THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 352 
 
 b&75 
 v. 25 
 
 ECONOMICS
 
 £
 

 
 VIEWS 
 
 ON 
 
 THE CURRENCY: 
 
 IK WHICH 
 
 THE CONNEXION BETWEEN CORN AND CURRENCY 
 
 • IS SHOWN ; 
 THE NATURE OF OUR 
 
 SYSTEM OF CURRENCY EXPLAINED; 
 
 AND THE 
 
 MERITS OF THE CORN BILL, 
 
 THE BRANCH BANKS, 
 THE EXTENSION OF THE BANK CHARTER, 
 
 AND 
 
 THE SMALL NOTE ACT EXAMINED. 
 
 By T. JOPLIN. 
 
 LONDON: 
 JAMES RIDGWAY, PICCADILLY; 
 
 AND BALDWIN AND CRADOCK, PATERNOSTER ROW. 
 
 MDCCCXXVIII.
 
 IONDON J 
 PRINTED BY T. BRETTEEL, RUPERT STREET, HAYMARKET,
 
 PREFACE. 
 
 The principles of the following Work have 
 appeared in former publications, but are more 
 fully developed in this. Those publications 
 have not been generally read, but were not, per- 
 haps, without their effect. They at least have 
 furnished the sub-stratum of more than one po- 
 pular essay: if any writings on subjects of Po- 
 litical Economy can be called popular. 
 
 With the writings of the modern political 
 economists, this work has nothing in common. 
 However much the author may admire the ta- 
 lents and ingenuity which have been displayed 
 by Messrs Ricardo, Mill, Tooke, Torrens, and 
 M'Culloch, he is compelled to dissent from the 
 chief part of their doctrines. Indeed it would 
 hardly be fair to stop at them. The science of 
 political economy was corrupted at its fountain 
 head, and all which can be said is, that they have 
 not freed it from its corruptions. Dr Adam 
 Smith, in his Wealth of Nations, throws much 
 light upon political science, but more darkness ; 
 and his errors and obscurities unfortunately have 
 reference to the most important parts of his sub- 
 ject. The Wealth of Nations is a work, not- 
 withstanding, of great genius ; the best proof of 
 which is, that men of genius have adopted its 
 
 a 2
 
 IV 
 
 errors, and reasoned upon them as unquestion- 
 able truths. 
 
 Had Dr Smith never written, it would have 
 been better for the science. The French eco- 
 nomists had discovered the important truth, that 
 the produce of land forms the basis of wealth. 
 But in their hands the value of the principle was 
 destroyed by the use they made of it. Had it 
 not been for Dr Smith, subsequent writers would 
 have had one sound general principle to start 
 from, and with the aid of experience, would have 
 been able to arrive at more just conclusions. 
 The Wealth of Nations, however, came like an 
 ignis-fatuus, to mislead the future economist in- 
 to bogs and quagmires, where he finds it in vain 
 to tempt the man of plain but solid sense to fol- 
 low him. 
 
 Since Dr Smith's time, consequently, not any 
 light has been thrown upon the subject, at all 
 proportioned to the attention which it has re- 
 ceived. Malthus on Population, and the pam- 
 phlet of Ricardo, entitled, " The high Price of 
 Bullion a Proof of the Depreciation of Bank 
 Notes," together with the Report of the Bullion 
 Committee to which that pamphlet gave rise, 
 are the only works that have contributed in any 
 material degree to enlarge the boundaries of the 
 science. The former, perhaps, is the only per- 
 fect work on political economy that ever was 
 published ; and its principles have been the guide 
 of legislation on subjects connected with popu-
 
 lation ever since it appeared. The latter re- 
 vived a doctrine of Dr Smith's, but revived it 
 with all its errors ; and was chiefly important 
 from its connection with the events to which it 
 referred, and the discussions to which it gave rise. 
 
 At the same time that the author is convinced 
 more correct views on the subject of politi- 
 cal economy are much required, he neither has 
 the requisite qualifications nor the leisure ne- 
 cessary to become the founder of a new sys- 
 tem. He may, nevertheless, contribute his 
 mite towards the formation of one. Rome was 
 not built in a day. Before the master mind ap- 
 pears, that has to give order, consistency, and 
 beauty to the fabric, there must be useful drudges 
 who will hew out the rude materials, and help 
 to clear away the rubbish. One of these humble 
 instruments, the author will be very glad if he 
 happen to prove. 
 
 The best test of any principles must be found 
 in their application to practice ; and to this test 
 those suggested in the following work are ap- 
 plied in an attempt to analyze the merits of the 
 corn bill of 1827, and the measures of 1826 with 
 regard to the currency. 
 
 It will be seen that while the author finds rea- 
 son to approve of the corn bill, he considers the 
 repeal of the act for the withdrawal of the small 
 notes from circulation to be absolutely necessa- 
 ry. How far his views on this latter subject 
 may be correct, must be left to the determina-
 
 VI 
 
 tion of the reader. But he thinks it proper to 
 mention, that when the act was passed, he saw 
 no objection to it. His present opinions are 
 the result of subsequent reflection. He was 
 under the gallery of the House of Commons, 
 and heard the whole of the debate upon it when 
 it was proposed ; and had he been a member, 
 would no doubt have voted in its favour. 
 
 To stile and manner, and even to great 
 correctness, the author makes no pretension. 
 Perspicuity has been his chief object. It may 
 likewise be proper to mention, that the work 
 was written and printed in the country ; and 
 was for convenience printed as it was written. 
 If his views, therefore, on any particular point 
 happened to enlarge or receive any modifica- 
 tion in the progress of the work, he had no op- 
 portunity of altering what he had previously 
 said. It was also commenced last August 
 with the intention of having it published by 
 Christmas ; but the author was prevented by 
 circumstances from attending to it for two or 
 three months. It has, in consequence, been 
 quite as much hurried as such a work ought to 
 be. All these considerations the good-natured 
 reader will be pleased to remember and make 
 allowances for. 
 
 March 3rd, ] 828.
 
 CONTENTS. 
 
 PAGE 
 
 Preface — - — — — - iii 
 
 SECTION I.— On the Com Bill of 1827, the Causes which 
 
 led to it, and the Principles on which it was opposed 1 
 
 Corn Bill of 1815 - - - - - 1 
 
 The Agricultural Distress 2 
 
 Causes assigned for the Agricultural Distress - 3 
 
 Causes assigned for the Agricultural Distress, by the Com- 
 mittee of the House of Commons 4 
 Principles laid down by the Committee, for the future Re- 
 gulation of our Corn Laws 5 
 Report, in Unison with Public Opinion 7 
 Views of Government, directed to promote such an Altera- 
 tion in our Corn Laws, as the Report recommended 11 
 Corn Bill of 1827 .... 12 
 
 The Law calculated to induce great Stocks to be held in 
 Bond ...... 14 
 
 This Tendency of the Bill, a reasonable Ground of Appre- 
 hension, on the Part of the Agriculturists - 16 
 The Opinion, so generally admitted, that a small Excess or 
 Deficiency in the Supply, has a great Effect upon Prices, 
 the Basis on which the Apprehensions, with Regard to 
 the Bill, may be said to be founded - - 19 
 
 SECTION II.— On the Effect which the Supply of Corn 
 
 has upon the Prices of it - - - . 23 
 
 What the Agricultural Distress did not proceed from 23 
 
 What the Agricultural Distress did proceed from 32
 
 Vlll 
 
 PAGE 
 Mr Tooke's Theory examined ... 34, 
 
 The Reverse of Mr Tooke's Theory proved to be the Fact 38 
 
 SECTION III. — On the Principle that Corn creates its own 
 
 Demand ...... 47 
 
 The Agriculturists derive their Power of consuming Corn, 
 
 from the Supply - - ... 48 
 
 The Demand for Corn cannot proceed from an Increase of 
 
 Manufacturing Population ... 49 
 
 A Demand for Corn cannot proceed from an Increase in 
 
 Manufacturing Skill and Capital 50 
 
 A Demand for Corn not caused by Foreign Trade 51 
 
 The Manner in which Foreign Trade increases National 
 
 Wealth ...... 60 
 
 The Demand for Corn must proceed from the Supply 68 
 
 Income multiplies itself, in its Progress to Consumption 71 
 
 Land will yield Income to the Community, when it yields 
 
 none to the Landlord .... 71 
 
 Improvements in Machinery do not diminish the Demand 
 
 for Labour 72 
 
 SECTION IV. — On the Principle that all Alterations in the 
 Price of Corn whatever, are Changes in the Value of 
 Money ...... 75 
 
 Alterations in the Value of Money, of two Kinds, which 
 may be termed negative and positive - - 76 
 
 Negative Alterations, in the Value of Money, less than 
 positive ones ..... 77 
 
 A Metallic Currency subject to the same positive Altera- 
 tions, in the Value of Money, as a Paper Currency 80 
 
 SECTION V.— On the Importation of Foreign Com 82 
 Foreign Corn creates its own Demand - - 82 
 Foreign Corn cannot be sold in Competition with our own 87 
 A great Demand for Foreign Corn would diminish the Sup- 
 ply we should obtain .... 88 
 The last Principle only applicable to fully-peopled Coun- 
 tries, and not to North and South America - 90 
 Gold, from South America, as much a Commodity as Cot- 
 ton and Indigo - .... 92
 
 IX 
 
 PAGE 
 SECTION VI.— On the Interest of the Working Classes 
 
 in the Question of the Corn Laws - - 94 
 
 The Average Price of Corn of no Importance to the Work- 
 ing Classes .... 94 
 A permanent Increase in the Supply of Food of no Im- 
 portance to the Working Classes - - 96 
 
 SECTION VII.— On the Principle of taxing Foreign Com 102 
 The defective Principle of the Corn Law of 1815 102 
 
 Nature points out that a Tax on Foreign Corn is the best 
 
 Mode of keeping Prices at a particular Level 103 
 
 A Tax on Foreign Corn not paid by the People of this 
 Country, but by the Foreign Consumers of our Manufac- 
 tures ..__-_ lOi 
 The Advantages of a Tax upon Foreign Corn - 106 
 Mr M'Culloch's Objection to Corn Laws examined 107 
 
 SECTION VIII.— On the Corn Bill of 1827 - 110 
 
 The Price at which Foreign Corn is allowed to be import- 
 ed, fixes the Value of Money, and adjusts the Contracts 
 of Society - - - - - 110 
 
 Sixty Shillings Winchester, or sixty-two Imperial Measure, 
 a proper Average Price, according to the Rule which a 
 Nation ought to observe, in fixing such an Average 111. 
 
 How the different Classes have been affected by the 
 
 Changes of Times, examined ... \\q 
 
 How the Landlords have been affected - 119 
 
 How the Farmers have been affected - - 120 
 
 How the Owners of Houses and such Property have been 
 
 affected - - - - - 122 
 
 How People in Trade, Annuitants, and People with fixed 
 
 Salaries, have been affected - - - 122 
 
 From a Review of the Situation of all Parties, sixty Shil- 
 lings Winchester Measure, appears to be a fair Average 123 
 A higher Price than sixty Shdlings Winchester Measure, 
 could not, in all Probability, be obtained by Corn Laws, 
 if it were desired .... 125 
 
 No fixed Price could be secured by Prohibition 12 
 
 Nor yet could a fixed Price be secured by a fixed Duty 
 
 b
 
 PAGE 
 
 The Bill, under present Circumstances, founded on right 
 Principles .... - 130 
 
 The Bill will prevent Corn rising, in the Event of a great 
 Demand ..... 131 
 
 The Bill will practically shut the Ports, when Corn is be- 
 low sixty Shillings Imperial Measure, in the Event of a 
 moderate Demand .... 132 
 
 The Bill will not prevent Corn falling below sixty Shil- 
 lings Imperial Measure, in the Event of a limited De- 
 mand, and for which a Remedy is suggested 134 
 
 SECTION IX.— On our Systems of Banking and Currency 137 
 The Corn Bill can only affect Prices, in a3 far as by Means 
 of the Balance of Payments, it affects the Issues of the 
 Country Banks .... 137 
 
 The proper Amount of Paper in Circulation, is such an 
 Amount as will preserve Prices at the Level at which 
 our Foreign Trade will balance - - 138 
 
 The Balance of Payments, since the War, proves that the 
 Amount of our Currency is not regulated by our Foreign 
 Trade ...-.- 139 
 
 The Balance of Payments, since the War, the Effect as 
 
 well, as Proof of Derangements in the Currency 142 
 
 The Balance of Payments, but for other Causes, would 
 have a greater Effect upon our Paper than upon a Me- 
 tallic Currency ... - 143 
 The Principles upon which Banks issue their Notes 145 
 The Bank of England - 145 
 The Demand for the Notes of the Bank, of two Rinds, 
 
 external and internal - 145 
 
 Money lent at Interest, always the Savings of Income 146 
 
 The Bank cannot issue to Excess, in supplying the external 
 
 Demand for its Notes - 147 
 
 The Bank can only isssue to Excess, in supplying the in- 
 ternal Demand for Money - 147 
 The Policy of the Bank Directors, in regulating its Issues 148 
 The Private Bankers of London deal in Interest Money 
 only ...... 150 
 
 The Market Rate of Interest cannot be arbitrarily fixed 151
 
 XI 
 
 PAGE 
 
 The Issues of the Bank would fluctuate, were they govern- 
 ed by the Demand for Money, at any given Rate of In- 
 terest ------ 152 
 
 The Monopoly of the Bank of England cannot be done 
 away until our System of Currency be otherwise im- 
 proved - - - - - 153 
 
 The Country Banks 153 
 
 The external Demand for Money, experienced in a Supply 
 and Demand for Bills upon London - - 153 
 
 A Banker, as regards his own Security, cannot issue to 
 Excess, in discounting Bills upon London - 155 
 
 The Supply and Demand for Bills upon London, may re- 
 sult from the internal and the local, as well as from the 
 general Balance of Payments, or external Demand for 
 Money - 155 
 
 The local and internal Balance of Payments quickly arises 156 
 
 From the internal and local Balance of Payments, no gene- 
 ral Increase or Diminution of Issues can take place 158 
 
 A Supply and Demand for Bills upon London, also gene- 
 rated by the Demand for Interest Money, or the Savings 
 of Income - 158 
 
 The Country Bankers are unable to distinguish the Princi- 
 ples upon which their Issues are made - 161 
 
 All the Issues of the Country Banks made in supplying the 
 Demand for the Savings of Income - - 162 
 
 The Causes of the Fluctuations in the Issues of Country 
 Bank Notes, since the War - - - 163 
 
 A Reform in our Systems of Currency and Banking re- 
 quired ----- 166 
 
 The Power of issuing Notes at Pleasure, ought to be taken 
 from the Banks, and the Currency be made to regulate 
 itself, without human Interference, on the same Princi- 
 ples as a Metallic Currency - 167 
 
 A Change in our System of Currency practicable, without 
 Injury to the existing Banks, which must be dealt with 
 cautiously - 168 
 
 Private Banks never enjoy a rational Public Confidence 169 
 
 The History of the Panic - - - 169 
 
 b 2
 
 xii 
 
 PAGE 
 
 The Bubble Mania without Cause or Effect, as regarded 
 the Currency and Banks - - - 179 
 
 The second Panic produced by the Letter of Ministers to 
 the Bank, a further Proof of the Necessity of the Reform 
 in the Banking System ... ISO 
 
 Money, in a Bank, consists in Houses, Lands, Goods, &c. 
 and not Money, and it is a Defect in Principle, that there 
 should ever, from Panic, be a Demand for that which 
 has no Existence - 182 
 
 Had our Country Banks been Joint Stock Companies, their 
 Issues would not have fluctuated as they have done - 188 
 
 Private Banking should, in Strictness of Principle, be pre- 
 vented by Law - 191 
 
 Our Banking System may be sufficiently improved, by an 
 Intermixture of Joint Stock Banks, as in Scotland 192 
 
 The Steps taken by Government to improve our 
 Systems of Banking and Currency - - 194 
 
 The Branches of the Bank of England - - 195 
 
 Alteration of the Bank Charter - 201 
 
 The Act for the Withdrawal of all Notes, under the Value 
 of Five Pounds, from Circulation - 216 
 
 Appendix. An Account of the State of the Crops, from 
 1819 to 1824, abstracted from the Farmer's Magazine ; 
 together with the State of the Prices, and Demand of the 
 Country Bankers for Stamps, in each succeeding Year 246
 
 INTRODUCTION. 
 
