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TheStrangeDeathofMercantilistEngland:GoldandProtectionism,1815‐1846

TimothyAlborn

LehmanCollege/CUNYGraduateCenter

PapertobediscussedattheColumbiaUniversitySeminaronEconomicHistoryPleasedonotcitewithoutauthor’spermission

In1935thehistorianGeorgeDangerfieldascribedwhathecalled“the

strangedeathofLiberalEngland”toaconjunctionofConservativebacklash,Irish

unrest,suffragettespectacle,andtrade‐unionmilitancyinthedecadebeforeWorld

WarOne.1Acenturyearlier,mercantilistEnglandunderwentsimilarlystrange

deaththroes,renderedstrangerstillbythefactthatmostliberaleconomists

consistentlyclaimed,throughoutthefirsthalfofthenineteenthcentury,thatDavid

HumeandAdamSmithhadalreadykilledmercantilisminthe1770s.2Thesame

conclusionregardingmercantilism’stimeofdeathhaslongbeenreachedbymost

historiansofeconomicthought,whogenerallysettleonHumeandSmithastheend‐

pointoftheirhistoriesofmercantilism.Thefactthatprotectionismremained

Britain’scoreeconomicpolicyforseventyyearsafterSmithhas,ofcourse,notgone

unnoticedbyhistoriansofeconomics;buttheyhavetendedtofollowthoseclassical

economistswho,after1820,reserveddiscussionsofmoneysupplytotherealmof

debatesoverBankofEnglandpolicy,andtendedtoframetradepolicyintermsof

rentandcostofproduction,withRicardo’slawofdiminishingreturnsloominglarge.

1GeorgeDangerfield,TheStrangeDeathofLiberalEngland(NewYork:SmithandHaas,1935).2AlthoughthetermmercantilismdidnotentercommonparlanceinBritainuntilthelate1838(theOEDlistsareferencefromTheNewMoralWorldin1838),theclusterofideasthatitimplied(whichweresetoutinAdamSmith’sTheWealthofNations)wereclearlyrecognizedthroughouttheperiod,andoftenreferredtoas“themercantilesystem”orthe“theoryofthebalanceoftrade.”

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HistoriansofeconomicswhofocusonBritishmonetarythoughtinthefirst

halfofthenineteenthcenturyhavespentrelativelylittletimeonthecornlaws:

hence,forinstance,FrankFetterdevotedasolitarypagetothecornlawsinhis

historyof“Britishmonetaryorthodoxy”between1797and1875.3Historianswho

focusonthecornlawdebates(whoarefewerinnumber),havespentevenlesstime

addressingthefrequentreferencestobulliondrainsthatbothsidesmadeduringthe

courseofthedebate.D.P.O’Brien’sexhaustivebookonJ.R.McCulloch,forinstance,

providesonlyabrief(albeitcritical)noticeofMcCulloch’sefforttolinkBritain’s

goldreserveswithitstradepolicy.ApartialexceptionisBoydHilton’sCorn,Cash,

andCommerce,whichmakesapointtobringthetwotopicstogether;buthis

analysisendsin1830,beforetheanti‐cornlawcampaignwasofftheground,and

focusesmainlyoninternaldebateswithinParliament.4AnotherisAnnaGambles’s

historyofprotectionistthoughtbetween1815and1852,whichclearlylocatesthe

placeofgoldsuppliesintheseargumentsbutneitherdwellsonthemindetail,nor

connectsthemtoalongermercantilisttradition.5

Nobodydeniedatthetimethatdrainsofbullionwerearecurrentproblem

between1820and1846:goldsuppliesintheBankofEnglandswungbetweenlow

ebbsof£4.6min1826and1839‐41tohighsexceeding£10min1821‐24and1838;

thisaccompaniedswingsinprices,althoughtheoveralltendencywasdeflationary.

3FrankWhitsonFetter,DevelopmentofBritishMonetaryOrthodoxy,1797—1875(Cambridge,MA:HarvardUniversityPress),176.4BoydHilton,Corn,Cash,Commerce:TheEconomicPoliciesoftheToryGovernments,1815‐1830(Oxford:OxfordUniversityPress,1977),esp.108‐126,132‐134,278‐301.5AnnaGambles,ProtectionandPolitics:ConservativeEconomicDiscourse1815‐1852(London:RoyalHistoricalSociety,1999).Seeinparticular134‐142,andherveryusefuldiscussionofToryjournalistsandpamphleteersat10‐18.

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Inallcases,moreover,mostcontemporariesrecognizedthattightmoneysupplies

producedconsequencesthatrangedfrominconvenienttodevastating,sincethe

BankofEngland’seffortstoattractgoldbackintothecountryviahigherinterest

ratesinevitablyaffectedeconomicactivity.Notallthegoldthatdrainedfromthe

Bankwasusedtopayforforeigngrain:althoughpoorharvestsprecededdrainsin

1824and1839,bullionalsolefttheBanktopayforAmericancottonin1838and

(bywayofbankruns)inresponsetopoliticalunrestin1832.6

Protectionistsreasonedfromthesedevelopmentstopredictdisastrous

consequencesforthecountryunderfreetrade,owingtotheneedtopayfor

additionalgrainsupplieswithbullion.Theirliberalopponentsmainlyattributed

pricevariationsanddeflationtotheoperationofcornlaws,which(theyargued)

prevented“regular”foreignmarketsfromdevelopingthatwouldbepreparedto

acceptBritishgoodsinexchangeforgrainintimesofdearth.Theyalsodiverted

attentionfromtradetomonetarypolicy,blamingBankofEnglanddirectorsand

jointstockbankersforfailingtocurtailloansintimetopreventdrainsfromgetting

outofhand;andto“overtrading”merchants(bothinBritainandAmerica)whose

demandforaccommodationexceededthenation’smoneysupply.Atbottom,this

debatepittedastate‐centeredtheoryoftrade,whichplacedacentralemphasison

theroleofnationalrivalriesindeterminingspecieflows,againstamoreidealized

internationalmodelthatminimizedgold’sroleinsettlingforeignaccounts.6ArieArnon,ThomasTooke:PioneerofMonetaryTheory(AnnArbor:UniversityofMichiganPress,1991),17‐19(tablesdrawnfromMitchellandDeane);M.J.R.HealyandE.L.Jones,“WheatYieldsinEngland,1815‐59,”JournaloftheRoyalStatisticalSociety125(1962),578.Pricesfellbyroughly40%between1819and1850.Asmuchas£10minbullionleftEnglandin1839topayforcorn:PeterMathias,TheFirstIndustrialNation:AnEconomicHistoryofBritain,1700‐1914(London:Methuen,1969),230.

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1.AdamSmithandtheMakingofaShibboleth

OneofAdamSmith’smostenduringsectionsinTheWealthofNationswashis

spiriteddemolitionof“theMercantileSchool”intheopeningchapterofBookFour.

Onereasonitenduredwasthathisdenunciationenabledfuturegenerationsof

liberalstodescribetheirprotectionistopponentsasholding“exploded”beliefs,and

therebypre‐emptivelydraintheirargumentsofapparentrelevance.Thiswas

WilliamNassauSenior’stacticin1827whenhewalkedhisreadersthroughSmith’s

argumentsonthewaytoconcludingthat“insteadofopposing…experienceto

theory,”nineteenth‐centuryprotectionistswere“opposingthetheoryofa

barbarousagetothetheoryandexperienceofanenlightenedone.”7Identifying

protectionismwithSmith’saccountofmercantilismturneditintoashibboleth,

whichdivertedattentionfromseveralimportantconditionsthathademergedafter

1800andthatmadeithardertodefendSmith’soriginalgroundsforopposing

mercantilistthinking:theseincludedtheriseofprotectionismintheUnitedStates

andEurope,theexponentialgrowthofBritain’snationaldebtandaccompanyingtax

burden,andthethreedecadesofdeflationthatfollowedtheresumptionofcash

paymentsin1821.

Withoutadmittingitinsomanywords,Smith’sattackonmercantilism

paralleledDavidHume’searliercritique,spelledoutinhis1752essay“Ofthe

BalanceofTrade.”There,Humehadrecalledthe“universalpannic”thatJoshuaGee

7WilliamNassauSenior,AnIntroductoryLectureonPoliticalEconomy,deliveredbeforetheUniversityofOxford(London:J.Mawman,1827),31.Seniorstretchedthistactictoitsbreakingpointin1843whenhecondemnedRobertTorrens’sdefenseofreciprocalfreetradeasacovertattempttoresurrect“notinwordsindeed,butineffect,theMercantileTheory”:“FreeTradeandRetaliation,”EdinburghReview78(1843),8.

