The Two Nations

E-text prepared by M.B.

"Say what you like, our Queen reigns over the greatest nation that ever existed."

"Which nation ?" asked the young stranger, "for she reigns over two ... two nations;  between whom there is no intercourse and no sympathy;  who are as ignorant of each other's habits, thoughts and feelings, as if they were dwellers in different zones, or inhabitants of different planets;  who are formed by a different breeding, are fed by a different food, are ordered by different manners and are not governed by the same laws."

"You speak of" — said Egremont hesitatingly.

"The Rich And The Poor."

Disraeli's Sybil, Book ii, Chapter 5.

Our minds move so much along the same paths, so large is the debt that I owe to you for having brought me to those paths that it is but fitting that I should offer you the dedication of this work.

The footnotes give the authorities for the statistics and for the quotations which appear in the text.  From the text, too, it will, I think, be sufficiently clear who are the writers of the past by whose teaching I have been led to my conclusions.  Among living writers in this, as in all that I have ever written, I gratefully recognize the debt which I owe to Mr. G.K. Chesterton — a debt so large that, in accordance with the best traditions of international finance, I intend never to repay it.  This is a very different book from any book that Mr. Chesterton would himself write.  But it will not have been without its value if it serves to show — what Mr. Chesterton's own brilliance and wit have sometimes concealed — that the dullest and driest of statistics are often clamorous upon his side.  It is worth while being dull if by doing so one can prove to the British public that Mr. Chesterton, when he is brilliant, is also right.

I am under obligation, too, to many others — to some who had no notion that, when they were talking to me, they were helping me to write a book.  But in particular I should like to mention, and to recommend to those who have not come across it, A Main Cause of Unemployment, by Mr. P.C. Loftus, M.P.  When I consulted Mr. Loftus on a point, his modesty caused him to say that he owed his own theories to Holsinger's Mystery of the Trade Depression, but, if it was so, I can only reply as Voltaire replied to the quip that Homer wrote Virgil.  If Holsinger wrote Loftus, it was his best work.

Finally I should like to thank Lord Oxford and Mr. Douglas Woodruff for revising the proofs and my wife for performing the thankless task of making an index.

Christopher Hollis.

There is one central truth running through all history.  It is that a steeply falling price-level inflicts such widespread suffering that no attempt drastically to reduce a price-level has ever been permanently successful.  Once prices have been allowed to rise, whether by dishonesty, by wise policy, or by miscalculation, experience has invariably proved that there has been no alternative but to accept the new price-level as a fait accompli.

A falling price-level inflicts great hardship and injustice — on producers and debtors.  A rising price-level also, it may be argued, inflicts hardship and injustice — on creditors and those who live on fixed incomes.  The rise may be as unjust as the fall, but those who suffer from the rise are in no position to hit back at the society which has robbed them.  Those who suffer from the fall — the producers — can always compel society to suffer with them by refusing to produce if it is not made worth their while to do so.  Therefore it has happened throughout the course of centuries that prices have sometimes risen but have never substantially fallen.  By consequence they are to-day, in England as in every other country, greater by a very considerable multiple than they were at any date in the distant past.

It is also true that, had the country lived under an automatic monetary system, as that phrase is often understood — that is, had the amount of money in the country been dependent merely on the amount of silver or gold in the country and that amount in its turn been dependent on the accidents of commerce and mining — in many periods of history prices must inevitably have fallen.  A country's productivity as a rule increases gradually from generation to generation; the proportion of goods produced that are sold for money on a market tends to increase.  On the other hand, throughout a large portion of the world's history — from Roman times, for instance, almost until the discovery of America — there has been no important addition to the world's supply of precious metals at all.  Had it been merely England that was short of silver in the Middle Ages, the problem would have righted itself without management.  The shortage of silver would have caused low prices in England, and the low prices in England would have caused the owner of silver in, say, France to spend his money in England where he could buy more for it.  Thus silver would have flowed into England until the price-level was restored.  But in the late medieval Europe there was no country that was possessed of this surplus of silver.  It is clear then that, had the currency not been managed then, prices must have fallen.  In medieval Europe we lived under a managed currency.

The way in which it was managed was as follows.  From time to time the weight of silver in every coin was reduced.  Thus the number of coins that could be coined out of a constant amount of silver was increased, and by this means an increased monetary supply was put out to buy the increased quantity of goods and a fall in prices prevented.  If we study a list of medieval prices such as that collected by Thorold Rogers,⁽¹⁾ we find that, owing to the poverty and slowness of communications, there were considerable local and seasonal variations of price in the different commodities.  Yet at the same time, for the hundred and fifty years before the Black Death — the high period of the Middle Ages — the general price-level was held absolutely steady.  Then, with the Black Death and the consequent sudden decrease of productivity, prices jumped up by about 20 per cent.  Edward III had the wisdom to accept the new price-level as a fait accompli and not to attempt to force it down again to the pre-Black Death level.  They remained steady at the new level until the end of the century.  Then came the revolution of 1399 against Richard II, a sort of Catholic dress-rehearsal of 1688, the overthrow of the true English monarchy, and the establishment in its place of the Lancastrian monarchy, which was a cross between a monarchy and a plutocratic republic.  For the first time in English history power passed into the hands of men who wished to play tricks with the price-level.  As a result it fluctuated about wildly.  According to the computation which Mr. Feaveryear⁽²⁾ has made from Thorold Rogers's figures of a price-index of commodities not dependent on the chance of harvest, if prices were 100 in 1400, by 1402 they had risen to 115.3.  Then they fell steadily until by 1446 they were down to 80.4 — just about what they had been before the Black Death.

Yet to medieval morals such a policy was so intolerably wicked that no régime could long survive which allowed it to be practised.  Both the Yorkists and the Lancastrians learnt their lesson, and throughout the second half of the century, whoever was in power, prices remained remarkably stable.  By 1500 they were at 76.8 to 1400's 100 and there they remained until the dissolution of the monasteries and debasement of the coinage by Henry VIII in 1542.  Throughout all those hundred years they never moved more than a trifling number of points either way.  With the two exceptions of the period of the Black Death and the quite exceptional first forty years of the fifteenth century, prices moved far less in a hundred years in the Middle Ages than they have often moved in a single year in our times.

"From the 25th of Edward III," writes Adam Smith,⁽³⁾ "to the beginning of the reign of Elizabeth, during the space of more than two hundred years, six shillings and eight pence, it appears from several different statutes, had continued to be considered as what is called the moderate and reasonable, that is the ordinary or average, price of wheat.  The quantity of silver, however, contained in that nominal sum was, during the course of this period, continually diminishing in consequence of some alterations which were made in the coins.  But the increase in the value of silver had, it seems, so far compensated the diminution of the quantity of it contained in the same nominal sum, that the legislature did not think it worth while to attend to this circumstance."

It is hard to know just what Adam Smith means by "the legislature did not think it worth while to attend to this circumstance."  For it was obviously the threat of falling prices which caused the King and the legislature to "attend to this circumstance" and reduce the silver content of the shilling.  It is also true that during the last sixteen years of that period — during, that is to say, the last years of Henry VIII and the reigns of Edward VI and Mary — 6s. 8d. might indeed be spoken of as an ordinary price of wheat, but only in the sense in which some people in the years after the War spoke of the 1914 price-level as a normal price-level to which, when the world was sane again, we should return.  It was not in fact the price-level of the moment, and very soon people had to recognize that it never would be possible to return to it.  In the same way the price-levels of Edward VI's and Mary's reigns were not the price-level of pre-1542 England and people had in the end to reconcile themselves to the impossibility of returning to that price-level.  Nevertheless Adam Smith's words are of importance as evidence of the stability of the price-level for the two hundred years up to 1542.

In 1542 Henry VIII began to debase the coinage.  He did it in the hope that thus he would be able to pay his debts for nothing.  To begin with, he kept secret what he was doing, collected all the silver and gold that was paid in to him as loans and benevolences, and issued it out again from the Mint, mixed with alloy, and thus he was able to pay out about a quarter as much again as he received.  With every £100 of new loan that he received he could pay off £125 of old debt.  As was inevitable, the trick was soon discovered.  He then frankly raised the price which he was prepared to pay for gold and silver, thus causing all possessors of those metals — there were plenty such owing to the recent loot of the monastic plate — to bring them to the Mint to be recoined into a larger quantity of base metal coins.  He himself profited out of the seigniorage which he charged them for minting and also by borrowing the metals for his own uses for the period of some three or four months which elapsed between delivery and reissue.

The difficulty was, as may be imagined, with foreign trade.  Foreign merchants were reluctant to take Henry's debased coins.  The reason for this was not that in itself it mattered whether the coins were pure or alloyed.  The trade between England and the Continent was a trade of goods against goods.  Coin was only used to effect a temporary balance if the English did not happen, at a moment when no foreigner wanted any of their goods, to have an export with which to buy back their import.  In the long run the English coins returned to England, or at least about as much gold and silver returned to England as left it.  The concern then of the foreigners, it is clear enough, was not that the coin should be made of this or that purity of metal but that they should have a guarantee that the English price-level would be kept stable — that the coin would buy as many goods on the day when the debt should be collected as it did on the day when it was incurred.  With such a guarantee they would have been perfectly willing to have accepted payment in paper.  Owing to the debasement, to the inflationary effect of the first American silver and of the coining of a certain amount of the looted monastic plate, money had in Henry VIII's time increased more rapidly than goods, and therefore there had been a rise in prices.  The two hundred year old English tradition of a stable price-level had been broken, and therefore Henry's credit abroad necessarily suffered.

Yet it is vital to the understanding of the story of England that we should grasp clearly the statistics of Henry VIII's experiment.  According to Mr. Feaveryear's⁽⁴⁾ calculation, between 1542 and his death in 1547, Henry called in £400,000 of pure silver money and reissued it as £526,000 of debased silver money.  The inflation of those five years, that is to say, was trivial in comparison with, say, the inflation of the four years of the war of 1914.  Comparatively trivial, too, was the effect on prices.  According to Thorold Rogers's price-lists, if 100 was the price-level in 1541, then that level rose to 124.6 in 1545 and by Henry's death in 1547 had sunk again to 116.4.

A King is not likely to debauch the currency unless he is the veriest simpleton.  For, as Lenin pointed out in our own day, such debauchery is the most effective way possible of plunging a country into anarchy.  From anarchy it is clear that a King is very likely to lose and cannot possibly gain.  For he cannot become more than a King.  It is not even to the true interest of a King to raise the price-level for, though such a manoeuvre may be immediately convenient to him in enabling him to pay off more cheaply some debt that he has contracted, it is clear that, if he raises the prices of everything, he will raise the cost of his own government.  Therefore taxation will have to be increased, and the necessity of increasing it will bring unpopularity, if nothing worse, to the monarch.