 The average price of Corn is always 
 determined by the quantity of Money in 
 circulation ; and Corn Laws are a means of 
 regulating that quantity, so as to produce a 
 particular price. In treating of Currency, 
 it is therefore necessary to begin with Corn ; 
 and the first hundred and thirty-six pages of 
 this Work are chiefly devoted to proving 
 the above proposition, and applying the 
 principles so established to the examination 
 of the proposed system of Corn Laws. 
 
 The remainder of the Work is devoted to 
 an explanation of the nature of our peculiar 
 system of Currency, and an examination of 
 the steps taken by Government for its im- 
 provement. This may be read separately, 
 by those who wish for information exclu- 
 sively on the part of the subject to which 
 jt refers.
 
 The following, by Mr. Joplin, may be had of all 
 JSoohselle?'s. 
 
 AN ESSAY ON THE GENERAL PRINCIPLES AND 
 PRESENT PRACTICE OF BANKING IN ENGLAND 
 AND SCOTLAND ; with Supplementary Cbservations on 
 the Steps proper to form a Public Bank, and the System on 
 which its Accounts ought to be kept. By T. Joplin. Sixth 
 Edition, with Specimen Plates for Country Bank Notes. 7a. 
 boards. And 
 
 VIEWS ON THE SUBJECT OF CORN AND CUR- 
 RENCY. By T. Joplin. 4s. Gd. boards. 
 
 ALSO, 
 I. 
 
 OBSERVATIONS ON PAPER MONEY, BANKING, 
 AND OVERTRADING. By Sir Henry Parnell, Bart. 
 M.P. Second Edition. Including those parts of the Evidence 
 taken before the Committee of the House of Commons, which 
 explain the Scotch System of Banking. 5s. Gd. boards. 
 
 II. 
 
 THE SPEECHES OF THE RIGHT HONOURABLE 
 GEORGE CANNING, corrected by Himself, with a Memoir 
 of his Life. By R. Therry, Esq. of Gray's Inn, Barrister at 
 Law ; illustrated by a Fine Portrait, Fac-similes of his Hand- 
 writing, a Plate exhibitive of his mode of correcting and 
 revising his Speeches, &c. &c. 6 vols. 8vo. 31. 12s. 
 
 " A Biographical Memoir of the most illustrious Statesman and 
 accomplished Orator of our age, prefixed to the only authentic edition 
 of his Speeches, has far superior claims to notice and credit over any of 
 those ephemeral and hurried Sketches of his Life, which, without 
 authority, and for mere abject purposes of lucre, have been thickly 
 palmed upon the public attention. * * * It embraces the essence and 
 substance of all the truth that (except it should be through the affec- 
 tionate and venerating zeal of personal friends or kindred), will, pro- 
 bably, ever be told of the life of George Canning. * * * Altogether, 
 Mr. Thierry's Memoir, so far as it goes, may be received, like his 
 version of the Speeches, for an authentic and authorised production." — 
 Monthly Review for April. 
 
 " This excellent and valuable edition of Mr. Canning's Speeches, by 
 Mr. Therry, contains, among other things, a remarkable ^stance of the 
 application of the new process of typolithography. * * * The arrange- 
 ment aud publication of Mr, Canning's Orations (v\ Inch form at once the 
 best monument of his fame and the most indisputable record of his 
 opinions) was a task of much arduonsness as well as importance; and 
 it seems to be extremely well performed." * * * — Times. 
 
 " Altogether, we regard the publication of this work as a valuable 
 and substantial addition to the stock of British literature, and in a 
 department of British literature too, which, before its appearance, was 
 deficient in works of sterling merit." — Sun. 
 
 Most favourable Reviews have appeared in all the principal Newspapers and 
 Magazines.
 
 VIEWS 
 
 ON 
 
 THE CORN BILL 
 
 1827, 
 
 &,-c. Sfc. 
 
 SECTION I. 
 
 On the Corn Bill of 1827, the Causes which 
 led to it, and the principles on which it 
 was opposed. 
 
 Corn Bill of 1815. During the late war, the 
 
 price of corn was very high, frequently averaging 
 throughout the year upwards of 100s. per quarter; but 
 on the return of peace, it suffered a great fall. In 
 August, 1812, wheat was 155s.; in March, 1813, it 
 was 122s., from which it fell, until, in 1815, it was 
 only 55s. per quarter. 
 
 This fall produced the greatest distress and ruin 
 among the agriculturists. It was chiefly attributed to 
 the importation of foreign corn, which took place in 
 1814- ; and as the farmers substantiated, before a com- 
 mittee of the House of Commons, that they could not 
 grow wheat under 80s. a quarter, an act was passed to 
 exclude foreign corn from our markets when our 
 prices were under that level ; but its importation was 
 
 A
 
 admitted, for the purpose of being warehoused under 
 the King's lock, until they reached that point. 
 
 The Agricultural Distress. — After this law was pass- 
 ed, corn began to rise again. The crop of 1816 was also 
 a failure, by which the rise was accelerated and in- 
 creased. In 1817, the price of wheat averaged 94s. 
 per quarter; and in 1818, it averaged 83s. The prices 
 of 1818, though they may now seem to have been high, 
 were by no means the result of scarcity. The crop of 
 1817 was an average one in quantity, though not in 
 quality ; but there were added to it the largest importa- 
 tions of foreign corn we ever experienced. The wheat 
 imported, amounted to 1,586,030 quarters. This, how- 
 ever, would not be more than equal to one-eighth of 
 our annual produce, which is estimated to be 12,000,000 
 of quarters. If, therefore, we assume the inferior qua- 
 lity to have deteriorated the crop of 1817 an eighth, 
 the supply, with the importations of 1818, might be 
 equal to an average one. Neither could there be any 
 superabundance in 1818; for the scarcity of the former 
 year had completely reduced those old stocks, which the 
 more wealthy farmers in ordinary years generally hold. 
 The prices, however, began to fall again, and con- 
 tinued falling for four or five years, as follows : — 
 Wheat averaged in 1818, 83s. per quarter. 
 
 in 1819, 72s. 
 
 in 1820, 65s. 
 
 in 1821, 54s. 
 
 — - in 1822, 43s. 
 
 By this fall, the agriculturists were reduced to much 
 greater distress than before. It affected the highest as 
 well as the lowest — the landlord as well as the tenant; 
 many of both were ruined, and all were injured. The 
 misery it caused, indeed, was so great and unpre-
 
 cedented, and continued so long, that it was em- 
 phatically termed, and has since been familiarly called, 
 the agricultural distress. 
 
 Causes assigned for the Agricultural Distress. — The 
 cause of this fail was quite inexplicable. Many reasons 
 were assigned, and conjectures made upon the subject, 
 but none were satisfactory. Some thought it must have 
 been caused by the importations of 1818; but for this 
 there was manifestly no foundation. The ports were 
 shut in February, 1819; and no material fall took 
 place until after the importations had ceased. Prices kept 
 up, and there was a brisk demand during the whole 
 time the imported corn was brought into the market. 
 
 It was by others believed to have resulted from the 
 Bank of England having withdrawn its one-pound 
 notes from circulation, and having returned to cash 
 payments. There are two things undoubtedly in the 
 composition of price : — the commodity sold, and the 
 money paid for it ; and if money be taken out of cir- 
 culation, while the quantity of commodities produced 
 is the same, the price of them must fall; for the same 
 amount of money cannot possibly be had for them : 
 but in order to this there must be an actual reduction 
 in the quantity of money in circulation. 
 
 It makes no difference whether the bank, at any 
 time, returns to cash payments, or to non-payments in 
 cash, provided no difference in either case be made in 
 the amount of money current — prices are not effected 
 by the magic of a name : and it appeared that the bank 
 had put more gold into circulation, by two or three 
 millions, than it had taken notes out. The effect, 
 therefore, of its returning to cash payments, was not to 
 diminish (so far as its operations went), but to increase 
 the amount of the circulating medium, and this could 
 
 a -2
 
 not be the cause of the fall of prices which had oc- 
 curred. 
 
 Causes assigned for the Agricultural Distress by the 
 Committee of the House of Commons. — These various 
 conjectures, however, ended in a committee being ap- 
 pointed in 1821, by the House of Commons, to in- 
 vestigate the subject. They sat for some time, ex- 
 amined a great mass of evidence, and finally made 
 (what all must admit to have been) an able report. 
 
 In this report, after examining the different causes 
 to which the fall had been attributed by different per- 
 sons, and dissenting in a great measure from them, the 
 committee state, that, they consider the fall to have 
 been chiefly produced by a glut caused by super- 
 abundant seasons; and the following are the reasons 
 for that conclusion : — 
 
 " In the article of corn there is one consideration to 
 
 * be constantly borne in mind, most material to ena- 
 
 * ble the house and the country to arrive at a sound 
 ' and safe conclusion on this important subject, namely, 
 { that the price of corn fluctuates more than that of any 
 i other commodity of extensive consumption, in propor- 
 c tion to any excess or deficiency in the supply. 
 
 *' The cause which produces this greater suscep- 
 
 * tibility in the corn market, cannot be better explain- 
 f ed by your committee than in the following extract 
 f from the answers of Mr Took, one of the witnesses 
 c who were particularly examined upon this point. 
 
 * Why should a different principle apply to corn than 
 ' to any other general production ? Because a fall in 
 ' the price of any other commodity not of general ne- 
 f cessity, brings the article within the reach of a greater 
 ' number of individuals; whereas in the case of corn, 
 1 the average quantity is sufficient for the supply of every
 
 " individual : all beyond that is an absolute depression 
 " of the market for a great length of time ; and a sue- 
 " cession of two or three abundant seasons must evident- 
 " ly produce an enormously inconvenient accumulation. 
 " Is there not a greater consumption of corn when it is 
 " cheap, than when it is dear, as to quantity ? There 
 " may be, and possibly must be, a greater consump- 
 " tion ; but it is very evident that if the population was 
 " adequately fed, the increased consumption from 
 " abundance can amount to little more than waste; and 
 " this would be a very small proportion to the whole 
 " excess of a good harvest or two. 
 
 " In the substance of this reasoning your committee 
 " entirely concur; and it appears to them that it can- 
 " not be called in question without denying either that 
 " corn is an article of general necessity and universal 
 " consumption amongst the population of this country, 
 " or that the demand is materially varied by the amount 
 " of the supply. This latter proposition, except within 
 " very narrow limits, altogether disproportioned to the 
 " fluctuations in production, is not warranted by ex- 
 " perience. The general truth of the observation re- 
 " mains, therefore, unaltered by any small degree of 
 " waste on the one side, or of economy on the other, 
 " neither of which are sufficient to counteract the effect 
 " which opinion and speculation must have upon price, 
 " when it is felt how little demand is increased by redun- 
 " dancy, or checked by scantiness of supply." 
 
 Principles laid down by the Committee for the future 
 Regtdation of our Corn Laws. — From a principle so clear- 
 ly laid down, and so important, it was natural to ex- 
 pect that the committee would arrive at some practical 
 conclusion, with a view to the guidance of our future 
 policy in regulating our corn laws, and they go on to
 
 6 
 
 state : — " In order to apply this leading principle as af- 
 " fecting the trade in corn to the present state of 
 " this country, and of our corn laws, your committee 
 " will assume, what they believe is not far from our 
 " actual situation, that the annual produce of com, the 
 " growth of the United Kingdom, is upon an average 
 " crop, about equal to our present annual consumption ; 
 " and that with such an average crop the present im- 
 " port prices, below which foreign corn is by law 
 " altogether excluded, are fully sufficient, more espe- 
 " cially since the change in the value of our money, 
 " to secure to the British grower the complete raono- 
 " poly of the home market. So long as he retains that 
 " monopoly, the fluctuation of prices in that market will, 
 " it must be obvious, range between the maximum at 
 " which foreign corn is admitted, or (owing to the 
 " mode of ascertaining the averages) some temporary 
 " price not much beyond it, and the minimum to which 
 " that price may be reduced by a very abundant harvest, 
 " or a succession of such harvests until British corn falls 
 " below the price of some foreign market, and finds a 
 " vent in exportation." 
 
 That is to say, so long as we, by our corn laws, keep 
 our prices much above the level of Europe we shall be 
 constantly subject to these fluctuations ; for the only 
 way to get rid of the superabundance of a good harvest 
 or two, is by exportation. Or, in other words, if we 
 keep our prices at 60s. while the average of Europe is 
 40s. our prices must fall below 40s., say to 30s. or 35s., 
 before any surplus can be exported, and we shall be 
 constantly subject to such falls when ever a good har- 
 vest or two occurs in succession. But if the average 
 of Europe were increased to 60s., or ours reduced to 
 40s., or some other common level, we might get rid of
 
 our surplus by a comparatively small reduction in 
 price. 
 
 There can be no greater evil to a country than fluc- 
 tuation in prices. A great fall generally begins with 
 throwing the manufacturing classes out of employment, 
 and ends in ruining the agriculturists. It sweeps like 
 a pestilence over the whole face of the country, and no 
 sound-minded man can contemplate, for a moment, the 
 continuance of any system of laws calculated to give 
 rise to such effects. Having the permanent welfare of 
 the country for their object, the duty of parliament 
 under this view of the subject was therefore obvious, 
 namely, to do away the existing laws, and to bring the 
 prices of this country to a level with those of other 
 countries as soon as possible, or to bring them as near- 
 ly so, as the circumstances of the country in other 
 respects would permit, and this the committee recom- 
 mended. 
 
 It suggested " to parliament, as a matter highly de- 
 " serving of their future consideration, whether a trade 
 " in corn, constantly open to all nations of the world, 
 " and subject only to such a fixed duty as might com- 
 " pensate to the grower the loss of that encouragement 
 «' which he received during the late war, from the ob- 
 " stacles thrown in the way of free importation, is not 
 " as a permanent system preferable to that state of 
 " law by which the corn trade is now regulated." 
 
 Report in Unison with Public Opinion. — This re- 
 port was drawn up by Mr Huskisson, but we believe 
 there never was a report, of which the views were less 
 exclusively those of the party who drew it. The opi- 
 nions it expressed were the views of the committee at 
 large, and on this particular point became at once the 
 opinions of all intelligent men.
 
