm
complacency. At first, Sir Charles Wood, the most singular optimist of
his day, received the different deputations of pallid merchants with
assurances that every thing was right. "There is not the slightest
occasion for alarm," was the language of this sapient Solon. "Money
never was more plentiful in the country--accommodation will readily be
granted to every one who has property to show for it--the
currency-machine is working remarkably well,"--and the Cabinet went
placidly to sleep.
But the cries of distress from without became so loud, and the storm
of indignation so vehement, that the ministry were at last compelled
to exhibit some symptoms of action and vitality. Cabinet councils were
summoned--new deputations received--the tale of sorrow was again
heard, and this then with decreased disdain. But the perplexity of our
rulers was such, or their dissension so great, that they could not
devise a plan, whereby even temporary ease might be afforded; and as
there is safety in a multitude of councillors, they eagerly inquired
into the remedy which each successive sufferer could suggest. These of
course were varied and conflicting, but in one point all were
agreed--that the restriction act should be suspended. Even then,
nothing would force conviction upon the impotent Whigs. They clung to
restriction as if it had been the palladium of British credit, nor
would they relax their hold of it until they were threatened with
force. The crisis was so imminent, that the London bankers were
compelled to exhibit the power which they undoubtedly possessed, and
to threaten its immediate enforcement. The deposits which they held
were immeasurably greater in amount than the quantity of bullion which
the Bank of England could give out; and the Lombard Street deputation
accordingly intimated that, if government would not suspend the
operation of the Act of 1844, they would exercise their statutory
right of demanding payment in specie, and expose the whole fallacy of
our monetary laws by rendering the Bank insolvent. That threat had
more effect than any amount of argument. At the eleventh hour the
Whigs yielded, not to remorse, but to necessity, and the Act was
accordingly suspended, clogged, however, with a condition, which,
instead of relieving the pressure, was infallibly calculated to
increase it. The Bank of England alone--for both Peel and the Whigs
contend for the monopoly of that establishment--was permitted to
over-issue, but with a recommendation, which was in fact an order,
that the minimum rate of interest on short bills should be eight per
cent, a rate which no merchant or manufacturer can afford to pay.
Surely the Bank of England might have been left in this crisis to use
its own discretion. But there was another object in view. As the
revenue had palpably fallen under the operation of the tariffs, which
constitute the measure of free trade already dealt to us, the Whigs
were desirous, even _in extremis_, to make a profit out of the
national misery, and it was intimated that the additional gain was not
to be appropriated by the Bank, who undertook the risk, but to be
handed over hereafter to the government, who undertook the
responsibility of suspending the operation of the Act. Under such
circumstances, it is clear that real accommodation was almost as
difficult to be obtained as before. The suspension, for which Ministry
are entitled to no credit whatever, did little actual good, owing to
this preposterous condition, beyond relieving the public mind from the
apprehension of the frightful nightmare. In fact, the Bank of England
did not avail itself of the liberty so granted. It merely raised the
rate of discount, and therefore no indemnity is required. The only
wise thing which the Cabinet has done, was the summoning together of
Parliament at an early day, for assuredly there is need of wiser heads
than those possessed either by Lord John Russell or by Chancellor Wood
to help us out of the present dilemma.
But where, all this while, is the money? That is the question which
every one is asking, and to which very few will venture to give a
distinct reply. It is, however, a question which ought to be answered,
and we think that there is no great mystery in the matter. The greater
part of the money is still in the country, but it is not passing from
hand to hand with its usual rapidity, nor in its ordinary equitable
proportion. The portion of it which the banks do hold, is, of course,
profitless in itself, but yet so far useful that it serves as a basis
for paper; the portion which the public hold is fearfully checked in
its circulation. This anomaly proceeds from the following causes: We
have been forced to make that amount of money, which in ordinary times
of unshaken credit was barely necessary to liquidate or balance the
ordinary transactions of the community, embrace also the new
operations rendered indispensable by the introduction and development
of the railway system. We have called forth and created a new source
of industry within ourselves, but we have omitted to provide the means
by which that kind of industry can be maintained, without trenching
upon and abstracting from the supply applicable, as formerly, to our
other wants. This is not a question (and herein lies the fallacy of
those who are waging such determined war against the railways) of
absorption of capital, but of want of the circulating medium. We have
been trying, under Peel's guidance, to make that amount of money which
barely served eight persons before, suffice now for the extended wants
of twelve; and we are perplexed at any scarcity, totally forgetting
that we have advanced in the close of the year 1847, to a widely
different position from that which we occupied at the commencement of
1844. Gold has become scarcer, altogether independent of the
exportation, because there are more persons who require money; and
when gold cannot be had, Sir Robert Peel forbids us to trade in paper.
