XXXIV. 1841. CHAP. strength, because you introduce a new and far more effective method of extracting their resources out of the people. But this is done only at the expense of present discontent and future ruin; the perfection of European administration, if not tempered by the establishment of European freedom, instead of a blessing, becomes the greatest possible curse to humanity. The universal insurrection of the Druses, and other hill tribes, against Ibrahim Pasha, prove how soon that was discovered by the inhabitants of Asia Minor. The sequel of this History will show whether the same political lesson is not taught by the English possessions in India. CHAPTER XXXV. INTERNAL HISTORY OF ENGLAND FROM THE ACCESSION OF SIR R. PEEL IN THE END OF 1834, TO THE FALL OF HIS CHAP. 1834. 1. changes in rency Laws peace. UNOBSERVED amidst the strife of parties, unmarked by political leaders, unknown to the dominant multitude, XXXV. one cause of paramount importance and irresistible force was, during the forty years' peace, incessantly acting on vast effect the British Empire. THE MUTATIONS OF THE CUrrency, of the anticipated before 1819, experienced since that period, the Curfurnish the key to all the variations in social happiness during the which were experienced during that eventful period. They explain the alternations of feverish and shortlived prosperity, and exhausting and long-continued distress, which invariably occurred; they account for the vast political changes which ensued, and the entire alteration in the balance of internal power, and in the tendency of foreign and commercial policy, which occurred during their continuance. Without a constant reference to this paramount and irresistible cause, all attempts to explain the political history of Great Britain during this long period will prove nugatory, and the most important lessons to be derived from contemporary history will be lost. Leading It has been already explained, that as the great objects 2. of a currency are to be adequate and retainable, so the greatest possible mistakes which can be committed in re- evils of the gard to the circulating medium, are, to establish it on a laws. basis which is either too narrow or liable to fluctuation. currency XXXV. 1834. CHAP. As gold has from the earliest times been considered as the most precious of metals, and on that account been the great medium of payment and vehicle of commerce among mankind, so it seems, at first sight, the wisest course to establish the currency on that basis, because then it rests on a foundation which is not, in the general case, of a changing or evanescent character, but durable, if any earthly thing is entitled to that appellation in the changing concerns of men. Gold, no doubt, in some political crisis, does change value often to a very considerable degree; but it does so, from its being universally current, much less so than any other commodity; and therefore a currency resting on it as a basis seems more secure than any other which can be figured. These are the principles on which the monetary systems of Great Britain since 1819 have been entirely founded, which, beyond the limit of £14,000,000 issuable by the Bank of England, and about a similar amount by the private banks in the empire, requires the whole circulation to be based on gold, and liable to be expanded or contracted according as the supplies of that metal are abundant or scanty. And these ideas are in themselves so plausible, and the evils of an unlimited issue of paper had been so forcibly illustrated by the French assignats, that it is not surprising that they commanded general assent, and for more than one generation entirely governed the monetary policy of the empire. Reflection had, however, in the very outset, revealed Grand error to a few sagacious observers, what experience and sufferthey spring. ing have now taught even to the most inconsiderate of mankind, that these views are essentially erroneous, and, as applied to a domestic currency intended to sustain industry at home, of the most dangerous tendency. For the purposes of foreign transactions, indeed, whether of nations or individuals, it is indispensable to have a currency consisting either of the precious metals, or of paper convertible on demand into them, because none other will pass current in foreign natious. But with regard to the 3. from which XXXV. 1834. currency which is to be retained at home, and conduct CHAP. the commerce of men in internal transactions, the requirement is just the reverse. The object of such a currency is to be adequate and durable, neither liable to be unduly accumulated at one time nor extensively withdrawn at another. Unless this is the case, money will be plentiful on some occasions, and encourage speculation by the rise of prices and the facility of getting it; and scarce on others, and so discourage enterprise, from the withdrawal of the circulating medium, and consequent fall of prices. The greatest social evils which can afflict an industrious and commercial community are induced by a circulating medium for internal transactions which is liable to fluctuation, and are capable of being avoided by one which is not liable to change. 4. currency based on tion of gold The very circumstance which renders gold and silver the best possible foundation for the currency which is to Danger of a conduct the foreign transactions of a country, renders it mainly the worst for that which is to sustain its domestic industry. the retenThe reason is obvious: being always so much in request, and silver. they are the first to go away. Being the most coveted and precious of all articles, they are universally acceptable, and are more readily received than manufactures or other merchandise in payment of foreign importation, or in liquidation of foreign loans. Hence, whenever a great importation of foreign produce takes place into such a nation, or any adventitious cause occasions a great export of the precious metals, the currency, and with it the credit of the State, is shaken to its foundation, and undertakings the most necessary are suspended from want of the necessary funds to carry them on. If the basis could be permanently retained at home, it would all be well; but if it cannot, better to rest it on something of less intrinsic worth, and less coveted in foreign lands. The justice of these principles was to a certain extent recognised in the monetary system of Sir R. Peel, because the Bank of England was permitted to issue notes VOL. VI. H XXXV. 1834. 5. insufficient recognition were involved two capital errors. of these principles in our monetary system. CHAP. to the extent of £14,000,000, and the country banks of the whole empire of nearly as much more on securities only, not on bullion. But in this regulation, and still Partial but more in the adherence to it in subsequent times, there In the first place, the whole of the Bank of England was convertible currency on demand at the Bank into gold, and that of country bankers at their several places of issue into Bank of England notes, without distinguishing between those parts of the currency issued on securities and those on bullion. Thus the whole currency was made dependent on the retention of gold. In the second place, supposing the limit of £14,000,000 had been adequate for the public necessities at the time when it was adopted, it became inadequate from the growth of the nation and the increase of mercantile transactions, the first of which had increased fifty per cent, the latter more than doubled, in thirty years after the system was introduced. To suppose that because £14,000,000 was enough at one time, therefore it was always to be enough, is the same error as to suppose that the measure of a boy of eighteen will do for a man of thirty, or the food which feeds an army of forty thousand men will suffice for seventy thousand. 6. of a currency based on the retention of gold. It is the peculiar evil of a system of currency mainly Double set dependent on the retention of gold, that it inevitably of dangers tends unduly to foster and inflame speculation when the precious metals are plentiful, and proportionably check and prostrate it when they are withdrawn. When from any external cause, or the exports becoming nearly equal to the imports by the effect of long-continued and general suffering, gold has become plentiful in the coffers of the Bank, and consequently its own issues, and those of all other banks, have become fearless and abundant, prices rise, speculation flourishes, great undertakings are commenced, and general prosperity for a brief season prevails. But in this very prosperity, acting on a system of currency based on the retention of the precious metals, are involved |