 8 
 
 Nor was it necessary to assume with Mr Tooke, 
 that the population in ordinary years were adequately 
 fed, and could not increase their consumption, in order 
 to believe that (our home supply being on the average 
 equal to our consumption) an abundant harvest or two 
 would produce a great fall in prices, which could only 
 be relieved by exportation. Mr Ricardo puts the ques- 
 tion more reasonably in his work " On Protection to 
 Agriculture" : — 
 
 " When the quantity," he observes, " of corn at 
 market, from a succession of good crops, is abun- 
 dant, it falls in price, not in the same proportion as 
 the quantity exceeds the ordinary demand, but con- 
 siderably more. The demand for corn with a given po- 
 pulation must necessarily be limited ; and though it 
 may be and undoubtedly is true that, when it is abundant 
 and cheap, the quantity consumed will be increased, 
 yet it is equally certain its aggregate value will be di- 
 ' minished. Suppose fourteen millions of quarters be 
 ' the ordinary demand for England, and that from a 
 * very abundant season twenty-one millions are pro- 
 { duced : if the remuneration price were £3 per quar- 
 ( ter, and the value of the fourteen millions of quar- 
 ' ters be £Vl, 000,000, there cannot be the least doubt 
 ' that the twenty-one millions of quarters would be of 
 1 very considerably less value than ^4-2,000,000. No 
 i principle can be better established than that a small 
 1 excess of quantity operates very powerfully upon price. 
 c This is true of all commodities, but of none can it be 
 ' so certainly asserted as of corn, which forms theprin- 
 « cipal article of the food of the people. The princi- 
 ' pie I believe has never been denied by those who 
 f have turned their attention to this subject." 
 A little further on he again observes : — " This, how-
 
 " ever, is I think certain, that the aggregate value of 
 " an abundant crop will always be considerably less 
 " than the aggregate value of an average one, and that 
 " the aggregate value of a very limited crop will be 
 " considerably greater than that of an average crop. 
 " If 100,000 loaves were sold every day in London, 
 " and the supply should all at once be reduced to 
 " 50,000 per day, can any one doubt that the price of 
 " each loaf would be more than doubled ? The rich 
 " would continue to consume precisely the same num- 
 " ber of loaves, although the price was tripled or 
 " quadrupled. If, on the other hand, 200,000 loaves, 
 " instead of 100,000, were daily exposed for sale, could 
 " they be disposed of without a fall of price farexceed- 
 " ing the proportion of the excess of quantity ? Why is 
 " water without value, but because of its abundance ?" 
 
 Mr Samuel Turner, who wrote a very able Pamphlet 
 in reply to Mr Ricardo, states in answer to the above : 
 — " It is impossible not to admire the ingenuity with 
 " which Mr Ricardo has endeavoured, in this section, 
 " to shew that the evils, under which the agriculturists 
 '* are now suffering, have proceeded from superabun- 
 " dant crops, and not from any political causes. J be- 
 " lieve that he is right in his position, that the rise or fall 
 " of prices, particularly on articles of a comparatively 
 " perishable nature, such as agricultural produce, is not 
 " regulated exactly by the ratio of the super abundant or 
 " deficient quantity raised and brought to market." — 
 Considerations, #c. Page 21. 
 
 Thus Mr Turner agrees in the principle, but differs 
 as to the degree only, in which a good harvest would 
 depress prices; but he does not give any sufficient rea- 
 son for such difference of opinion. 
 
 Mr Malthus, who, in an article in the Quarterly 
 
 B
 
 10 
 
 Review on the Report of the Committee of 1821, to- 
 tally denied the fact assumed by Mr Tooke, that the 
 population in ordinary years were adequately fed; is, 
 notwithstanding, of the same opinion as to the effect of 
 a plentiful year in depressing prices, when our home 
 supply is, on the average, equal to the demand. He 
 had promulgated the doctrine seven years before. — 
 " The whole effect of restrictions on importations," he 
 observes, " is to stint the supply of the general market, 
 " and to raise, not to lower, the price of corn ; nor is 
 " it in their nature permanently to secure what is of 
 " more consequence, steadiness of ■price. During the 
 " period, indeed, in which the country is obliged re- 
 " gularly to import foreign grain, a high duty upon it is 
 " effectual in steadily keeping up the price of home corn, 
 " and giving a decided stimulus to agriculture. But 
 " as soon as the average supply becomes equal to the 
 " average consumption, this steadiness ceases ; a plenti- 
 " Jul year will then occasion a sudden fall ; and from 
 " the average prices of the home produce being so much 
 " higher than in the other markets of Europe, such a 
 " fall can be but little relieved by exportation." — Ob- 
 servations on the Corn Laws, P. 25, published 
 in 1814. 
 
 The Edinburgh Review maintained the principle 
 still more strongly, with its usual ability ; and there 
 was hardly a writer, either on one side or the other, 
 that did not admit it more or less. Jn short, public 
 opinion, by which I mean the opinion of the most in- 
 telligent portion of the public, could not be moie 
 strongly expressed in favour of any principle, than the 
 principle that our home supply being equal to the demand, 
 a good harvest or two must produce a great fall in prices, 
 unless the market could be relieved of the excess by ex- 
 portation.
 
 11 
 
 Views of Government directed to promote such an 
 Alteration in our Corn Laws as the Report recommended. 
 — Hence it is reasonable to suppose that the views of 
 government would be directed to bringing about such 
 a reform in our corn laws, as would give greater free- 
 dom to the trade in foreign corn, and have the effect of 
 bringing the prices of Europe and this country more 
 upon a level, either by raising the prices in other 
 countries to our level, or reducing our prices more 
 upon a level with theirs. 
 
 Some alteration, in 1S22, was made in the law of 
 1815; but as it still excluded foreign corn until the 
 prices in the home market reached 80s., the law, in its 
 altered form, never came into operation as regarded 
 wheat, and we shall not stop to examine it. 
 
 For the purpose of carrying their views into effect, 
 and in order to obtain the best information that was to 
 be had on the subject at its fountain head, ministers 
 sent in 1825, Mr Jacob, a gentleman remarkably well 
 qualified for the task, to Poland, Prussia, and those 
 countries from whence corn is chiefly imported, to as- 
 certain the quantity that this country could be supplied 
 with, and at what prices. 
 
 By the instructions given to Mr Jacob, it appeared 
 that ministers were desirous to render the trade as free 
 as was consistent with maintaining prices at the level of 
 about 60s. to 64-s. for wheat by our averages. 
 
 During the session of 1826, Mr Jacob's report was 
 presented to parliament. It was a most able docu- 
 ment, and shewed that the foreign supplies which we 
 could obtain at any price, however great, were quite 
 trifling compared with our own growth. That the 
 prices in the Baltic had always been governed by the 
 prices in this country, — that they had risen as ours had 
 
 b 2
 
 12 
 
 risen, and vice versa ; that no great supplies could be 
 obtained at low prices, and that a duty often or twelve 
 shillings per quarter would amply afford the protec- 
 tion required. 
 
 Government were consequently desirous to adopt a 
 duty of ten shillings and throw open the trade ; and 
 they obtained the consent of parliament before the ses- 
 sion expired, that the corn then in bond should be set 
 free on these terms. 
 
 Had this system been adopted permanently, it would 
 have been proper with reference to the principles on 
 which it was founded, to have also given a bounty of 
 ten shillings on exportation. This, while it would 
 have kept our prices ten shillings above the level of 
 other countries, would have placed the trade on the 
 footing of perfect freedom. Exportation from the ef- 
 fects of a glut would in that case as soon have taken 
 place as had no duty been imposed; while it is pro- 
 bable that the duty received would have more than 
 paid the bounty which in abundant seasons would have 
 been granted. But before the next session, govern- 
 ment altered the principle and rate of duty at which 
 they proposed foreign corn should be admitted. 
 
 The Corn Bill of 1827.— In the bill of last ses- 
 sion, instead of ten shillings, the duty proposed was 
 20s. with a varying scale, calculated to keep prices stea- 
 dy at about 60s. Winchester, or 62s. imperial measure. 
 
 It was assumed that corn could be imported at 40s., 
 Winchester measure, and that a duty of 20s. would 
 keep it of course at 60s. ; while for every shilling that 
 the average price was below 60s., the duty was to be 
 increased 2s., and for every shilling that it was above 
 60s., it was to be reduced 2s. per quarter, until all duty 
 ceased, with the exception of a trifling one of Is. perqr.
 
 IS 
 
 The following table will shew the operation of the 
 proposed scale of duties, imperial measure. The im- 
 perial is a fraction larger than the Winchester quarter; 
 and it appears that this difference in measure is nearly 
 expressed by 2s. difference in price ; and as imperial 
 measure has become the standard measure, we shall 
 hereafter refer to it exclusively, without Winchester be 
 expressed. This scale refers also to wheat only. Si- 
 milar scales were proposed for other grain, but it is not 
 necessary to refer to them ; for the principles applica- 
 ble to wheat, are applicable to corn generally. 
 
 
 
 
 Average Price. 
 Measure 
 
 Imperial 
 
 Duty. 
 
 Price left to the 
 Importer of Fo - 
 reign IMieat, 
 after Payment 
 of the Duty. 
 
 
 
 S. 
 
 
 
 S. 
 
 S, 
 
 S. 
 
 s. 
 
 If the price per 
 quarter be 
 
 ? 72 and 
 
 upwarc 
 
 s .. 
 
 . 1 .. 
 
 • 
 
 71 
 
 ... 
 
 ... 
 
 71 and under 
 
 72.. 
 
 . 2.. 
 
 . 69 up to 70 
 
 
 .. 
 
 ... 
 
 70 
 
 ... 
 
 ... 
 
 71.. 
 
 . 4.. 
 
 .66 
 
 ... 67 
 
 
 .. 
 
 ... 
 
 69 
 
 .. 
 
 
 ... 
 
 70.. 
 
 . 6.. 
 
 .63 
 
 ... 64 
 
 
 .. 
 
 ... 
 
 68 
 
 .. 
 
 
 .. 
 
 69.. 
 
 . 8.. 
 
 .60 
 
 ... 61 
 
 
 .. 
 
 ... 
 
 67 
 
 ... 
 
 
 .. 
 
 68.. 
 
 . 10.. 
 
 .57 
 
 ... 58 
 
 
 .. 
 
 ... 
 
 66 
 
 .. 
 
 
 .. 
 
 67.. 
 
 . 12.. 
 
 .54 
 
 ... 55 
 
 
 .. 
 
 ... 
 
 65 
 
 .. 
 
 
 ... 
 
 66.. 
 
 .14.. 
 
 .51 
 
 ... 52 
 
 
 .. 
 
 ... 
 
 64 
 
 .. 
 
 
 ... 
 
 65.. 
 
 .16.. 
 
 .48 
 
 ... 49 
 
 
 .. 
 
 ... 
 
 63 
 
 .. 
 
 
 ... 
 
 64.. 
 
 . 18.. 
 
 .45 
 
 ... 46 
 
 Assumed point 
 of protection 
 
 ?62 
 
 •• 
 
 
 ... 
 
 63.. 
 
 .20.. 
 
 .42 
 
 ... 43 
 
 ... 
 
 ... 
 
 61 
 
 .. 
 
 
 ... 
 
 62.. 
 
 .'22.. 
 
 .39 
 
 ... 40 
 
 
 ... 
 
 ... 
 
 60 
 
 .. 
 
 
 ... 
 
 61 .. 
 
 .24.. 
 
 .36 
 
 ... 37 
 
 
 ... 
 
 ... 
 
 59 
 
 .. 
 
 
 ... 
 
 60.. 
 
 .26.. 
 
 .33 
 
 ... 34 
 
 
 ... 
 
 ... 
 
 58 
 
 .. 
 
 
 ... 
 
 59.. 
 
 .28.. 
 
 .30 
 
 ... 31 
 
 
 ... 
 
 ... 
 
 57 
 
 .. 
 
 
 ... 
 
 58.. 
 
 .30.. 
 
 • 27 
 
 ... 28 
 
 
 ... 
 
 ... 
 
 56 
 
 .. 
 
 
 ... 
 
 57.. 
 
 .32.. 
 
 .24 
 
 ... 25 
 
 
 ... 
 
 ... 
 
 55 
 
 .. 
 
 
 ... 
 
 56.. 
 
 .84.. 
 
 .21 
 
 ... 22
 
 The Law does not provide for relieving Glut by Ex- 
 jjortation, as recommended by the Committee. — It being 
 assumed that our prices will be kept by this law 
 at about 20s. above the import price, as it is not 
 proposed that any bounty shall be granted upon ex- 
 portation, it may also be assumed that in the event of a 
 glut from abundant harvests, the surplus could not be 
 exported with a profit, until the price fell to 30s. or 
 35s. — a fall which could not take place without involv- 
 ing our agriculturists in as great a state of ruin and 
 misery as they have yet experienced. It may there- 
 fore be inferred that the idea of getting rid of glut by 
 exportation has been given up, and our agriculturists 
 may be expected to feel themselves in that respect in 
 as dangerous a situation as ever, however necessary in 
 other points of view they may feel the law to be to 
 them. 
 
 The Law calcidated to induce great Stocks to be held in 
 Bond. — The law, besides, is calculated to have another 
 very important effect; and in the event of a scarcity an 
 obviously desirable one. It is calculated to induce spe- 
 culators to lay up great stocks in bond, ready to let out 
 upon the market when any rise shall take place. The 
 great fluctuations which have occurred in the price 
 of corn, and the great premium secured by the law, 
 from even a small rise in price, cannot fail to lead to 
 much speculation under it. 
 
 By the evidence taken last session by the Committee 
 of the Lords on the prices of foreign corn, it appears 
 that it can be warehoused at Hull, and trimmed and 
 turned, for about 2s. per quarter per annum, and in 
 London for about 3s. 6d. It is well known, also, that 
 if corn be kiln-dried, and be put into a warehouse in 
 good condition, and be properly turned and taken care
 
 15 
 
 of, it will keep five years without any deterioration in 
 either quantity or quality. Mr Dimsdale, an eminent 
 corn-factor, was asked by the above committee, what 
 profit would be sufficient to induce a merchant to hold 
 corn in bond ; and he stated from 4 to 15 per cent, 
 according to circumstances. Let us then take the high- 
 est profit of 1 5 per cent., and see what rise in the 
 course of five years would be sufficient to induce the 
 speculators to lay in a stock, contemplating the possi- 
 bility of his having to keep it that time. We must 
 presume that he would lay in his stock at a proper 
 time, when the prices were below 62s., rather than 
 when they were above it. Suppose, consequently, he 
 purchased at 40s. in the warehouse. He would likewise 
 calculate upon a rise in the first year, as soon as in the 
 last; but in his estimate would assume it to take place 
 •on the average in two years and a half. He would 
 naturally also hold it in the out-ports rather than in 
 London, on account of the cheapness of warehouse rent, 
 &c. In two years and a half, therefore, the expence 
 incurred at 2s. would be 5s. per quarter; 15 per cent, 
 on 40s. for that time would be 15s. ; — in all, 20s. Now 
 to obtain this profit, a rise of 7s. only would be necessary, 
 while a rise of 5s. would leave a profit of 10 per cent., 
 and a rise of 3s. a profit of about 4 per cent. If the rise 
 took place before the two and a half years expired, the 
 profit would be greater ; but if it took place after the 
 two and a half years had expired, it would be less, so 
 that the one chance would balance the other. 
 
 No merchant, looking at the great rises of price 
 which have occurred in much shorter periods of time 
 without any very apparent deficiencies, would consider, 
 if he laid in his stock at a low price, that he would 
 incur the remotest risk of a loss in such a speculation ;
 
 16 
 
 while he would probably calculate that his chances of 
 gain would be much more considerable than we have 
 estimated them to be. It is natural, therefore, to con- 
 clude, that when the law is passed, great stocks will 
 be held under it. 
 
 This Tendency of the Bill a reasonable Ground 
 of Apprehension on the Part of the Agriculturists. 
 — In this tendency of the bill the agriculturists saw 
 much to apprehend. If the stock which might be 
 accumulated would only be let out in an actual scarcity, 
 it would be a provision happily made ; but if it should 
 be let into the market without a scarcity, by manage- 
 ment of the corn-merchants, or by the presumed ef- 
 fect of a small deficiency in producing a rise much 
 greater than the ratio of such deficiency, by the opi- 
 nion of all the best informed writers on these subjects, 
 the consequence would be the most ruinous possible. 
 On these grounds, therefore, the bill was strenuously 
 opposed, and in the Lords was eventually lost ; though 
 ministers intend to bring it forward again next ses- 
 sion. 
 