There is a minimum supply of money representing that portion of
produce which is passing to consumption, without which no country can
hope to prosper, and we have already passed that minimum. Hence, the
sovereign, though it remains by statute of a fixed value, is of no use
as a standard at all, because you cannot measure property by it. You
cannot buy coin, except with coin, at any thing like a parity of
exchange; and therefore, if the sovereign does not nominally rise, the
same effect is produced by the depreciation of property, which, and
not bullion or notes, constitutes the real capital of the country. It
is a frightful consideration, but nevertheless it is true, that the
whole property of this vast country, estimated at something like five
thousand millions, is, to all intents and purposes, paralysed for the
want of some few millions of extra circulation to supply the extra
work we have engaged in, and the extra population we have employed.
And it is still more startling to think, that for the want of that
circulation, the value of this property is merely nominal and
relative, and has been, and is, declining at the rate of many millions
a day. In fact, we have at this moment no standard of property, and
with such a prodigious decline it may very soon become a serious
question, how the revenue of the country is to be raised.
In ordinary times the circulation is extremely rapid. Coin and notes
shift from hand to hand without delay, and alternate between the
public and the banks; and instances of hoarding are rare. This is well
known to be the case both in manufactures and commerce, the business
of which is transacted in towns where savings' banks afford the
labourer a ready means of depositing his earnings, and so contributing
to the passage of the currency. But the railway workman, who is now an
important personage in the state, possesses no such facilities. He is
essentially a wandering character, shifting his ground and place of
abode to accommodate himself to the scene of his labour, and he either
does not understand, or he will not avail himself of, the ordinary
channels of deposit. Many of this class have undoubtedly saved money
out of their ample and remunerative wages, but these savings are just
so many hoards which in the aggregate have an injurious effect upon so
contracted a currency as ours. So far from the immense expenditure of
capital upon the railways being a necessary drain upon the currency,
it would in truth, if the wages of labour were rapidly exchanged for
produce, have greatly facilitated the circulation; but the wages being
hoarded, and the gold and notes kept out for an absolutely indefinite
time, a new element of confusion has been introduced. It is not merely
difficult but absolutely impossible to calculate how much of the
circulating medium has been in this way withdrawn. We are inclined,
from the testimony of persons engaged in the construction of railways,
and intimately acquainted with the habits of the workmen, to place it
at a large figure. And when we recollect that the wages of nearly
600,000 men so employed have been for more than three years greatly
higher than those of the common agriculturist, we might be justified
in making an assumption which assuredly would startle the reader. The
hoarding of small sums, when that practice becomes general, has a most
extraordinary effect upon the currency, as every one who looks at the
amount of surplus wages invested in the savings' banks must
acknowledge: and as we cannot _force_ any portion of our population to
deposit, we are bound to take care that their ignorance, or erroneous
ideas of security, shall not be allowed to operate banefully upon so
important a matter as the circulation. The money thus hoarded is not
lost, but it is temporarily suspended, and its hoarding becomes an
evil of no common magnitude, which pleads strongly for an augmented
issue.
