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National presperity and the monetary system.


Agricultural Distress - Proposed Remedies - Mr. Cobbett - Resumption of Cash Payments - A restricted Currency - Scarcity of the Precious Metals - Inconvertible Paper Money - The Small Note Act; its Effect on Prices - Brilliant Dawn of Commercial Prosperity - Mr. Huskisson's Statement - A Popular Budget - The Reduction of the National Debt - The Sinking Fund - Mysteries of the Public Funds - Reform of our Commercial Policy - Mr. Huskisson as a Free Trader - Policy of the Navigation Laws - The Reciprocity System - His Answer to the Arguments of the Protectionists - The Shipping Interest - The Retaliatory Principle - The Petition of the London Merchants - The Principles of Free Trade clearly stated and triumphantly vindicated - Growing Influence of the Commercial Classes on Legislation in General- Flourishing State of all the National Interests - Enterprise and Progress - Joint Stock Companies - Abundance of Capital - Reckless Speculation - Excessive Issue of Notes by Country Banks - Spirit of Adventure - Mining Speculations - Drain of Bullion to South America - The Commercial Crisis - General Panic; its ruinous Effects - Remedy, a Government issue of Inconvertible Bank Notes - Evils of an inadequate Currency.
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The year 1823 opened auspiciously, and continued to exhibit unequivocal marks of progressive prosperity. Every branch of manufacturing industry was in a flourishing state. The cotton trade was unusually brisk. There was a considerable increase in the quantity of silks and woollens manufactured; and in consequence of augmenting exportation, the demand for hardware and cutlery was quickened from the state of stagnation in which it had remained since the conclusion of the war. The shipping interest, which had been greatly depressed, fully shared in the general improvement. The agriculturists, however, were still embarrassed and discontented. In January no less than sixteen English counties had sent requisitions to their sheriffs to call meetings to consider the causes of their distresses. The principal remedies proposed were reduction of taxation; a reform of the house of commons; a depreciation of the currency; a commutation of tithes; and an appropriation of the redundant wealth of the church to the public exigencies. At the Norwich meeting a series of resolutions were proposed and seconded by the gentry of the county, but they were rejected and put aside on the motion of Mr. Cobbett, who read a petition which was adopted with acclamation. It recommended an appropriation of part of the church property to the payment of the public debt; a reduction of the standing army; an abolition of sinecures and undeserved pensions; the sale of the crown lands; an equitable adjustment of contracts; the suspension of all legal processes for one year for the recovery of rents and tithes; and the repeal of the taxes on malt, soap, leather, hops, and candles.

The distress which had pressed so severely on the country, and which set the people thinking about the most perilous political changes, was intimately connected with the state of the currency. Throughout the troubled period of almost incessant war and lavish expenditure between 1797 and 1815, the business of the nation was carried on with an inconvertible paper currency, the precious metals having nearly all departed from the country. Bank notes were issued in such quantities, to meet the exigencies of the government, that the prices of all commodities were nearly doubled. The bill which was passed in 1819 providing for the resumption of cash payments, had reduced the currency from 48,278,070, which was its amount in 1819, to 26,588,000, in 1822. The consequence was the reduction of prices in the meantime, at the rate of fifty per cent., in all the articles of production and commerce. With this tremendous fall of prices, the amount of liabilities remained unchanged; rents, taxes, and encumbrances were to be paid according to the letter of the contract, while the produce and commodities - the sale of which was relied upon to pay them - did not produce more than half the amount that they would have brought at the time of the contracts. The evil of this sudden change was aggravated by the South American revolution, in consequence of which the annual supply of the precious metals was reduced to a third of its former amount. It was peculiarly unfortunate that this stoppage in the supply of gold and silver occurred at the very time that our legislature had adopted the principle that paper currency should be regarded as strictly representing gold, and should be at any moment convertible into sovereigns. A paper currency should never be allowed to exceed the available property which it represents, but it is not necessary that its equivalent in gold should be lying idle in the coffers of the bank, ready to be paid out at any moment the public should be seized with a foolish panic. It is enough that the credit of the state should be pledged for the value of the notes, and that credit should not be strained beyond the resources at its command. The close of 1822 formed the turning-point in the industrial condition of the country. The extreme cheapness of provisions, after three years of comparative privation, enabled those engaged in manufacturing pursuits to purchase many commodities which they had hitherto not been able to afford. This caused a gradual revival of trade, which was greatly stimulated by the opening of new markets for our goods, especially in South America, to which our exports were nearly trebled in value between 1818 and 1823, when the independence of the South American republics had been established. The confidence of the commercial world was reassured by the conviction that South America would prove an unfailing Dorado for the supply of the precious metals. The bankers, therefore, became more accommodating; the spirit of enterprise again took possession of the national mind, and there was a general expansion of industry by means of a freer use of capital, which gave employment and contentment to the people. This effect was materially promoted by the Small Note Bill which was passed in July, 1822, extending for ten years longer the period during which small notes were to be issued; its termination having been fixed by Peel's bill for 1823. The average of bank notes in circulation in 1822 was 17,862,890. In November of the following year it had increased by nearly two millions. The effect of this extension of the small note circulation upon prices was remarkable. Wheat rose from 38s. to 52s., and in 1824 it mounted up to 64s. In the meantime the bullion in the bank of England increased so much, that whereas in 1819 it had been only 3,595,360, in January, 1824, it amounted to 14,200,000. The effect of all these causes combined was the commencement of a reign of national prosperity, which burst upon the country like a brilliant morning sun, chasing away the chilling fogs of despondency, and dissipating the gloom of the popular mind.