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hadproducedbyinhispredictioninTradeandNavigationofGreat‐Britain

Considered(1729)that,inHume’swords,Britain’stradedeficit“wasagainstthem

forsoconsiderableasumasmustleavethemwithoutasingleshillinginfiveorsix

years.”Hecounteredthiswiththewryreassurancethat“luckily,twentyyearshave

sinceelaps’d,alongwithanexpensiveforeignwar;andyet…moneyisstillmore

plentifulamongstusthaninanyformerperiod.”Healsorespondedwitha

reassuring(ifsketchy)theory,whichsubsequenteconomistswouldcalltheprice‐

specieflowmechanism.Thefallinpricesoccasionedbyadraininbullion,he

argued,wouldimmediately“bringbackthemoneywhichwehadlost,andraiseus

tothelevelofalltheneighbouringnations…where,afterwehavearriv’d,we

immediatelylosetheadvantageofthecheapnessoflabourandcommodities;and

thefartherflowinginofmoneyisstoppedbyourfulnessandrepletion.”8

Smith’sdiscussionofthe“MercantileSchool”reinforcedHume’seffortsto

downplayconcernsaboutbulliondrainsandtradedeficits.InsteadofGee,he

reachedfurtherback,singlingoutThomasMun’sEngland'sTreasureinForeign

Trade(1664;writteninthe1630s)tostandformercantilism.Mun,heargued,had

mistakenlydistinguishedbetweengoldand“anyotherusefulcommodities,which

thefreedomoftrade,withoutanysuchattention,neverfailstosupplyintheproper

quantity.”Theonlymeaningfulfunctionofgoldandsilverwasas“utensils…asmuch

asthefurnitureofthekitchen”;hencestockpilingbullionwas“asabsurdasitwould

betoattempttoincreasethegoodcheerofprivatefamilies,byobligingthemto

8DavidHume,PoliticalDiscourses(Edinburgh:R.Fleming,1752),81‐83.OnSmith’sfailuretoincorporateHume’sprice‐specieflowmechanismintohiscritiqueofmercantilismseeJohnCunninghamWood(ed.),AdamSmith:CriticalAssessments(London:Routledge,1984),1:xxvi‐xxviiandaccompanyingarticles.

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keepanunnecessarynumberofkitchenutensils.”Themovementandsupplyof

bullioninthemid‐eighteenthcenturyappearedtojustifySmith’sassumptionthatits

roleintrade,thoughnecessary,wassubsidiarytoindustrialandagriculturaloutput.

As“themoneyofthegreatmercantilerepublick,”bullioncouldbereliedontoflow

efficientlyamongnationstobalanceaccounts;althoughSmithadmittedthatadirect

trade—forinstance,BritishhardwareandtextilesforFrenchwine—wasmore

profitabletoBritainthana“round‐aboutone”wherebyBritishgoodspurchased

Braziliangold,thenexchangedthatforthewine,heinsisted,followingHume,that

bothsidesstillgainedfromthelattertransaction.9

Fromhisperspectivein1776,Smithfounditrelativelyeasytodispensewith

twooftheissuesthatwouldrevivemercantilistargumentsinthenineteenth

century:adrainofbullionowingtoforeignwars,andtheimpactofatradedeficiton

thedomesticsupplyofmoney.ReferringtotheSevenYearsWar,whichwasupto

thatpointbyfarthemostexpensivewarBritainhadfought,Smithimplicitlyapplied

Hume’sprice‐specieflowanalysistodrainsoccasionedbyforeignwars:“whatever

partofthismoneyofthemercantilerepublickGreatBritainmayhaveannually

employedinthismanner,itmusthavebeenannuallypurchased,eitherwithBritish

commodities,orwithsomethingelsethathadbeenpurchasedwiththem,”which

“bringsusbacktocommodities…astheultimateresourceswhichenabledusto

carryonthewar.”Henceacountrywithsufficientproductionof“thefinerandmore

improvedmanufactures”(suchasBritain)couldeasily“carryonformanyyearsa

veryexpensiveforeignwar.”Smithwassimilarlydismissiveregardinganypossible9AdamSmith,AnInquiryintotheNatureandCausesoftheWealthofNations(London:W.StrahanandT.Cadell,1776),2:7‐8,15‐16.,23,78‐80.

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negativeimpactofabulliondrainonthecirculationofcoin.Atleastpartofhis

optimismonthisscorederivedfromhisrelativelybenignviewofa“wellregulated

papermoney,”whichcouldreplaceadiminishedsupplyofcoin“notonlywithout

anyinconveniency,butwithverygreatadvantages.”10

BytakingSmith’sanalysisastheirstartingpoint,classicaleconomists

effectivelydivorcedgoldfromtradepolicy—orrather,theysubordinatedtrade

policytothedictatesofan“automatic”internationalgoldstandard.InJoseph

Schumpeter’swords,theywere“neithernationalistsorétatistes,”favoring“an

unfetteredinternationalgoldstandard”asa“moralaswellasaneconomicideal,”

andembracinggoldas“thenaughtyboyintheroomwhoblurtsoutunpleasant

truths.”11InthethreedecadesafterWaterloo,theseunpleasanttruthsincludeda

steadydietofdeflationandasharp‐edgedbusinesscycle,whichroseandfellas

interestratesstruggledtokeeppacewithtrade‐inducedbullionflows.

Smith’searlysuccessesinturningthetideagainstmercantilismwere

impressive.Lookingbackfrom1843,WilliamNassauSeniorrecalledthatadecade

afterSmithhad“conclusivelyrefuted”thatdoctrine,ithadlikewisebeen

“abandonedbythescientificandliterarypublicthroughoutEurope,andbythe

mercantilepublicinGreatBritain.”Tosupportthisclaim,hecouldpointtoWilliam

Pitt’sembraceoffree‐tradeprinciples,aswellasthepassagein1786oftheEden

Treaty,whichprovidedunprecedentedaccessforgoodstoflowlegallybetween

BritainandFrance.AlthoughSeniorconcededthat“therevolutionarywarsarrested

ineachcountrytheimprovementofcommerciallegislation,”heconfidentlyasserted10Ibid.,2:20‐22,9‐12.11JosephSchumpeter,HistoryofEconomicAnalysis(Oxford:OxfordUniversityPress,1954),732.

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thatenlightenmenthad,bythelate1820s,returnedtoBritain,ifnotnecessarilythe

restofEurope.12

TheFrenchRevolutionandsubsequentwarsdidmorethaninterruptthis

momentuminthespreadofeconomicliberalism.Thesuspensionofcashpayments

in1793refutedSmith’s(andHume’s)predictionthatnoforeignwarcouldever

drainBritainofsomuchgoldastorendersuchameasurenecessary,Britain’sdebt

burdenrosefrom£262mto£885mbetween1793‐1815,andpricesroseby80%

overthesameperiod.13Therobustdebatesoverthe1815and1829CornLawsand

theresumptionofcashpaymentsin1819reflectedthistransformedfinancial

landscape.Aleadingthemeinthesedebateswastheperceivedneed,by“liberal

Tories,”tobalanceself‐sufficiencyingrainproduction(amajorconcernduringthe

war)withprotectionagainstfamineduringpoorharvests;and,byreturningtothe

goldstandard,toarrestinflationandtherebypaydownthenationaldebtonterms

thatwouldbefairtoBritain’screditors.14

Theresultwasadelicatepoliticalbalancewherebygraindutiesprotected

landowners’interestsandhardmoneyprotectedthoseofcreditors,hencecovering

bothbasesof“gentlemanlycapitalism”withoutanyspecificpolicyinplaceforthe

benefitofindustrialcapitalorlabor.15AstheBirminghamindustrialistandradical

MPGeorgeMuntzwouldcomplainin1840,“provisionhasbeenmadeforthe

12Senior,“FreeTradeandRetaliation,”5;cfJohnA.C.Conybeare,TradeWars:TheTheoryandPracticeofInternationalCommercialRivalry(NewYork:ColumbiaUniversityPress,1987),138‐156.13GeorgeRichardsonPorter,TheProgressoftheNation(London:MethuenandCo.,1912),617;Arnon,ThomasTooke,17.14Hilton,Corn,Cash,Commerce,esp.chs1and4.15SeethediscussionbyPeterJ.CainandA.G.Hopkins,BritishImperialism:InnovationandExpansion1688‐1914(London:Longman,1993),78‐84.

