therefore, is not owing to a want of capital for all its undertakings,
nor to any present deficiency in our native supply of food. It is
in vain that Sir R. Peel, to throw the blame off the Bank Charter
Act, says it is all owing to a deficiency of capital to carry on our
undertakings. Has the Right Hon. Baronet forgotten that, so recently as
_March last_, the Chancellor of the Exchequer borrowed £8,000,000 for
the destitute Irish at £3, 7s. 6d. _per cent._? Was this like a nation,
the capital of which was exhausted? Has he forgotten that, till within
these few months, the funds were from 88 to 90, and interest generally
at 3 or 3½ _per cent._? What has come of all this capital since
August last? Has it vanished before the genial showers and bright sun
which gave us so fine a harvest? But if deficient capital has been the
cause of our disasters, how has it happened that Lord John Russell's
letter of 25th October, authorising the Bank to make advances beyond
what the Act allowed, has already had a sensible effect in arresting
the disorder, at least in the metropolis? Can it be said that that
letter added one pound to the realised capital of the country? It might
as well be affirmed that it added a cubit to every man's stature in
it, or a quarter to the produce of every field it contained. Then how
has it to some degree arrested the panic in London, raised the 3 _per
cents._ from 79 to 86, and lowered the interest of money from 8 or 9
to 6 or 7 _per cent._? Evidently by its effect upon CREDIT; because
it begat a hope--not likely, we fear, to be realised--that government
had at last become sensible of the ruinous effect of the Bank Charter
Act, and would speedily restore the circulation of the country to
that amount, which the magnitude of its population and transactions
imperatively required.
To illustrate the terrible and all-powerful operation of this
deplorable Act on the best interests of the country, let it be supposed
for a moment that the _whole_ currency of the country, without any
change in its laws as affecting debtor and creditor, were to be
withdrawn. What would be the result? Evidently that every man and
woman it contained, from Queen Victoria and the Chancellor of the
Exchequer downwards, would become bankrupt. A nation possessing real
property, as the income-tax and poor-rate returns show, of the value of
£3,000,000,000 sterling, and moveable property of £2,000,000,000 more,
would, without the exception of a single living creature in it, become
bankrupt because £70,000,000 or £80,000,000 was withdrawn from its
circulation, while its laws remained unchanged. By these laws, every
debtor must discharge his liabilities _in money_; and therefore, if
the whole money was withdrawn, no debt could be discharged at all, and
universal bankruptcy would ensue.
Now, the contraction of the currency to any considerable extent
operates, so far as it goes, in just the same way on general credit
and the national fortunes. When money becomes scarce, no one can,
without difficulty, discharge his obligations, because the banks, who
are the reservoirs from which payment of all considerable transactions
are drawn, cannot afford the usual accommodation. Those who are not
in first-rate credit can get nothing from them at all, and at once
become bankrupt. The sum-total of difficulty and embarrassment thus
occasioned, is not to be measured by the amount of specie or bank-notes
actually withdrawn from circulation by the Bank of England, though
that on occasion of the present crisis has been very considerable. It
is to be measured by the shock given to credit; the increase in the
practice of hoarding, which a feeling of general insecurity never fails
to engender; the reluctance in the country banks to make advances;
the universal effort made to recover debts at the very time when the
means of discharging them have been rendered most difficult; the rapid
diminution in the private bills put in circulation from the experienced
impossibility of getting them discounted. The contraction of the
currency on the part of the Bank of England, from July 1846, when it
was £21,000,000, to September 1847, when it was only £17,840,000, was
no less than £3,160,000. Including the simultaneous and consequent
contraction by the country banks in Great Britain and Ireland, the
diminution of the paper currency was above £5,000,000. But this,
considerable as it is, was but a small part of the evil. The bills in
circulation in Great Britain in 1839 were estimated by Mr Leatham, a
most experienced Yorkshire banker, at £130,000,000. In 1845, it may
safely be assumed, that they had reached £160,000,000 or £170,000,000.