The Scottish and Irish banking acts of 1845, which were introduced,
and in spite of all national remonstrance, forcibly carried through by
Sir Robert Peel, ostensibly for the sake of uniformity, have very much
deranged the currency of England, by locking up a large portion of the
coin. We need not repeat here, for the fact is notorious, that
sovereigns, except to a merely fractional extent, are not current in
Scotland, and are received with absolute distrust. Nobody wants them;
and the note of a joint-stock bank is at all times a more acceptable
tender. But the acts which forced the banks to retain an amount of
bullion for all paper issued beyond their average circulation, were
based upon a false principle, which, three years ago, when the first
aggressive step was taken, we urged upon the consideration of
government, but unfortunately without success. The average circulation
of the banks over the year was not a fair calculation. Twice a-year,
as we have already remarked, all of the banks in Scotland required to
augment their issues in order to meet the term payments, and
notwithstanding Sir Robert Peel's enactments, the same necessity
exists. This will be better understood by comparing the amount of
notes delivered and received by the Bank of Scotland in exchange with
other banks on the term-days, with the like exchange during other
periods of the same months.
Notes Notes
1840. Delivered. Received.
May 1, £51,000 £43,000
19, (Term) 132,000 173,000
26, 38,000 33,000
Nov. 3, 38,000 32,000
13, (Term) 99,000 138,000
27, 66,000 42,000
There is also, we ought to remark, a considerable rise of the issue
during the weeks which immediately precede and follow these terms. Now
the same fluctuation occurs in every one of our banks, which about
term-time are called upon to furnish accommodation to an extent of
nearly three times their ordinary issue. No allowance was made in the
act of 1845 for this inevitable expansion, and consequently the
Scottish banker is forced to do one of two things. Either he must
permanently hold during the whole year a much larger amount of gold
than is necessary to satisfy the legal requirement for his ordinary
over issue, or he must provide gold from London twice a-year, in
boxes, which arrive sealed at his place of business, to be returned
within a fortnight with the seals unbroken! Such is part of the absurd
and ridiculous machinery, which it has been the study of Sir Robert
Peel during half a lifetime to elaborate; and the practical result is,
that nearly the whole of the gold required to balance the transactions
of Scotland for the term weeks, is withdrawn from the ordinary
circulation. Indeed, gold to the extent of _the whole_ term payments
would be required, save for the proviso in the act which allows the
circulation to be calculated at the end of every week; but, as we have
said already, the rise is gradual, not being limited to the term days,
and for two weeks at least, the circulation, that is, the amount of
the notes issued, is much larger than the ordinary average of the
year. It thus follows that the bullion to represent the term issues,
must either lie in the coffers of the Scottish banks, or in the hands
of their correspondents in London, ready to be sent down whenever the
appointed seasons shall arrive!
Here then is another drain, or rather suspension of a large proportion
of our circulating medium, which has been most unnecessary. The
Scottish public suffers from the want of accommodation; the Scottish
banker suffers from the enormous expense which this juggle entails
upon him; and the Englishman suffers by the gold which was formerly
_his_ currency, being kept in pawn at the period when he requires it
most. Besides, it is well worthy of remark, and known to every banker
here, that the circulation of Scotland during the year when the
average was taken, had been reduced to its very lowest possible ebb.
The frugality of the country, the extension of the branch banks, the
efficient mode of interchange, and, above all, the interest allowed
upon all deposits, were the causes which had led to this; and it seems
now to be universally admitted by all writers on currency, that a more
admirable and perfect system could not have been invented by the
ingenuity of man. All this, however, has been overturned by Sir Robert
Peel, to the great injury of Scotland, and the positive detriment of
England; and had he succeeded in pushing his bullion theories further,
and replaced the one pound note circulation in this country by the
sovereign, a double amount of calamity would have been inflicted at
the present moment. We entreat the attention of the English
currency-reformers to this; for they may rely upon it, that the
abolition and total repeal of the Scottish and Irish banking acts of
1845, without any new legislative enactment at all, would be an
inestimable boon, not only to these countries, but to England, which
is now compelled to furnish gold, which is neither used nor required,
and so to cripple and impede materially her own circulation.
The hoarding, therefore, by the railway labourer, and the reserves
nominally kept for the use of Scotland and Ireland, will account for
the disappearance of a large proportion of the coinage from the
circle. These are only primary causes of the scarcity, yet they are
material elements in inducing that want of confidence, which, as we
have already said, is the mighty evil that is now oppressing and
bearing us to the ground. Whenever want of confidence is manifested,
the circulation must farther contract. Joint-stock and private
bankers, for their own security, maintain a large reserve of Bank of
England paper and bullion, and there are always terrified persons
enough to occasion a partial run for gold. We do not charge the
bankers with impolicy in thus abetting the general contraction.