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fundholderbykeepingthestandardinitsoldposition…and,toagreatextent,the

landedinterestshavebeenmaintainedintheirpositionbythecornlaws;butIdo

notseethatanyfaithhasbeenkeptwiththeworkingclasses.”16Althoughfewother

peopleatthetimeopposedboththecornlawsandthegoldstandard(mostassailed

oneortheother),Muntz’sobservationisausefulreminderthatthesetwopillarsof

Britisheconomicpolicybetween1815and1846establishedtermsofdebatein

whichgoldsuppliesandforeigntradeconsistentlycrossedpaths.

ToresurrectSmithianideasintheaftermathofthewar,liberalsdidtheir

besttodivertalldiscussionofgoldtotherealmofmonetarypolicy,wherethey

wagedalargelyinternecinebattleovertheproperfunctionoftheBankofEngland

underthegoldstandard;andtolabelanyonewhoinsistedonconnectinggoldback

totradepolicyashopelesslybehindthetimes.Towardthisend,theyrepeatedly

citedSmith’sargumentsagainstmercantilism,bywayofdismissingany

contemporaryconcernsregardingbulliondrainsortradedeficitsasrestingon

groundsthathadlongsincebeen“exploded”or“abandoned.”17IncaseSmith’s

originalmessagewasnotclearenough,J.R.McCullochprefacedhis1828editionof

TheWealthofNationswithalengthyadditionalrebuttalofmercantilism,focusing

(asSmithhaddone)onThomasMun’sdefenseoftheEastIndiatrade.18When

liberalsturnedfromthe“self‐evident”claimsofHumeandSmithtotheiropponents’16ReportfromtheSelectCommitteeoftheHouseofLordsappointedtoconsiderofthePetitionoftheEastIndiaCompanyforRelief.London:HMSO,1840),1141.17See,e.g.,JohnAshtonYates,ALetteronthePresentDepressionofTradeandManufactures(Liverpool:G.andJ.Robinsonetal.,1841),16;WilliamWaterston,ACyclopaediaofCommerce,MercantileLaw,Finance,andCommercialGeography(Edinburgh:OliverandBoyd,1843),43.18AdamSmith,AnInquiryintotheNatureandCausesoftheWealthofNations(Edinburgh:AdamBlackandWilliamTate,1828),1:xii‐xviii.McCullochborrowedthispartoftheintroductionfromhisDiscourseontheRise,Progress,PeculiarObjects,andImportanceofPoliticalEconomy(Edinburgh,1824),21‐29.

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arguments,theydidqualifytheirverdictregardingthedemiseofmercantilism.Jane

Marcetlamentedin1816that“theoldpopularerrorrespectingthebalanceof

trade…stillprevails,evenamongstourlegislators,”andanEdinburghEncyclopaedia

articleonexportbountiespresentedmercantilism’sstayingpowerasaproblemof

irrefutabletheorybattlinginsufferablepractice:“Nonebutpersonsofobtuse

intellectare,nowadays,blindtotheabsurdityofitsprinciples;whilstitspernicious

operationisstillpermittedtogratifyamercantileandmanufacturingavarice,atthe

expenseofthegeneralcommunity.”19

Inthisway,mercantilismpersistedasapopularfoilinwhatemergedasa

typicalrhetoricalstrategyamongadvocatesoffreetrade:toeducatean

underinformedpublicopinionwiththeclearscienceofpoliticaleconomy.An

exampleofthiswasadialoguebetweenafarmerandhisenlightenedlandlordin

JohnHopkins’sNotionsonPoliticalEconomybyJaneMarcet.WhenHopkinsworried

thatsending“moneyinsteadofgoods”forrawmaterialsthatwereunavailablein

Britain“wouldnotencourageourmanufactures,”hislandlordrespondedwith

Smith’spointthataroundabouttradewasalsobeneficial:“it’sallonewhetherwe

sendthegoodstoAmericatopayforthegold,ortoFrancetopayforthesilks,”since

ineachcase“thelabouringmanufacturerwillhaveemployment.”20

WhentheIrisheconomistMountifordLongfieldponderedthesurvivalof“the

falseprinciplesofthemercantilesystem”in1835,hethoughthecameupwithan

19JaneMarcet,ConversationsonPoliticalEconomy(London:Longman,Hurst,Rees,Orme,andBrown,1816),413;EdinburghEncyclopaeida4(1832):364.Seealso,e.g.,ThomasPerronetThompson,“M’Culloch’sEditionof‘TheWealthofNations,”WestminsterReview17(1832),273.20JaneMarcet,JohnHopkins’sNotionsonPoliticalEconomy(London:Longman,Rees,Orme,Brown,Green,andLongman,1833),167‐168.

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answer,whichdoubledasastrategyforfree‐traders.Protectionistshadturnedto

“differentandmoreplausiblearguments”thanthe“explodederrorsofthemore

ancientsystemofthebalanceoftrade,”whentheyarguedthatdrainsofgold

diminishedindustrial(aswellasagricultural)productivitybydeprivingEnglandof

investmentcapital.Hiscounter‐argument,however,wasnotreallyanydifferent:the

pricemechanismwouldeventuallyattractgoldbackintoBritain,pullingpricesback

upandrestoringeconomicactivity.Whatwasdifferent(andrareenoughfor

classicaleconomistsbetween1815and1846)washisaccompanyingqualification:

“Theseoperationsarenotconstantlyperceptible,buttheforcewhich,ifnecessary,

wouldleadtothem,isalwaysactiveenoughtopreventanynationfromhaving

eithertoomuchortoolittlegoldinitspossession.”21Thetrick,inotherwords,was

togetprotectioniststoseebeyondmerelytemporarydrainsofgold,tothelong‐

termequilibria.Thiscapturedthebasicformofthedebate,whichwasaboutshort‐

termdrainsversuslong‐termgrowthandstability.Therealpointofcontention,

however,concernedtheprotectionists’additionalargumentthatalthoughdrains

seldompersistedformorethanayearortwo,theycarriedwiththemlong‐term

outcomesthatweredeleteriousfromtheperspectiveoftheBritisheconomy.

2.AnOrientalistPrologue

WhenBritishprotectionistsworriedabouttheimpactoffreetradeongold

supplies,theyseldomdidsoinwaysthatdirectlymirroredoldermercantilist

arguments.Buttheydidappealtoassumptionsthatoldermercantilistshad21MountifordLongfield,ThreeLecturesonCommerce,andOneonAbsenteeism(Dublin:MillikenandSon,1835),14‐17.

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originallyexpressed,andthatwerealmostentirelyabsentinclassicalpolitical

economy:specifically,theconcernthatBritain’stradingpartnershadreacheda

saturationpointintheircollectivedemandforBritishgoods,andthatanyfurther

grainimportscouldonlycomeattheexpenseofBritain’smoneysupply.This

sectionsurveyssomeexamplesoftheseconcernsastheyappearedineighteenth‐

centurydiscussionsofIndia,whichareusefulforshowingcontinuitiesandcontrasts

withlaterprotectionistdiscourse.Thesealsorevealanenduringsuspicionthat

Hume’sconceptofaprice‐specieflowmechanismdidnotnecessarilyapplywhere

“Asiatic”customsandpoliticalrulepersisted.Totheextentthatnineteenth‐century

protectioniststransferredthisperspectivefromIndiaandChinatoRussiaand

Poland,itispossibletore‐readthedebateoverthecornlawsasaremakeofan

earlierperformancepittingSmithagainstMontesquieu.

Inclaimingthatgrain‐supplyingnationswereunlikelytopurchaseBritish

goods,protectionistsrevivedseveralargumentsthathadcommonlyaccompanied

oldermercantilistcritiquesoftheIndianandChinatrade,whichforegroundedthe

unidirectionaldrainofbullionfromwesttoeast.AccordingtotheEastIndia

CompanyofficialJohnHenryGrose,whoservedinBombayintheearly1750s,India

was“abottomlesspitforbullion,whichcannevercirculatebacktoEurope”;the

OrientalistThomasMauriceclaimedthat“thegreattreasuresingoldandsilver,

producedbytheminesofSpain,flowed[toIndia],tobethereswallowedupina

vortexthatneverregurgitatedtheshiningspoil.”22

22JohnHenryGrose,AVoyagetotheEast‐Indies,beganin1750;withObservationscontinuedtill1764(London:S.Hooper,1766),324;ThomasMaurice,IndianAntiquities:or,Dissertations,relativeto…Hindostan(London:H.L.Galabin,1800),7:492.