In opening the session of 1823 the king, referring to this cheering state of things, said, "Deeply as his majesty regrets the continued depression of the agricultural interest, the satisfaction with which his majesty contemplates the increasing activity which pervades the manufacturing districts, and the flourishing condition of our commerce in most of its principal branches, is greatly enhanced by the confident persuasion that the progressive prosperity of so many of the interests of the country cannot fail to contribute to the improvement of that great interest which is the most important of them all." And in the royal speech delivered in opening the session of 1824, he referred to the same subject in a strain of congratulation, saying, " Trade and commerce are extending themselves both at home and abroad. An increasing activity pervades almost every branch of manufacture; the growth of revenue is such as not only to sustain public credit, and to prove the unimpaired productiveness of our resources, but to evince a diffusion of comfort among the great body of the people. Agriculture is recovering from the depression under which it laboured, and, by the steady operation of natural causes, is gradually re-assuming the station to which its importance entitles it among the great interests of the nation. At no former period has there prevailed throughout all classes in this island a more cheerful spirit\of order, or a more just sense of the advantages which, under the blessings of Providence, they enjoy. In Ireland, which has for some time past been the object of his majesty's particular solicitude, there are many indications of amendment."

On the 12th of February, 1823, the president of the board of trade said, in his place in parliament: - " The general exports of the country in the four years from 1815 to 1819 had decreased 14,000,000 in official value; and he took the official value in preference to the declared, because it was from the quantity of goods produced that the best measure was derived of the employment afforded to the different classes of the community. In the year from the 5th of January, 1819, to the 5th of January, 1820, the exports of the country fell off no less than 11,000,000; and in looking at that part of it which more completely embraced British or Irish manufacture, he found that the difference in four years was 8,414,711; and that in the year from the 5th of January, 1820, to the 5th of January, 1821, there was a decrease of 8,929,629. Nobody, therefore, could be surprised that, at that period, the industry of the country appeared to be in a state of the utmost depression; that our manufacturers were most of them unemployed; that our agriculturists were many of them embarrassed; and that the country, to use the phrase of a friend of his in presenting a petition from the merchants of London, exhibited all the appearances of a dying nation. Though the condition of the agricultural interest was not as favourable as he could wish, still it was most satisfactory for him to state that not only did the exports of last year (1822) exceed those of all the years to which he had been alluding, but also those of the most flourishing year which had occurred during the continuance of the war. In all the material articles there had been a considerable increase. The export of cotton had increased ten per cent., and hardware seventeen per cent.; of linens twelve per cent., and of woollens thirteen per cent.; and the aggregate exports of 1822 exceeded those of 1820 by twenty per cent., and of 1821 by seven per cent., notwithstanding a deduction was to be made from the exports of one great article, sugar, owing to a prohibitory decree of Russia, amounting to thirty-five per cent." The result of this prosperous state of things was that, in 1823, the new chancellor of the exchequer was enabled to present the best and most popular budget that had been laid before parliament for many years, remitting a large amount of taxes that had pressed most heavily on the springs of industry, and inflicted the greatest amount of inconvenience and privation upon the people. The revenue of the nation in that year was 57,000,000, and the expenditure was estimated at 49,852,786, leaving a surplus of upwards of 7,000,000. Of this surplus, 5,000,000 was set aside for the reduction of the national debt, and the remainder for the remission of taxes. As the assessed taxes were most oppressive, they were reduced fifty per cent., a reduction which was estimated on the window tax alone at 1,205,000. On the whole, the assessed taxes were reduced by 2,200,000. This included 100,000, the total amount of assessed taxes in Ireland. In England the whole of the window tax was removed from the ground floors of shops and warehouses. In the following year the chancellor of the exchequer had a still more agreeable account to render to the nation. The emperor of Austria had agreed to pay 2,500,000 out of an old debt of 6,000,000, an agreement which nobody expected. There was also a surplus this year, which enabled the chancellor of the exchequer to devote 5,000,000 to the reduction of the national debt, and 1,250,000 to the remission of the duties on rum, coals, wool, silk, and law proceedings.