Situated as they are, it becomes a matter of necessity to look to
their own interests in preference to the accommodation of the public;
but it is right that the public should be made aware of the mischief
which is caused thereby. The results are surely patent to the
apprehension of all. In proportion as circulation contracts, interest
rises; and the wary capitalist, foreseeing the advent of the dark
hour, realises while he can, in the knowledge that his money
hereafter, when things are at the worst, will enable him to drive the
most exorbitant and usurious bargains. This is the class of men for
whom Peel has uniformly legislated, and it is they who, under our
present miserable monetary system, must ultimately absorb the hard-won
earnings of thousands of their fellow-creatures. They are not enemies
of speculation--on the contrary, they fatten upon it. They strive for
a time to stimulate industry to its utmost, and then use every
exertion to depreciate the industrial result. Hard times are their
harvest, and prosperous years their seed-time; and never, so long as
they can hold it, will they relax their pressure of the screw.
The sacrifices of good solid property which have been made during the
last few months, and which were occasioned solely by the baneful
contraction of the currency, have been positively enormous. It is
common to hear the capitalists remark with a sneer, that such is the
inevitable result of over-trade and over-speculation. It needs no
prophet to tell us, that the man who has not a farthing in the world
can neither buy nor sell; and we admit that, in the present monetary
convulsion, as in every other, much ripe fruit has fallen to the
ground. But we deny that present prices have been the result of
over-speculation. We maintain that, sooner or later, the country must
have been brought to this unhappy condition, simply by the operation
of these currency restriction laws; and if we are insane enough to
allow them to continue, we shall inevitably be plunged into the same
abyss, even though temporary measures should effect a temporary rally.
It is calculated, and with great appearance of probability, that the
depreciation which has already taken place, is larger than the whole
amount of our national debt!
It is necessary that we should grapple boldly with the proposition,
that over-speculation in our home works, that is, the expenditure upon
the railways in progress, is the cause of our present embarrassment.
In order to do this, we must have recourse to statistics, and we shall
now lay before our readers tables exhibiting the state of our revenue
and population, for two periods of five years each.
| Year. |Population. | Taxation. | Year.|Population. | Taxation. |
+--------+------------+------------+------+------------+------------+
| 1811 | 18,547,720 |£64,342,741 | 1841 | 26,895,518 |£47,650,809 |
| 1812 | 18,812,294 | 63,179,164 | 1842 | 27,181,955 | 45,978,391 |
| 1813 | 19,076,868 | 67,189,287 | 1843 | 27,468,392 | 50,894,129 |
| 1814 | 19,331,441 | 70,103,344 | 1844 | 27,754,829 | 53,069,245 |
| 1815 | 19,606,015 | 71,372,515 | 1845 | 28,041,266 | 51,496,534 |
| +------------+------------+ +------------+------------+
| Total, | 95,374,338 |336,187,051 | |137,341,960 |249,069,108 |
| +------------+------------+ +------------+------------+
|Average,| 19,074,867 | 67,237,410 | | 27,468,392 | 49,917,821 |
But, in addition to the taxes which were levied during the years
1811-15, there were loans contracted as follows:
--------+--------------+------+-----------
Year. | Loan. |Year. | Loan.
--------+--------------+------+-----------
1811 | £19,143,953 | 1841 |_Nil._
1812 | 24,790,697 | 1842 | ...
1813 | 39,649,282 | 1843 | ...
1814 | 34,563,603 | 1844 | ...
1815 | 20,241,807 | 1845 | ...
| | |
Total, |£138,389,342 | | ...
| | |
Average,| 27,277,868 | |
--------+--------------+------+-----------
We thus arrive at the following results. About thirty years ago, with
a population of nineteen millions, we were able to raise an annual sum
of ninety-four and a half millions of pounds, whereof more than
one-half was expended abroad in subsidies and the maintenance of an
army, and little or none of it was returned in the shape of capital to
this country.