Without a doubt this immense sum was reduced by at least a fourth,
probably a half, from the contraction of the currency consequent on
the Bank Act of 1844. It is this prodigious contraction, the necessary
consequence of the banks having been rendered unable or unwilling
to discount bills, which is the real cause of the present universal
distress and general stoppage of all undertakings. And it was the more
ruinous from the circumstance, that it occurred at _the very time_
when, from the vast encouragement given by government to domestic
railways by the bills they passed, and to foreign trade from the
abolition of the main duties protective of industry by them, the nation
was landed in transactions of unheard-of magnitude, and producing an
unparalleled strain upon its metallic resources.
This last is a consideration of such paramount importance, that it is
of itself adequate to explain the whole phenomena, which have occurred;
and yet, strange to say, it has hitherto met with very little attention
either in or out of Parliament. The point to which we allude, and to
which we crave, in an especial manner, the attention of the nation,
is _the progressive and now alarming disproportion between the money
value of our imports and our exports_ which has grown up ever since Sir
Robert Peel's tariff was introduced in 1842, and which has now, from
the action of the free-trade in corn, risen to such a height as to be
absolutely frightful. The declared or money values of our total exports
and official value of our imports since Sir Robert Peel's tariff was
passed in 1842, have stood as follows:--
Imports, official value.
1841, £64,377,962
1842, 65,204,729
1843, 70,093,353
1844, 75,441,555
1845, 85,281,958
1846, Not made up.
Three first quarters of
1847, Not made up.
Exports, declared value.
1841, £51,604,430
1842, 47,361,043
1843, 52,278,449
1844, Not made up.
1845, 53,298,026
1846, 57,279,735
1847, 39,240,000
The imports for 1847 have not yet been made up, and cannot be till
January next, when the year is concluded. But in the figures we have
given, there is abundant room for the most serious reflection. The
fact which the Chancellor of the Exchequer has mentioned as to the
sums paid _for grain alone_, in fifteen months, having reached the
enormous and unprecedented amount of £33,000,000, leaves no room
for doubt that, in the year 1847, our imports _will have reached
£100,000,000, while our exports have sunk below £50,000,000_.[18] Now,
how was this fearful balance paid? The answer is evident. In cash. Here
then, without going farther, is a balance on the exports and imports
already returned, in 1846, of _forty millions_ against the nation, on
the transactions of the present year, of probably not less than FIFTY
MILLIONS STERLING.[19] Whoever considers these figures with attention,
will be at no loss to perceive from what cause in the main the present
disasters have arisen.
To give only one example of the way in which, under the system of
free importation, the balance of trade has been turned against this
country, we subjoin the official returns of the progress of our trade
with America since Sir Robert Peel's tariff was introduced in 1842,
and for five years previously.[20] From that it appears that the trade
with that country, which in 1830 was £8,000,000 on each side, has now
so immensely changed, especially since the tariff of 1842, that, while
our exports to it in 1845 were £10,000,000, our imports from it were
£22,000,000! How was the balance of £12,000,000 paid? The answer is,
_in money_; and that money it was which enabled them to conquer the
Mexicans. We shall look with anxiety for the returns of our exports to,
and importations from America for the last two years. When they appear,
it will at once be seen where the money, the want of which is now so
severely felt, has gone, under the fostering influence of free trade.
Sir Robert Peel says that the Americans have tried the system of paper
money, and they have had enough of it. We thank the Right Honourable
Baronet for having reminded us of this example of the effects of a
contracted currency. It appears that in 1836 the imports of English
manufactures into the United States were £15,116,300. In the next
year they were only £5,693,094 official value; and the declared or
real value in that year was only £4,695,225; and the declared value
of the imports from Great Britain in 1842, was only £3,528,807.[21]
What occasioned this extraordinary defalcation, we shall inform the
Right Honourable Baronet. In spring 1837, the metallic system was
introduced by General Jackson, then President of the United States,
(by his refusal to take any thing but specie in payment of government
claims,) the country being at the time engaged in vast railway and
other undertakings, with the concurrence and by the authority of
government. Thence the prodigious falling off in the imports from this
country, under which our own manufacturers suffered so severely, and
from which they have scarcely yet recovered. Thence the destruction
of three-fourths of the mercantile capital of the United States. May
heaven avert a similar catastrophe, resulting from the same policy, in
this country!