 The average price of 62s. did not appear to be much 
 objected to. No attempt was seriously made to obtain 
 more than 4s. above it ; and ministers, in their instruc- 
 tions to Mr Jacob, laid before parliament, assumed 
 from 60s. to 64s., that is from 62s. to 66s. imperial 
 measure, as the prices to which it might be proper to 
 carry protection ; giving by that means the license of 
 their authority for a difference of opinion to that ex- 
 tent. 
 
 It perhaps may be said, that the bill itself provided 
 
 against the whole of the corn being let suddenly out; 
 that a great many hundred holders, living in different 
 towns, could not act in concert, and would have differ-
 
 17 
 
 ent opinions ; that the slightest rise would consequently 
 induce some to take their corn out of bond, and thus 
 supply any small deficiency that might occasion it, 
 without bringing any overwhelming supply into the 
 market; that therefore the agriculturists showed a 
 want of proper calculation in considering the effect 
 of the bill, and that their fears respecting it were 
 quite unreasonable. 
 
 People with much at stake, acting under the influ- 
 ence of fear, are not often good calculators ; and are 
 seldom very reasonable. But we must confess that it does 
 not appear that their fears were so totally unreason- 
 able : they must have perceived that if speculators- laid 
 in any stocks at all, it would be on the calculation of a 
 rise without any positive scarcity. A scarcity occurs 
 only once in ten or fifteen years, and is too remote and 
 uncertain to be speculated upon. Great stocks, there- 
 fore, would not be laid in, except with a chance of 
 their coming into the market, though there should be 
 no great deficiency. Nor will it be difficult to show 
 that these apprehensions were well founded. Sup- 
 pose on the verge of harvest time, very bad weather 
 should occur, and threaten its destruction, and prices 
 should rise a few shillings. Let us then suppose that 
 the weather should suddenly take upg and do away in a 
 great measure the apprehensions which had been enter- 
 tained ; a re-action would no doubt be immediately ex- 
 perienced; — a fall would at once take place, greater 
 probably than the rise had been. But the averages by 
 which the duties would be payable must have been pre- 
 viously struck, — the fall would not affect them until a 
 a week at least after it had occurred. This would 
 leave ample time for the merchants to enter their stock 
 at the Custom House ; and there cannot be any doubt
 
 18 
 
 that in such a case, let the stock be ever so large, the 
 whole would be thrown upon the market, though a 
 single bushel might not be wanted. But it is not ne- 
 cessary to imagine an extreme case of this kind. If it 
 be true that a small deficiency has a great effect upon 
 prices, a small deficiency would bring the whole stock 
 on hand into the market, though it were five times the 
 amount of such deficiency ; for as the speculators need 
 never pay their duties until after they have ascertained 
 by their beginning to fall, that prices have risen to 
 their highest point, the effect of a rise under the pro- 
 posed law always must be, to suspend all entries at the 
 Custom House, either from ships or warehouses, until 
 prices' have risen as high as they will go. Corn will 
 be entered for consumption in a falling market, but 
 never in a rising one. When the holders perceive by 
 comparison of this week's prices with the last, that this 
 week's average will be higher than the last, it is obvi- 
 ous that they will wait and take advantage of the rise. 
 Hence if a small deficiency should have a great effect 
 in raising prices, the supply from the warehouses could 
 hardly fail to be greater than such deficiency, and the 
 market be depressed accordingly. By this the home 
 grower would be injured, while the speculators,, by 
 getting their corn out at a very low duty, might still 
 gain considerably, and would immediately begin a fresh 
 speculation on the same principles. Their capital be- 
 ing set at liberty, and the low prices preventing further 
 importation, except for the purpose of warehousing, 
 they would be the only buyers of foreign corn in the 
 market, and would immediately begin to purchase. 
 This they would go on doing until the market had re- 
 covered, and some small deficiency should raise prices 
 sufficiently to enable them to bring their stock out. again
 
 19 
 
 with profit to themselves, and with the same injury to 
 the British farmer as before. 
 
 Entertaining, therefore, the belief that our average 
 supplies are fully equal to our consumption, — that our 
 corn laws, however necessary to the agricultural inte- 
 rests, have placed our prices upon a dangerous pinna- 
 cle, from which the least excess of supply will drive 
 them, and that the bill in its present shape could hard- 
 ly fail, in their view, to bring supplies into the market 
 which were not wanted, by which it would be kept con- 
 stantly depressed, we cannot be surprised at the strong 
 opposition it encountered from the friends of that interest 
 in parliament. The amendment first proposed by the 
 Duke of Wellington to Mr Huskisson was evidently 
 intended to prevent too much corn being entered for 
 consumption at once; and it is not at all improbable, 
 should the bill pass into a law, that it may be necessa- 
 ry to adopt some regulation founded upon the princi- 
 ple of that proposition. 
 
 The Opinion so generally admitted, that a small 
 Excess or Deficiency in the Supply has a great Effect 
 upon Prices, — the Basis on which the Apprehensions 
 with regard to the Bill may be said to be founded. — If 
 it should not appear, that our home supplies are equal 
 to our consumption ; but, on the contrary, that we 
 should annually import large quantities of foreign corn, 
 it does not appear to us, that this would in any great 
 degree remove the objections to the bill. 
 
 In such case the prices would sooner recover from 
 any great fall produced by an over-supply from the 
 warehouses ; as the fall would have the effect of 
 keeping for a time all further foreign supplies out of 
 the market. But the speculator would calculate upon 
 this, and only proceed the more boldly in accumulat- 
 
 c 2
 
 20 
 
 ing a fresh stock in the warehouse, ready to overwhelm 
 the market as soon as ever it recovered, so as to admit 
 the stock being thrown upon it again with a profit. 
 
 The great objection, therefore, to the bill may be 
 said to rest on the inducement to speculate held out by 
 it, founded upon the opinion that a small excess or 
 deficiency in the supply of corn, will produce a great 
 effect upon the price of it ; and if the agriculturists be 
 mistaken on this latter point, they are mistaken in com- 
 mon with all the most intelligent writers on these sub- 
 jects. 
 
 Mr Ricardo says "It is impossible to read Mr 
 " Tooke's able evidence before the agricultural com- 
 " mittee of 1821, without being struck with the sur- 
 " prising effects which an excess of supply produces on 
 " price; and for which, in fact, there is no effectual 
 " remedy but a reduction of quantity." — On PROTEC- 
 TION to Agriculture, P. 75. 
 
 " It must be recollected," observes the Edinburgh 
 Review, " that a comparatively small excess or defi- 
 " ciency of the usual supply of the prime necessaries of 
 " life, causes a very great fluctuation of prices." — No. 
 72, P. 457. 
 
 " There is nothing in political economy more cer- 
 " tain," observes the Westminster Review, ** than that 
 " a variation in the supply of such a commodity as 
 " corn produces a much more than proportional va- 
 " riation in price: a position that Mr Tooke, who has 
 " explained so many of the complicated phenomena of 
 " prices, has shewn to be as conformable to ob- 
 " served facts as it is to sound reasoning." — No. 6, P. 
 410. 
 
 Mr Tooke, it must also be remembered, did not 
 confine himself to delivering his opinion to the com-
 
 -21 
 
 miltee of 1821; but, in 1823, substantiated the prin- 
 ciple he had laid down, by publishing an ingenious 
 work, in which he shewed that all the great fluctuations 
 which had occurred in the last thirty years, might be 
 traced to the operation of the same principle. The 
 principles of this publication have been generally ap- 
 proved, and it may now be considered a standard work 
 upon the subject. Col. Torrens speaks of it, and of 
 the principles it establishes, as follows, in the Preface 
 to the third edition (published so recently as last year) 
 of his work on the " Corn Trade" — a work universally 
 admired, even by those who may question the truth of 
 its principles: — 
 
 " To this edition have been added some facts and 
 " reasonings originally published by the author, in 
 " 1816, in a ' Letter addressed to the Earl of Liver- 
 " pool, on Agricultural Distress.' These principally 
 " relate to the refutation, by a comparison of the 
 ** prices of corn and of silver, of the opinion that the 
 " fluctuations in the prices of agricultural produce, 
 " which occurred during and subsequent to the war, 
 " were occasioned by variations in the value of the 
 " currency; and to the statement of the doctrine^ that 
 " redundant supply reduces prices in a ratio greater 
 " than that of the excess. It is a gratifying confirma- 
 " tion of the correctness of these principles, that, al- 
 " though he had not seen the publication in which 
 " they first appeared, one of our ablest writers on 
 " questions of Political Economy, by an original pro- 
 " cess of his own, arrived at similar conclusions. Mr 
 " Tooke, in his work on ' High and Low Prices,' one 
 " of the most able contributions which have of late 
 " years been made to the science, has established these 
 " principles by an ample induction from curious and
 
 " valuable facts, and has explained in a masterly man- 
 " ner their extensive influence on the varying pheno- 
 *' mena of the market." 
 
 Hence it is evident that nothing could be more ge- 
 nerally acknowledged, or more firmly established in 
 public opinion, than the principle, that a small excess 
 or deficiency in the supply has a great effect upon the 
 price of corn. This being the case, nothing could be 
 more reasonable than the apprehensions entertained with 
 regard to the proposed bill, by those who represented 
 the agricultural interest in parliament. Even those 
 who did not analyze the grounds of their hostility with 
 the same precision as others, feeling the prices of corn 
 to be suspended on so frail a thread, might naturally 
 wish to keep danger at a distance. If we see any thing 
 to alarm us, we seldom calculate how near we can go 
 to it without being hurt, but rather how far we can 
 keep from it ; if we have the power, our natural im- 
 pulse is to place ourselves out of the reach of acci- 
 dent. No man voluntarily brings danger to his door 
 if he can help it, whether in the shape of magazines of 
 corn, or magazines of any other description.
 
 23 
 
 SECTION II. 
 
 On the Effect which the Supply of Corn has 
 upon the Prices of it. 
 
 Having, in the last section, explained the nature of 
 the proposed bill — the premium it will hold out to lay- 
 ing up corn in bond, and then taking it out again on 
 any slight rise; and having further explained, that so 
 long as it is the received opinion that a small excess, or 
 deficiency, in the supply, will produce a great effect 
 upon prices, this tendency of the bill must prove a 
 great objection to it ; we will now proceed to examine 
 this principle, upon which the objection chiefly rests, 
 and which may be termed Mr Tooke's principle, viz. — 
 that a small excess, or deficiency, in the supply, is cal- 
 culated to produce a much greater effect upon the price 
 of corn, than other commodities. 
 
 This principle, like most others in political eco- 
 nomy that have taken root of late years, is the very 
 reverse of the fact. Not only is corn not liable to be 
 affected by any small deficiency or redundancy in the 
 supply, but it is a striking exception to all other com- 
 modities, in the very great extent to which the supply 
 will vary without materially affecting its price ; and 
 this we have no doubt we shall be able very clearly to 
 demonstrate. 
 
 What the Agricultural distress did not proceed from. — 
 With this view it will be proper, first, to show, that 
 the agricultural distress did not proceed from the 
 superabundance of a good harvest or two, and also 
 what it did proceed from, in order that whatever truth 
 there may be in Mr Tooke's principle, it may be seen
 
 24 
 
 that it derives no authority whatever from the state of 
 things it was adopted to account for. 
 
 In the first place then, it did not proceed from the 
 superabundance of a good harvest or two, for this very 
 sufficient reason, viz. : that there was no such super- 
 abundance. 
 
 There is nothing in general with regard to which 
 more vague and general estimates are formed, than 
 with respect to the productiveness of the crops. Ge- 
 nerally speaking, every crop, which is not strikingly de- 
 ficient, is thought by the mass of the public to be abun- 
 dant, and no farmer can, with any accuracy, say what 
 his crop will yield until he has tried it. The best ge- 
 neral account of the result of the crop of each year, 
 published, is to be found in the Farmer's Magazine, 
 published quarterly in Edinburgh. It was commenced 
 in the year 1800. Returns are obtained by it from the 
 most intelligent agriculturists in all parts of the king- 
 dom, and we should imagine, that so far as accuracy is 
 attainable, by the general observation and enquiries of 
 parties most competent to make them, the accounts in 
 the Farmer's Magazine may be depended upon. 
 
 The crops which must have produced the agricultu- 
 ral distress, had superabundant seasons been the cause 
 of it, were those of 1818, 1819, and 1820. The fall 
 commenced in 1819, when the crop of 1818 would be 
 in progress of consumption, and the report of the com- 
 mittee was made in June, 1821. The following is the 
 account of these crops, from the abovementioned pub- 
 lication : — 
 
 " 1818. Wheat : although the stack yards are cer- 
 " tainly defective in bulk, the produce in grain will be 
 " found fully equal to an average crop." 
 
 " 1819. Wheat: in shallow hot soils, and in more
 
 25 
 
 " early situations, the grain is in many respects of an 
 " inferior description. In districts where crops do not 
 " fully ripen but in very favourable seasons, and on 
 " deep moist soils, the produce good and abundant. 
 " In Scotland, the crop fully equal to an average one." 
 
 " 1820. Taking all kinds of grain together, there 
 " can be no doubt that the produce is at least equal 
 " in quantity to that of seasons of medium fertility. 
 " Wheat especially, is represented as an abundant 
 " crop, though it has suffered in some situations from 
 " mildew, and from being laid by heavy rains in the 
 " early part of the autumn ; but in point of quality it 
 " is perhaps rather inferior to the produce of the for- 
 " mer years, even where no reason is assigned. The 
 " want of heat during the ripening is perhaps sufficient 
 " to account for this." 
 
 From these accounts we may conclude that in 1818, 
 wheat was about an average crop; in 1819, something 
 less than an average; and that in 1820 only, was it a 
 particularly abundant crop. Let us next compare this 
 statement with the following account of the fall. The 
 crop of one year, it being remembered, chiefly comes 
 into consumption and affects the prices in the year fol- 
 lowing. 
 
 1818, average price 83s. 
 
 1819, average price 72s. fall lis. 
 
 1820, average price 65s. fall 7s. 
 
 1821, average price 54s. fall lis. 
 
 In this statement of the fall we see nothing corre- 
 sponding with the state of the crops. Had the prices 
 of each year been affected by the supply alone, they 
 ought to have remained stationary after the crop of 
 1818; ought to have risen after that of 1819, and 
 ought to have fallen again after that of 1820; but 
 
 o
 
 on the whole there ought to have been no material fall 
 whatever. 
 
 All general estimates, however, of the state of the 
 crop from a cursory view of it, must be more or less 
 imperfect. The only way to know the state of it with 
 accuracy is by some plan of gauging it. This the emi- 
 nent house of Messrs Cropper, Benson, and Co. of 
 Liverpool, were convinced of, and have adopted a plan 
 for that purpose. They send out persons every year 
 throughout all the best corn districts in the kingdom, 
 and obtain samples, upon particular principles, of the 
 whole crop. These they dry, measure, and weigh, 
 and thus obtain a knowledge of the state of the crop 
 with a precision never before equalled. It is very 
 much to be*regretted that our government do not adopt 
 some such plan. There is no better mode of putting 
 down false theories than by true facts. The follow- 
 ing result of these surveys for six years from 1815, 
 their partner, Mr Hodgson, furnished to the Commit- 
 tee of 182], but the importance of the evidence was 
 overlooked at the time. It may perhaps be proper to 
 explain, as it gives additional value to the account, by 
 confirming the probability of its accuracy, that their 
 surveys were commenced five or six years before 1815, 
 but they had not got them settled upon right princi- 
 ples, and would not give the Committee the result of 
 them before 1815, because they were not to be depend- 
 ed on. 
 