At present, with a population of twenty-seven millions and a half, we
are said to be unable to lay out thirty-five millions annually in the
construction of our railways, in addition, to a taxation of fifty
millions,--in other words, we cannot raise eighty-five millions a-year
without approaching to the verge of bankruptcy!
This, if true, is a very humiliating position, and shows symptoms of a
decadence so marked, that we question whether any parallel case can be
extracted from history. A population augmented by one-third, say the
economists, cannot afford to expend a sum less by ten millions than
that which was raised without inconvenience towards the end of the
great continental war; and this sum, far from being swallowed up
abroad, is usefully employed at home, and is daily assuming the shape
of realised capital, yielding a profitable return!
It would follow, then, as a matter of necessity, that we must be
infinitely poorer now than we were thirty years ago. Let us see how
that matter stands. The net rental of the real property, _in England
alone_, as we find from the assessment tables for the poor-rates, had
risen from £51,898,423 in 1815, to £62,540,030, in 1841, and may be
estimated at the present moment as augmented by fully one-fourth all
over the united kingdom. The personal property, according to Mr
Porter, whose accuracy will be unquestioned by free-traders, was
estimated at twelve hundred millions in 1814, at two thousand millions
in 1841, and has since continued to augment, so that we may fairly
assume, that within thirty years, that species of property has been
doubled.
Here, then, are grounds for a panic such as that which is now shaking
the empire! Here are reasons for leaving the inchoate railways
unfinished, dismissing the workmen, and closing our accounts in terror
of a national bankruptcy! Really, with such facts before us, we cannot
avoid coming to the conclusion that men who use such language as has
been too commonly prevalent of late, are either shamefully ignorant,
or have a motive for promulgating error.
The expenditure from 1811 to 1815 was, as we have already seen, wholly
profitless, and yet it in no way whatever deranged the economy of the
country. The vast outlay of capital, which took place at subsequent
speculative periods, was a thorough drain upon the country, because it
was consumed abroad without return, and gave no employment or stimulus
to the home producer. But the railways are investments of a very
different description. They do not affect the currency farther than we
have noted above, and the remedy for that is simple. By their means
the pressure of the famine has been lightened to the poorer classes,
and they are not only remunerative to their owners, but of immense
benefit to the districts through which they pass. Of three thousand
one hundred miles of railway now open, the gross receipts may be
taken, in round numbers, as at nine millions annually. Passengers are
carried at one half the cost of the old conveyances--so are goods, and
time is prodigiously economised. There is, therefore, a positive
saving of other nine millions to the inhabitants of the country; and
the completion of the works now in progress, will add immensely to,
and more than double this. The cheapening of fuel, the transport of
manure, and of building materials, and the opening up of mineral
fields, hitherto unused and unprofitable, are vast boons to
agriculture and trade, and there can be no doubt that the country is
deeply interested in their progress.
If it be asked whether the public are able to spare the capital
requisite for the completion of those lines without danger or
embarrassment to other branches of industry, we think the calculations
which we have already given will afford a satisfactory reply. There is
no want of capital in Britain, and railway companies will always be
able to obtain it at a certain rate of interest. But a currency
contracted like ours, and totally incapable of expansion, must
inevitably, upon the occurrence of any external accident, derange
every branch of our social economy; and as interest rises, so, as a
matter of course, will the value of realised property be depreciated.
Money is at present the scarcest thing in the market: the capitalist
may demand his own price of usance for it; and were this state of
things to continue, the results would be far more ruinous than any one
has yet anticipated. People are prepared to suffer almost any
sacrifice for the maintenance of that credit which is the idol of the
Englishman; but the sacrifice must be temporary, not prolonged, else a
stoppage becomes inevitable. Neither the merchant nor the
manufacturer, nor any other class of men, can afford to conduct their
operations at a remunerative rate, while money is exorbitantly high;
and all questions even of convertibility shrink into absolute
insignificance before the fact, that were money to continue long at
eight per cent., the mills and manufactories throughout the country
must be shut up, and the public works discontinued. In other words, we
would be plunged into a state of anarchy, the ultimate issue of which
it would be very difficult to conceive.