Now a King, whether he be a good man or a bad man, has little motive for preferring any other interest before that of the preservation and strength of the monarchy.  For a King intends to be a King for life.  A regent, on the other hand, knows that his term of office is limited.  If he be a good man he will, in spite of this, be conscientious.  But if he be a bad man then he is under every temptation, just as any other politician is, to use his term of office to feather his own nest.  History can tell us of good regents but it would, I think, be possible to argue without much exaggeration that no ancient monarchy has ever fallen except when it has been previously weakened by a period of unscrupulous regency.  For it is obviously to the baser interests of a regent to issue an excess of money and to put the surplus, directly or indirectly, into his own pocket, to sell the Crown lands to himself or his friends at unfairly low prices.  It is nothing to him that such conduct will create a monetary problem that will certainly embarrass and may in the end destroy the monarchy, so long only as he behaves with sufficient restraint to postpone the crash until after the conclusion of his own period of office.

So it was during the protectorship of the Duke of Somerset that the English monarchy was destroyed.  In contrast with Henry VIII's comparatively trifling £126,000 Somerset by his further debasement increased the monetary supply by £1,000,000 and, as a result, prices rose from 116.4 of 1547 to 202.3 in 1551.  Somerset died, leaving behind him Somerset House, the English currency debauched, and the monarchy fatally weakened.

Somerset left to his successor, Northumberland, a very difficult problem.  For, once the currency was thoroughly and admittedly debauched, then no action of the Government was required to cause a steady further inflation.  For obviously everybody possessed of an old coin of good silver would turn it into two coins of debased and thus contribute to a yet further inflation.  To counteract this process Northumberland hoarded and put out of circulation all the coins on which he could lay his hands.  He was thus successful in checking the rise in prices, which fell somewhat so that by Edward's death they were down to 173.6.

Northumberland forced them down, if anything, too far, for he checked production.  Therefore Mary at her accession threw a little of Northumberland's hoard back on the market with the result that prices rose again to 199.3.  Froude in his History [vii, 454] accuses Mary of "pouring out a fresh shower of money containing but 3 oz. of silver," but subsequent investigation has shown that for this as for so many of his statements that great writer was indebted wholly to his imagination.  Mary was able to keep prices at approximately their new level throughout her reign with the exception of the years 1555 and 1556, when they jumped up to 212.9 and 213.5.  Those years were years of exceptionally bad harvest.  The effect of a very bad harvest in a country with a metallic currency is always inflationary, for people in their necessity bring out their savings and thus put into circulation money which is not in circulation in normal years.  Also, if there are fewer goods, then, unless the monetary supply is also reduced, each particular article will clearly cost more.  However, Mary recaptured control of the price-level in 1557 and brought it back again to that level at which she found it at her accession.

Elizabeth on her accession found in circulation some £900,000 of debased silver money.  She borrowed from Antwerp 200,000 crowns of pure silver.  On 27th September, 1560, she issued a proclamation that henceforth every penny should pass for three farthings, every two-penny bit for a penny halfpenny, and the sixpenny teston for fourpence halfpenny.  She then announced that anyone who brought in the base money would receive its new value in pure silver with a bonus of 3d. in the £.  She proclaimed vigorous penalties against anyone who should export the coins in the hope of getting a better price abroad.  The new silver she, of course, to begin with coined out of the Antwerp crowns.  She fixed a date — 9th April, 1561 — after which the old base coins would no longer be legal tender.  The business was carried through with vigour and ability and was successful.  For the base coins that were brought in she had to pay out £638,113 15s. 6d. But, when she had extracted the silver out of them, she was able to make of it £733,248 of new good money.  Her gross profit on the proceeding was thus a little short of £100,000 and her net profit, after all expenses had been deducted, some £14,000.

But the effect of the whole proceeding was, of course, deflationary.  For the coins for which she paid out her £600,000 odd had, before the proclamation of 1560 reducing the coins' purchasing power by 25 per cent, a value of £600,000 odd × ¾ , that is to say, of about £850,000.  Elizabeth had therefore taken £850,000 out of circulation and only put back £730,000 in its place.  We should therefore expect to find that prices fell, and so they did for the moment.  In 1561 — the year when the old base coins ceased to be legal tender — they stood at 205.  By 1562 they had fallen to 1929.

Yet immediately afterwards they took a turn upwards again and rose steadily throughout the rest of her reign, at the end of which they stood at about 275 to 1541's 100.  They rose because the money in circulation was increasing more rapidly than the goods in circulation.  For that there were two reasons.  The first reason was that, as always before the invention of milled edges, the clipper was at work, decreasing the de facto value of the coins by clipping little bits off the edges of them.  Such were his activities that by the end of the reign in 1601 the Government found that it had no alternative but to reduce the silver content of the coins that it itself issued — a measure, of course, of inflation.  The second reason was the influx of American gold and silver.

Now the first of these two evils the Government was unable to remedy, for the method of circumventing the clipper had not as yet been discovered.  The second, on the other hand, it could well have remedied.  Among the many important services that have been rendered to truth by Professor Soddy, there is none more important than his exposure of the sloppiness with which so many historians and economists at every interesting stage of their narrative try to slip past truth beneath a camouflage of impersonal verbs.  Listening to language about gold and silver pouring into England from America, one might think that the precious metals fell like rain from heaven, or that they were a couple of ducks which swam across and landed one morning on English soil without so much as a "by your leave."

If gold and silver came into England somebody brought them.  Who brought them? and why ?  A good deal, of course, came in as result of piracy.  But the greater part came in as a result of trade — a new sort of trade — the exchange of goods against gold and silver.  The Spaniards, having a surplus of precious metals, developed the habit of purchasing goods with them and of living on foreign imports instead of on the products of their own country.  Whether or not this was wisdom in them we need not discuss.  But the consequence of it for the English was that they gave the Spaniards consumable goods and received in exchange for them unconsumable metal.  If, as Adam Smith truly says, the one object of production is consumption, it is clear that this exchange was pure loss to the English, and it is not surprising that with such a commerce the reign of Elizabeth should be filled loud with the poor's complaints of their desperate poverty.

Why then did Elizabeth tolerate this disadvantageous commerce ?  The notion that she did not understand the plain consequence of filling the country with silver and emptying it of goods may be dismissed at once.  The woman was not an idiot.  The elements of monetary theory had been perfectly understood since the time of the, Greeks.  As Macaulay records,⁽⁵⁾ Gresham's Law is found noted in Aristophanes.  In the Middle Ages the quantitative theory was familiar to every educated person, nor was it, as will be later shown, until in the eighteenth century the educational machine deliberately imposed confusion on men's minds, that there was any misunderstanding of the ABC of these problems.  Both Elizabeth and all other educated people were then well aware that if silver "poured" into England it would cause a rise in prices.  It would have been perfectly possible to have forbidden its import and insisted that the Spaniards, if they wanted our goods, must give us goods in exchange.  Had she done so there would have been in England both a more adequate supply of goods and a stable price-level — to the great advantage of the country.

Why then did she let the treasure in ?  It is true that, as the mercantilists argued, it was an advantage to a Government to possess a reserve of gold and silver which it could use in the event of the emergency of war.  And, had Elizabeth been able to capture for herself, as the French Kings were able to do, the new supplies of metals and to hoard them against the day of necessity when she might wish to buy from abroad and be unable to offer goods in exchange for those that she wanted, her policy would then have been most intelligible.  But that was not at all what happened.  An inconsiderable proportion of the new metal passed into the royal hands.  As a result the royal wealth and royal income did not at all keep pace in increase with the increase of the national wealth and national income, while the royal expenditure rose with the rise of prices.  Thus according to Professor Neale,⁽⁶⁾ Elizabeth's ordinary revenue from Crown lands, Customs, etc., at her accession was £200,000.  By her death it had risen to £300,000.  From taxation she was able to raise on an average about £50,000 a year at the beginning of her reign and £80,000 at the end.  In other words her revenue was increasing less rapidly than prices were rising, while the revenue itself in the first place was a revenue adequate for the expenses of government at the price-level of Henry VII's time rather than that of the latter half of the century.  It was by that latter half quite inadequate if ever there was any extraordinary expenditure.  How then did she manage ?  She raised money by a variety of dodges, as her two successors were to do after her.  But, when every dodge was exhausted, Elizabeth again and again had to face the ugly truth that she could only make both ends meet by selling some of the Crown lands.  In one year at the time of the Irish campaigns she had to sell £120,000 worth of these.  A temporary relief, these sales by reducing income left the situation more desperate still for the future.  By the end of her reign the royal income was beginning to decline not merely in proportion to the national income but absolutely.  It is clear enough then that the influx of gold and silver was against Elizabeth's interest because it impoverished her; she would have stopped it had she been free to follow her proper policy and not the servant of the stronger forces that guided her.  It was also against the interests of the poor because it caused an artificial scarcity of commodities.  But it was to the interests of those who sold goods to the Spaniards in exchange for gold and silver, of those who robbed the Spaniards of their gold and silver, and of all the others who could in any way annex to themselves a share of the new store of precious metals.  Such people were indifferent to a rise in prices, for they immediately invested their gains in land and houses whose price rose with the general rise.  They were the masters of the State, so that no one could prevent them from passing on the burden of higher prices to the poor by a successful refusal to raise wages, whereas they were strong enough to prevent the Queen from passing on the burden of her increased expenses to them in the form of increased taxation.  For at that date there was, of course, no question of the Government acting as it does in modern Parliamentary States and just taking from the subject whatever money it sees fit.  The moneylending interest, on the other hand, which likes falling prices, was not yet strong enough to dominate the State.

Income falling, expenditure rising — that was the situation which Elizabeth bequeathed to her successor, James I.  The price-level stood at about 275 to 1542's 100.  There was no possibility of reducing prices by any substantial amount, but at least it should have been the object of James's policy to have prevented a further increase in them.  In this he failed.  In Elizabeth's reign a high proportion of the silver that had come into the country had been used for domestic and not for monetary purposes.  But the effect of her reduction of the silver content of the shilling in 1601 was, of course, to increase the sale price of silver.  The result was that for the next ten years the owners of plate were in a steady stream bringing their plate to the Mint and having it turned into coin.  Clearly James should have raised the Mint charges so high as to have made it unprofitable for silver to be brought in.  He did not do so.  The result was that between 1601 and 1611 there was a great increase of money in circulation, a gross inflation, and consequent rise of prices to between 400 and 500.

During the last fourteen years of James's reign there was, it is true, little minting of new silver, but clipping of the old coins was proceeding at a rapid rate.  Throughout the whole of English history the clipper had been steadily at work, but, so long as the price-level was kept stable, he preserved some discretion in his activities, knowing that it was he who would be blamed if that stability was upset.  At a time when that stability was already notoriously upset by other causes, he felt secure from risk and able to throw all discretion to the winds.  In these years and in the first years of Charles I's reign good new silver was coined in large quantities in accordance with an arrangement by which a third of the Spanish silver from America for use in the Netherlands was coined in London.  No sooner were the new coins issued than they were clipped.  As a result, by James's death the price-level was up to 550.

Thus it is easy to see that Charles I was the inheritor of a situation that was already utterly incapable of solution.  By no wriggle of arithmetic is it possible to pay off a debt of 5½d. when you possess only 1d.  It was that which Charles spent the last sad half of his life in trying to do.  Had the problem been merely a financial problem, Charles would have appealed to the Parliament and said to them, "Gentlemen, the situation has changed from that which existed in my predecessors' time through faults that are neither mine nor yours.  We must therefore have a New Deal.  If you wish me to be your King, will you please endow me with capital sufficient to give me an income so that I can carry on the government?" If they refused to do that, the alternative was that the King should be dependent upon annual Parliamentary grant for his income — that is to say, what was later to be known as Parliamentary Government.