Hitherto, everything connected with the public accounts and the national debt was involved in mystery. So great were the complications that it was difficult for even the best accountants to understand them, while they were- almost unintelligible to the public. Mr. Robinson showed the strength and superiority of his mind by attempting to simplify the whole financial system, especially what related to the national debt, for the reduction of which he set apart the annual sum of 5,000,000. This was the "sinking fund," which, had it been preserved, would, in thirty years, with the growing interest upon interest, have paid off 300,000,000 of the public debt. But it was not preserved, and the national debt still remains almost in its integrity, absorbing nearly half the revenue to pay the interest on it. In 1824 government was able to spare 500,000 sterling for the building of churches in the manufacturing districts, 1,000,000 having been previously granted for the same purpose. The sum of 300,000 was voted for repairing and enlarging Windsor Castle, and 57,000 for the purchase of Mr. Angerstein's collection of pictures, which laid the foundation of the present National Gallery.

In 1823 we behold the starting point of the liberal system of commercial policy, for which, not only England, but the world, is so much indebted - the rivulet, which gradually expanded into a mighty river, bearing incalculable blessings upon its bosom to every nation under heaven. The appointment of Mr. Huskisson as a member of the government was an immense advantage to the nation. He was a man of great abilities^ which he had perseveringly devoted to the study of political economy. He was a complete master of all subjects in which statistics were involved, and was universally looked up to as the highest authority on all financial and commercial questions. As president of the board of trade, he had ample opportunities of turning his knowledge to account, and to him is mainly due the initiation and direction of the course of commercial policy which a quarter of a century later issued in the complete triumph of free trade. Mr. Huskisson was not only intimately acquainted with the whole range of economic, financial, and mercantile subjects, in their details as well as in their principles, he was also a powerful debater, a sound reasoner, and was animated in all he did by a spirit of generous philanthropy.

A law in force since the time of Cromwell had provided that no merchandise from Asia, Africa, or America should be imported into Great Britain in any foreign ships; and not only the commander, but three-fourths of the crew, were required to be English. In addition to this restriction of our foreign commerce to English-built and English- manned ships, discriminating duties were imposed upon foreign ships from Europe, which had to pay more heavily than if the goods were imported under the English flag. The object of this system, which prevailed for one hundred and fifty years, was to maintain the ascendancy of England as a maritime power. Adam Smith remarks, that the Navigation Act may have proceeded from national rivalry and animosity towards Holland; but he held that its provisions were as beneficial as if they had been dictated by the most consummate wisdom. He admits, however, that they were not favourable to foreign commerce, or to the growth of that opulence that can arise from it, remarking, " As defence is of more value than opulence, the Act of Navigation is perhaps the wisest of all the commercial regulations of England." But had Adam Smith lived in our time, he would have seen that the utmost freedom of commerce with foreign nations, and the most boundless opulence arising from it, are quite compatible with a perfect system of national defence; and whatever were the advantages of the restriction system, other nations could act upon it as well as England. America did so, and thus commenced a war of tariffs equally injurious to herself and the mother country, causing the people of each to pay much more for most of the commodities they needed than they would have done if the markets of the world were open to them. The consequence was, that both parties saw the folly of sending their ships across the Atlantic in ballast, and a commercial treaty was concluded in 1815, which put the shipping of both America and England upon an equal footing, and relieved them from the necessity of paying double freight. The reciprocity system was also partially adopted in our commerce with other countries. In 1822 Mr. Wallace had brought in four bills, which made other important alterations. The 3 George IV., cap. 41, repealed certain statutes relating to foreign commerce which were passed before the Navigation Act. Another act (cap. 42) repealed that part of the Navigation Act itself which required that goods of the growth or manufacture of Asia, Africa, and America should only be imported in British ships; and that no goods of foreign growth or manufacture should be brought from Europe, except from the place of their production, and in the ships of the country producing them. The next enactment prescribed certain specified goods to be brought to Great Britain from any port in Europe, in ships belonging to the ports of shipment. Two other acts further extended freedom of commerce, and removed the vexatious restrictions that had hampered our colonial and coasting trade. In 1823 Prussia retaliated, as the United States had done, which led Mr. Huskisson to propose what are called the Reciprocity Acts, ' George IV., cap. 77, and 5 George IV., cap. 1, which empowered the king, by order in council, to authorise the importation and exportation of goods in foreign ships from the United Kingdom, or from any other of his majesty's dominions, on the same terms as in British ships, provided it should first be proved to his majesty and the privy council that the foreign country in whose favour the order was made had placed British ships in its ports on the same footing as its own ships. Since that time reciprocal treaties of navigation have been made with Prussia, Denmark, Hanover, Greece, Holland, France, Sweden, Austria, Russia, Portugal, and several other countries.

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