No doubt, the railways have had their share in absorbing capital, but
what we maintain is, that the capital is abundant and could not have
been better employed. The mania of 1845,--for most assuredly
enterprise at that time had assumed that extravagant form--was checked
by the intervention of Parliament, and a host of crude and unnecessary
schemes were at once consigned to oblivion. Should it be said that
Parliament did not exercise with sufficient energy its undoubted
controlling power, then we shall merely ask who the gentlemen were
that, down to the end of the above year, lent their countenance to
railway extension? On the 13th of November 1845, we find Sir Robert
Peel near Tamworth, with electro-silver plated spade, and mahogany
barrow, wheeling away the first sod raised on the line of the Trent
Valley railway, and expatiating broadly upon the advantage of "a more
direct and immediate communication between the metropolis on the one
hand, and Dublin and a great part of Ireland on the other; between the
metropolis and the west of Scotland; between the metropolis and that
great commercial and manufacturing district of which Liverpool and
Manchester are the capitals." Not a word of warning or reproach, or of
indication of coming scarcity of money, fell then from the lips of the
great author of the Restriction Acts,--measures which were still lying
in abeyance to awake for the benefit of the capitalist, and the
depression of every other class, long before the sod, so
ostentatiously turned over, could be replaced by the permanent rail.
What wonder, then, if Parliament, with such examples before their
eyes, and such notable testimony in favour of the development of the
railway system, should have been slow in foreseeing the danger of too
hasty an internal development?
It is also self-evident that during the last few months the frequent
and heavy railway calls have added much to our pecuniary
embarrassment. In some instances these calls have been by far too
recklessly urged; in others it is difficult to see what other course
could have been adopted. For whilst, on the one hand, the extreme
dearness of money, the utter stoppage of credit, and the impossibility
of disposing of property at any thing like its real value, were
elements which the directors were bound to consider before using their
statutory power; yet, on the other, they were not entitled to overlook
the influence which a discontinuance of these works would exercise
over the value of the capital already expended, and the great amount
of individual and aggregate suffering which would result from the
arbitrary dismissal of their labourers. It was the duty of government,
while it was yet time, to have stepped in with some precautionary
measure. They might have compelled the directors to summon a general
meeting of the shareholders previous to the announcement of a call,
and have allowed the latter a _veto_ if their interests should have
required it; but although proposals to that effect were laid before
the Chancellor of the Exchequer, nothing whatever was done, and the
increasing panic was heightened by the prospect of peremptory demands.
So much for the railways; by far the most useful class of works which
the country has ever undertaken--useful, because, however they may
appear to suffer by temporary depreciation, they will, we firmly
believe, in the long run, prove amply remunerative; because, in a year
of famine, they have given ample employment and adequate wages to a
class of men who must otherwise have suffered unexampled deprivation;
and because they have opened, and are opening up new elements of
wealth, economising time, and facilitating our trade and our commerce.
If, under the influence of monetary laws, for which their undertakers
were in no wise responsible, they have tended in some degree to
increase the common difficulty, let us recollect that the same power
which sanctioned them is answerable for the restrictive measures. We
have already shown that this new class of works required an increase
of the internal currency which was not vouchsafed to it, and the
authors of the Banking Act of 1844 are the parties chargeable with
that neglect.
In short, to use the words of one of the Rothschilds, who surely is a
competent judge, the prosperity of Britain depends, to a great degree,
upon the amount of its circulating medium. It is our interest to have
money plentiful and to keep it so; and we ought to interpose as few
checks as possible to the fair operation of credit. With plenty of
money we may command the markets of the world; with a restricted and
contracting issue like the present we are comparatively powerless. The
great fault of Sir Robert Peel and his coadjutors is, that they seek
to confine credit within absolutely intolerable bounds. We may ask,
with perfect propriety, whether the colossal fortunes, either of the
right honourable Baronet or of his adviser Mr Jones Loyd, could, by
any possibility, have been erected without this important element of
credit, which they have now combined to prostrate? We apprehend not;
and yet in a certain, though not very creditable sense of the phrase,
both gentlemen have been true to their order. The new capitalist has
the smallest possible degree of sympathy for those who are struggling
upwards.