 1815, — 37 Winchester bushels per acre — quality good. 
 1816, — 25 ditto — very bad in quality; nearly rotten. 
 1817, — 33 ditto — quality not very good. 
 1818, — 32 ditto — quality very good. 
 1819, — 27 ditto — quality very good, but not so good 
 as the year before.
 
 27 
 
 1820, — 37 Winchester bushels peracre — sound and dry, 
 but not so good as the two preceding years. 
 
 These surveys are taken in the best wheat districts. 
 They consider 32 bushels an average crop, from which 
 about one-sixth would have to be deducted to obtain 
 the actual produce. 
 
 ■Comparing the accounts of the crops of 1818, 1819, 
 and 1820, with those from the Farmer's Magazine, 
 they will be found to nearly correspond : — 
 
 Mess. Cropper &■ Co.'s Account. Account in Farmer's Magazine. 
 
 1318, — yielded 32 bushels, An average crop, 
 
 which is an aver- 
 age crop. 
 
 1819, — 27 or 5-32 below An average in Scotland, but 
 
 an average. not in England. 
 
 1820, — 37 or 5-32 above an An abundant crop, 
 
 average. 
 
 The three crops together, by Messrs Cropper and 
 Co.'s account, produced 96 bushels, which were 32 
 bushels on the average, or three average crops. Hence 
 it must be evident that there was no superabundance 
 in those years, — a fact which the agreement of the two 
 accounts puts beyond the reach of doubt, and totally 
 negatives the supposition that superabundant harvests 
 produced the fall in question. 
 
 There is another mode of accounting for the falls 
 and rises in prices which have occurred since the peace, 
 to which it may be proper also to advert, namely, that 
 the high prices attracted capital to land, and produced 
 an over-supply by an excess of cultivation, and that 
 this caused low prices, which, in their turn, checked 
 it, and brought about high prices, by the land being 
 in consequence again thrown out of cultivation. Those 
 who know any thing of farming must know that there 
 
 d2
 
 28 
 
 is not the slightest foundation, in fact, for this hypo- 
 thesis : they must know that land is not taken into and 
 thrown out of cultivation in any such manner ; that 
 crops are raised by a course of husbandry that cannot 
 be changed with such facility ; and that, in point of 
 fact, there is quite as much land in cultivation now as 
 there was when prices during the war were at the high- 
 est level they ever attained. 
 
 No doubt, by the aid of skill and capital, land has 
 been reclaimed and made highly productive, which be- 
 fore produced hardly any thing. This, however, was 
 less the consequence of an increased price of corn than 
 of an improved system of agriculture. But the mere 
 fact at any rate, of throwing poor pasturage land into 
 tillage, does not immediately add any great amount of 
 produce to our supply ; for if bad land, upon which 
 cattle were before kept, be taken into tillage, good land 
 must be thrown out of tillage, in order to sustain the cat- 
 tle. The rich will not want their usual supply of beef, 
 because poor land is taken into cultivation, if they pay 
 the more for it. Poor land, in short, is seldom taken 
 into cultivation, except for the purpose of its being 
 laid down in grass again. The crop pays for the clear- 
 ing of the ground ; but generally the improvement of 
 the pasturage is as much the object in view as the crop 
 which may be obtained. Any surplus that may be 
 yielded by it is trifling. The theory, therefore, of 
 the supply being varied by poor lands being taken 
 into and thrown out of cultivation, is a mere closet 
 speculation, which is not true, and could produce no 
 great effect if it were. 
 
 We have stated also that the agricultural distress 
 was not produced by the Bank of England returning 
 to cash payments, or by Mr Peel's bill, as it was fa-
 
 29 
 
 miliarly called, inasmuch as the amount of money in cir- 
 culation was not reduced by the measure. The Bank 
 put more gold into circulation than it took notes out ; 
 and in 1822, when wheat averaged only 43s., the cir- 
 culation in gold and Bank of England notes was two 
 or three millions greater than it was in 1818, when 
 prices averaged 83s. per quarter. Many persons, not- 
 withstanding this, attributed the agricultural distress to 
 Mr Peel's bill, and do to this day. 
 
 It would not, however, have produced such effects, 
 even had it diminished the amount of the circulation in 
 the district of the Bank of England. That district is 
 confined to Middlesex and Lancashire — only two coun- 
 ties of the United Kingdom. In the rest, the notes 
 of the Bank of England and gold are hardly ever seen ;* 
 but so far as money affects the price of corn, it must 
 be the money received for it. It is out of all reason to 
 suppose that the notes of a bank or money can affect 
 the price of corn, when they are never seen by those who 
 sell it. That description of money must affect its price 
 which the sellers get for it, and not that which they 
 do not get for it. 
 
 Middlesex and Lancashire are no doubt the two 
 most populous counties in the kingdom ; but assuming 
 their population to be two millions and a half, and that 
 they consume more in proportion to their population 
 by one-third than the inhabitants of other counties, 
 their consumption will amount to about one-sixth of 
 the United Kingdom ; and the effect of the circulation 
 of the Bank of England upon the price of corn, must 
 be in that and no greater proportion: while the notes 
 
 * Now that the one-pound notes of the country bankers are going out 
 of circulation, sovereigns are obtained to supply their place, and are 
 more common.
 
 30 
 
 of the banks in the different other parts of the king- 
 dom, must regulate the price of corn to the extent of 
 the other five-sixths of the quantity consumed. 
 
 It may be said, indeed, that the issues of the Bank 
 of England in gold and paper are as great as that of all 
 the rest of the banks in the kingdom put together; but 
 it must also be taken into account, that London is not 
 only the centre of payment for all sales of property, and 
 higher transactions in commerce, which have no im- 
 mediate connexion with consumption, but it is the 
 centre of payment for other countries of the world ; 
 and what can our prices have to do with money em- 
 ployed in settling an account between a merchant in 
 France and one in America ; or between parties, one 
 of whom converts his land into stock, and the other his 
 stock into land ?* There must always be a certain 
 sum of money suspended in circulation for such pay- 
 ments, independent of the money employed in pro- 
 moting consumption ; and of this, which may be term- 
 ed the money in abstract circulation, the circulation of 
 the bank chiefly consists ; whereas the circulation of 
 the country banks is more employed in promoting con- 
 sumption, or in consumptive circulation, and it is the 
 money so employed that affects prices. 
 
 But those who contend for the paramount influence 
 of the Bank of England circulation, say that it governs 
 the circulation of the country banks; — that if the Bank 
 of England increases its issues, the country banks do 
 the same, and vice versa. This, however, is not the 
 fact. It was formerly the opinion ; but since the ac- 
 counts have been so kept at the stamp-office as to shew 
 
 * A great many of these transactions are settled by cheques upon 
 bankers ; but then a great portion of the notes of the Bank of England 
 lies at all times in the bankers' hands, to meet the payment of cheques.
 
 31 
 
 the progress of the country bank circulation, this opi- 
 nion is proved to have been erroneous. 
 
 The following table gives the circulation of the Bank 
 of England on the one hand, and the amount in value 
 of Bank Notes for which Stamps were issued to the 
 Country Bankers on the other, from 1813 to 1822 in- 
 clusive. 
 
 Stamps issued to Country Circulation of the Bank of 
 Banks. England. 
 
 1813— ^£12,615,509 .£24,023,569 
 
 1814— 10,773,375 26,901,422 
 
 26,887,018 
 26,574,840 
 28,274,901 
 27,221,218 
 27,000,000 
 28,000,000 
 29,000,000 
 30,000,000 
 
 After 1818, the Bank began to pay off its one pound 
 notes, and by the returns, its circulation in notes ap- 
 peared to be on the decrease; but had its issues in gold 
 been given, the reverse would have appeared to have 
 been the fact; therefore, after that period, I have stated 
 what I have reason to believe would be near the truth. 
 By this table it will be seen that in 1814, while the 
 demand for country bank notes was reduced two mil- 
 lions, the issues of the Bank of England were increased 
 nearly three millions, and from that time while the 
 country circulation fluctuated between the greatest ex- 
 treme?, that of the Bank of England remained compa- 
 ratively steady. 
 
 Hence it is evident that Mr Peel's bill neither did 
 nor could have produced the agricultural distress: 
 
 1815— 
 
 7,624,949 
 
 1816— 
 
 6,423,466 
 
 1817— 
 
 9,075,958 
 
 1818— 
 
 12,316,868 
 
 1819 — 
 
 5,640,313 
 
 1820 — 
 
 3,574,894 
 
 1821 — 
 
 3,987,582 
 
 1822— 
 
 4,217,341
 
 32 
 
 first, because it did not reduce the circulation in the 
 district of the Bank of England, and next, because it 
 would not have affected prices if it had ; for it could 
 only affect them materially by governing the circula- 
 tion of the country banks, which it appears by the 
 clearest evidence not to do. 
 
 Previous to considering what the agricultural dis- 
 tress did proceed from, it will also be proper to men- 
 tion, that it did not proceed from any failure in the usual 
 sources of demand. There had been no internal 
 changes in the country to diminish the demand, except- 
 ing that of which it was itself the cause ; and the brisk- 
 ness of our foreign trade was not only proved by our 
 manufacturers, at least in 1821 and 1822, being actively 
 employed for the foreign market, but by the very large 
 quantity of money which was imported into the country 
 in payment for our manufactures exported. Indeed 
 the want of the usual sources of demand was so obvi- 
 ously not the cause of the agricultural distress, that in 
 the various speculations on the subject, I do not re- 
 collect seeing it ever suggested as being so. 
 
 What the Agricultural Distress did proceed from. — 
 Having thus shown what the agricultural distress did 
 not, we shall next proceed to show what it did, pro- 
 ceed from, which the foregoing observations will have 
 rendered not difficult. 
 
 There are only two causes from which it could have 
 proceeded, namely, from a variation in the supply and 
 demand for corn, or from a reduction in the amount of 
 money in circulation ; and as it did not proceed from 
 the former it must have proceeded from the latter. 
 Now, the circulation of this country, at that time, con- 
 sisted of the notes of the Bank of England and gold, 
 which, as we have before stated, circulated in Middle-
 
 33 
 
 sex and Lancashire, and the notes of the country 
 banks which circulated in the rest of the kingdom ; 
 and as it neither did nor could have proceeded from 
 the circulation of Middlesex and Lancashire, it must 
 have been produced by a contraction of the issues of 
 the country banks in the other parts of the kingdom ; 
 and that it did proceed from that cause is rendered 
 clear to demonstration by the returns from the Stamp 
 Office which we have already given. These, indeed, 
 not only prove the fall in prices from 1818 to 1822, to 
 have proceeded from a contraction of the country bank 
 circulation, but the previous fall of prices from 1813 to 
 1815, to have proceeded from the same cause. Let us 
 compare that account with the variations in prices of 
 that period. 
 
 Annual demand for stamps. 
 
 Price of wheat. 
 
 1813— .£12,615,509 
 
 ... 
 
 107s. per quarter. 
 
 1814— £10,773,375 
 
 ... 
 
 74s. 
 
 1815— £ 7,624,94-9 
 
 ... 
 
 64s. 
 
 1816— £ 6,423,466 
 
 ... 
 
 75s. 
 
 1817— £ 9,075,958 
 
 ... 
 
 94s. 
 
 1818— £12,316,868 
 
 ... 
 
 83s. 
 
 1819— £ 5,640,313 
 
 ... 
 
 72s. 
 
 1820— £ 3,574,894 
 
 ... 
 
 65s. 
 
 1821— £ 3,987,582 
 
 ... 
 
 54s. 
 
 1822— £ 4,287,341 
 
 ... 
 
 43s. 
 
 From these returns, 
 
 we do 
 
 not obtain the actual circu- 
 
 lation of the country banks ; but they furnish an evidence 
 of its increase and decrease sufficient for our purpose. 
 
 In considering the above table, it will be necessary 
 to keep in view that the prices of 1816 and 1817 were 
 influenced by the failing crop of the former year. In 
 January, 18i6, the price of wheat averaged 52s.: in 
 December, 103s.; and also that though there was a 
 small increase in the demand for notes in 1821 and 
 
 E
 
 34 
 
 1822, there would be a diminished circulation, as the 
 notes of 1818 and 1819 would in these years be taken 
 out of circulation. This table renders it clear to de- 
 monstration, that the agricultural distress was produced 
 by a contraction of the issues of the country banks, 
 while we have shewn by our previous arguments, that 
 there was no other way in which it could have been 
 produced. 
 
 These variations in the issues of the country banks, 
 are chiefly caused by variations in the value of mo- 
 ney or capital. The Bank of England can keep its 
 circulation steady, because if it cannot obtain commer- 
 cial bills to discount, it can issue its notes in purchase 
 of exchequer bills. The country banks have not this re- 
 source, and being chiefly private banks, they darenotlend 
 money upon any other security than commercial bills, 
 and if they cannot get them, the country is deprived of 
 its circulating medium, and an alteration in prices takes 
 place — so that an alteration in prices is pretty certain 
 to follow an alteration in the value of money. As ca- 
 pital or ready money becomes plentiful, currency be- 
 comes scarce, if such a term can be applied to cur- 
 rency, and vice versa. 
 
 Mr Tooke's Theory examined. — We have thus shewn 
 what the agricultural distress did not, and what it did 
 proceed from, from which it must be evident that Mr 
 Tooke's theory receives no support from the fall in 
 prices it was adopted to account for. It might, how- 
 ever, still be true, notwithstanding. If a person have a 
 hurt like a bruise, but which came by some other means, 
 it does not prove that a bruise would not have been 
 sufficient to have produced a similar hurt. As there 
 was no superabundance, the principle remains in some 
 degree unimpeached, though unsupported by the fall
 
 35 
 
 in question ; and we will now proceed to a more par- 
 ticular examination of it. It is in substance as follows : 
 — " People can eat a given quantity of food and no 
 " more. This quantity they obtain in ordinary years, 
 " and consequently any surplus cannot be consumed 
 " by them ; for cheapness will not induce a person to 
 " eat more than he wants. When there is a surplus, 
 " therefore, however small, it must be a drug upon 
 " the market; and the surplus of a good harvest or 
 <( two, could not fail to produce a ruinous depression 
 " for a length of time." 
 
 Of the correctness of this principle there could be no 
 doubt, if it were true that, in ordinary years, the popu- 
 lation are adequately fed. But if this were the fact, 
 there would be no truth in the principle universally 
 admitted, that population is only kept down by want, 
 to a level with the means of subsistence, nor yet would 
 there be any need of poor laws. The fact, however, is, 
 that the population is not only not adequately fed in 
 ordinary years, but is, on the contrary, very in- 
 adequately fed, of which some proof is afforded in the 
 annual payment of six or seven millions in poor rates. 
 Instead, therefore, of the population not being able to 
 consume more than the produce of an average crop, it 
 would be more near the truth to assert, that it could 
 consume two average crops instead of one. No prin- 
 ciple could be founded on a fact less true and more 
 easily refuted, than that, in ordinary years, the popu- 
 lation is adequately fed. 
 
 But, notwithstanding, if the harvest was sufficiently 
 productive, it might exceed the amount to which con- 
 sumption could go. In that case, however, it should 
 be at least a double crop ; whereas it is probable that a 
 superabundant crop never does exceed an average one 
 
 E 2
 
 86 
 
 above 20 per cent. ; so that there can be very little 
 doubt that the most abundant crop can always be con- 
 sumed with the greatest ease. 
 