Unfortunately the situation was complicated.  There was a powerful party which wanted not to solve the difficulties but to take advantage of them in order to prevent the institution of monarchy from working in its historic fashion.  Between the King and the Puritan party, which was powerful in Parliament, there was the unbridgeable gulf of religious difference.  The King's conscience would not permit him to allow Puritanism to dominate England, nor would the Puritan conscience allow such a domination to the King's Anglo-Catholicism.  There was then, after every twist and evasion had been tried, no alternative in honour but to fight the matter out to the death.

Unfortunately, as so often happens, victory in war settled little.  The killing of the King did nothing to bring down prices.  Cromwell, inheriting the power of Charles, inherited also the expenses of his Government.  He had in addition the expense of the upkeep of a large standing army.  The dishonesty of the Parliamentarians, who had ascribed to extravagance and tyranny Charles's demand for money instead of explaining that that demand was an inevitable result of circumstances, recoiled on the head of Cromwell, their only important survivor, and made it impossible for him to put forward a demand for high taxes without forfeiting all popularity.  He dared not disband the army until he had obtained some popular support for his rule, and, the longer that he continued to rule through the army, the more unpopular his rule became.  Caught in an insoluble dilemma, he dragged out his miserable days.

Cromwell's rule was opportunist, and under it no attempt was made to recapture for sovereignty that control of the price-level, without which any plan for the reform of the nation's financial arrangements was foredoomed to failure.  The problem now was the problem of the clipper.  New supplies of the precious metals from America were no longer coming into the country to any important extent.  On the other hand, the busy clipper was increasing the monetary supply too rapidly for productivity to keep pace and was forcing up prices.

The first need for the day was then for a method of circumventing the clipper.  In 1649 there arrived in England a Frenchman, Pierre Blondeau, equipped with an invention for coining milled edge coins, which was already in use in France and which would effectually make clipping impossible.  A Parliamentary committee examined his plan and reported favourably on it.  For seven years, however, the Government on one excuse and another delayed adoption.  The reason for this delay Blondeau explained without hesitation in an angry pamphlet which he issued.  It was that not only were there clippers abroad throughout the country but that the very officers of the Mint issued the new coins light of weight and pocketed themselves the profits of their roguery.  Blondeau's machine would have prevented the possibility of this theft, but the officers of the Mint were strong enough to raise petty difficulties and prevent its adoption.  At last in 1656 he was able to get leave to stamp some new coins, but Cromwell, "probably for political reasons," says Mr. Feaveryear,⁽⁷⁾ decided at the last moment not to issue them and Blondeau retired in disgust to France.

In 1660 Charles came in and the great issue had at last to be fought out.  The situation was as follows.  Charles was not brought back to be a king in the sense in which any of his predecessors had been kings.  The old theory of the monarchy had been that the King should possess sufficient capital to give him an income which would enable him to carry on the government of the country in normal times.  In abnormal times he appealed to the people to help him by the supplement of taxation.  The new theory of the monarchy was that the King should have no capital of any importance and should be entirely dependent upon a regular income, voted to him by Parliament who would thus be able to control his conduct.  In practice Parliament took care to vote him an insufficient income so as to compel him to contract debts.  Charles's policy, on the other hand, was to come back to the throne on what terms he could and then to find some means by which he could trick those who had restored him and escape out of their clutches.

He very nearly succeeded.  It was the age of the first rumours of invention.  The roads were open for the development of commerce.  Once therefore, that the country settled down to peace after the disturbances of the last twenty years, there was an opportunity for a very great expansion of productivity.  Obviously then, if the goods in circulation were going to increase, it would be possible to increase the money in circulation in proportion without any change in the price-level.  How was that increase to be effected?

As has been said, the influx of precious metals had by now ceased.  The monetary-supply, so far as it was increased, was now being increased by the activities of the clippers.  Clearly Charles's first task was to put a check on these activities.  Therefore he called back Blondeau from France and made him Engineer of the Mint.  In future only milled-edged coins were to be issued.  It is true that that was not an immediate and total solution of his problem.  To solve the problem he should clearly have called in all the old clipped coins and issued in their place new milled coins of the average de facto weight of the old coins, declaring that, after such and such a date, the old coins would no longer be legal tender.  He did not do that, with the result that the new coins got melted down by the clippers and made up again into a larger quantity of "fake-antique" coins of short weight.  The melting of them was illegal but it was a law which it was impossible to enforce.  Yet clearly Charles had discovered the remedy and was only waiting the convenient opportunity of properly applying it.

Having thought of a way of preventing the clipper from increasing the country's monetary-supply, Charles had next to find a way of issuing that increased supply himself and for his own benefit.  His remedy was paper-money.  Clearly, the more that he could reduce the quantity of gold and silver in the country, the larger the gap which Charles could fill with his paper money without causing that rise in prices, which would of course discredit the experiment.  How could he get gold and silver out of the country ?

It has been explained how in the sixteenth century the trade between Spain and England was peculiar in that it was a trade not of goods against goods but of goods against money.  In Charles's time there was growing up another such trade — peculiar this time in the opposite direction — the trade between England and India.  The Indian had not as yet developed any considerable taste for English or European goods; on the other hand, he loved the precious metals simply for their own sake.  Therefore the trade between England and India was, to a large extent, one of the exchange of Indian goods against English money.  It was estimated, according to Davenant⁽⁸⁾ at the end of the seventeenth century, that the gold and silver "carried away and sunk in the East Indies" amounted to £150,000,000.

According to Davenant and to the conventional bullionist opinion, which considered the object of trade to be the acquisition of as large as possible a stock of precious metals, this trade was a loss.  Europe, he said, would "be richer by full one third if that trade had never been discovered."  But to one who looked on economic problems with a gaze free from confusion the Indian trade was a trade of pure gain to England.  We got from the Indians consumable goods which we wanted; we gave them in return useless gold and silver which we did not want and whose place in our internal economy could be supplied by paper money which cost us nothing.  Therefore Charles very reasonably removed the restrictions on the export of bullion and encouraged the East India Company by all the means in his power.  Throughout his reign it flourished exceedingly, and the shares which had stood at 100 at his accession had risen by his death to 300.

In that way he made as large as possible the gap which his paper money was to fill.  Now let us understand how it was that he issued that paper money.  He did not venture merely to issue Treasury notes, as the Government issued them during the late War.  Public opinion would not have been prepared for that.  His plan was more subtle.  In every age of the world's history there has been a certain amount of trading on credit.  That is to say, A is willing to buy an article from B but has not for the moment the cash ready at hand.  B therefore sells him the article in return for a promise to pay, made out in one form or another, at some future date.  Such credit-trading has, I say, existed in every age and in every country and, naturally enough, it always grows more common in a period of disturbance when physical obstacles often separate a man from his cash.  Therefore it had been widely used in the years before Charles's accession.  People were used to it.  The essence of it was that the seller always got paid in real cash eventually.⁽⁹⁾

Charles was in debt, and it had been his habit, just as it had been that of his predecessors, to issue to his creditors tallies, or notched pieces of wood, which the creditors re-presented when the taxes came in and in return for which they then received the cash due to them.  Charles conceived the plan of making these tallies negotiable and later, since pieces of wood were not convenient for this purpose, he paid his debts in negotiable paper orders instead.  That is to say, these paper orders — which, of course, cost him nothing — were to count as money up to such and such a date.  They were to be accepted in the shops, to be legal tender for the discharge of a debt and so on.  When the given date came, then whoever found himself in possession of them could bring them to the Treasury and exchange them for cash.

"Why was this of such importance," it may be asked, "if the King was going to pay cash in the end ?  He was merely postponing the payment of his debt — just like anyone else who gives an IOU for his debt instead of paying cash down."  That was, of course, what he wished people to say.  The experiment was important for this reason.  According to Charles's system each particular holder of a paper order would, it is true, at some future date be able to exchange it for cash and thus have a feeling of security, which, in the temper of the times, a purely paper currency could not perhaps have given him.  But at any given moment there would be a considerable amount of paper money in circulation.  Thus a creditor, to whom Charles owed money on 1st January, 1667, was given a paper order which could be turned into cash by whoever chanced to be in possession of it on 1st January, 1668.  But on 1st January, 1668, the King would issue a new set of paper orders which would run current until 1st January, 1669, and so on.  It was not intended that there should ever come a day on which all the outstanding paper orders should be redeemed.  The process was like that of emptying a cistern into a bath, to take a metaphor which Professor Soddy has used to illustrate a different point.  Every drop of water that leaves the cistern and enters the pipe in time comes out of the cistern into the bath.  But at any given moment the quantity of water in the bath is less than the quantity that has left the cistern by the quantity in the pipe.

Doubtless, had the experiment succeeded, Charles would gradually have lengthened the period to elapse before redemption.  By lengthening and shortening the period in accordance with the demands of the price-level he could have regulated the monetary supply in exactly the same way as that in which President Roosevelt regulates it to-day by unbalancing his budget.  Eventually, no doubt, he would have issued the orders, frankly as paper money, accepting a vague obligation to convert into gold and silver on a demand which he had discovered from experience to be very rarely made.  In fact, as Dr. Shaw, the greatest authority on the subject, points out,⁽¹⁰⁾ the orders would have performed all the functions that were in the next century to be performed by the privately issued banknotes.  They would have played in history a part much more important than that of temporarily relieving the financial embarrassments of a harassed monarch.  For the vastly increased productivity of the next two hundred years were to necessitate a vastly increased monetary supply.  By a strange anomaly private persons were to be permitted to invent that money and put it into circulation in the form of loans.  Nor is it any paradox to say that that anomaly is the cause of the greater part of the evils that have since afflicted mankind.  Had Charles's experiment succeeded, had it come to be recognized that, when new money was required, it was the business of the King to issue it, the whole history not only of England but of the world must necessarily have been changed.

Now why did Charles's experiment fail ?  Let us first understand who exactly was interested in its failure.  It has been said that the proclaimed theory of the Restoration of 1660 was to restore a King dependent upon taxation voted by Parliament for the expenses of government.  That was the theory.  But in practice from the first year of the Restoration Parliament refused steadily to vote the King a sufficient income, while of the £1,200,000 which it voted he never in fact received more than £800,000.⁽¹¹⁾ The legend that Charles's extravagance was to any important extent responsible for the insufficiency of his income has been quite exploded by the researches of Mr. Bryant.  Parliament refused to vote Charles sufficient taxes — some of its members because they were ill-read squires with a natural dislike of taxation and of an understanding incapable of comprehending the consequences of unbalanced budgets, others because they understood those consequences only too clearly.  They were consequences which would be, they reckoned, directly or indirectly to their own advantage.

It was clear that, if Parliament would not vote Charles the necessary money then he must either get that money by some trick or windfall or else he must borrow it from the owners of gold and silver.  The price of such loans would be, in the end, the passing of the control of policy away from either King or Parliament into the hands of the money-lenders.  It was in an effort to avoid that consummation that Charles made his experiment with paper money, just as it was for the same purpose that he afterwards accepted the gold and the silver of Louis XIV.