But a fettered currency is not the only evil for which the country
demands a remedy. Far more perilous influences have been at
work--influences which must be thoroughly probed and exposed at
whatever cost of mortification to the dupes, or loss of credit to the
schemer. We are willing, even in this age of free trade, when new
principles are applauded to the echo and adopted with unseemly
precipitation, to incur the odium of maintaining that protection to
native industry is the foundation of the prosperity of Great Britain,
and that in departing from it we have adopted a wrong course, which,
if wise, we shall speedily abandon. Fortunately there is yet time;
for the measures to which we allude have been so rapidly productive of
their effects, that very little demonstration is required to open the
eyes of all men to their baneful nature. Glad indeed shall we be if
experience can work conviction.
To prevent all misconception, we beg leave to premise, that we do not
enter now into any discussion upon the subject of the repeal of the
corn-laws. Our sentiments with regard to that measure have been stated
in another place; and although we have seen no cause to alter them,
they are unnecessary for our present argument. We have always
maintained that the success or failure of that measure in so far as
the interest of our agricultural population, no unimportant section of
the community, was concerned, could not be immediately tested--that
its effects would necessarily be slow, but not on that account the
less insidious. Agriculture cannot decline in one day like commerce,
and even were it otherwise, extraneous circumstances have since
occurred to delay the period of trial. The operation of the tariffs
introduced by Sir Robert Peel, with the full sanction of the
free-trade party are far more open to comment, and, as we shall
presently show, all classes have an interest in the national wager. It
is, therefore, the nearer and more engrossing topic of free trade, as
affecting commerce and the legitimate wages of the workman, with which
we now propose to deal.
Burthened as he is with taxes, poor-rates, and every species of local
impost, it would naturally be supposed, that the British manufacturer
could hardly be able to compete with the foreigner even in an alien
market. But we unquestionably possess great counterbalancing
advantages in the abundance of our coal and iron, the skill and energy
of our people, and above all, in our accumulated riches. These, if
properly managed, are sufficient to enable us to maintain our old
supremacy undiminished.
The whole manufactured produce of Great Britain may be estimated in
round numbers, and on an average at two hundred millions yearly,
whereof three-fourths are consumed at home, and about fifty-one
millions or one-fourth of the whole are destined for exportation. The
home market, therefore, being by far the most important, is the first
province of the manufacturer: the foreign and lesser market, however,
is to a certain extent the index of the nation's wealth, because we
have a direct interest to see that our exports are larger than our
imports, in other words, that we are not annually paying away a
greater value than we receive. The home market is certain, or at all
events we can render it so if we choose, and the field is constantly
increasing. The foreign market, on the contrary, is fluctuating, and
over it we have little control. Without an entire change in our
colonial system, which, to say the least, would be attended with much
difficulty and danger, we must continue to compete with the foreigner
abroad on no other vantage ground than that of offering an article
equal to or better than his at a smaller price and profit.
It has always been the policy of England, to enlarge this latter field
as much as possible, and unquestionably the policy is sound. We give
and take with foreign nations as freely as may be, sending out
articles which we have produced, and bringing home cargoes for our own
consumption. The balance of the two operations must be taken as the
estimate of our increasing wealth.
We have paid in manufactures for the specie which constitutes great
part of our currency, and which is no product of our own, certainly
not less than forty millions. When any portion of that coinage is
withdrawn from the country we become so much the poorer, because we
are forced to replace the deficit by another exchange of manufactures
and that at a diminished price.
The doctrines of the free-trade party may shortly be stated as
follows: Sweep away, they say, all restrictions, and do every thing
you can to encourage imports, that is, to swell the amount of
consumption of foreign produce at home. The inevitable result of this
policy will be an increased demand from abroad for the staple
commodities which we produce, and an enlarged field for our
operations. Therefore reduce the duties levied at the custom-house as
much as possible, and let the revenue be raised either directly by
income tax, or in some other mode which may not interfere with the
progress of trade.