 But without going the whole length of Mr Tooke's 
 hypothesis, if we assume that the whole of a good 
 crop could easily be consumed, yet if the means of pur- 
 chasing it were to remain the same, a considerable fall 
 might still be the consequence in an abundant year. 
 Suppose that, in ordinary years, the price was £2> per 
 quarter, and the produce 12,000,000 quarters, thirty- 
 six millions would be the fund appropriated to the pur- 
 chase of corn. It must be kept in view that those who 
 can afford it, always consume as much corn as they re- 
 quire, whether it be dear or cheap, and their consump- 
 tion would not be increased in cheap years, nor di- 
 minished in dear ones. We shall suppose one-third of 
 the population to be in this situation; that is to say, 
 they will consume 4,000,000 quarters, whatever be the 
 state of the crops. Whatever increase, or diminution, 
 takes place in consumption must, therefore, be with 
 the other two-thirds, or the labouring class. Let us 
 then estimate that an abundant crop will produce 
 14,400,000 quarters, which is one-fifth more than an 
 average crop ; this would leave 10,400,000 for the la- 
 bouring class. But as this part of the population would 
 be scantily fed in average years, the whole of the funds 
 they could spare for that purpose would have been laid 
 out in provisions, which funds, as we have before sup- 
 posed, would amount to ^€24,000,000. Now should 
 this class have no more money in plentiful years than 
 in average ones, they could not give any additional 
 money for the additional supply, though they might be 
 able to consume it. The farmers, therefore, would 
 only get ^24,000,000 for 10,400,000 quarters, or about
 
 37 
 
 46s. per quarter ; and as this part of the crop, or the 
 price paid by the working class, would determine the 
 price paid by the rich for the 4,000,000 quarters they 
 consumed, the crop would yield as follows : — 
 
 10,400,000 quarters would sell for - - - - £24,000,000 
 4,000,000, at the same rate, would produce in 
 
 round numbers, say - - - - £9,500,000 
 
 14,400,000 quarters would produce .... £33,500,000 
 
 An average crop we have assumed would produce 
 ^£36,000,000 ; and by this calculation it will be evident, 
 that the monied demand for corn remaining the same 
 in a bountiful year as in an average one, the farmers 
 on the aggregate would lose ^2,500,000 by having a 
 crop one-fifth greater than usual. By the same rule, if 
 the crop was one-fifth below the average, they would 
 be into pocket by it. In that case, there would only 
 be 5,600,000 quarters left for the labouring part of the 
 population. One-fifth off" 12,000,000 quarters would 
 leave 9,600,000, and 4,000,000 consumed by the rich 
 would leave 5,600,000 for the poor. For this they 
 would give all the j£24,000,000, and more if they had 
 it, in their competition to obtain as great a share as 
 possible of the diminished supply. The crop would 
 consequently yield the farmers as follows; — 
 
 5,600,000 quarters would leave £24,000,000 
 
 4,000,000, in the same proportion, would leave, 
 
 say £17,000,000 
 
 9,600,000 quarters would produce - - - - £43,000,000 
 
 Thus the farmers would gain seven millions by the 
 crop being one-fifth below an average.
 
 38 
 
 However contrary this may be to experience, it is 
 clear to demonstration, that if the monied demand for 
 corn by the working class be the same in one year as 
 another, the farmers must make more by a bad crop 
 than a good one, and the economists assuming the de- 
 mand not to vary, have thus reasoned. 
 
 But the fact we know to be that the farmers invari- 
 ably make by good crops and lose by bad ones. Now, 
 this could not happen without there was a greater mo- 
 nied demand for corn in seasons which were productive 
 than in those which were not. 
 
 It is quite clear that if this were not the case the 
 farmers must be under a mistake, and Mr Ricardo and 
 the economists would be right in assuming that a good 
 crop, whatever it may be to the community, is a curse 
 to the farmer. 
 
 " No one has said," observes Mr Ricardo, " that 
 " abundance is injurious to a country, but that it fre- 
 " quently is so to the producers of the abundant com- 
 " modity. If what they raised was all destined for 
 " their own consumption, abundance could never be 
 " hurtful to them ; but if in consequence of the plenty 
 " of corn, the quantity with which they go to market 
 " to furnish themselves with other things, is very much 
 " reduced in value, they are deprived of the means of 
 " obtaining their usual enjoyments ; they have in fact 
 " an abundance of a commodity of little exchangeable 
 " value." On Protection to Agriculture, p. 21. 
 
 That is to say, in plain terms, they will get much less 
 money for an abundant crop than for an average one. 
 
 The reverse of Mr Tooke's Theory proved to be the 
 Fact. — But this is not the fact. All farmers rejoice in 
 a good season, though it may extend over the whole 
 world, and lament a bad one. They say let us only
 
 39 
 
 have a plentiful crop : for if we get less for it per quar- 
 ter we shall get more for it on the whole. But this, as 
 we have said, could not be, unless the means of pur- 
 chasing by the labouring part of the population was in- 
 creased. If the farmers on the average get six millions 
 more for a good crop, the labouring part of the popu- 
 lation must at least have six millions more to give for 
 it; or if on the other hand they obtain six millions less 
 for a bad crop, the means of the labouring class must 
 still more obviously be diminished to that extent : for 
 there is no doubt than when the supply is more defici- 
 ent than usual, they would be disposed to lay out a 
 greater rather than a less proportion of their wages in 
 the purchase of food. The high price and deficient 
 supply would only induce them to pinch themselves in 
 other things in order to obtain provisions. It would 
 not induce them to apply a shilling less of the funds at 
 their command for that purpose. If, therefore, the 
 farmers got six millions less for their corn in a deficient 
 crop, than in an average one, it could only arise from 
 the power of purchasing by the labouring class being 
 diminished in that or perhaps in a greater proportion. 
 It is evident, therefore, that the labouring class must 
 have more money in plentiful years, or the farmers 
 could not obtain more money for their crops; and less 
 money in bad years, or the farmers would gain by them. 
 Now the demand for corn depends of course upon 
 the demand for labour, the source from whence the 
 income and means of the labourer are derived; and our 
 next point is to ascertain whether the demand for labour 
 rises and falls with the variations in the crops. Dr. 
 Adam Smith says it does ; and he is great authority in 
 matters of fact. He was besides, twenty years in wri- 
 ting his Wealth of Nations, and had ample opportunity,
 
 40 
 
 after his attention was directed to the subject, of ob- 
 serving the effects of the state of the crops on the de- 
 mand for labour. 
 
 " A French author," he observes, " of great know- 
 " ledge and ingenuity, Mr Messance, receiver of the 
 " tallies in the election of St. Etienne, endeavours to 
 " shew that the poor do more work in cheap, than in 
 " dear years, by comparing the quantity and value of 
 11 the goods made upon those different occasions, in 
 " three different manufactories — one of coarse wool- 
 " lens, carried on at Elbeuf; one of linen, and another 
 • of silk, both of which extend through the whole ge- 
 " nerality of Rouen. It appears from his account, 
 " which is copied from the Registers of the Public 
 " Offices, that the quantity and value of the goods 
 " made in those three manufactories, have generally 
 " been greater in cheap than in dear years, and they have 
 " always been the greatest in the cheap years. All the 
 " three seem to be stationary manufactures ; or which, 
 " though their produce may vary somewhat from year 
 " to year, are upon the whole neither going backwards 
 " nor forwards." 
 
 " It is," he further observes, " because the demand 
 " for labour increases in years of sudden and extraor- 
 " dinary plenty; and diminishes in those of sudden 
 " and extraordinary scarcity, that the money price of 
 " labour rises in the one, and sinks in the other." 
 
 " In a year of sudden and extraordinary plenty, 
 " there are funds in the hands of many of the employ- 
 " ers of industry, sufficient to employ and maintain a 
 " greater number of industrious people than had been 
 " employed the year before; and this extraordinary 
 " number cannot always be had. Those masters, 
 " therefore, who want more workmen, bid against one
 
 41 
 
 " another in order to get them, which sometimes raises 
 " both the real and the money price of labour." 
 
 " The contrary of this happens in a sudden and ex- 
 " traordinary scarcity. The funds destined for era- 
 " ploying industry are less than they had been the 
 " year before. A considerable number of people are 
 " thrown out of employment, who bid one against ano- 
 " ther in order to get it, which sometimes lowers both 
 " the real, and money prices, of labour. In 1740, a 
 " year of extraordinary scarcity, many people were 
 " willing to work for bare subsistence. In the suc- 
 '* ceeding years of plenty, it was more difficult to get 
 " labourers and servants." Wealth of Nations. 
 
 If we refer back to 1817, it is also within our own 
 recollection, that the scarcity of that year, was more 
 particularly felt by the poor in the want of demand for 
 labour. The funds which were raised for the relief of 
 the poor in that year, were almost universally distri- 
 buted by giving employment to it, in improving roads, 
 or some other work of public utility ; and the want of 
 employment ceased altogether in the year following, 
 after the scarcity was over. 
 
 From this it will be evident that the demand for la- 
 bour does increase and decrease with the productive- 
 ness or unproductiveness of the seasons. 
 
 This is a wise provision of nature : for if men have 
 not food, it is better that they should not have work. 
 A person without labour can exist upon much less food 
 than with it. Neither is the idleness resulting from 
 want of labour, accompanied by want of food, at all 
 likelv to conduce to idle habits ; and the propriety of 
 appropriating the funds raised for the relief of the poor, 
 at such periods, in giving employment to able bodied 
 men, may be questioned. It is opposed to the wisdom 
 
 F
 
 of Providence. Such funds should rather be appro- 
 priated to the aid of the weak and sickly, who not 
 being able to find employment, are unable to support 
 the privations of the season, and become unable to 
 work. These should be sought out, and administered 
 to, in proportion to their wants. In expending the 
 funds in employing those who can work, you assist 
 those who can best assist themselves. In a season of 
 endurance, those should be assisted whose strength 
 fails them — not those who can do something for them- 
 selves, and might perchance find employment else- 
 where. 
 
 Hence it is clear, both from reason and experience, 
 that the demand for labour does vary with the seasons. 
 Our reason tells us so, because if such were not the 
 case, the farmers could not make by a good crop, and 
 lose by a bad one; and this is confirmed by the facts 
 pointed out by Dr. Smith, as well as by what occurred 
 in our own recollection in 1817, which is sufficiently 
 notorious. 
 
 Having thus established that the demand for labour 
 does increase and decrease in good and bad seasons, 
 we shall next endeavour to ascertain the degree of 
 effect that this has upon the price. Should the harvest 
 exceed an average one, by two millions of quarters, but 
 at the same time should the demand for labour be so 
 much increased as to place six millions of additional 
 funds in the hands of the labouring class, applicable to 
 the purchase of food, there would be no fall of price. 
 It would remain at £3 per quarter as before. The 
 extra 2,000,000 quarters would be met by a corres- 
 ponding demand for it. The benefit of the additional 
 supply would be felt, not in a reduction of price, but in 
 an increased demand for labour. On the other hand,
 
 43 
 
 should the crop be 2,000,000 quarters beneath an aver- 
 age, and the funds of the labouring class applicable to the 
 purchase of food, be reduced six millions, neither would 
 the price rise : labour to that extent would be thrown 
 out of employment. Hence it is obvious, that prices 
 must be prevented from falling, or rising, in pro- 
 portion as the additional or diminished demand for 
 labour shall correspond with the increased or re- 
 duced supply of corn. In a famine, when people 
 will part with every thing they have for food, we can 
 easily conceive that a falling off in the demand for la- 
 bour will not prevent corn rising in the same degree 
 as when the diminished supply is not so great as to call 
 for such sacrifices. 
 
 The effect which the accompanying fluctuations in 
 the demand for labour has in neutralizing the effect 
 on prices, by variations in the crops, can only of course 
 be ascertained by reference to experience; and for this 
 purpose, we will turn to the crops of which Messrs 
 Cropper, Benson, and Co. have furnished so accurate 
 an account. 
 
 By their account, it appears that the crop of 1819 
 was 5-32nds below an average, and that the crop of 
 1 820 was 5-32nds above an average one. This com- 
 puting the average produce to be 12,000,000 quarters, 
 would make 
 
 The deficiency of 1819, - 1,750,000 quarters. 
 
 The excess of 1820, - - 1,750,000 quarters. 
 
 Total difference between them, 3,500,000 quarters. 
 
 When it is considered that the importations of 1818, 
 which were the greatest we ever had, did not amount 
 to more than 1,586,030 quarters, we shall have some 
 
 F 2
 
 44 
 
 idea of the immense difference between these two crops ; 
 and we might naturally expect, if there was the shadow 
 of ground for Mr Tooke's theory, of the great effect 
 produced upon price by the variation in the supply, 
 that a very striking difference would have been ob- 
 servable in the prices of those two years. 
 
 But how was the fact ? From is 18 to 1822 was a 
 period, as we have shown, of declining prices, from a 
 contraction in the circulation of the country banks, 
 and these two harvests occurred in the midst of that fall. 
 Let us therefore examine the state of all the crops and 
 prices of that period. We must always keep in mind 
 that the crop of each year is chiefly consumed in, and 
 affects the prices of the year following. 
 1818. — 83s. ..The crop of 1817 with the importation of 
 
 1818, amounted to an average one. 
 1819. — 72s.. ..The crop of 1818 an average one. 
 1820. — 65s.. ..The crop of 1819, 1,750,000 quarters de- 
 ficient. 
 1821. — 54s.. ..The crop of 1820, 1,750,000 quarters re- 
 dundant. 
 1822. — 43s.... The crop of 1821 an average crop. 
 
 The fall in each year appears to have been as fol- 
 lows : — 
 
 1819. — lis.. ..After the average crop of 1818. 
 
 1820. — 7s.... After the deficient crop of 1819. 
 
 1821. — lis.. ..After the abundant crop of 1820. 
 
 1822. — lis.... After the average crop of 1821. 
 By this it appears that the deficiency of 1819, which 
 in amount was much greater than the largest importa- 
 tions we ever received in one year, did not check the 
 fall more than 4s. per quarter, and that the abundance 
 of 1820, which was equally great, did not enhance it 
 in the least. The fall after the average crops of 1818
 
 45 
 
 and 1521, being precisely the same as after that of 
 1820, namely lis. in each year; so that, in point of 
 fact, there is not an observable difference, arising from 
 the state of the supply, of more than 4s. per quarter 
 between the years 1820 and 1821, although the differ- 
 ence in the supply was 3,500,000 quarters. 
 
 Let us take another instance. It is well known that 
 in 1823 prices took a start. A demand for capital be- 
 gan to be experienced, and the country banks to in- 
 crease their issues, and a rise in prices followed, which 
 went on as the country bank circulation extended, un- 
 til both were checked by the panic of December, 1825. 
 Every one attributed this rise to the increased circula- 
 tion of the country banks ; even Mr Tooke partly did 
 so. 
 
 In 1822, the demand for stamps was .=£4,217,341. 
 
 1823, ditto ditto ditto 4,657,589. 
 
 1824, ditto ditto ditto 6,093,367. 
 
 1825, ditto ditto ditto 8,532,438. 
 Now, by Messrs Cropper, Benson, and Co.'s sur- 
 veys, 1822 was an average crop, 
 
 1823 1 -6th below an average,* 
 while the average prices in those years were as follows : 
 
 1822— 43s. 3d. 
 
 1823— 51s 9d. being a rise of 8s. 6d. 
 
 1 824 — 62s being a rise of 1 1 s. 9d. 
 The deficiency in 1823 would be equal to 2,000,000 
 quarters, by which it will be seen, that the rise in 1824 
 was enhanced 3s. 3d. The rise being 8s. 6d. after 
 the average crop of 1822, and only lis. 9d. after the 
 crop of 1823, which, it appears, was two millions of 
 
 * Their account given to the Committee of 18*21, does not ero further, 
 of course, than 18*20; but the author was favoured by Mr Cropper with 
 these particulars since then.
 