It is hard to form a just judgment of the monetary problems of this reign unless we bear in mind the balance-sheet of it which Dr. Shaw drew up.  "With our modern system of annual budgets," writes Dr. Shaw,⁽¹²⁾ "estimates and supplementary estimates, we are so far removed from this seventeenth century practice and theory that we cannot conceive it possible.  It is this want of proper sense of historical perspective that has produced the accepted Whig view of Charles II's reign — a view which is as mean in its psychology as it is gross and palpable in its ignorance.

Rough Balance-Sheet As Between Charles II And His Parliament

"Even and quit.

"Requiescant in pace et Parliamentum suum fide Rex lissimum."

It is easy enough to see why the owners of gold and silver are always anxious for it to appear that it is not possible to maintain a stable price-level with a non-metallic currency.  But it is important, too, to understand who were at that time the owners of the gold and silver.  Doubtless the little clipper was working for Charles's defeat, but the real business of clipping and melting was in the hands of the big London goldsmiths, now for the first time emerging also as bankers or money-lenders.  "The bankers," explains Clarendon,⁽¹³⁾ "did not consist of above the number of five or six men, some whereof were aldermen and had been lord mayor of London.... They were a tribe that had risen and grown up in Cromwell's time.... They were for the most part goldsmiths."  They had first gained their riches by supplying Cromwell's "wants of money upon great advantages."  The names of the two best known were Viner and Backwell.

Yet they themselves were as yet hardly masters in their own houses.  The financial centre of the world at that date was Amsterdam.  "I believe there is at this day," writes a correspondent from Amsterdam in 1652,⁽¹⁴⁾ "forty times more gold and silver in the Low Countries than in England."  We must not, of course, attach any importance to the figure "forty," but the sentence was substantially true.  Seventeenth-century Holland, like nineteenth-century England, was a comparatively high-wage country, whose financiers were anxious to export their capital to lower-wage countries where it would earn a larger dividend.  England was, in the circumstances of the time, such a country.  The Dutch, wrote Child⁽¹⁵⁾ about this time, "give generally more wages to all their manufacturers by at least twopence in the shilling than the English."  As a consequence, interest rates in England were higher than in Holland.  There was a difference, says Barbon,⁽¹⁶⁾ of 3 per cent, and right back in James I's time the plea that it would cause a flight of foreign capital was already being used as an argument against the reduction of English interest-rates.  "This will draw much money out of the country, the Dutch having much here," was the argument against the reduction of the legal rate to 8 per cent.⁽¹⁷⁾ During the Civil War some of the Dutch capital was withdrawn, but it returned after the Restoration.  It was stated that London after the Great Fire was largely rebuilt with Dutch capital.⁽¹⁸⁾ In 1669, the very time when Charles was making his experiments with paper money, a Parliamentary committee was being told⁽¹⁹⁾ that "Alderman Bucknill had above £100,000 in his hands, Mr. Meynell above £30,000, Mr. Vandeput at one time £60,000, Mr. Dericost always near £200,000 of Dutch money lent to merchants at 7, 6 and 5 per cent when money was at 8 per cent."  That is to say, the London goldsmiths, who play so large a part in the story of Restoration England, were to a very great extent mere agents, operating with Dutch money.

Now why did Charles's experiment fail? and how did it fail ?  It was not that the price-level got out of hand.  There was no rise in prices.  Charles did not issue an excess of paper money, but he did on the other hand make the blunder of only issuing his paper orders for large sums.  This meant that the recipient of them naturally, as a rule, wanted to change them.  The bankers — the goldsmiths — offered to change them.  In return for Charles's orders they gave to their clients their own notes, or "promises to pay" in smaller denominations.  These "promises to pay" they professed themselves willing to change into cash on demand, and on the strength of that profession charged a heavy discount on Charles's "promises to pay" in the future.  At the same time they did all that they could to persuade their clients that it would in practice be foolish of them to bother to change their notes into cash.

Now by refusing to make the exchange except at a large discount the goldsmiths were able to bring Charles's orders into a certain discredit.  Thus in the year 1672 — in the middle of the Dutch War — Charles, saddled with heavy expenditure which Parliament refused to meet out of taxation, found his creditors reluctant to accept more of their payments in paper orders.  Therefore he said most reasonably that, since it was the goldsmiths who were the cause of that reluctance, it must be they who should be inconvenienced rather than the whole country suffer by defeat in war, by defeat at the hands of those who were in fact the goldsmiths' paymasters.  He therefore postponed for a year his repayment of his past debts to the goldsmiths and announced that the taxes as they came in would entirely be devoted to current needs.  An exception was made for the paper orders that were in the possession of contractors, suppliers of stores, or servants; they were to be redeemed.  Of those in possession of bankers the redemption was to be postponed.  On the other hand the debt was not repudiated.  On the contrary the King promised to repay the principal as soon as possible and in the meanwhile to pay 6 per cent interest.

However, the news of the exchequer's stoppage made the holders of the goldsmith's "promises to pay" wonder if the goldsmiths really were in possession of the cash for which they had issued those promises.  They went to the goldsmiths and demanded their cash.  Of course the goldsmiths had not got it, for they had been promising to pay cash on the King's orders to the extent of ten times what they possessed.  According to Sir Dudley North,⁽²⁰⁾ a banker, then as now, who owed £10,000, seldom kept more than £1,000 in his vaults.  Therefore they had, of course, to suspend payment.  In 1667, when the Dutch had been up the Medway, there had been talk of a run on the banks, and they had had to postpone payment.  Thus Pepys, under the date of 14th June, 1667, "So to the office after dinner; and thither comes Mr. Pierce who tells me his condition, how he cannot get his money, about £500 (which he says is a very great part of what he hath for his family and children) out of Viner's hand; and indeed it is to be feared that this will wholly undo the bankers."  However, the King had then come to their rescue by pledging his word to the punctual repayment of their loans.  For up to that time they had only lent on to the King cash that had been deposited with them by their clients — or at least so they were able to pretend.  By 1672 they had developed quite a new technique.  They had lent to their clients "promises to pay" which they knew themselves unable to make good and were taking interest on them as if they were loans of cash.

So in 1672 they smashed.  A large number of poor people, of course, suffered as they always do from bankers' inability to perform their promises.  But the whole story dealt no murderous blow to the country's prosperity, for immediately afterwards — in 1674 — a movement of unexampled trade expansion began.  The Customs receipts rose; credit steadily improved, and this improvement continued for the rest of the reign.  Yet suffering had been caused and there was blame to be awarded.  But it was clear to one who properly understood what had happened that the bankers were far more deeply to blame than Charles.  Charles, at the worst, was guilty of a somewhat slick exploitation of public stupidity.  He did not deceive people about what he was doing; he confessed it frankly, possibly a little hoping that they would be too stupid to follow.  But the bankers had been guilty of the far greater fault of giving promises which they knew themselves unable to redeem.

To-day we take it for granted that that is what bankers do, but at that date it was not yet frankly admitted that bankers lent out beyond their cash-holdings.  Men like Sir Dudley North, when they let the cat out of the bag, were revealing a trade secret.  It was, however, beginning to be widely suspected that they did so.  And to allay suspicions the Bank of Amsterdam, then the leading bank of the world, every year allowed its vaults to be examined by municipal officials, who then deposed on oath that they had found there cash equivalent to the bank-notes in circulation.  Yet it was so manifestly to the advantage of the shopkeepers and burghers of Amsterdam that the city should keep its position as the world's financial capital that the depositions of the officials were not widely believed.  At this very date, 1672, there was therefore in face of the French threat a danger of a run on the bank.  To check this the magistrates took any depositors who wished into the bank's vaults and showed them its stores of cash untouched, a form for every form bank-note that was on issue.  How exactly this clever piece of window-dressing was arranged has never been quite discovered, as it is certain that the Dutch did lend well beyond their cash-holdings.  Yet it was effective in strengthening public confidence in bankers.  It was vital for them that, at this very moment when the Dutch bankers had bluffed with unhoped-for success, the English bankers should not let the cat out of the bag.⁽²¹⁾

Up till now the English bankers had on the whole been on the King's side in politics.  But they could no longer afford the luxury of a preference.  Somebody was going to be blamed for the crisis of 1672 and, if it was not to be the bankers, the only alternative was that it should be the King.  Therefore from now on they had two objects — the first, to weaken the monarchy politically so as to make sure that it did not strengthen itself financially — the second, so to confuse the public over the story of 1672 that they should think that it was the King and not the bankers who was responsible for their sufferings and thus to divert public attention from inquiry into what it was that they were doing.

This is not the place in which to trace through the fascinating but intricate story of the duel between Charles and Shaftesbury with which the rest of Charles's reign was filled.  It was a complex multitude of causes which went to build up that Whig mentality which was prepared to use every weapon to prevent a revival of the ancient monarchy.  But it is notable that whereas Shaftesbury had been a member of Charles's ministry at the time of the experiment of paper money and whereas in the early years of the reign the bankers had given their support to a King whom they fondly imagined would be as putty in their hands, now that Shaftesbury went into opposition it was from the financial interests and the City of London that he found his support.  It was necessary to clip the King lest the King should stop them from clipping the coins.

Whoever was deceived by the confusions of the times, there was one clear mind, among the clearest that has ever given itself to the study of English politics, to whom every move in the game lay patent and exposable.  The whole story can be read to-day in the great verse of John Dryden, the first man clearly to comprehend that necessary battle between monarchy and money-power with which all subsequent history has been filled.  The object of Shaftesbury and the City of London was, as he wrote in the Medal [228-9] with characteristic wit and truth,

"Perhaps not wholly to melt down the King
But clip his legal rights within the ring."

Their desire, as he explains in Absalom and Achitophel, was for a disputed succession, for with two claimants to the throne, the one to be played off against the other, there would be no risk of a revived monarchy ever challenging, as Charles was challenging, the Whigs' right to rule.  Dryden explains the reason why Shaftesbury supported the cause of Monmouth.

"Not that he wished his greatness to create,
For politicians neither love nor hate,
But for he knew his title, not allowed,
Would keep him still depending on the crowd."  [Part i, 222-5]

Shaftesbury had united behind him a motley following of people who were ready

"For several ends to serve the same design."  [Part i, 501-8]

Among them were those who

"for interest sought to embroil the state
To sell their duty at a dearer rate
And make their Jewish markets of the throne,
Pretending public good to serve their own.
Others thought kings a useless, heavy load
Who cost too much and did too little good.
These were for laying honest David by
On principles of pure good husbandry."  [Part i, 494]

And in all the incomparable portrait-gallery of that great poem there is no picture more living nor more damning than that of Slingsby Bethell [Part i, 585-632], the sheriff of the City of London,

"Shimei, whose youth did early promise bring
Of zeal to God and hatred to his King."

He had spent his youth, said Dryden,

"heaping wealth by the most ready way
Among the Jews — which was to cheat and pray,"

and now, even in maturity,

"If any leisure time he had from power. —
Because 'tis sin to misemploy an hour —
His business was by writing to persuade
That kings were useless and a clog to trade."