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Thedrainofbullionthatthesewritersweredescribingwasnotafigmentof

theirimaginations.Between1600and1800,asteadyflowofgoldandsilverfound

itswayfromLatinAmericatoIndiaandpointseast:bullionexportswereworth

around£200,000in1600,risingto£750,000ayearin1700and£1.3mby1800.

SpainandPortugaltypicallypaidofftheirtradedeficitswithEngland,France,and

theNetherlandsoutofthebulliontheyreceivedfromLatinAmerica,andwhatthe

lattercountriesdidnotkeepathometheysentontoEastAsia(aswellastheBaltic

StatesandtheMiddleEast).23Bullionincludedsilveraswellasgold,andespecially

intheseventeenthcentury(priortonewgolddiscoveriesinBrazil),theBritish

shippedmuchmoresilverthangoldtoIndiaandpointseast.Asevereshortageof

silvercoininLondonin1620wastheproximatecauseofthefamousmercantilist

debatesthatSmithwouldrefertoinTheWealthofNations:EdwardMisselden’s

critiqueoftheEastIndiatradeasthe“specialremotecauseofourwantofmoney”

spurredMun’sresponseinEngland'sTreasureinForeignTrade.24

Todiagnosethisdigestionofbullion,Britishwritersidentifiedfourrelated

culturalandpoliticalconditions,allofwhichconvenientlysetIndiaapartasdistinct

fromNorthernEuropeanhabitsandpolicies.Firstwasasuperstitioustendencyto

adorntheirtemplesandidolswithgold.Secondwastheirproclivitytoadorntheir

bodieswithgold.Third,oftenlinkedtothefirsttwo,wasapoliticalsystembasedon

tyrannyandplunder.Andfourth,theSouthAsianclimatecurtailedIndiandemand

23ArturAttman,AmericanBullionintheEuropeanWorldTrade,1600‐1800(Göteborg:Kungl.Vetenskaps‐ochVitterhetsSamhallet,1986),5‐8,77‐78.FactoringinthepreciousmetalsthatweresmuggledoutofLatinAmerica,theactualvolumewasperhapstwiceaslarge24Misselden,FreeTrade(1622),citedinBarber,BritishEconomicThoughtandIndia1600‐1858(Oxford:ClarendonPress,1975).

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forwesterngoods,leavingbullionastheonlydesirableitemintrade.Inallthese

cases,thefocuswasonculturaldifferenceasanexplanationofaperceived

economicproblem.MichaelSymes,whoaccompaniedanembassytoBurmain1795,

depictedtheuseofgoldthereasaninversionofBritishpriorities:“althoughhighly

valued,itisnotusedforcoininthecountry;itisemployedsometimesinornaments

forthewomen,andinutensilsandear‐ringsforthemen;butthegreatestquantityis

expendedingildingtheirtemples,inwhichvastsumsarecontinuallylavished.”

Britishwritersspentevenmoretimecataloguingthewidespreaduseofgoldin

adorningIndianbodies,accountsofwhichservedthesimilarfunctionofmarking

SouthAsiansasaraceapartfromEuropeans.WilliamHodges,describingMadrasin

1780,identified“themomentinwhichanEuropeanfeelsthegreatdistinction

betweenAsiaandhisowncountry”asthepointwhenhenoticed,enteringthe

harbor,acrowdof“blackfacesadornedwithverylargegoldear‐rings.”25

ManycommentatorspairedthesedescriptionsofIndiansuperstitionand

adornmentwithenvironmentalorpoliticalexplanationsforwhyIndiansaccepted

onlybullioninexchangefortheirgoods.Montesquieu,whoseobservationsonIndia

inSpiritoftheLawscastalongshadowoversubsequentaccounts,claimedthatthe

Indianclimate“neitherdemandsnorpermitshardlyanythingwhichcomesfrom

ours.”Followinginthisvein,theBritishhistorianAlexanderDowascribedthedrain

ofbulliontoIndiatothefactthatitsinhabitants’wants“weresuppliedalmost

spontaneouslybythesoilandclimate,”andanotherBritishOrientalistcited“the

25MichaelSymes,AnAccountofanEmbassytotheKingdomofAva,sentbytheGovernor‐GeneralofIndia,intheYear1795(London:W.Bulmer,1800),260;WilliamHodges,TravelsinIndia,quotedinAnalyticalReview15(1793):241.

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peculiarbenignityoftheclimateinwhichtheylived”asthereasonwhyIndians“had

norelishfortheproductionsofanyothercountry.”26ThetravelwriterMaria

Grahamprovidedatypicalpoliticalexplanationin1813:“Wherethepeoplewere

dailyexposedtotheravagesofbarbarousarmies,itwasnaturaltoendeavourto

keeptheirlittlewealthinthatforminwhichitcouldwithmosteasebeconveyed

outofthereachofplunderers.”27

SuchdiagnosesofAsianabsorptionofbullionstartedtorecede(althoughit

neverwhollydisappeared)after1760,whentheEastIndiaCompanystartedtorely

ontaxrevenuesinsteadofbullionimportstopurchasegoods.Fromashareoffour‐

fifthsofitsexportstoIndia,bulliondeclinedtoaone‐eighthshareinthedecade

after1757.28Thisreversalmadefree‐tradeadvocatesoptimisticthatnineteenth‐

centurydrainsinthewouldalwaysbemoremoderatethanhadbeenthecasewhen

Asiahadabsorbedwesternbullion.McCulloch,forinstance,defendedunilateral

freetradewithFrancein1819onthegroundsthattheflowofbullionwasless

stickyamongEuropeantradingpartnersbecausethevalueofgoldandsilverin

neighboringcountrieswas“alwaysextremelynearapar”:indistinctcontrastto

Asia,wheretransportcostsandanassymetryinthevalueofthepreciousmetals

madeanindirecttradelessefficient.29

26CharlesdeMontesquieu,TheSpiritofLaws(trans.ThomasNugent;London:J.NoyrseandP.Vaillant,1750),2:21,328;Dow,xliv;CriticalReview38(1803):146.ThomasMunalsoappealedtoclimatetoexplainthedrainofsilvertoIndiainEngland’sTreasurebyForraignTrade(1668):seeBarber,BritishEconomicThought,12.27MariaGraham,JournalofaResidenceinIndia(Edinburgh:GeorgeRamsay,1813),3.28RamaDevRoy,“SomeAspectsoftheEconomicDrainfromIndiaDuringtheBritishRule,”SocialScientist15(1987):40‐41.29J.R.McCulloch,“CommercialEmbarrassments—TradewithFrance,”EdinburghReview32(1819),59.

16

Atamorebasiclevel,thereversalofspecieflowsfromeasttowestfreedup

bullionforotheruses,nottheleastofwhichincludedwagingwaragainstthe

AmericancoloniesandFranceafter1776,andmaintainingthegoldstandarddespite

recurrentdrainsofbulliontoEuropeandAmericaafter1820.McCullochcitedthis

asoneofseveralreasonstobehopefulthatthedeflationthathaddoggedBritainin

the1820swouldsoonbeathingofthepast.30Severalliberalcommentatorsalso

citedthiseventasindicativeoftheability(ifnotinevitability)ofanindustrialnation

tobreakintoeventhemostresistantmarkets—typicallyneglectingtomentionthe

importantroleplayedbythecoercivepowersoftaxcollectionandmilitaryinvasion

inproducingthisoutcome.31ThefactthatIndia(andlaterChina,aftertheOpium

Wars)onlybeganacceptingmanufacturedgoodsinsteadofbullionfromBritain

followingmilitarydefeatmaybethereasonwhyalmostnoliberalsappealedto

thosecountriesbynamewhentheypredictedthatEuropeanswouldwarmtothe

ideaoftradewithBritain.

Britishprotectionists,fortheirpart,drewaverydifferentsetoflessonsfrom

therecenthistoryofAnglo‐Asiantrade.Withdueallowanceforapparent

differencesinnationalcharacterandpoliticalsystems,theyrecurrentlyinvoked

ethnographicandpoliticalargumentsthatparalleledearlier“Asiatic”discoursesin

30J.R.McCulloch,ADictionary,Practical,Theoretical,andHistorical,ofCommerceandCommercialNavigation(London:Longman,Rees,Orme,Brown,GreenandLongman,1832),57.HealsocitedincreasedoutputofgoldandsilverinSouthAmerica(relativetothedipinproductionbetween1810‐25)andRussia.31SubstanceofaDebate,intheHouseofCommons…onEastandWestIndiaSugar(London:J.S.Brickwood,1823),13(WilliamHuskisson);ReportofthePublicMeetingatLiverpool…[on]theRestrictionsimposeduponCommercebythePresentCharteroftheEastIndiaCompany(London:W.Lewer,1829),36(motionbyJohnEwart).OntheroleofpoliticalforceinIndiandeindustrializationseePrasannanParthasarathi,TheTransitiontoAColonialEconomy:Weavers,MerchantsandKingsinSouthIndia,1720‐1800(Cambridge:CambridgeUniversityPress,2001).