 46 
 
 quarters deficient. From these facts we may form some 
 idea to how great an extent the demand for corn accom- 
 modates itself to the supply, and how very erroneous 
 the principle is. that a small excess or deficiency in 
 the supply will produce a much greater effect upon 
 price than an equal excess or deficiency in the supply 
 of any other commodity. 
 
 The difference between corn and other commodities 
 consists in this, that with corn the monied demand in- 
 creases and decreases with the supply, — a thing which 
 was not at all taken into account by Mr Tooke, Mr 
 Ricardo, and others; whereas with other commodities, 
 though cheapness may give rise to additional consump- 
 tion, it does not increase the income and means of the 
 purchaser.
 
 47 
 
 SECTION III. 
 
 On the Principle that Corn creates its own 
 
 DEMAND. 
 
 In the last Section we have shown, that there is no 
 truth whatever in Mr Tooke's principle, that a small 
 excess or deficiency in the supply of corn, has an effect 
 upon the price of it far beyond the ratio of such excess 
 or deficiency ; but on the contrary, that the demand 
 accommodates itself to the supply, and that a very 
 great increase or falling off may take place in the sup- 
 ply without any material effect upon price. 
 
 This affords an additional proof, not only that the 
 agricultural distress was not produced by an excess of 
 supply, but that none of the great fluctuations we have 
 experienced in the last thirty years were caused by the 
 state of the supply, as Mr Tooke and others have en- 
 deavoured to establish. 
 
 In accounting for the fluctuations we have experi- 
 enced by the state of the supply, it has always been as- 
 sumed, that the demand was stationary or perhaps in- 
 creasing, while the supply fluctuated; whereas it is 
 evident that the demand follows the supply. The sup- 
 ply comes first, and the demand after — the supply 
 causes the demand ; which renders corn in that re- 
 spect an exception to all other commodities. And as 
 all legislation on the subject of corn, has hitherto been 
 framed with reference to the principle, that the demand 
 preceded the supply — that the demand was the cause 
 and the supply the effect, it is not a matter of surprise 
 that we should not yet have settled our corn laws upon 
 right principles : for there cannot be a greater error
 
 4.8 
 
 than mistaking the cause for the effect, or one more 
 likely to produce a confusion of ideas on any subject. 
 
 It is generally said, that as capital, manufactures, 
 commerce, and population increase, the demand for 
 corn increases — that manufactures and commerce give 
 rise to population, and population to the consumption 
 of, and a demand for corn. And it is no doubt true 
 that until manufactures and commerce are established, 
 corn is seldom extensively cultivated ; but it does not 
 follow as a necessary consequence that manufactures 
 are the cause, and the production of corn the effect, 
 more than that the priming or water put into a pump 
 to make it work, is the real cause of the supply of water 
 which is obtained from it. 
 
 In order to ascertain whether commerce, manufac- 
 tures, and population are the cause of the demand for 
 corn, or the effect of the supply, it will be proper to di- 
 vide the population of the country into three classes : — 
 The agricultural class, including all those who derive 
 their income and means of subsistence from the soil ; 
 the capitalists, whose incomes are derived from capital 
 employed in trade and commerce, or generally in con- 
 tributing to the supply of our wants and enjoyments; 
 and the class of labouring manufacturers and others, 
 who are thus employed. 
 
 The Agriculturists derive their power of consum- 
 ing Corn from the Supply. — Now the first of these de- 
 rive their income from the soil at once, with them, 
 including both land-owner, farmer, and labourer, the 
 supply of corn clearly furnishes the means of their 
 purchasing it. We therefore pass on to the other two 
 classes, with whom the demand for corn must origi- 
 nate, if it be the demand which causes the supply ; 
 and we shall begin with the working class.
 
 49 
 
 The demand for Corn cannot proceed from an increase 
 of manufacturing Population. — The labourer, whatever 
 his wants may be, cannot purchase corn without mo- 
 ney, and he can obtain money only by means of a de- 
 mand for his labour. The amount of corn this class 
 can purchase, therefore, depends upon the amount of 
 demand for their labour. The question consequently 
 is, can this class of themselves in any way increase that 
 demand? The manner in which this is generally sup- 
 posed to be done, or at least the way in which the in- 
 creased demand for corn is supposed to arise, is by an 
 increase of population. But how is an increase in the 
 supply of labour, to increase the demand for it? If I 
 have the power of employing ten men, I do not see 
 how that power is to be increased by my having the of- 
 fer of twenty ; unless, indeed, I could thereby get more 
 work done for the same money. But in that case no 
 increased demand for corn would be the consequence ; 
 the same sum or power of purchasing corn, would 
 merely be divided amongst a larger number of persons. 
 
 It is erroneous to suppose, that merely an increase 
 of population can increase the demand for corn without 
 an increased demand for labour. Any increase in po- 
 pulation must be preceded by an increased demand 
 for labour, if it give rise to an increased demand for 
 corn. When the population increases without an in- 
 crease in the demand for labour, misery and starvation 
 are the consequence, as Ireland at this moment sufficient- 
 ly proves. If we, therefore, wish to ascertain what it 
 is that gives rise to an increased demand for corn, we 
 must inquire into the cause which gives rise to an in- 
 creased demand for labour. 
 
 Before a country is fully peopled, an increase in po- 
 pulation has no doubt the effect of increasing the de-
 
 50 
 
 mand for corn. But even in that case, the supply 
 may be said to exist before the demand, in as much as 
 it is in the earth, and any one who tills may obtain it ; 
 which is not the case after a country is fully peopled, 
 and the earth is made to yield the utmost it is in the 
 power of those who cultivate it, to make it yield. The 
 earth may therefore be said, before a country is fully 
 peopled, to have a demand for labour which is not fully 
 supplied. Hence the demand for labour in strictness 
 of principle, may, in such case, be considered to pre- 
 cede the increase of population and demand for corn. 
 But in this state of society, all, or nearly all, are agri- 
 culturists. They belong to that class, who, at least, in 
 a more advanced state of civilization, very obviously 
 derive their power of consuming corn from the supply, 
 and consequently are not the class we have been speaking 
 of. The class we have been considering, is the class of 
 artisans, &c. who are fed upon the surplus produce of 
 the soil, after it comes to yield a surplus ; and an in- 
 crease in their numbers, without an increased demand 
 for labour, paid for in money, will not, it is evident, 
 produce any increase in the demand for corn. 
 
 A Demand for Corn cannot proceed from an Increase 
 in manufacturing Skill and Capital. — If an increase in 
 the number of labourers will not increase the demand 
 for corn, still less can that demand be increased by the 
 employment of capital in trade and manufactures. 
 The immediate effect of all improvements in ma- 
 chinery, is to throw labour out of employment; where- 
 as an increased demand for corn must be accompanied 
 by an increased demand for labour. 
 
 Neither does an accumulation of capital increase the 
 demand for corn. The effect of an accumulation of 
 capital in trade, is to diminish the profits of trade, and 
 the incomes of those who live by its profits ; and it is
 
 51 
 
 not possible that the consumption of corn can be in- 
 creased by reducing the incomes of those who con- 
 sume it. 
 
 It is said, indeed, by the economists, that as capital 
 is saved, additional labourers are employed :— men ex- 
 tend their manufacturing concerns, and embark in new 
 undertakings, by which a new demand for corn is 
 created. The simple answer to this however is, that 
 it is not true. 
 
 In all trades at this moment, there is more capital 
 than is wanted, and more would be employed were it 
 possible to employ it with advantage. The employ- 
 ment of capital, in trade, is restrained to the amount 
 sufficient to supply the demand for the commodities 
 which it is the object of trade and manufactures to pro- 
 duce, and the demand for these cannot be increased by 
 merely increasing the supply. 
 
 Hence, upon the slightest consideration, it must be 
 obvious, that an increased demand for corn cannot be 
 produced either by an increase in manufacturing popu- 
 lation, manufacturing capital, or manufacturing skill. 
 The latter, indeed, must obviously have the effect, so 
 far as it goes, to diminish the demand for corn in the 
 employments in which the improvements in skill and 
 machinery occur ; and with regard to the two former, it 
 is evident, that they cannot increase the demand for corn 
 unless an increase in the demand for labour and com- 
 modities previously occurs. 
 
 A Demand for Corn not caused by Foreign Trade. — 
 As it thus appears, that the demand for corn depends 
 upon the demand for labour and commodities, we have 
 next to enquire what it is that generates this demand ; 
 and we are naturally led to examine whether it may not 
 be produced by foreign trade. 
 
 G 2
 
 .52 
 
 At the same time, however, it must be observed, that 
 let the demand for commodities come from where it 
 may, it must be a demand by those who have the power 
 of purchasing and consuming them; and this power 
 must be derived from income, in whatever way the in- 
 come may be obtained by the parties who possess it. 
 Whether the demand be a home demand or a foreign 
 demand, it must proceed from those who enjoy the 
 means in the country in which they reside, of purchas- 
 ing the necessaries and luxuries, foreign or domestic, 
 which they may consume. 
 
 In considering our trade with foreign nations, it 
 must also be remembered that we purchase and con- 
 sume their commodities as well as they ours. It must 
 likewise be previously explained, that if we did not 
 purchase and consume foreign commodities, the same 
 amount of money must be spent at home: for income 
 must be spent either in one way or another. 
 
 A man must do one of three things with his income — 
 he must spend it, or lend it, or hoard it. If he spend 
 it, he must do so in a demand for home labour and 
 produce, should he not purchase foreign commodities; 
 if he lend it, it must be to those who mean to use it, 
 and who must spend it in a demand for home produce 
 and labour, if they do not consume foreign commodi- 
 ties ; and if he hoard it, he takes the money out of cir- 
 culation, contracts the currency, reduces the price of 
 commodities generally, and increases the power of con- 
 sumption by those who possess the money left in circu- 
 lation. Hoarding may alter the value of money and 
 scale of prices, but it does not prevent consumption. 
 At the same time, it is so little practised, that it is not 
 worth consideration as a general principle; and where 
 it is practised, people do not hoard for ever; so that while
 
 53 
 
 some are hoarding, others are bringing their hoards in- 
 to circulation. We may therefore leave hoarding out 
 of view, and say that income must be spent ; because 
 people must either spend it themselves or lend it to 
 others, who will do so. It will, however, be proper to 
 explain, that it is not meant to be said that a person 
 cannot save his income; but that he must do so by 
 spending it or lending it. If he neither hoard it nor 
 lend it, and yet save it, he must convert it into capital 
 by building houses, buying goods, or spending it in 
 some way in which consumption and production will 
 be promoted. Income or ready money cannot be 
 saved, though capital can ; and it is important to keep 
 this in view. 
 
 As it thus- appears, that if we do not spend our in- 
 come in consuming foreign commodities, we must do so 
 in consuming our own, it will be evident that if foreign- 
 ers do not purchase a greater amount of our commodi- 
 ties than we do of theirs, they do not increase the con- 
 sumption of our produce more than if we had no foreign 
 trade at all. More of our labour and produce is not 
 consumed than would be by the expenditure of our own 
 income at home. Thus, if we import and consume 
 thirty millions of foreign commodities, while foreigners, 
 in return, purchase and consume thirty millions of our 
 manufactures, they appropriate thirty millions of their 
 income in a demand for our labour and produce, while 
 we appropriate thirty millions of our income in a 
 demand for their labour and produce. An exchange, 
 but not an increase of consumption takes place. With- 
 out meaning to deny that such exchange is highly be- 
 neficial, and calculated to increase the income and con- 
 sumption of both ; yet in such a state of the trade, it is 
 obvious that the foreign demand for commodities, and
 
 54 
 
 by consequence for corn, does not exceed the amount 
 of what would be generated by the expenditure of our 
 own income, on the supposition that we had no trade 
 with the rest of the world, and spent our income en- 
 tirely in consuming our own produce. We can obtain, 
 therefore, no increased demand for our manufactures 
 and increased consumption of corn by foreign trade, so 
 long as the demand of foreign nations for our commo- 
 ditics does not exceed our demand for theirs. 
 
 This will be evident for another reason. In this 
 state of the trade, our exports would exactly pay for 
 our imports — our payments would balance — we should 
 not receive any money; and if the amount of corn and 
 other commodities in the country were not reduced, 
 the price of them, without additional money in circu- 
 lation, could not rise ; and it is a rise in price which 
 is always considered to indicate an increase of demand. 
 For example, let us put an extreme case, and enquire 
 for a moment whether it would be possible without any 
 deficiency whatever in the supply of corn, for the price 
 of it to be doubled without any increased demand for 
 it in money. Would it be possible for the farmer to 
 sell his produce at double prices, and yet obtain no 
 more money for it than before? There is no magic in 
 these matters, and it is certain if he got no more mo- 
 ney he would get no more price ; and it is equally cer- 
 tain that he could not get more money without there 
 was more money in the country for him to get. The 
 price of corn and other commodities may be increased 
 by the quantity of them being diminished, the amount 
 of money in circulation remaining the same ; but prices 
 cannot be increased if there be no diminution in the 
 supply, without some have more money to give for 
 them ; and this could not be the case if the balance of
 
 55 
 
 payments were not in our favour, and no additional sup- 
 ply of money came into the country. Hence, also, when 
 our foreign trade balances in commodities — when our 
 imports are equal to our exports, no increased demand 
 for corn and rise in prices can be experienced by a fo- 
 reign demand for our manufactures for want of an ad- 
 ditional supply of money. 
 
 But we must here be understood to refer to the ope- 
 rations of a metallic currency. With a metallic cur- 
 rency no addition could be made to the amount of mo- 
 ney in circulation, except by means of a balance of 
 payments in our favour. Our paper cuirency, how- 
 ever, though it represents a metallic currency, is not 
 always governed by the principles which regulate the 
 currency it represents. But in our present reasoning, 
 as it is not our immediate object to speak of its defects, 
 we shall assume that it has none — that it increases in 
 amount as gold comes into the country, and decreases 
 in amount as gold goes out ; and that the amount of 
 paper is at all times precisely equal to the amount of 
 gold there would be in circulation, were there no paper. 
 
 Having seen that with the balance of trade equal, 
 there can be no increased demand for corn from our 
 foreign trade, let us next suppose that foreigners 
 have a greater demand for our commodities than we 
 have for theirs, and that the balance of payments is in 
 our favour, and see how far this will give rise to an in- 
 creased demand for corn. For example, suppose their 
 demand for our commodities to be forty millions, while 
 our demand for theirs did not exceed thirty, so that the 
 balance in our favour to be paid in money amounted to 
 ten millions. It must, as we are speaking of the fo- 
 reign demand for corn, through the medium of a de- 
 mand for our manufactures, and not of the foreign
 
 56 
 
 supply, which we shall speak of hereafter, be also un- 
 derstood that either by prohibitory laws, or natural 
 causes, which would render an importation of corn im- 
 possible, we can obtain no foreign supply, and must 
 altogether depend upon ourselves. Let us then sup- 
 pose that the whole of this ten millions, through the 
 demand for manufactures, was in the course of a year 
 spent in agricultural produce — in hay and corn for 
 horses, and meat and corn for men : for the keep of 
 horses as well as men, forms a part of the cost of our 
 manufactures. Then let us compare this additional 
 demand with the supply. Colquhoun, estimating the 
 average prices to correspond with 70s. 6d. per quarter, 
 makes agriculture, in all its branches, yield in the year 
 1812, .£2 16,8 17,624. Agriculture has since been 
 much extended, but prices have fallen, and to be on 
 the safe side, we will strike off one third, and estimate 
 that the value of produce which would be affected by 
 this demand, would amount to .^144,545,083, or for 
 the sake of round numbers, to j£1 50,000,000. For 
 this amount of produce, there would be a demand were 
 the balance of payments not in our favour, and the ten 
 millions would form an additional demand. Now, 
 what would be the effect on prices by an additional de- 
 mand often millions for one hundred and fifty millions 
 of produce? If it were a simple increase of demand, 
 and the same effects were produced which we observe 
 to take place on any increase of demand for other com- 
 modities, it is evident, that one hundred antl sixty mil- 
 lions would be given for that which before had sold for 
 one hundred and fifty millions. The demand would 
 have increased ten millions, and prices exactly in that 
 proportion. Estimating the rise in shillings per quar- 
 ter, it would amount to 4s. upon 60s., and no greater
 
 51 
 
 rise could take place. But our experience tells us that 
 if we suddenly bring ten millions of money into con- 
 sumptive circulation, the rise is more likely to be 30 
 or 40s. per quarter. Money, which is received in a 
 demand for our manufactures, did it meet no ob- 
 struction, would circulate throughout the country ; and 
 we have seen the very great effect upon prices, which 
 the contraction and expansion of our country bank 
 circulation produces. The contraction did not pro- 
 bably exceed ten millions, which reduced pi ices from 
 83s. in 1818, to 43s. in 1822, nor the expansion 
 exceed six millions, which raised them again to 66s. 
 in 1825. But of this, at all events, we are certain, that, 
 estimating the circulation at fifty millions, an ad- 
 dition of ten millions to it, could not fail to raise the 
 price of corn one fifth, instead of one fifteenth, and not 
 only the price of corn but of every thing. The rise there- 
 fore on 60s. would at least be 12s. instead of four, and 
 what is not the case with an ordinary demand, the price 
 would continue steady, though the foreign demand for 
 our manufactures the next year should fall off, and be 
 reduced to an equality with our demand for foreign 
 commodities. 
 