Bethell had, as it happened, written a treatise on the Interest of Princes and Stales, advocating free trade and attacking monarchies, but it is characteristic of Dryden's peculiar felicity to bring against Shimei the accusation that is not only true of Bethell in particular but also true of all the tribe of Shimeis in general.

"Their business was by writing to persuade
That kings were useless and a clog to trade."

It would be hard to think of any words that could more aptly hit off the whole business of Whig political teaching, then just coming into being and to rule England for a hundred and fifty years.

Yet it was a paradox in Charles II's England, for so far had that King been from proving himself a "clog to trade," that trade had flourished under his rule as it had never flourished before.  The Customs duties,⁽²²⁾ for instance, which in 1661 yielded only £260,000, in 1685 had risen to £800,000.  It was indeed this very increase in productivity which made possible that increase of money, the issue of which the City interests were scheming to get completely into their own hands.  But of that, according to their campaign, nothing must be said.  It must instead be put about that a monarchy was of its nature irresponsible and unfit to be trusted with the nation's monetary-supply.  No credit must be given to the King for the increase of the country's trade; the whole blame for the temporary crisis of 1672 must be placed upon his shoulders.

As everybody knows, the attempt to substitute the Duke of Monmouth for James, as Charles's heir, failed, but the later plan for supplanting James by William of Orange succeeded.  Thus for the next sixty years or so England had a disputed succession; the King on the throne did not dare to pursue a strong policy through the fear that, if he did so, powerful interests would transfer their allegiance to the King over the water.  It was not until fifteen years after the final defeat of the Jacobites in 1745 that it was possible for George III even to attempt to strengthen the monarchy.

Now, once more, it was a complexity of interests which was responsible for the Revolution of 1688.  It is not the business of such a book as this to attempt to disentangle them.  Contemporaries thought of the revolution as a revolution of the large land-owners — the Grandees — against the monarchy.  It established, Lord Acton has said, "the divine right of freeholders."  It was well understood that the bankers were also of the opposition to James and that their influence in the State was not to be despised.  But none at the time thought of them for a moment as of an equal standing with the large landowners.  The social relationship between the two classes was that of a master and his agent.  Readers of Macaulay⁽²³⁾ will remember how Sir Dudley North found to his disgust that he "could not go on Change without being followed round the Piazza by goldsmiths, who, with low bows, begged to have the honour of serving him."

Yet, as Napoleon was to tell the world a century later, "the hand that gives is above the hand that takes," whatever social appearances may seem to say.  Just as, forty years before, Cromwell had discovered that he had deposed Charles only to inherit his financial problems in an aggravated form, so now with William III.  The Parliament which had been unwilling to vote a sufficient income to Charles II was just as unwilling to vote one to his nephew.  Yet William almost from the first moment of his accession was at war with Louis XIV — a war of desperate importance to his own country, Holland, but of little real concern to England and acquiesced in by the moneyed classes principally that they might use it as an opportunity for establishing their power over the State.  How was William to get his money?

After a number of tricks in the way of tontines and lotteries had been tried with little success, the following plan was adopted.  It was suggested by a curious financial adventurer called Paterson and piloted through Parliament by Montague, then a Lord of the Treasury.  The bill was called "A Bill for Granting to Their Majesties Several Rates and Duties upon Tunnages of Ships and Vessels and upon Beer, Ale and other Liquors; for Securing Certain Recompenses and Advantages, in the said Act mentioned, to such Persons as shall voluntarily advance the Sum of Fifteen Hundred Thousand Pounds towards carrying on the War with France."  The bill was vigorously opposed, especially in the House of Lords, but Camarthen, who was in charge of it there, was able to silence all objectors with the unanswerable answer that, if the bill was rejected, the country would be left without a fleet in the Channel — as indeed it would have been, unless the rich were to consent to tax themselves more heavily, of which of course there was no question.

The plan was that, instead of borrowing from the goldsmiths, the Government should instead borrow £1,200,000, of which it was in need, from a newly formed Corporation called the Bank of England.  This corporation promised to collect the required money from the public and to lend it on to the King at 8 per cent plus £4,000 per annum for expenses — a rate considerably lower than that which he would have had to pay to the goldsmiths.  In return for lending at this low rate the Bank received a number of privileges of which the most important was that it had the right to issue notes up to the extent of its loan to the Government "under their common seal" on the security of the Government.  That is to say, it had the right to issue a £1 note; the holder of that £1 note had the right to demand that the Bank give him cash for his note, but, if he made that demand, the Bank had the right to demand that the Government raise that £1 by taxation and repay £1 worth of debt to the Bank so that the Bank might repay its £1 to the note-holder.  As Disraeli put it, "the principle of that system was to mortgage industry in order to protect property,"⁽²⁴⁾ or, as Paterson, the originator of the Bank, himself explained with charming simplicity, "The bank hath benefit of the interest on all moneys which it creates out of nothing."

The required £1,200,000 was easily subscribed.  The Bank, however, did not hand over the whole sum to William in cash.  They handed over £720,000 in cash and the remaining £480,000 in notes "under their common seal."  The Government was thus compelled to use the Bank's notes to pay its bills, which gave them prestige.  The Bank on its part was left the possessor of £720,000 in notes "under their common seal" and £480,000 in cash.⁽²⁵⁾ Now William, in the difficulties of the previous years, had been reduced, as Charles had been reduced before him, to issuing tallies in lieu of payment of his debts.  The Bank now determined to use its spare notes and cash to buy up these tallies at a considerable discount, usually of 7 per cent, just as the goldsmiths had done in Charles's day.

Before long they had thus issued notes to the full extent of £1,200,000 which the Act of Parliament entitled them to issue "under their common seal."  No one but a special-pleading lawyer doubted that the intention of the Act had been to prevent them from issuing notes beyond that amount at all, but they knew very well that William was now so dependent upon their notes for the carrying on of his business that he would not dare to break with them.  He was caught by what was perhaps the cleverest trick of blackmail in history.  If he tried to repudiate his debt, his creditors would certainly go over to James and he would lose his throne.  On the other hand he could only pay it if Parliament should vote him the money in extra taxation.  The sum required would have been an inconvenient, but not an impossible, burden, but the Bank had seen to it that their influence in Parliament was sufficient to prevent it being voted.  The monarchy was caught in a trap from which it was never to escape.

Therefore they issued the further notes beyond the £1,200,000, guarding themselves against prosecution by issuing them signed by the cashier and without their "common seal."  Now, so far is it from it being true that a purely metallic currency is necessary for stable prices that the price-level had been kept exceptionally stable throughout all Charles II's reign.  "The great revolution caused by the rise in prices seems to have run its course in England by or somewhat before the middle of the century," writes Professor Clark,⁽²⁶⁾ "and until the last quarter of the eighteenth century there seems to have been no very great change."  It is true that he adds, "though what change there was ran in an upward direction," but, as we shall see, the slight rise which made the price-level of 1789 a little higher than that of 1660 took place not in Charles II's reign, but in that of William III.  That was because both Charles and the goldsmiths, divergent as their other interests were, were at least united in their desire that the whole experiment of paper money should not be discredited by a rise in prices.  They therefore kept the quantity of it issued strictly proportionate to the increase in productivity.  The Bank of England, however, confident that the King was impotent against them and that at the same time it was the King who would be blamed by public opinion for a rise in prices, saw now no necessity for restraint.  They lent freely — a proceeding which did not cost them a halfpenny — issuing their notes well beyond the country's productive capacity.  As the figures given in the contemporary Houghton's Collection for the Improvement of Husbandry and Trade show, prices rose as a result from 100 to 137 between June, 1694, and August, 1695.

The Government, quite mistaking the disease, thought that the rise in prices was due to the clipped money, although English money had been clipped since the beginning of time and prices had remained perfectly stable since Cromwell's death.  They therefore determined to call in all the old money and reissue it instead in milled money, and fixed a date after which unmilled money would no longer be legal tender.  This was wise and fair enough, but with incredible folly they made no provision for seeing that the nation had an adequate temporary monetary supply during the time that silver was in the Mint for recoining.  The consequence was a most drastic deflation, threatening far greater suffering than had been caused by the inflation.  Through the folly of the Government the Bank of England notes were alone available to prevent that disastrous fall in prices.  Sir John Houblon, its Governor, was able to explain to the people that he would indeed, if they demanded it, pay them a proportion of their notes' value in cash but that nothing could be less in their interest than that he should pay the full value, as such a demand would compel a drastic calling in of the Bank notes at the very time of the severe restriction of cash.  The people agreed; so did the Government, which had quite lost control of the situation and was only too grateful for any suggestion which might save the country from chaos.  It was not until three months later that it occurred to them to issue their own paper money as an expedient.

Therefore as a result the Bank was allowed to make its notes partly inconvertible.  They issued these partly inconvertible notes and with them bought up the Government's tallies.  So, when in November, 1696, a return of the position of the Bank of England was given to a Parliamentary committee, it was discovered that only £1,500,000 of cash had ever passed out of the hands of the Bank into those of the King or of anybody else — £1,200,000 of its own capital and £300,000 which it had borrowed in Holland.  Yet nevertheless by this puerile conjuring trick the King was in debt to the Bank £3,034,576 16s. 5d.

The effect of the creation of paper money by the Bank of England was totally different from that of its creation by either Charles II or the Caroline goldsmiths.  The King, if he issues money, spends it and it becomes merely a part of the general money circulating in the country.  The goldsmiths were but individuals, who, if luck favoured them, perhaps made fortunes, but, having made them, retired and spent them on consumable goods.  Their paper had no guarantee;  they were always liable to the demands of their depositors and, taking one goldsmith with another, the profit from the interest of one was not perhaps more than sufficient to balance the loss of another.  But the paper money of the Bank introduced an entirely new element.  In the first place, the Bank was a continuing joint-stock corporation.  There was no moment when it died and divided up its fortune among its relatives, no moment when it retired from business and settled down to spend that which it had amassed.  It existed to lend and it proposed to go on lending until the end of time.  In the second place, so long as it lent only to the Government or against adequate collateral security, it was lending virtually without risk.  Its only risk lay in a risk of the general collapse of the régime.

Now, if a corporation lends money at interest and without risk, then re-lends the repaid loan and so on, never distributing more than a trifle of its profits either as wages or dividends, then, however small its original capital, however moderate its rate of interest, it is but a simple proposition in mathematics that in course of time it must necessarily become the possessor of the entire wealth of the country.  The only remedy is, it may be said, for the people to refuse to borrow from it.  But, if the corporation has itself the privilege of issuing money, then the public has no choice but to borrow from it, for, as we have seen, the consequence of a deflation is a violent fall in the price-level, causing most widespread suffering.  And, if the money issued by the corporation as a loan has once established itself as an important part of the country's monetary supply, then it is clear that the public, if they suddenly started to refuse that corporation's loans, would throw the whole of their productive machinery into chaos.

It is then obvious why it was that the Bank inflated in 1695.  As a general rule the bias of a bank is towards deflation, for the bank prefers prices low.  But in 1695 the incidental consequence of inflation was a rise in prices, its essential consequence was so to increase the proportion of the Bank's money in circulation to King's money as to make the Bank's money an essential part of the nation's economy.