17

ordertorefutetheclaimthatforeignerswouldcondescendtotakeBritishgoods,as

opposedtobullion,inexchangefortheirgrain.Boththeparallelsandthe

departuresweresignificant.Byinvitingearliercomparisonstodecidedlyun‐

EnglishpeasantsandOriental‐styledespotism,protectionistspaintedBritain’s

would‐betradingpartners,andforeigntrademoregenerally,asafarriskier

propositionthanliberalsallowed.Theydepartedfromearliermercantilist

argumentswhentheyponderedwhateasternEuropeanswerelikelytodowiththe

bulliontheyabsorbed.IncontrasttoAsiaticdespots,who(accordingtothe

Orientalistnarrative)wastedgoldandsilveronpompousdisplayandterrorized

theirsubjectsintoburyingit,Europeanautocratsallegedlyhadfarmoresinister

plansforthegoldtheyabsorbedinexchangefortheirgrain:toinvestin

manufacturing,therebybringingBritishindustrydownalongwithitsagriculture.32

Anotherdeparturefromeighteenth‐centurymercantilism,towhichIwill

returnintheconclusion,relatedtotheimpactofgoldandsilversuppliesonprices.

Intotheearlynineteenthcentury,defendersoftheEastIndiaCompany’smonopoly

celebratedthedrainofbulliontoAsiaasusefullybluntinginflationintheWest;in

DavidMacpherson’swords,Europehadbeen“happilypreservedbytheexportation

ofsilvertoIndiafrombeingoverwhelmedbytheinundationofthepretious

metals.”33Instarkcontrast,mercantilistsinthefirsthalfofthenineteenthcentury

32Anotherparallelthatonlypartlyheldupconcernedthewaynineteenth‐centuryprotectionistsdepictedpeasantsincentralandeasternEurope,whichtendedtobelimitedtonegativeassertionsregardingtheirincapacitytodevelopatasteforBritishgoods.DepictionsofEuropeanpeasantswastinggoldonadornmentfocusedonsouthernEurope,tradewithwhichdidnotfeatureinprotectionistwriting.33DavidMacpherson,TheHistoryoftheEuropeanCommercewithIndia(London:Longman,Hurst,Rees,Orme,andBrown,1812),337.

18

fearedthedeflationaryimpactofbulliondrains,againstthebackdropofthe

increasingscarcityofgoldandsilver.

3.MercantilistWineinProtectionistBottles

Sinceliberaleconomistsstudiouslyignoredanyandallprotectionistappeals

tonationalcharacterandpoliticalmachination,thedebatesurroundingthese

concernsseldomprogressedmuchfartherthanadirepredictionononeside,

followedbyanassertionontheotherthatthepredictionwentagainstthelawsof

politicaleconomy.Atbottom,theeconomiclawinquestionwasSay’sLaw,which

refutedthepossibilityofageneralglut,inthatliberaleconomistsclaimedthatthe

price‐specieflowmechanismwouldalwayseventuallyregeneratedemandfor

Britishgoods.Totheextentthateithersidegotbeyondthisstalemate,theground

shiftedtotheargumentthatevenatemporarydeficitinthebalanceofpayments

wouldhavearedistributiveimpact,sincedeflationfavoredthefinancialsectorover

the“productive”classes.

Fewprotectionistmanifestosthatappearedbetween1825and1846lacked

somevariantonthedoomsdayscenarioinwhichanopengraintradewouldleadto

a“ruinousdrainuponthemetallictreasuresofthecountry”or“drainthebullion

coffersoftheBankofEnglandtotheverydregs.”34Tosupportthis,theyneededto

meethead‐ontheliberalclaimthatAmericansandEuropeanswouldacceptBritish

34ArchibaldAlison,ThePrinciplesofPopulation,andtheirConjunctionwithHumanHappiness(WilliamBlackwoodandSons,1840),2:443;JamesCharlesDalbiac,AFewWordsontheCornLaws(London:JamesOllivier,1841),53.SeealsoEdwardDaviesDavenport,TheCornQuestion,inaLetteraddressedtotheRightHon.W.Huskisson(London:J.Ridgway,1825),3‐4;RemarksupontheCornLawsoftheUnitedKingdomofGreatBritain([London[,1828),37‐38;OughttheCornLawstobeRepealed(Edinburgh:A.Cannon,1840),23.

19

manufacturedgoods(insteadofgold)inexchangefortheirgrain;and,failingthat,

wouldacceptbillsofexchangedrawnoncountriesthatdidbuyBritishgoods.They

counteredthefirstargumentbyproclaimingtheincapacityofEuropeanpeasantsto

acquireatasteforBritishexports,andbypointingtothetendencyofgrain‐

exportingautocraciestoprotecthomemanufacturesattheexpenseofBritishgoods.

Theywerelesssuccessfulataddressingthesecondclaimuntilafterthecommercial

crisisof1836‐38,whenthefailureoftheUSeconomytoabsorbexcessBritish

exportsprovidedthemwithhardevidencethattheglobalmarketforthosegoods

wasnotreliablyelastic.

Thetermsofthisdebatewerealreadywellestablishedbythelate‐1820s,as

rumorsswirledconcerningHuskisson’sdesignsonthe1815cornlaw.Anearly

examplewasLaytonCooke’sclaimin1827that“itcouldscarcelybeexpectedthat

theserfsofPolandandRussiawouldrequiretheluxuriesoflifeessentialonlyto

thosewhohavearrivedatahighstateofcivilization.”Answernumbereighteenona

listofTwentyQuestionssubmittedbytheGeneralAgriculturalCommitteethesame

yearpredictedthatliberalizingthe1815CornLawwould“takethegoldoutofthe

country”topayforcorn“frompoor,thinlyinhabited,orsemi‐barbarouscountries,

whoimportfewmanufacturedgoods.”35Suchclaimspersistedintothe1830s,as

whentheBuckinghamshireMPGrenvillePigottarguedin1832that“theywhoare

acquaintedwiththeconditionofthepeasantryorfarmers(fortheyarethesame)in

north‐easternGermany,Poland,andRussia”knewthatitwould“require

35LaytonCooke,PracticalObservationsontheImportationofForeignCorn,underaGraduatedScaleofDuty(London:JamesRidgway,1827),24;TwentyQuestionssubmittedbytheGeneralAgriculturalCommittee…andAnswersReturnedfromVariousPartsoftheKingdom(London:byOrderoftheCommittee,1827),10.

20

generationstogivethemevenatasteforthemanufacturesofthiscountry,”as

opposedtogoods“suppliedbytheirownhousehold.”36

Sofar,protectionistsonlyprovidedreasonswhypeasantsontheContinent

wereunlikelytotakeBritishgoodsinexchangefortheirgrain.Thenextplankof

theirargumentturnedtowhatthesecountrieswoulddowiththebullionthat

Britainsentthem.Here,thepresidingfear(asaCarlislefarmerexpresseditin

1829)wasthat“thegoldwepayforforeigngrainwillactasabountytoextendtheir

manufactures.”37Fuelingthisfearwastherapidemergence,almostimmediately

followingtheCongressofVienna,ofindustrialprotectioninAmericaandEurope:

startingwiththeTariffof1816intheUS,followedbyPrussianCustomsUnionof

1818(whichevolvedintotheGermany‐wideZollvereinby1834)andaRussian

tariffonover200importsin1822.38

Sinceittooktimefortheeconomicimpactofthesenewtariffstobefelt,

protectionistsinthe1820sinsteadextrapolatedfromthewaryears,whenBritain

“promoted[foreigners’]capabilityofcreatingmanufacturingestablishments”by

sendinggoldtoherEuropeanalliestopayforgrain.39Bythelate1830s,two

decades’worthofexperiencewithforeigntariffshadhardenedtheirstance.One

36GrenvillePigott,ALetterontheNatureoftheProtectionaffordedbythePresentCornLaws,andontheProbableResultofaFreeTradeinCorn,addressedtotheLand‐Owners,Farmers,andElectorsofBuckinghamshire(London:RoakeandVarty,1832),48.37ARefutationofaCatechismontheCornLawsbyaCumberlandFarmer(London:JamesRidgway,1829),22.38C.EdwardSkeen,1816:AmericaRising(Lexington:UniversityofKentuckyPress,,2003),62‐65;ToniPierenkemperandRichardH.Tilly,TheGermanEconomyduringtheNineteenthCentury(NewYork:BerghahnBooks,2004),31‐37;BorisAnanich,“TheRussianEconomyandBankingSystem,”inDominicLieven,TheCambridgeHistoryofRussia:Vol.2,ImperialRussia,1689‐1917(Cambridge;CambridgeUniversityPress,2006),400.39ThomasGardnerBramston,ThePrincipleoftheCornLawVindicated(London:J.HatchardandSon,1827),76;