Sir Robert Peel, who has adopted these doctrines, has acted upon them
to a certain extent, and the history of his financial proceedings
since he last assumed the reins of office is curious and
characteristic of the man. He commenced by laying on an income tax,
which we were assured was not to last beyond the period of three
years, and he promised the public not only to relieve them from the
load at the expiry of that time, but to exhibit the national revenue
in a more flourishing condition than ever. Proposals so confidently
made were cheerfully and even gratefully accepted, for no one could
have supposed that there lurked a deception concealed beneath so
plausible a scheme.
To the amazement of many, the adoption of an income tax was shortly
followed by a reduction of revenue duties, an experiment which has
since been repeated. The effect of those reductions was as
follows:--the ordinary revenue of the country, at the time when Sir
Robert Peel came into power, was within a fraction of forty-eight
millions. Ten millions and a half were derived from certain articles,
which were subsequently dealt with on free trade principles. These
articles under the reduced duty now yield only six millions, whilst
the other sources, that have not been tampered with, contribute, as is
shown by late returns, forty-one and a half, instead of thirty-seven
and a half millions to the revenue. The gain therefore to the country
on those items which were left under the operation of our former
system was four millions,--the loss upon the articles reduced by Peel
was four millions and a half, whereof the greater part has gone into
the pocket of the foreigner; and, as Lord George Bentinck well
remarked, it is material, with such facts before us, to consider "what
would have been the situation of the country if Sir Robert Peel had
tried his experimentary hand upon the whole of what are called the
ordinary sources of revenue to the country?" There must then have been
a huge mistake somewhere. If Sir Robert really believed that in three
years he would be enabled to dispense with the income tax, he must
have calculated that the reduction of the duties would have the effect
of increasing the consumption of imports to such a degree that the
revenue would be largely augmented--a result which, we are sorry to
say, has by no means arrived. On the contrary, the revenue has fallen
off, and the income tax, far from being removed, will, in all human
probability, be extended.
The avowed object of these reductions, which have curtailed our
revenue, and saddled us permanently with a war tax, was to increase
the amount of our exportations in exchange. If this effect has not
been produced, or if there is no likelihood of its being produced
within a reasonable period of time, then we are entitled to conclude,
from the arguments of the free-traders themselves, that the experiment
has been a total failure. We must never lose sight of the fact, that
the sure test of free-trade, for which object we have sacrificed our
revenue, is _augmented export_. Let us see how far this branch of the
scheme has succeeded. We shall take the exports and imports for the
years 1845 and 1846, which will afford a sufficient indication of the
manner in which the new tariff is likely to work.
Exports 1845, L.53,298,026
Ditto 1846, 51,279,735
__________
Decrease L.2,018,291
__________
Duties on Imports, 1845, L.21,860,353
Ditto 1846, 22,498,827
__________
Increase L.638,474
__________
Thus, while the exports are decreasing, the imports are augmenting; we
are selling less and buying more, and the foreigner is reaping the
profit.
We are fortunately enabled, from the last official tables, issued
after the greater part of this article was sent to press, to show what
the results of free trade have been since 1846. Several of our
friends, who hold ultra liberal commercial opinions, are, as we full
well know, slow to conviction, and will be apt to maintain that our
experience of the new system up to that period, has not been large
enough to justify our condemnation of its failure. Let us then see
what testimony 1847 can bear in favour of free trade.
These tables, according to the _Economist_, a free trade organ of
undoubted ability, "continue to show an enormous comparative
importation and consumption of all the chief articles which contribute
to the daily sustenance of the people, and a marked falling off of
those which form the basis of our manufacturing industry, and
consequently of our future trade." In other words, whilst we are
buying, and buying largely, our articles of provision and immediate
consumpt from the foreigner, the supply of the raw material which we
can reproduce in the shape of manufactures is falling off. The
foreigner has the benefit of underselling us in the home market, and
we are losing the power of competition in the markets abroad. The
increase of our consumption is most remarkable, and the agriculturist
will probably derive but little comfort from the following comparative
statements, which show the amount of certain articles of import during
nine months of the last three years.