The causes, then, to which the present dreadful crisis is owing, are as
plain as if the proofs of them were to be found in Holy Writ. We shall
simply record what Sir Robert Peel and the bullion party have done for
the last five years, and then ask whether under such a system it was
possible a catastrophe could be averted.
In the first place, they introduced the tariff of 1842, which so
materially diminished the duties on importation in this country, and
gave so great an impulse to the introduction of foreign articles of all
sorts into the consumption of the people, as raised our imports in 1845
to £85,000,000, while our exports were only £53,000,000, exhibiting a
balance of £32,000,000 against the country, which of course required to
be paid in the precious metals.
Secondly, having established this great drain of nearly _thirty
millions_ annually on the metallic resources of the country, Sir Robert
Peel next proceeded to pass the Bank Charter Acts, for England of 1844,
and for Scotland and Ireland of 1845, which limited the bank notes of
the empire, issuable on securities, to £32,000,000,[22] and enacted
that for every note issued beyond that amount, a sovereign should be in
the bank's strong-room to represent it.
Thirdly, having imposed these firm restrictions on the increase of the
paper circulation, and left no room for an augmentation to meet the
growing wants of the community but by an addition to the stores of
bullion in the country, and compelled a proportional contraction of the
currency when the bullion was withdrawn, the Right Honourable Baronet
and his administration next passed railway bills to the amount of above
£150,000,000 sterling, to be executed in the next three years, and gave
every facility to the undertaking of such projects, by lowering the
deposits required from ten to five _per cent._ on the estimated cost of
the undertakings.
Fourthly, when the strain on the metallic resources of the country was
beginning to be felt, from the immense balance of thirty millions in
our commerce against us, and the calls on railway shares were becoming
considerable, the Right Honourable Baronet next, as a permanent system,
not an extraordinary remedy to meet a temporary disaster, introduced a
free trade in grain, which was immediately applied by his successors to
sugar. He thus sent thirty-three millions, in gold and silver, abroad
in fifteen months. The consequence has been that the imports of the
empire have probably become _double_ its exports in money value; that a
balance of nearly £50,000,000 has this year been sent abroad in payment
of articles of import; that the sums paid for grain alone in the three
months immediately _following the finest harvest on record_, have
exceeded £14,000,000; that nearly all the railways in the country have
been stopped from the necessary contraction which, under the existing
law, this export of specie occasioned to the currency; that distress of
dreadful magnitude pervades the mercantile and manufacturing classes;
and that our exports have fallen off at the rate of a million a-month,
and our revenue above six millions a-year.
Such are the principles and results of that splendid combination
effected by modern wisdom--FREE TRADE AND A FETTERED CURRENCY. And as
these results flow naturally and necessarily from the principles put in
practice, it is evident that they may be expected in a less or greater
degree _to be permanent_, so long as these principles regulate the
policy of government.
Suppose a general at the head of one hundred thousand men were to
double, by orders issued or licenses granted from head-quarters, the
distance to be marched, and the work done by the men, and _at the
same time_ to establish a system which sent half of the commissariat
stores out of the camp,--what could be expected from such a policy
but starvation, discontent, and ultimate mutiny among the soldiers?
Or suppose a master manufacturer, as a great improvement on the
machinery of his mill, were to introduce a system which abstracted
the oil in proportion to the quickened movement of the wheels, or
diminished the moving power in proportion to the increase of the work
to be done,--what could be expected from such a change, but that the
machine would stop when it had most work to do? And yet, is not a
currency, and _a sufficient currency_, as necessary to an industrious
nation as food to the soldier, or coals to the steam-engine, or oil
to the wheels? Can we be surprised that such a system, when applied
to a nation, terminated in disappointment and ruin? But one result of
inestimable value has followed from its adoption; it is in periods
of suffering that truth is learned, because the consequences of
error are experienced. It is now seen what the true principles on
the subject are, because the effects of the opposite principles have
been demonstrated. With truth may it be said, that Sir R. Peel is the
philosopher who "HAS INSTRUCTED US IN THE CURRENCY."