It is perfectly true, of course, as an abstract proposition in financial theory, that the King might have cancelled the privileges of the Bank and have filled the gap by paper money of his own.  But by the bargain by which he held his throne, by the Bill of Rights of 1689, he was prevented from doing this without the consent of Parliament — which meant in practice without the consent of the Bank of England.  This bill was passed to protect the liberties of Englishmen against such tyrants as James II.  As if the maddest of believers in the divine right of kings had ever fashioned in imagination a tyranny one-hundredth part as strong as that which was clamped upon us by the Revolution of 1688 !

It is sometimes said that the foundation of the Bank of England was followed by a great increase in productivity and rapid improvement in credit.  But, as Mr. Feavearyear⁽²⁷⁾ has shown, credit had already been improving and productivity increasing ever since Charles II's time, and especially during James II's reign there had been "a remarkable improvement of credit."  The Bank was no more responsible for the increased productivity of the seventeenth century than were the acceptance houses responsible for the increased productivity of the nineteenth century.  Both the one and the other merely took advantage of it.

It was not possible to write the previous chapters of this book without reflecting upon a curiosity. Of no one of the facts contained in them is there, I think, any serious dispute. I have given the references for them, and they are all the commonplaces of any important books of admitted authority such as, for instance, Mr. Feavearyear's Pound Sterling or Mr. Lipson's Economic History. They will be all quite tediously familiar to any one who has given a study to these important questions. Such students will be inclined peevishly to ask why it was thought necessary to tell again a tale already so well known.

At the same time, should this book fall into the hands of anyone who learnt his history at school and has not had occasion to study it since, the whole story will seem to him like a wild fairy tale. Scarcely one of these facts which you allege, he will protest, was even mentioned in the textbooks from which I was taught my history. Why, if as you say, their truth is admitted and their importance is admitted, why then are we not taught a word about them in the schools ?

It is a very reasonable question and shall receive a proper answer.

After the collapse of the South Sea Bubble; Walpole ruled England for more than twenty years. It can be argued that in some ways he ruled England very well. But the method by which he ruled her was the method of frank bribery and blackmail — of blackmail particular in his neglect to prosecute influential persons of whose corruption there was in reality little doubt, of blackmail general in that he was able to present the people of England with the ultimatum, "The alternative to us is anarchy, therefore you had better allow us to remain in power and not ask too many questions about the manner in which we are enriching ourselves."

Now to-day the very frankness of Walpole's cynicism makes his appear a less unattractive character than that of his contemporaries. The modern reader, sickened with the sentimental rhetoric and imperialistic bombast with which, say, a Chatham was afterwards to cover up the tracks of usury, turns with relief to the very brutality of Walpole and finds it hard not to be persuaded by such a writer as Mr. Stirling Taylor⁽²⁸⁾ into a certain liking for the blackguard. If the things that he did were often dirty things, at least the things that he loved were clean things. At least he spent the money that he made — on building a house, on entertainment, on the pleasures of the country. He did not merely lend out again at usury the profits of usury in a lunatic's lust, for accumulation. Whatever he was, he was at least a man and not a bank.

So at a distance we like a man who lets cats out of bags, but it is only reasonable to remember that to those, whom one can only call Walpole's fellow-gangsters, the prime concern was not whether Walpole's character was attractive or unattractive but whether an arrangement which concentrated the wealth and power of the country into the hands of this gang could possibly be made to last. Walpole's urbane and winking jollity — his candid assumption that "We're all on the make together and each one has a skeleton in his cupboard" — might be tolerable round the dinner-table when the servants had withdrawn. It was well enough to denounce the South Sea Company in public as a fraud and then, when the Earl of Pembroke asked him what he ought to do about it, to say,⁽²⁹⁾ "I will only tell you what I have done myself. I have just sold out at 1,000 per cent and am fully justified" — so long as such remarks were kept for the Earl of Pembroke. But if the poor heard too much talk like that the whole régime must collapse. "The bank hath benefit of the interest of all the moneys which it creates out of nothing," explained Paterson — which again was fair enough and frank enough, but would not perhaps a little something about "service to the community" have been a trifle more discreet?

It was Townshend, Walpole's brother-in-law, who grasped perhaps more clearly than any of the other Whigs of the early eighteenth century that an aristocracy, if it is to retain its privileges, must make some pretence of earning them by some service to its country. Every régime must have its appropriate rhetoric of half-truths — an aristocracy no less than any other. Englishmen are ready with their criticism and their ridicule when they hear of the masters of the State in Russia, in Germany, in Italy, or America using the machinery of education in order to impose upon the minds of its citizens a certain view of history, selected rather for its convenience to the rulers than its truth. They sometimes fail to understand that these later and cruder countries are but doing two hundred years afterwards what the English with their far subtler technique had already done in the eighteenth century. It was not convenient, as Townshend and his colleagues saw, that the methods by which the gentlemen of England had become so should be widely known. Therefore attention must be diverted from the details of that rise, and an official version must be put out to occupy the minds of those whose interest in history it was not possible wholly to suppress.

The first suggestion of the scheme for a permanent national debt came from Burnet, the historian of the Reformation, who had been secretary to William of Orange before the Revolution and after the Revolution was rewarded with the Bishopric of Salisbury. Now, as the war dragged on, Burnet grew to be seriously alarmed at the unpopularity of the debt-system among the gentry who had to pay the taxes to meet its charges. "The gentry are for the most part the worst instructed and least knowing of any of their rank I ever went amongst," was how he put the point. Nor did the educational system do anything at all to correct this fault in them and to reconcile them to acceptance of the principles of the Revolution. Both Universities, and particularly Oxford, were Tory. "In those seats of education instead of being formed to love their country and constitution, the laws and liberties of it, they are rather disposed to love arbitrary government and to become slaves to absolute monarchy."  Therefore a Whig history must be written — the History of Our Own Times — in order to show them "what are the methods bad princes have taken to enslave us and by what conduct we have been preserved" and to arouse in them, "which ought to be the top of an an English gentleman's ambition, to be an able Parliament man."

So the Whig history was written. The next thing was to get it read, or at least talked about. The important task was to capture the educational machine. Therefore, in 1724, Townshend and Gibson, the Bishop of London, arranged for "24 persons, who are Fellows of Colleges in the two Universities, 12 from Oxford and 12 from Cambridge" to preach a sermon each at Whitehall. For that sermon the preacher was to receive the considerable emolument of £30, and none "must hope for a share of this bounty but they who are staunch Whigs and openly declare themselves to be so."⁽³⁰⁾  It was a beginning, but there was needed, thought Townshend, "some further encouragement."  He wrote to George I of the race of Dons, "As Your Majesty knows I have always had the gaining them over to Your Majesty very much at heart, so I have lately had frequent conversations with the Bishop of London, who is, with me, fully persuaded it would be very practicable to reduce them to a better sense of their duty; and we have already made a rough draft of some things proper to this end."⁽³¹⁾

The "things proper to this end" were "the foundation of a new professorship to teach the modern tongues and modern history, in which George himself is to put in the professor."⁽³²⁾  "No encouragement has hitherto been made in either of the said Universities," it was explained with truth, "for the study of modern history or modern languages," and thus there have been "opportunities frequently lost to the Crown of employing and encouraging members of the two Universities by conferring on them such employment both at home and abroad."  The salaries of these new Regius Professors were to be £400 a year, out of which they had to pay £25 each to two assistant teachers — "an appointment so ample," said the University of Cambridge in its letter of thanks, "as well nigh to equal the stipends of all our other Professors put together." The duties of the Professor were to deliver one lecture a term and to keep an eye on "twenty scholars nominated by the King to be taught gratis" and every year to send "an attested account of the progress made by each scholar... to our principal Secretary of State." The only work of historical scholarship produced by a University History Professor during the eighteenth century came from the pen of Spence, Regius Professor at Oxford and tutor to the Duke of Newcastle's son. In the year 1745 he wrote Plain Matter of Fact, or a Short Review of the Reigns of our Popish Princes since the Reformation; in order to show what we are to expect if another should reign over us.⁽³³⁾

There happen to have survived two books of the Duke of Newcastle's secret service accounts.⁽³⁴⁾ It is not surprising to find from them that a high proportion of that money the Whig noblemen merely put into their own pockets. There are grants to the two Secretaries of State, to the Dukes of Grafton, St. Albans, Somerset, Bolton, Marlborough, and Rutland. But of what could be spared from this primary purpose a very high proportion again went on capturing the educational machine. We find grants to "the Fellows of Eton College, the Fellows and Master of Emmanuel College, Cambridge, the readers of physics and modern history at Oxford and Cambridge."

Now what was the history which these endowed teachers taught? It was the progressive theory of history — a theory hitherto unknown, a theory soon, as a result of their activities, accepted uncritically, a theory created in the first place quite cynically and clear-headedly in order to cover up the traces of truth. It was the purpose of that history to create among the public the ambient feeling that, bad as things might be at the moment of writing, yet the lesson of history was a lesson of steady improvement, that each present generation was always, as Macaulay put it⁽³⁵⁾ of his generation, "the most enlightened generation of the most enlightened people that ever existed." Where there was evil, that evil was the relic of an evil past; where there was good, that good was the product of the increasing purpose which runs through the ages and which was assuredly leading us to a yet more glorious and more rosy dawn ahead.

This, though it was said, was not very seriously believed in the eighteenth century. It was said to keep quiet those who did not belong to the governing classes. Yet, as always happens with educational reforms, you have to have one generation of conscious lying, and then the second generation, the generation that was pupil when the masters were lying, honestly believes what it was taught. The common belief that schoolboys like to disagree with their masters is unfortunately entirely untrue; very few masters are stimulating enough to arouse disagreement. So by the end of the eighteenth century the progressive theory of history had received general acceptance among those who claimed for themselves the prestige of educated people. It was, therefore, not necessary specifically to teach it any more. So long as there was no great risk of their believing inconvenient history, it was much safer for the governing class not to learn any history at all. For they believed that they had a divine right to everything as it was. So history could not possibly teach them that they were justified in taking more, and might possibly arouse in them scruples at having so much.

Therefore, as soon as the Hanoverian régime was safely established, the lectures and pupils of the Regius Professors were allowed to lapse. Only their emoluments remained, as a hint to historians that silence was golden. "When I first read my warrant," confessed Nares,⁽³⁶⁾ who was appointed Professor in the early years of the nineteenth century," I well remember feeling ashamed of my ignorance of this curious science" — political economy. But, arrived at Oxford, he found his colleagues indifferent and as ignorant as himself, and "the young men too constantly engaged upon higher pursuits" to attend to "a subject comparatively so light and unacademical as modern history."  "Things might be better," he reflected as he retired to his private house in Surrey, "if the office were bestowed upon some resident member of the University."