21

pamphleteerin1843predictedthatunilateralfreetradewouldenableEuropeansto

“growrichbybringingcorn,pork,andbeeftoyourshoresandtakingbackgold;and

thesurplusoftheirwealth…willbelentoutatfullusancetotheyoungand

enterprisingmanufacturerswhowantcapital.”JohnGladstonesimilarlyopposed

theliberals’“vapid,frothydeclamation”thatEuropeanswouldtakeBritishtextiles

inexchangefortheirgrainbyarguingthattheyhad“beenengagedforyearspastin

originatingandadoptingmeasuresfortheexclusionofourmanufacturesandthe

promotionoftheirown.”40

ImplicitinmanyoftheseargumentswastheconcernthatPrussianand

Russianautocratswoulduseanymeansnecessarytofoilfree‐traders’hopesthat

Europeanconsumerscouldeverbeconvincedtovotewiththeirpocketbooks.A

“PracticalFarmer”paintedthispictureinthebleakestpossiblecolorsin1839,

worryingthatunderfreetrade,

themoneyedcapitalists,andtheEmperorofRussia,wouldthenhaveitalltheirownway.Russiaalonewouldthenraise,betweenWoronetzandOdessa,quitesufficientcorntosupplythisempire…ThefirstthingtheEmperorwoulddo,inthiscase,wouldbe,tobuildGovernmentwarehousestoagreatextent,andinsistuponallthecornbeingthereplaced;andadutywouldbeimposedforrent;andanadditionaldutyuponexportation,whenthiscountryrequiredthecorn.Goldwouldberequiredforthepurchaseofthecorn:anditisabsurdtoexpect[that]Russiawouldtakeyourmanufacturesforcorn.Theywouldsay,“Bringgold;orgoback,andletyourpeoplestarve.”Fewpersons,exceptthosewhohaveresidedinRussia,areawareoftheeffectofanukaseissuedbytheAutocrat:disobedience,inthemosttriflingparticular,byalandowner…wouldinsurehimajourney,gratis,toSiberia:andhispropertywouldbeconfiscated.”

40ReflectionsontheDesignsandPossibleConsequencesoftheAnti‐Corn‐LawLeague(London:Marchant,SingerandSmith,1843),15;JohnGladstone,FourLettersaddressedtotheEditoroftheMorningPostontheObjectsoftheMinisterialBudget(London:WilliamBlackwoodandSons,1841),5.SeealsoJosephHubback,ALetterontheCornLaws(Liverpool:LaceandAddison,1843),29,wherehecites“thehostiletariffsoftheUnitedStates,France,Germany,SpainandPortugal.”

22

Addinginsulttoinjury,someprotectionistspredictedthatonceEuropeandespots

hadruinedBritishfarmersandcaughtupwithBritishindustry,theywouldbeina

positiontolureawayBritishartisans,deliveringthedeath‐blowtoindustryaswell.

Oneprotectionistpamphlettookthisreasoningtodesperateextremes:“Englishskill

andinventiveingenuitywillbeplantedinaforeignsoil,inwhichtallchimnieswill

everywheremeettheview:ourownlandwillbedesolate,andouroncevaunted

manufactorieswillbeturnedintoreceptaclesforthestarvingmillionsthusthrown

outofemployment.”41

ProtectionistsalsoneededtoconfrontthescenarioinwhichBritain’sgrain

providerswouldacceptbillsofexchangeissuedonthesecurityofotherBritish

exportmarkets,henceremovingtheneedtosendthemgold.Theymetthisclaimby

arguingthatdemandwasnotelasticinthosepartsoftheworldthatpresently

purchasedBritishtextiles.Suchassertionsbecameeasiertomakeafterthe

commercialcrisisof1838,whenAmericansprovedtohaveasatiableappetitefor

Britishgoods.Writingin1840,theIrishjournalistR.N.Kellywaswillingtoallow

thatbeforethecrisisBritishgrainimportswere“actually,thoughindirectly,

purchasedwithourmanufactures”viaAmericanbills;butsincethen,“muchmore

goldhasgoneoutofEngland,…thanwouldhavegone,hadourcommercial

relationswithAmericabeenuponasoundandwholesomefooting”;andconcluded

that“whatmaybeconsideredthecommercialinsolvencyofthatcountryhastotally

derangedtheordinarycourseofourowndealingswithothernations.”ADoncaster41LettertotheDukeofBuckingham,ontheCornLaws(London:T.Cadell,1839),16‐17;FallaciesofthePhilanthropists!ACandidAppealtoCommonSense,inSomePlainTalkingtotheManufacturersandArtisansaboutThemselvesandtheAgriculturists(London:W.HDalton,1841),18‐19.

23

protectionistspecificallyblamedthe1838crashonBritishcapitalists’“desireto

multiplybeyondallpastprecedent,theproductivepowersofmanufactures,“and

citedthedramaticincreaseinBritishexportstotheUSinthefouryearsleadingup

tothecrashas“factswhichcornlawrepealersshouldkeepinmind.”42

Adifferentprotectionistargument,whichalsotappedintoamercantilistfear

ofunrequitedtrade,focusedontheredistributiveeffectsofdrain‐induceddeflation.

ThiscameoutmostclearlyinanexchangebetweenThomasPerronetThompson

andananonymousFraser’sreviewerin1833‐1834,focusingonthesilktradewith

France.WhenFraser’slinkedfreetradewiththe“continuallesseningofour

circulatingmedium,”andThompsonansweredwiththeusualappealtothe

“counteractingoperations”effectedbytheprice‐specieflowmechanism,Fraser’s

respondedthatthis“wouldanswertolerablywelliftherewerenonationaldebt,no

‘deadweight,’nomortgages,pensions,fixedsalaries,settlements,andother

immoveablepayments,interwovenwitheveryman’saffairs…Bytheirtwo

nostrumsof‘metalliccurrency’and‘freetrade,’oureconomistshavecontrived,in

littlemorethantenyears,toreducethepricesofallkindsofcommodities.”43

Notallprotectionistswereasreadytoabandonthegoldstandardasthis

writer(althoughmanywere),butmostwouldhaveagreedthatthecornlaws

performedtheessentialserviceofproppinguppricesinthefaceofgold’s

deflationarytendencies:especiallyinlightofthehightaxesthatBritain’sdebt

42R.N.Kelly,AReviewoftheCornLawQuestion(Edinburgh:WilliamBlackwoodandSons,1840),48;G.CalvertHolland,LectureontheCornLaws(Doncaster:R.Hartley,1840),12‐13.CfMauriceLévy‐Leboyer,“CentralBankingandForeignTrade:theAnglo‐AmericanCycleinthe1830s,”inC.KindlebergerandJ.P.Laffargue(eds.),FinancialCrises:Theory,HistoryandPolicy(Cambridge:CambridgeUniversityPress,1982),66‐113.43“OnNationalEconomy,”Fraser’sMagazine9(1834),359,361.