It is the same thing, it is often said, whether we send specie abroad
in return for imports or manufactures of our own creation, for specie
is not the growth of this country, and it could only have been brought
here in return for some produce of ours previously exported. The
common sense of mankind, founded on experienced suffering arising
from the abstraction of specie, has ever repudiated this doctrine of
the schools; and present experience has amply demonstrated that, how
specious soever it may appear, there is some fallacy in it. Nor is it
difficult to see what that fallacy is. If we send manufactures abroad
in exchange for specie, we make a fair exchange; but if, having got
the specie, we send IT abroad _again_, instead of manufactures, to buy
food,--we have _only one_ export of British produce to set off against
_two_ imports of foreign. For instance, if we send £5,000,000 worth of
manufactures to South America to buy that amount of specie, it is a
fair exchange, and there is no unfavourable balance established against
us. But if, having got the £5,000,000 worth of specie, we again send
it to North America for grain, which is imported into this country,
instead of sending £5,000,000 worth of manufactures, we have, on the
whole, only exported £5,000,000 worth of manufactures for £10,000,000
worth of produce, bullion and corn imported: that is, there is a
balance of trade to the amount of £5,000,000 established against us,
which, to that extent, is a drain on our metallic resources. Had we
sent £5,000,000 worth of manufactures instead of the same amount of
specie to North America to buy food, our exports on the whole would
have been £10,000,000 instead of £5,000,000; and the difference of
£5,000,000, instead of being _a deduction from_, would have been _an
addition to_ the metallic resources, that is, the life-blood of the
nation. It is because a great import of grain invariably leads to such
an export of specie, that it is so hazardous a trade for a nation: it
is because Sir R. Peel's policy contracted the paper currency at the
very time that he sent the metallic abroad in quest of food, that he
has brought such calamities on the State.
The Right Hon. Baronet's defence of his policy is mainly to be found in
the following paragraph of his late able speech, in the close of the
currency debate:--
"I think there has been some misapprehension as to the objects
contemplated by the Act of 1844. I do not deny that one of them was
the prevention of the convulsions that had theretofore occurred in
consequence of the Bank of England not taking due precautions as to the
regulation of its issues. I did hope, after the experience of former
crises, that the Bank of England would adhere to those principles of
banking which the directors acknowledged to be just, but from which
they admitted they have departed. (Hear, hear, hear.) I am bound to
admit that in that hope, and in that object, I have been disappointed;
and I also admit, seeing the number of houses that have been swept
away--some of which, I fear, were long insolvent--(Hear, hear)--and
others which, being solvent, have suffered from the failure of other
houses--I am bound to say that in that object of the Bill I have been
disappointed. (Hear, hear.) It was in the power of the Bank to have, at
an early period of the distress, raised the rate of discount, and to
have refused some of the accommodation they granted between 1844 and
1846. (Hear, hear, hear.) I cannot, therefore, say that the defect is
exclusively, or mainly, in the Bill--(Hear, hear)--but my belief is,
that executive interference might have been given without the necessity
of the authority of the noble lord."--_Morning Post_, Dec. 2, 1847.