As a consequence it was possible to be certain that all the ablest youths in the country during all their formative years, during the only years perhaps in which they might ever have leisure for study, should never come in contact within any problem that had been a reality since the foundation of Christianity. And yet in this world of unreality they acquired qualifications which they imagined to entitle them to positions of command in the real world. Thus Sir Robert Peel, the first man ever to win an Oxford double first, was allowed without question to take a leading part in his country's government, and neither he nor anyone else ever suspected for a moment his total misunderstanding of the forces that had gone to shape that country. "Now remember what I say," writes Jackson,⁽³⁷⁾ his Headmaster, to him, "Give the last high finish to all that you now possess by the continual reading of Homer. Let no day pass without your having him in your hands. Elevate your own mind by the continual meditation of the vastness of his comprehension and the unerring accuracy of all his conceptions. If you will but read him four or five times every year, in half a dozen years you will know him by heart." No one yields to the present writer in his admiration for Homer, but to advise a young man whose business is to reform the credit system to read Homer every day is clearly the advice of a maniac.

The miseries of the time, miseries to which Peel's absorption in the classics and consequent ignorance of history made no inconsiderable contribution, raised up at length their protest against the privilege of class. There stepped out another perfectly honest man — from Eton and Christ Church — to make himself the mouthpiece of that protest, Gladstone. The Civil Service, which now governed England, was, he agreed, no longer to be filled merely by nomination and favouritism. Entrance to it should be by competitive examination — and naturally to such a man it appeared merely as a matter of course that such examinations should be in the subtleties of the Latin and Greek languages, subtleties which could hardly be acquired save by those whose fathers could afford for them the luxuries of public school and University education and the acquisition of which would take up so much of their time and energy that it was very unlikely that they would also give themselves to any serious study of history. Innocent of that study, they complacently accepted the progressive theory of history of whose origin they had no knowledge, and to sceptical speculations they replied, "Well, such things may have been or may not have been, but you cannot deny that out of them there emerged the present society, which offers to everybody a higher standard of living than has been offered by any of its predecessors."  Like Hume, even when they deplored the injustices and barbarities of the past, they felt it impossible to deny that they "produced good," because they "led to our present situation."⁽³⁸⁾  To question the progressive theory came to be looked on almost as a species of disloyalty — of disloyalty to country, to school, to University, to class, to the philosophy of Gilbert and Sullivan and the half a dozen other things whose claims upon him the English gentleman thinks to be superior to those of truth. For, while the educated Englishman is not perhaps the most mendacious of men, there is certainly nobody else who thinks it bad form to tell the truth for so many different reasons.

Now what is the truth? In the fifties of the last century there lived in Oxford a clergyman, called Thorold Rogers, who made for himself a living by coaching in the classics and in philosophy. The only work that he had published up till then was an Introductory Lecture to the Logic of Aristotle. In 1860, however, he began serious research into the wages and prices ruling at the various dates in English history, and on the strength of this research in 1862 he was elected Drummond Professor of Political Economy. It was while he held that chair that there appeared the first two volumes of his History of Agriculture and Prices. He had set himself a task which no man had ever attempted before. He had set himself to collect all the statistics available of wages paid at different dates and in different parts of the country and of the prices ruling at those dates and places. The material collected for his History of Agriculture and Prices he subsequently used again for his Six Centuries of Work and Wages. The statistics which he collected alone fill a thick volume, and there is no reason to suspect that the conclusions at which he arrives are generalizations from insufficient data. In a smaller work — of extracts from his large Six Centuries — called The History of Work and Wages, he summarizes these conclusions. [pp. 56-66.]

In 1495 the wages of the agricultural labourer were fixed at 2s. a week. The price of wheat was 4s. 0¾d. a quarter, that of malt 2s. 4½d., of oatmeal 5s. 4d. Suppose, argues Rogers, that the labourer's family requires for its year's provisions three quarters of wheat, three of malt, and two of oatmeal, the cost of that will be 12s. 2¼d. + 7s. 1½d. + 10s. 8d., or 29s. 11¾d. That is to say, the labourer will be able to earn it by fifteen weeks' work.

In 1564 the labourer got, on the average, 3s. 6d. a week, but wheat was now 19s. 9d., oatmeal probably 25s., and malt 10s. 8d. a quarter. To earn the same store of provisions, the sum proves that the labourer would have had to give forty weeks' work.

By 1610 the earnings of his whole year would have been insufficient to buy that store by 24s. 9½d. In 1651 things are a trifle better and he could earn his store by forty-three weeks' work. In 1684 his whole year's work would be just insufficient to earn him the store. By 1725, when the labourer could earn from £13 to £15 a year and when the price of the provisions would have worked out at £16 2s. 3d., the sum would plainly have been insufficient.

He then, to vary the method of calculation, takes some figures given by Arthur Young in 1772 of the earnings of a family of seven, all in work. The sum total of their yearly earnings comes to £51 8s. a year. The same people, working in Henry VII's time, would, he shows, have earned £24 10s., and, by a comparison of prices, £183 15s. would have been required in 1777 to purchase what could be purchased by £24 10s. in Henry VII's time. In Young's time the wage of the agricultural labourer was 7s. 6d. a week. By 1866 it had risen to 13s., but by 1866 prices were twelve times what they had been in Henry VII's time, when the wage had been 2s. a week.

Only less striking is the story told by the study of the artisan's wages. Wages in the building trade in 1877 were, Rogers found, 42s. 9d. a week. In Henry VII's time they were 3s. 4d., which multiplied by twelve is 40s. Nor in those figures is there even that small improvement which there appears to be. For in Henry VII's time, and indeed right up to the reign of Charles II, rent was a negligible factor. Wages failed to keep pace with the rise in prices in the sixteenth and seventeenth centuries. On the other hand the amount of the rent, where there was rent to pay, was settled by custom. Now the whole strength of the landowners against the Crown was, as has been already argued, that their dues to the Crown were customary dues, and they had been strong enough to prevent those dues being revised with the rise of prices. But, refusing to permit a revision of their dues to the Crown, they could not demand, as long as the issue between them and the Crown was undecided, a revision of the yeoman's rent to them. By Charles II's reign, however, they thought that the cause of monarchy was so wholly beaten that it was no longer necessary to preserve an attitude of logical consistency in their opposition. They therefore abolished their feudal payments to the Crown, while preserving the yeoman's feudal payments to them.

In 1679 they also passed the Statute of Frauds. By that Statute they enacted that everyone must produce written evidence of his claim to his lands. After the confusion of the Civil Wars there was about such an enactment a superficial appearance of justice. But in truth the gentlemen possessed written titles and the peasants did not. The gentlemen possessed such titles, not because their claims were better than those of the peasants but because they were a great deal worse. The gentlemen had acquired their estates at the time of the dissolution of the monasteries and, foreseeing that such titles might well be challenged, had been careful to obtain written evidence of them from the King. The peasantry had inherited their lands by custom dating back to ancestors in the heart of the Middle Ages and had no written title. Thus the gentlemen were able to acquire the land of the peasants and at will to re-let it to them for a fixed term of years and at a greatly increased rent, to seize the land and employ the former peasant as an agricultural labourer, or to seize the land and turn the former peasant loose to fend for himself. There were a few gentlemen scattered about the country who refused for honour's sake to raise their rents, and among them it is pleasant to find the noble name of John Dryden. But the Statute of Frauds marks in general both the destruction of the English peasantry and the imposition upon the poor of rent as one of the major items in their expenditure.

"We owe the fact," Thorold Rogers tells us,⁽³⁹⁾ "that the great English nation is tenant-at-will to a few thousand landowners, to that device of evil times, a strict settlement. We are informed that the machinery which has gradually changed the whole character of the rural population of England was invented by the subtlety of two lawyers of the Restoration, Palmer and Bridgman. As there have been men whose genius has bestowed lasting benefit on mankind, so there have been from time to time exhibitions of perverted intellectual activity, whose malignant influence has inflicted permanent evils. It may be that the mischief which this practice has induced is too widespread for remedial measures. But no Englishman who has the courage to forecast the destinies of his country can doubt that its greatest danger lies in the present alienation of its people from the soil, and in the future exodus of a disinherited peasantry."

There are probably but few men to-day who would agree with Rogers's diagnosis that the solution for all these evils is to be found only in the application of the full gospel of his friend, Cobden. Concerning one or two details of his statistics there has been controversy. In their main outline they remain unchallenged and unchallengeable. His careful and exhaustive evidence makes finally certain what the more random evidence of Cobbett had already shown to be highly probable. Broadly he asserts this. Between Henry VII's time and 1850 the population of England multiplied by about five, rising from four million to twenty million. The productivity of the country had multiplied by about four by 1800, and multiplied by another four and a half between 1800 and 1850, making a total of 18. As a result the poor ought to have been between three and four times better-off. They were, however, considerably worse-off. The gentlemen of England, so far from being those leaders of the nation towards a finer and a wider freedom which the progressive history had represented them to be, were revealed as in the heyday of their power the trickiest and most rapacious class ever known among men.

The sweeping rhetoric of Macaulay⁽⁴⁰⁾ had in 1830 professed itself "unable to find any satisfactory record of any great nation, past or present, in which the working classes have been in a more comfortable situation than in England in the last thirty years." Very different was the verdict of one who was himself born in that class and knew their lives. "Experience," wrote Cobbett⁽⁴¹⁾ in the Political Register, "daily observation, minute and repeated personal inquiry and examination, have made me familiar with the state of the labouring poor, and, sir, I challenge contradiction when I say, that a labouring man in England with a wife and only three children, though he never lose a day's work, though he and his family be economical, frugal, and industrious in the most extensive sense of those words, is not now able to procure himself by his labour a single meal of meat from one end of the year unto the other."

It was on the side of Cobbett's rhetoric and not of Macaulay's easy learning that the figures gave their verdict. From Rogers's hard arguments and dry statistics emerged the terrible conclusion, "I contend that, from 1563 to 1824, a conspiracy, concocted by the law and carried out by parties interested in its success, was entered into to cheat the English workman of his wages, to tie him to the soil, to deprive him of hope and to degrade him into irremediable poverty.... For more than two centuries and a half the English law and those who administered the law were engaged in grinding the English workman down to the lowest pittance, in stamping out every expression or act which indicated any organized discontent, and in multiplying penalties upon him when he thought of his natural rights."⁽⁴²⁾ "The condition of the peasant," he wrote elsewhere in 1869 in one quiet and awful sentence,⁽⁴³⁾ "is now lower than it was even in Cobbett's time."  And yet, if you go round the school libraries of England to-day, how many hundreds of copies of Macaulay will you find for every one of Cobbett?

It is true that between the middle of the nineteenth century and 1900 the lot of the poor improved greatly. The standard of living of the modern poor man is definitely higher than that of his medieval ancestor, but it is only slightly higher. The modern poor man has a very much wider selection of objects upon which he can spend his money. He can go to the cinema; he can eat tinned apricots; he can ride in a charabanc — all of which were impossible to his ancestor. But, except to a trivial extent, he can only do these things by denying himself things which his ancestors used to enjoy. They are not additions to his life. He possesses, so to speak, more alternatives than his ancestor, but he does not possess more goods. Society at large is at an advantage over medieval society in that it has banished the fear of real famine, but in the Middle Ages, if there was a sufficiency of food, the poor man was certain to be able to get his share of it.