24

burdenimposedonlandlordsandfarmers.44Thiswasespeciallythecaseduringthe

shortperiodoftimewhenthecornlawscoexistedwiththemorestringent

requirementsunderthe1844BankCharterAct,whichpeggednoteissuetothe

BankofEngland’sbullionreserves.AprotectionistwriterfortheEnglishReview

arguedthatthemorerigidpost‐1844goldstandardneededsuchalawmorethan

ever:“themonetarysystemofthecountryisdependentforitsveryexistenceupon

thepreventionofanyconsiderableimportationofforeigngrain.”Or,asanother

protectionistproclaimedin1846,theBankCharterActmadeitallthemoreclear

that“freetradeincornandmonopolyinmoneycannotpossiblyexisttogether.”45

4.BuryingTreasure:GoldandFreeTrade

Themostcommonresponseamongadvocatesoffreetradetoprotectionist

fearsaboutadrainofbullionwastofocusintentlyonoutcomesratherthan

processes.Withmorethanalittleimpatience,theycontinuallyreminded

protectioniststhatgoldwouldanddidreturntoEnglandintheend,justasHume

hadpredicteditwould;andthatwhenitdid,overalloutputalwaysincreased.When

stoppedtofocusontheproblemscausedbydrains,theyeitherblamedthisonthe

cornlaws,which(theyclaimed)preventeda“regulartrade”withgrainexporters;or

divertedattentiontomonetarypolicy,andspecificallythenumerousmistakes

committedbytheBankofEnglandandjointstockbanks.Allthesearguments

followedSmithinde‐emphasizingthesignificanceofgoldintheinternational

44See,e.g.,AlarmingStateoftheNationConsidered;theEviltracedtoitsSource,andRemediesPointedOut(London:JamesRidgway,1830),37‐39.OnthispointmoregenerallyseeGambles,ProtectionandPolitics,chs.4‐5.45“Wellington,”EnglishReview4(1845),304;“CurrencyandCorn,”Hood’sMagazine5(1846),87.

25

economy.LikeSmith,theypresentedgoldandsilverasusefulutensils(possessing

“scarcelyanyvaluebutasinstrumentsofexchange,”asonejournalistputitin

1823),alwaystherewhenpeopleneededit,butnotnearlyasimportantasmany

protectionistsseemedtothink.46

Free‐tradersmostoftenrespondedtofearsaboutbulliondrainsby

bemoaningtheinabilityofprotectioniststounderstandbasiceconomics.Manyof

themledwiththeclaimthattalkofgolddrainswasaredherring:“aperfectly

irrelevantconsideration,whichhasnothingwhatevertodowithfreetrade,butwith

whichithasbeenfoundpeculiarlyconvenient,bycertainsophists,toencumberthe

matter,”asonepamphleteerarguedin1839.47Mostappealed,directlyorindirectly,

toHume’sprice‐specieflowmechanism,aswhenRichardBadnallofferedthe

assurancein1830that“acountryexportingherproduce,andonlyimportinggold,

cannotcontinuetodosowithoutcausingaglutofthatcommodity,whichissureby

eventuallyfindingitsownlevel,toreturnthroughonechanneloranother,tothat

countryfromwhichitwasoriginallyexported,inexchangeforothercommodities.”

Elevenyearslater,theliberaljournalFactsandFigurescounteredtheargumentthat

“foreignerswillonlytakeourgoldinpaymentfortheircorn”byinsistingthatthey

“candonothingofthesort,”since“underafreetradesystemeveryarticlefindsits

levelinprice,andsodoesgold.Ifwehavetoolittlepettycashtocarryonourtrade,

andanothercountryhastoomuch,wecangiveahigherpriceforit,andbackit

comes.”Thatlinessometimesblurredbetweeneconomicargumentsandarticlesof

46EdinburghAnnualRegister16(1823):116.47JelingerC.Symons,ArtsandArtisansatHomeandAbroad:withSketchesoftheProgressofForeignManufactures(Edinburgh:WilliamTait,1839),262.

26

faithisapparentfromafree‐tradetractin1838,whichsimplyproclaimedthat“the

exchangeswouldatalltimesputthemattertorights.”48

Atitsmostutopian,thisargumentrestedonaprofoundfaithinthecapacity

ofBritishingenuitytogenerateaninfinitedemandfortheirproducts.Returning

fromEasternEuropein1839,theagriculturalreformerJohnPagetsawnoreason

whygrainimportsnecessarilyimpliedadrainofbullion:“What,inthesedaysof

universalmovement,steamandrailroads,istohinderatasteforEnglishluxuries

andEnglishenjoyments,tospringupamongsttheownersofthevastplainsof

Europe;and,insteadofgoldgoingoutforcorn,suddenlycripplingeverybranchof

commerce,andimpoverishingtheentirecommunity,EnglishingenuityandEnglish

manufacturesstimulated,advanced,andexchanged,inreturnforcontinentalgrain.”

Forthefree‐traderGeorgeBrowning,Britainpossessed“akindofnaturalnational

monopoly”onintelligenceandindustry,whereby“thenaturalcurrentofher

commerceis,tomanufactureforthosecountrieswhosupplyherwithraw

materials.”49

Amoresophisticatedvariantonthisargumentwastheclaimthata“regular,”

asopposedtosporadic,demandforcornonBritain’spartwouldsustainaregular

demandformanufacturesontheotherside.Inotherwords,mercantilismwasonly

48RichardBadnall,LettertotheLordsandCommons,onthePresentCommercialandAgriculturalConditionofGreatBritain(London:Whittaker,TreacherandCo.,1830),129‐130;FactsandFigures1(1841),14‐15(paraphrasingaletterbyHamerStansfieldofLeeds);TheInjuryInflicteduponthePeoplebytheCornLawsandtheProsperitythatwouldresultfromtheirRepeal(NewBrentford:CharlesJamesMurphy,1838),15.SeealsoWilliamAnderson,NoticesonPoliticalEconomy(J.M.Richardson,1821),67;J.C.Ross,AnExaminationofOpinionsmaintained[byMalthusandRicardo](London:J.M.Richardson,1827),42‐43;HenryBooth,FreeTrade,asItAffectsthePeople(Liverpool:WalesandBaines,1833),16.49JohnPaget,HungaryandTransylvania(1839),quotedinLondonSaturdayJournal3(1840),121;GeorgeBrowning,TheDomesticandFinancialConditionofGreatBritain(London:Longman,Rees,Orme,Brown,Green,andLongman,1834),.

27

arelevantconcernunderthecornlaws,whichcreatedconditionsinwhichgold

suppliesmatteredmorethanwouldbethecaseunderfreetrade.Removethem,and

goldwouldsoonrecedetothemarginsjustasHumehadpredictedwouldbethe

case.“IftherewerenorestrictionsontheimportationofforeignCorn,”arguedthe

HuddersfieldministerEdmundKellin1840,“foreignnationswouldgrowcorn

regularlytosupplyanydeficiencyinourharvests,andwouldthenpayusinCornfor

ourmanufactures,andallthatwouldbenecessarytocarryonourcommercewith

suchcountrieswouldbeasmallportionofgold,toactlikecounters,inadjustingthe

triflingbalances.”50Thiswasanespeciallypopularargumentagainstthesliding

scalethatHuskissonhadintroducedin1829,which,manyargued,madeBritish

demandforgrainlesspredictableforforeignsuppliers.Onelecturerarguedin1843

thatundertheslidingscale,“wecomepouringinonthemwithourgoldlikean

invadingarmyoflocusts,layourhandsoneverybushelofcornthatallthebullionof

theBankofEnglandcanbuy,sweeptheirmarketsbare,andleavefaminebehind.”

Noneofthiswouldhappen,heconcluded,ifwewouldonly“letnaturealone.”51

Thesetypesofarguments,whichessentiallywishedawayanypossible

negativeeconomicconsequencesofadrainofbullion,wereeffectiveenoughwhen

50EdmundKell,TheInjuriousEffectsoftheCornLaws,onAllClassesoftheCommunity,includingtheFarmerandtheLandowner(London:SmallfieldandCo.,1841),23.SeealsoJamesS.Buckingham,AnAddressontheProposedReformsintheCommerceandFinanceoftheCountry(London:Simpkin,MarshallandCo.,1841),231‐232;J.E.Elliot,LettertotheTeviotsideFarmer(London:T.Brettell,1841),7‐8;TheIncubusoftheNation,andEffectsofItsRemoval(JamesPattie,1841),8;ThomasPlint,Speech…attheWest‐RidingMeetingofAntiCornLawDeputies(Leeds:JohnBarr,1841),11;ReportoftheConferenceofMinistersofAllDenominationsontheCornLaws,heldinManchester(Manchester:J.Gadsby,1841),43,97,107.51PhilipHarwood,SixLecturesontheCorn‐LawMonopolyandFreeTrade(London:JohnGreen,1843),104‐105.OntheimpactoftheslidingscaleonsupplyanddemandseeWrayVamplew,“TheProtectionofEnglishCerealProducers:TheCornLawsReassessed,”EconomicHistoryReview33(1980):382‐395.