The observations which have now been made, show that these remarks
are not only unfounded, but precisely the reverse of the truth. Had
the Bank of England drawn in their discounts, and raised the rate of
interest between 1844 and 1846, at the very time when the railway and
free-trade work, into which Sir Robert Peel had plunged the nation,
was at its height, what must have been the result? Nothing but this:
that the catastrophe which has ensued would have come on two years
sooner than it has actually done. The Right Hon. Baronet would have
been prevented from making his emphatic speech on the admirable effects
of his policy, and the diminution of crime, in the opening of the
Session of 1846; he would have found the jails and the workhouses full
enough, at the period of that glowing eulogium on free-trade policy
and its effects. By making liberal advances to railway companies in
1844 and 1845, the Bank of England, and the other banks which followed
its example, only enabled the country for a time to do the work upon
which Sir Robert Peel had set it. By enabling, by similar advances,
the manufacturers for two years longer than they otherwise could have
done, to send a large export of manufactures abroad, the Bank, for
that period, averted or postponed the catastrophe which must ensue in
a commercial state, when its imports, for a series of years, have come
greatly to exceed its exports. It is because the contraction of the
currency, rendered imperative on the Bank by the Right Hon. Baronet's
bill, has disabled our manufacturers from carrying on their operations
to their wonted extent, that the import of the raw materials employed
in manufactures, has decreased during the last eighteen months to such
an extent, our export of manufactures declined in a corresponding
degree, and the drain of specie abroad to pay for the enormous
importations simultaneously introduced, increased to such a ruinous
extent.
Sir R. Peel reminds us of the great catastrophe of December 1825,
and observes that that disaster, at least, cannot be ascribed to his
Bank Charter Act, and that it arose from the everlasting tendency to
overtrading in the people of this country. Again we thank the Right
Hon. Bart. for reminding us of that disastrous epoch, which, in the
still greater suffering with which we are now surrounded, had been
well-nigh forgotten. We entirely agree with him as to the magnitude
of that crisis, and we will tell him to what it was owing, and how it
was surmounted. It was owing to Mr Secretary Canning, in pursuance
of liberal principles, "calling a new world into existence," by
violating the faith and breaking through the duties of the old one.
It arose from the prodigious loans sent from this country to prop
up the rickety, faithless, insolvent republics of South America, and
the boundless incitements held out to wild speculation at that period
by "Mr Prosperity Robinson," especially in South American mining
speculations. It arose from all this being done and encouraged by the
government, at the very time when the act of 1819, introduced by Sir R.
Peel, compelled the Bank,--though drained almost to the last guinea,
by the prodigious quantity of gold sent headlong to South America to
support these speculations, induced or fostered by the government,--to
pay all its notes in gold. This was what induced the crisis. And what
arrested it? Lord Ashburton has told us it was the issue of £2,000,000
of forgotten _bank-notes_, drawn out of a cellar of the Bank; but
which sum, inconsiderable as it was, proved sufficient to arrest the
consequences of the gold being all sent away to South America, in
pursuance of liberal principles, to prop up "healthy young republics,"
carved out of the dominions of an old and faithful ally. Sir R.
Peel, two-and-twenty years afterwards, has repeated the same error,
by sending the gold to North America in the midst of great domestic
transactions for grain, but he has not repeated the same remedy.
In truth, the system now established in regard to the bank by the acts
of 1819 and 1844, _necessarily_ induces that very feverish excitement
in periods of prosperity, and sudden contraction in those of adversity,
of the consequences of which Sir R. Peel so loudly complains. When the
bank is obliged to accumulate and keep in its vaults so prodigious
a treasure as £15,000,000 in prosperous times, and £9,000,000 or
£10,000,000 in those of adversity, _lying_ dead in its possession;
_how is it to indemnify itself for so vast an outlay_, without,
whenever an opportunity presents itself, pushing its circulation to
the utmost? The very interest of this treasure amounts, at 5 _per
cent._, to above £700,000 a-year; at 7 _per cent._, the present rate,
it will reach a million. How is this sum to be made up, the expense
of the establishment defrayed, and any profit at all realised for the
proprietors, if paper, to a large amount, is not pushed out whenever an
opportunity presents itself for doing so to advantage?
Again, in adverse times, when there is a heavy drain upon the
establishment for buying foreign grain, or discharging adverse
exchanges, how is the bank to avoid insolvency, without at once, and
suddenly, contracting its issues? The thing is unavoidable. Undue
encouragement to speculation in prosperity, and undue contraction
of credit in adversity, is to the Bank, since the acts of 1819 and
1844, not merely an essential preliminary to profit, but in trouble
the condition of existence. Yet Sir R. Peel complains of the Bank
doing that which his own acts have rendered indispensable to that
establishment.