Thorold Rogers stood again for his professorship at Oxford when the term of it expired in 1867. They put up against him a certain Bonamy Price, a man who had until recently been off his head, though Professor Hewins in the Dictionary of National Biography assures us that by the time of the election he had completely recovered. Price was elected by a large majority and subsequently re-elected three times. He had had no previous training in economics and, Professor Hewins tells us, "he made no important contribution to economic science." It was a sufficient qualification. Rogers meanwhile had to earn his living by giving lectures at a coaching establishment in Bayswater. It was only in 1888, two years before his death, that Oxford offered to him some reparation by re-electing him to his professorship.

Now does not the story of Thorold Rogers explain why it is that the truths of history sound to the average man's ear as strange and exaggerated paradoxes? There is hardly a scholar in all Europe to-day who would not acclaim Rogers's greatness. But has anyone who has only studied history in the text-books that they dole out in the public schools ever heard either his name or his thesis? Has such a one to-day any notion that solid scholarship has seriously challenged, let alone refuted, the progressive theory of history? And yet a distinguished modern Cambridge scholar, Mr. Butterfield, is able truly to say in his Whig Interpretation of History [p. 5], after having given a list of the main historical controversies of the last four hundred years, "In all the examples given above, as well as in many others, the result of detailed historical research has been to correct very materially what had been accepted Protestant, or Whig, interpretation." Those whose affection for the public schools is deepest should be the first candidly to admit that their system has not been so much a system of education as a system to prevent boys from getting education, their history little more than a prescription for setting the consciences of gentlemen at rest.

The poor in Townshend's day were illiterate. Therefore, so long as they were not educated at all, there was no necessity to educate them wrong. As a result there remained among them a strange and clouded memory that there had been good times in the past before the dissolution of the monasteries. This memory was quite unconnected with any present Catholic sympathies: it came from the fact that it was the coining of the monastic plate that started the rise in prices.

"I'll tell thee what, good fellow,
Before the friars went hence
A bushel of the best wheat
Was sold for fourteen pence,
And forty eggs a penny
That were both good and new,"

sings Ignorance in the Percy Ballad of Plain Truth and Blind Ignorance. And, though Truth is made to win the theological debate, he specifically refuses even to try to refute Ignorance's economic history. The Rev. C.L. Marson is his book on Glastonbury [p. 56] tells how the Somerset labourers in the last century still spoke of the Glastonbury monks as a "wonderful good class of people served terrible bad." It has taken but two generations of compulsory education and text-book history to make the poor as ignorant as the rich.

Now how was it that this perversion of history played into the hands of the masters of the credit-system? That was not its original purpose, the purpose for which Townshend and his friends invented it. They invented it to serve their own interests and owing to it they had a very comfortable innings. Yet from the first they suffered from the inevitable weakness of all blackmailers. They were defenceless against double-crossing. As has been argued, the Revolution of 1688 was essentially the work of gentlemen; the bankers were their very subordinate allies. Yet the most important result of that Revolution was the concession to the Bank of England of the extraordinary privilege of inventing money — a privilege which, as Swift demonstrated, by an inevitable mathematical necessity has caused the possessors of it to acquire a lien on the entire wealth of the nation to the loss of the gentlemen and everybody else. Nothing would have been easier than for a system of education to explain to its pupils the nature of this privilege of the bankers; nothing could be more evidently the duty of any proper system of education than to give such an explanation. But Townshend's education did not dare to give it because it was not possible to tell the story of the founding of the Bank of England unless you also told the true story of the Revolution of 1688. The two were inextricably intertwined. Thus, secure against all dangers of publicity, the power of usury was able to extend its control over the state and, by a horrid irony, all the strong forces of conservatism and tradition were used to defend the activities of the most dangerous enemy that those forces have ever had to encounter. It was the discovery of usury that the gentleman's code could be used, if used with skill, for the promotion of injustice as well as for the promotion of justice. The individual gentleman, unless like Townshend he was very rich, would, it is true, be unwilling to "do anything that would let down the school," or the regiment, or what not. But, if you could trick the whole school into connivance at injustice, then, on the gentleman's code, it would become disloyalty to question the conduct of the school. So Shylock exchanged the Jewish gaberdine for the Old School Tie and was elected with acclamation to the governing body.

Under the system the gradual extrusion of the landed classes by the monied classes was mathematically inevitable. It happened. At the time of the Revolution, Gregory King tells us, the income of a merchant prince was "half that of a baronet, little more than an eighth that of a nobleman and little more than a third that of a bishop." "In 1750 it is probable that the City of London had a larger commercial income than the rents of the whole House of Lords and the episcopal bench."⁽⁴⁴⁾  It was the Napoleonic wars which brought the final and complete triumph of the money-lenders. As Mr. Chesterton has justly put it:⁽⁴⁵⁾

"The squire seemed struck in the saddle; he was foolish as if in pain.
He leaned on a staggering lawyer, he clutched at a cringing Jew.
He was stricken, it may be, after all, he was stricken at Waterloo."

Cobbett saw the whole thing happening in one part of Hampshire. "Let us look back to the place where I started on this present rural Ride. Poor old Baron Maseres, succeeded at Reigate by little Parson Fellowes, and at Betchworth (three miles on my road) by Kendrick, is no bad instance to begin with; for the Baron was nobly descended though from French ancestors. At Albury, fifteen miles on my road, Mr. Drummond (a banker) is in the seat of one of the Howards, and close by he has bought the estate, just pulled down the house and blotted out the memory of the Godschalls. At Chilworth, two miles further down the same vale and close under St. Martha's Hill, Mr. Tinkler, a powder-maker (succeeding Hill, another powder-maker, who had been a breeches-maker at Hounslow) has got the old mansion and estate of the old Duchess of Marlborough, who frequently resided in what was then a large quadrangular mansion, but the remains of which now serve as out farm-buildings and a farm-house, which I found inhabited by a poor labourer and his family, the farm being in the hands of the powder-maker, who does not find the once noble seat good enough for him. Coming on to Waverley Abbey, there is Mr. Thompson, a merchant, succeeding the Orby Hunters and Sir Robert Rich. Close adjoining Mr. Laing, a West India dealer of some sort, has stepped into the place of the lineal descendants of Sir William Temple.... Coming on to old Alresford (twenty miles from Farnham) Sheriff, the son of a Sheriff, who was a commissary in the American war, has succeeded the Gages. Two miles further on at Abbotston (down on the side of the Itchen) Alexander Baring has succeeded the heirs and successors of the Duke of Bolton, the remains of whose noble mansion I once saw here. Not above a mile higher up the same Baring has, at the Grange with its noble mansion, park, and estate, succeeded the heirs of Lord Northington; and at only about two miles further Sir Thomas Baring, at Stratton Park, has succeeded the Russells in the ownership of the estates of Stratton and Micheldover, which were once the property of Alfred the Great.... The small gentry to about the third rank upwards (considering there to be five ranks from the smallest gentry up to the greatest nobility) are all gone, nearly to a man, and the small farmers along with them. The Barings alone have, I should think, swallowed up thirty or forty of these small gentry without perceiving it. They indeed swallow up the biggest race of all; but innumerable small fry slip down unperceived, like caplins down the throats of the sharks, while these latter feel only the codfish.... The big, in order to save themselves from being 'swallowed up quick' (as we used to be taught to say in our Church prayers against Bonaparte) make use of their voices to get, through place, pension or sinecure, something back from the taxers. Others of them fall in love with the daughters and widows of paper-money people, big brewers and the like; and sometimes their daughters fall in love with the paper-money people's sons, or the fathers of those sons; and, whether they be Jews or not seems to be little matter with this all-subduing passion of love. But the small gentry have no resource. While war lasted, 'glorious war,' there was a resource; but now, alas, not only is there no war but there is no hope of war; and not a few of them will actually come to the parish-book."⁽⁴⁶⁾

"To ascribe the whole to contrivance" he wrote⁽⁴⁷⁾ in another place "would be to give to Pitt and his followers too much credit for profundity; but ... if these knaves had said, 'Let us go to work to induce the owners and occupiers of the land to convey their estates and capital into our hands,' and if the Government had corresponded with them in views, the effect could not have been more complete than it has thus far been.... It was the sheep rendering up the dogs⁽⁴⁸⁾ into the hands of the wolves."

"The gentlemen of England," said George Wyndham at the beginning of the twentieth century, "must not abdicate."  But the whole history of England has been little but a history of gentlemen abdicating. The abdications have only not been noticed for the same reason as that for which Sir John Harrington found that treason never prospered — because the people who stepped into power always called themselves gentlemen.

1. History of Agriculture and Prices, vol. ii.

2. The Pound Sterling, A. Feavearyear, p. 60.

3. Wealth of Nations (ed. Routledge), p. 143.

4. Pound Sterling, Feavearyear, p. 57.

5. History of England, Macaulay, iv, 621-2, footnote.

6. Queen Elizabeth, p. 284.

7. Pound Sterling, Feavearyear, p. 86.

8. Worhs (ed. 1771), i, 91.

9. There is, it is true, another sort of credit-transaction in which B gives the article to A in return for a promise from A to supply an article of equal value at some future date. In such a transaction, of course, the promise is cancelled when the second artic'e is delivered and no cash ever changes hands at all. The cash value is merely a measure.

10. Introduction to the Volume of Treasury Books in the State Papers.

11. Charles II, Bryant, p. 139.

12. Calendar of Treasury Books, vol. vii, part i.

13. Life of Edward, Earl of Clarendon (ed. 1827), iii, 7.

14. Calendar of State Papers, Domestic Series, xxiv, 21.

15. A New Discourse of Trade (4th ed.), pp. x-xi.

16. A Discourse of Trade (1690), 33, 84-5.

17. House of Commons Journal, i, 679.

18. Hist. MSS. Comm., part i, 134.

19. Ibid.

20. Discourses upon Trade (1691), 21.

21. Holland, Thorold Rogers, pp. 223, 224.

22. Jacobite Movement, Petrie, p. 37.

23. History, iv, 491.

24. Sybil, Bk. i, chap. 3.

25. Short Account of the Bank of England, Michael Godfrey, p. 8.

26. The Later Stuarts, Clark, p. 38.

27. Pound Sterling, Feavearyear, p. 107.

28. Life of Walpole.

29. South Sea Bubble, Erleigh, p. 82.

30. Portland MSS., vii, 377.

31. Walpole, Coxe, ii, 297, 299.

32. Reliquiae Hernianae, ii, 200; May 20, 1724.

33. The previous pages are based on an article by Professor C. H. Firth in the English Historical Review for January, 1917.

34. The Structure of Politics at the Accession of George III, Namier, p. 231.

35. Essay on Soulitey’s Colloquies.

36. See article of Professor Firth referred to above.

37. Peel, Ramsay, pp. 13, 14.

38. Quoted by Cobbett in his Rural Rides.

39. History of Agriculture and Prices, Thorold Rogers, .pp. 693, 694.

40. Essay on Southey’s Colloquies.

41. Political Register, 6th December, 1806.

42. Work and Wages, pp. 65, 66.

43. Historical Gleanings, Lecture on Cobbett.

44. Work and Wages, Thorold Rogers, p. 111.

45. Secret People.

46. Rural Rides, pp. 310-12.

47. Ed. 1853, p. 92.

48. Sic. Does he mean "The dogs rendering up the sheep"?