28

liberalswerepreachingtotheconvertedatAnti‐CornLawLeaguemeetings.They

werelesseffectivewhentheyfoundthemselvesinParliament,wheretheywere

expectedtodosomethingaboutthenegativeimpactofrecurringeconomic

downturns.Oneoptionwastoblame“overtrading”bymerchantsandbankers,a

conceptthatatleastdivertedblameforcommercialcrisesfromthelandlordswith

whomtheylegislatedinparliament.ThiswasthefavoredapproachofMalthusian

financialreformerslikeLordOverstone,whoassumedthatthatbusinessmenwho

recklesslyspeculatedbeyondtheirmeansweredoomedtoexperienceendless

wavesofself‐deceptionandbankruptcy.52McCullochsimilarlyblamedthedrainin

1837onAmericanmerchants,who“grosslyovertraded”andshuttheireyestothe

inevitable“scarcityofmoney”thattheiractionshelpedtobringabout.53

Asecond,moreconstructive,liberalresponsetocommercialinstabilitywas

totinkerwithmonetarypolicy.Oneinterpretationforthevastamountofinkspilled

on“thecurrencyquestion”between1820and1846,themajorityofwhichwas

producedbypeoplewhowereunitedintheiroppositiontothecornlaws,isthatit

divertedattentionfrommercantilistdiagnosesoffinancialcrises.Thesedebates

focusedontheallocationofresponsibilityamongbankersandtherelevant

instrumentsofcreditthatshouldbesubjectedtoregulation;theyculminatedinthe

victoryofthe“currencyschool,”whichresultedinthe1844BankCharterAct.Aless

successfulproposal,whichDavidRicardofirstintroducedin1816andMcCulloch

revivedin1828,servestoillustratethetendencyofliberalstoembracecurrency

52BoydHilton,TheAgeofAtonement:TheInfluenceofEvangelicalismonSocialandEconomicThought,1795‐1865(Oxford:OxfordUniversityPress,1988),131‐136..53J.R.McCulloch,“CrisisintheAmericanTrade,”EdinburghReview66(1837),234.

29

reformasanalternativetomercantilism.Theschemeconsistedinapapercurrency

backedexclusivelybybullion,withonlytokencoinsincirculation.Notonlywould

thisgreatlyreducetheriskofdomesticbankruns,McCullochargued,itwouldalso

enabletheBanktoregulatepriceswithsufficientprecisiontoenticetrading

partnerstopreferBritishexportsovergold“underalmostanyconceivablestateof

ourcommercialrelations.”54

Asisoftenthecaseinpersistentcontroversies,bothsideswerecorrect

regardingdifferentaspectsoftheirarguments.Theliberalclaimthatgolddid

alwaysreturnfollowingadrainwas,ofcourse,trueforthefirsthalfofthe

nineteenthcentury,andtheeconomydid,bymostaccounts,achievesignificant

overallgrowthduringthesameperiod.Ontheotherhand,thatperiodwasalso

markedbyboutsofdevastatingunemploymentandpersistentdeflation,which

couldatleastinsomecasesbetraceddirectlytodrainsofgold,andwhichcame

withaclearsetofwinnersandlosers.Oneofthesecretstoliberalsuccessinthe

battleforfreetradewastheirabilitytokeepattentionfocusedonconsumerprices

and“monopoly”rentschargedbylandlords,andfocusedawayfromthecreditor

interestthatgainedsubstantiallyfromdeflation.PeriodicallydemonizingtheBank

ofEnglandand“overtrading”speculatorshelpedtheircause,asdidthereticence

withwhichmanyprotectionistsdirectlyattackedthe“fundholder”interest,forfear

ofbeingassociatedwithBirminghamradicals.

54J.R.McCulloch,supplementtoAdamSmith,WealthofNations(1828ed.),4:249.McCulloch’sproposal,whichoriginallyappearedinTheScotsmanin1826,builtonasimilarproposalinRicardo’sProposalsforanEconomicalandSecureCurrency:seeD.P.O’Brien,J.R.McCulloch:AStudyinClassicalEconomics(NewYork:BarnesandNoble,1970),167‐177,forafulldiscussion.

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5.Conclusion

ReportinghomefromatourinFrankfurtin1848,theToryjournalistWilliam

AytountooktheopportunitytoprovidereadersofBlackwood’sMagazinewitha

grimpost‐mortemoftherecentlydepartedcornlaws:

Istrolledonfromshoptoshop,gleaningeverywhereasIwentstatisticstouchingthemannerinwhichourfree‐tradeinnovationshaveaffectedtheindustryofGreatBritain.Forayearandahalf,thebootandshoetradehasbeenremarkablythriving;theLondonmarketbeingthemostprofitableintheworld,andnothingbutBritishgoldexportedinreturn….Whenwecouplethosefacts,whichmaybelearnedineveryContinentaltown,withthestateofourfallingrevenue,andthegrievousdirectburdenwhichisimposeduponusintheshapeofpropertyandincometax,itisdifficultforanyBritontounderstanduponwhatgroundsthefinancialreputationofSirRobertPeelisbased,ortocomprehendthewisdomofadheringtoasystemwhichsacrificeseverythinginfavouroftheforeigner,andbringsusinreturnnoearthlyrecompenseorgain.

AytounlinkedPeel’spolicies,andthe“adversestateoftheforeignexchanges”that

theyhadbroughtabout,with“thecalamitousmonetarypanicof1847,”which,he

claimed,hadbeen“occasionedbythedemandforgoldtomeetthelarge

importationsofforeigngrainconsequentuponthe[Irish]famine.”Thefactthat

goldhadsoonreturnedtotheBank,heargued,hadonlytakenplaceatthecostof

forcedsales“atpricesruinouslylowtotheproducers”and“bythesuddenlimitation

oftheemploymentoflabour.”55

Bytheearly1850s,manyprotectionistsweresingingaverydifferenttune.

Whathadchangedintheinterveningyearswasthediscoveryofmajornewsupplies

ofgoldinCaliforniaandAustralia,whichwouldincreaseworldgoldoutputfrom

55W.E.Aytoun,“AGlimpseofGermanyanditsParliament,”Blackwood’sEdinburghMagazine64(1848),534;Aytoun,“Agriculture,Commerce,andManufactures,”Blackwood’sEdinburghMagazine67(1850),372.

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justoverfortytonsayearinthe1840stoaround800tonsin1860.56Awashingold,

protectionistsbaskedintheanticipationofgrainpricesrisingwiththemoregeneral

inflationarytide,andnolongerworriedifsomeofthenewgolddepartedthe

countrytopayforadditionalstocksofgrainfromabroad.ArchibaldAlison,

referringtotheCaliforniagoldrushas“thecurrencyextensionactofnature,”

predictedthatthis“giftofProvidencetoasufferingworld”would“arrestthe

generalandcalamitousfallofpriceswhichtheFree‐tradershavelabouredso

assiduouslytointroduce,andthusdiminishinamostmaterialdegreetheweightof

debtsandtaxes.”EdwardCayley,whohadbeenaleadingprotectionistduringthe

1840s,putitevenmorestrongly:“Givemegold—givemecheappaper—andIdon’t

careforprotection.WehaveAustralia—wehave,thankstoabeneficentProvidence,

California,andthatsettledthequestionoffreetrade.”57

Totheextentthatthenewsuppliesofgoldprovidedprotectionistswitha

deusexmachinathatwouldundothebanefuleffectsoffreetrade,thegoldrushes

alsostruckthefinaldeathknellofBritishmercantilism,atleastinitsandearly

nineteenth‐centuryincarnation.Thereasonforthiswasthat,after1800,

mercantilistdiscoursehadhingedontherelativescarcityofgoldandsilver,which

enabledprotectioniststoforecasteconomicdisasterfollowingthepredicted

diversionofthosepreciousmetalstopayforgrain.AsAytoun’sgloomydispatch

fromFrankfurtsuggests,suchforebodingsmightverylikelyhavecontinuedto

56NiallFerguson,TheCashNexus:MoneyandPowerintheModernWorld,1700‐200(NewYork:BasicBooks,2001),331.57ArchibaldAlison,“TheCurrencyExtensionActofNature,”Blackwood’sEdinburghMagazine69(1851),19;YorkHerald,11April1857,quotedinH.I.DuttonandJ.E.King,“AnEconomicExile:EdwardStillingfleetCayley,1802‐1862,”HistoryofPoliticalEconomy17(1985),215.

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accompanycritiquesoffreetradewellintothesecondhalfofthenineteenth

century,hadnotthepromiseofasufficiencyofgoldsuddenlyappearedonthe

scene.