 Now, if this be not an ordinary demand, it must be 
 an alteration in the value of money ; and it has always 
 been admitted that an alteration in the value of money 
 can produce no increase of demand whatever. " It 
 " was a shrewd observation," observes Hume, in his 
 Essay on Money, " of Anacharsis the Scythian, who had 
 '* never seen money in his own country, that gold and 
 ** silver seemed to him of no use to the Greeks, but to 
 " assist them in enumeration and arithmetic. It is 
 " indeed evident that money is nothing but the repre- 
 " sentative of labour and commodities, and serves only 
 
 H
 
 58 
 
 " as a method of rating or estimating them. Where 
 " coin is in greaty plenty, as a greater quantity of it 
 " is required to represent the same quantity of goods, 
 " it can have no effect, either good or bad, taking a 
 " nation within itself, any more than it would make an 
 " alteration in a merchant's books, if, instead of the 
 " Arabian method of notation, which requires few cha- 
 " racters, he should make use of the Roman, which 
 "• requires a great many." 
 
 Hence an addition of ten millions to the circulation, 
 would not increase the demand for commodities ; it 
 would merely alter the scale or rate by which they were 
 estimated. At the same time it may be enquired, if the 
 ten millions be spent iri the purchasing corn, how could 
 there be no increase of demand for it? 
 
 The answer, however, is obvious: while the power of 
 purchasing corn by those who received the ten millions 
 was increased, the power of purchasing it in a corre- 
 sponding degree by those who had the money in previous 
 circulation, would be diminished; and, upon the aggre- 
 gate, no more corn would be purchased than before. 
 It is apparent that the increased quantity of money 
 would not increase the quantity of corn, neither would 
 it make it scarcer. There would be as much corn as 
 ever, and not more people to eat it; and if not one 
 grain more of corn was grown in consequence of the 
 rise in price, the nation, notwithstanding the rise, 
 which is always assumed, though erroneously, to indi- 
 cate scarcity, would not be worse off than before. If 
 the rich did not eat less, they would not eat more corn 
 for the rise in its price, and the remainder must always 
 be consumed by the working classes, at whatever their 
 wages enable them to give for it ; so that if the sup- 
 ply be the same, neither a rise nor a fall in price ought,
 
 59 
 
 generally speaking, to be of any consequence to them. 
 Such rise or fall must be determined by the quantity of 
 money they have to give for it. If that quantity be 
 large, the price is high ; if it be small, the price is 
 low. Corn is a perishable commodity, and must be 
 brought to market, and sold at whatever price can be 
 obtained for it, and the labouring classes must get the 
 whole, after the rich are supplied ; more they cannot 
 get, whether the price be high or low. 
 
 After the money had been introduced into circula- 
 tion, it would increase the monied income upon which 
 the demand for labour previously depended, not merely 
 to the extent often millions, but to the extent of one- 
 fifth of the whole income of society ; so that if the de- 
 mand was increased at all, it would not be increased 
 ten, it would be increased perhaps fifty millions. But 
 as the price of all things would be increased in a cor- 
 responding degree, this would not give the possessors 
 of the income of the country the power of purchasing 
 more of labour and home produce than before. 
 
 Persons who have thought in the least degree on the 
 subject of currency, will readily admit that paper 
 money may be depreciated in value, without making 
 any real difference in the condition of the country, or 
 without affecting the relative state of supply and de- 
 mand in the least. If paper money were issued to 
 such excess, as to reduce the value of a pound note 
 to a shilling, the demand for corn would not be in- 
 creased by such excess. The price of corn and all 
 things, in paper money, would merely rise to twenty 
 times their present level. A depreciation, indeed, si- 
 milar to this, occurred in the paper money of France 
 during the revolution ; as well as, though not to so 
 
 h 2
 
 60 
 
 great an extent, in the paper money of other continent- 
 al states, without of course affecting the real condition 
 of the country, with reference to the State of demand 
 and supply of any thing produced in it. Now paper 
 money is introduced into circulation in the same man- 
 ner as metallic money, namely, in a demand for com- 
 modities. It is issued by government, in payment of 
 its troops, or its debts, or in some way in which a con- 
 sumptive demand is promoted ; and if such demand 
 merely produces an alteration in the value of money, 
 the same must be the effect of metallic money coming 
 into a country, though it be obtained by the more le- 
 gitimate channel of foreign trade. Hence it is evident 
 that an excessive foreign demand for our manufactures, 
 when paid for in money, does not increase the real de- 
 mand for corn. It only raises the price of it, by depre- 
 ciating the value of the gold currency, and the paper 
 money, of course, which represents it. 
 
 Although a depreciation in the value of money be 
 the only effect of an increased foreign demand for our 
 manufactures, and balance of payments in our favour, 
 as regards the demand for corn, it has other important 
 effects upon national wealth, which have not hitherto 
 been understood, but which it will be proper to ex- 
 plain. 
 
 The Manner in which Foreign Trade increases Na- 
 tional Wealth. — All trade, both domestic and foreign, 
 consists in an exchange of commodities, and money is 
 only the instrument by which they are valued, and the 
 barter conducted. Trade, for example, could not be 
 carried on by any nation long, that would sell its goods 
 for money alone, even if other nations were willing to 
 trade with it on these terms. Suppose we were to pass 
 a law, that no one should import foreign commodities,
 
 61 
 
 though they might export whatever they thought pro- 
 per, and foreign nations continued to trade with us 
 under these circumstances, and of course to pay us 
 with money, for whatever they purchased from us, the 
 effect would be, that our prices would rise, and theirs 
 would fall; the monied income of their consumers 
 would be diminished, while the prices of our commodi- 
 ties would be increased, until, in time, the trade would 
 be put an end to, by the high price of our goods, and 
 the impossibility of their purchasing them for want of 
 money. This would be the inevitable result. No other 
 trade can be carried on for a continuance, but that 
 which consists in an exchange of commodities. By 
 such an influx of money, we should gain nothing, nor 
 would the nations we treated with, lose any thing. The 
 only difference would be, that, in the notation of pay- 
 ments, gold with us would perhaps come to express the 
 value that silver had done before, and silver with them 
 to express the value that gold had done before. Na- 
 ture, by the respective alterations in the value of mo- 
 ney, would have merely terminated a trade which con- 
 sisted in giving something for nothing: for such money 
 would be, under these circumstances. It would not be 
 worth having. 
 
 Thus, trade must consist in an exchange of commo- 
 dities. But then, how are the values of the respective 
 commodities of each country to be determined ? An 
 acre of produce with us is worth more, probably, than 
 an acre of produce in Russia; and the labour of the 
 artisans of England is of more value than the same 
 amount of labour in almost any country we deal with. 
 It is not, however, by the quantity of labour in a com- 
 modity, so much as by the demand for it, that its value 
 in the exchange is estimated ; and the process of the
 
 6^2 
 
 valuation is remarkably simple. In consequence of 
 the skill of our workmen, and the perfection of our ma- 
 chinery, our commodities are in great request amongst 
 the nations we deal with, and they in return have arti- 
 cles, particularly of raw produce, which we are desirous 
 to obtain. But this kingdom possesses only about 20 
 millions of people, and our demands for the produce of 
 other nations must be confined to the consumption of 
 the twenty millions. Whereas our articles are light 
 and portable, can easily be transported over the whole 
 world, and are in demand over the whole world. Not- 
 withstanding this, our trade must be confined to an 
 exchange of commodities, and the demand of the whole 
 world for our commodities must be limited to our de- 
 mand for the commodities of the world. But let us 
 suppose, for example, that at any existing state of prices 
 throughout the world, the demand of the whole world 
 for our manufactures were double our demand for the 
 commodities of the world — that our exports for in- 
 stance amounted to forty millions, and our imports to 
 only twenty. We should of course receive twenty mil- 
 lions in money ; an elevation would consequently take 
 place in the price of our commodities, and a depression 
 in the prices of the commodities of the countries from 
 which the money was received. This would have the 
 effect of diminishing their power of purchasing our 
 commodities, and of increasing our power of purchasing 
 theirs, and the balance of payments would continue in 
 our favour until their demand for our commodities was 
 reduced to a level with our demand for theirs. It is 
 upon this principle that our prices are higher than the 
 rest of the world, and the effect is to make all foreign 
 commodities relatively cheap with us. Thus, though 
 a balance of payments in our favor, and a rise in prices
 
 63 
 
 is of no importance as regards the supply and demand 
 for corn, and every article of home produce, yet, in 
 our dealings with foreigners, it enables us to sell dear- 
 er and buy cheaper ; and, of course, the higher our 
 prices the better for this country : the richer we become 
 in the power of consuming foreign commodities, of 
 which a great portion of the luxuries of life consist, 
 without our power of consuming corn and other home 
 produce being in the least diminished. Contrast, for 
 instance, the situation of a labourer in England, with 
 corn at 60s. per quarter, and his situation in any other 
 country with it at 20s. per quarter, assuming the 
 amount of population compared with the food produced 
 to be the same. Food for himself and family, is of 
 course the first object of the labourer's solicitude, and 
 to which in every country the greatest portion of his 
 wages must be applied. If we take this upon the ave- 
 rage at two-thirds, and suppose that the other third is 
 appropriated to the purchase of those luxuries and 
 comforts which habit has rendered necessary, the 
 amount of the comforts enjoyed by the labouring poor 
 in the two countries may be thus compared : — For 
 every guinea received by the labourer in England, 
 seven shillings would be received by the labourer where 
 corn was 20s. per quarter. In England, consequently, 
 14s. would be applied to the purchase of food, and 7s. 
 to luxuries; and where corn was 20s., 4s. 8d. would be 
 applied to the purchase of food, and 2s. 4d. to the pur- 
 chase of luxuries. Now, 14s. would not purchase more 
 food with corn at 60s. than 4s. 8d. would with corn at 
 20s. ; but the 7s. would purchase three times as many 
 luxuries as the 2s. 4d. Colonial produce is as dear in 
 other parts of Europe as in England, keeping out of 
 view the duties to which each state may respectively
 
 64. 
 
 subject it; and manufactured commodities, from the 
 lightness of carriage, are sold almost equally cheap in 
 other countries as in our own. Thus, the luxuries en- 
 joyed by the labourer in England will be three times as 
 great as where corn is one-third the price : and it is 
 consistent with experience that in all manufacturing 
 states where high prices have existed, the labouring 
 poor have uniformly enjoyed the greatest portion of 
 the comforts of life. 
 
 The same also with the proprietors of the soil: they 
 obtain (speaking of the principle in question, without re- 
 ference to the advantage they might gain by a deprecia- 
 tion in the value of money, in the payment of taxes, 
 &c.) Dp benefit by a rise in prices, as regards their 
 consumption of British labour and produce; but in 
 the consumption of foreign commodities, they are 
 highly advantaged by it. Properly speaking, our ex- 
 ports consist of corn represented by labour. The pror 
 duce of the soil m;iy be said to form the basis of all 
 exports. Man is the produce of the soil, and his la- 
 bour represents its produce. Manufactures, indeed, 
 are as much the produce of the soil, as if the raw ma- 
 terial had been put into it, and had sprung up webs of 
 cloth, and knives, and scissors. Now in the shape of ma- 
 nufactures, corn becomes so portable, that a quarter of 
 corn probably may, in some articles, be sent to China 
 for a shilling. Hence, the land-owner sells his corn in 
 China, in exchange for tea, &c. at, perhaps, sixty 
 shillings per quarter, while he may get his tea at the 
 rate of ten shillings, and he deals at corresponding 
 advantage with other parts of the world. 
 
 There is, however, another advantage that the land- 
 owner gains by an elevation in the prices of corn, but 
 which is an equal advantage to the rest of the commu-
 
 65 
 
 nity, namely, its tendency to increase the supply with- 
 out diminishing the price. As the price rises, an ex- 
 tension of tillage frequently takes place, and a greater 
 quantity of both corn and cattle is produced. An exten- 
 sion of tillage, indeed, is of no value if it does not increase 
 the quantity of food obtained generally. Breaking up 
 pasture land for the mere purpose of growing corn, is 
 of no advantage: it merely deranges the proportion 
 which exists between the amount of corn and cattle 
 produced. Cattle will only, in such case, become rela- 
 tively higher than corn; and others will be induced to 
 lay down a corresponding quantity of land in pasturage 
 again. A rise in price, however, has the effect of in- 
 creasing production generally. 
 
 Not that the farmer, in the long run, can produce food 
 more at one price than another. If he sell his corn at 
 80s., he must pay in that proportion for his labour and 
 expence of tillage. If he sell his corn at 40s , his 
 expences of tillage will be proportionately low. It will 
 neither take more nor less labour to cultivate the soil, 
 because of the price; and corn that cannot be cultivated 
 atone price, cannot on an average of years be cultivated 
 at another. The expence of tillage is regulated by the 
 price of corn, and must on the average rise and fall 
 with it. In 1815 it was dearly proved before a com- 
 mittee of the House of Commons, that corn could not 
 then be grown under 80s. per quarter ; it is now 
 universally admitted that 60s. is a remunerating price ; 
 and it could be grown at sixty pence per quarter as well 
 as at either price. 
 
 Notwithstanding this, however, a ri.^e in the price of 
 corn has the effect of increasing the supply. Setting 
 aside his rent, which the farmer has generally contracted 
 to pay at the value of money and price of corn before 
 
 I
 
 66 
 
 the rise, the expence of tillage neither rises nor fall* 
 so rapidly as the price of corn. In all employments, 
 there are generally more men than can be fully em- 
 ployed ; and the first effect of an influx of money into 
 the country, is to increase the demand for labour at the 
 old price ; and all hands are immediately engaged. 
 Those who had work before, and only continue to get 
 the old wages, are worse off; but those who could not 
 get employment before, are better off. Employment is 
 more general, and more work is done for the same 
 wages in the necessaries of life. A rise in prices con- 
 sequently amounts, practically, to a reduction in the 
 price of labour, and an equalization of employment. 
 
 The farmer getting a better price for his corn, with- 
 out any material increase for a time in the cost of till- 
 age, is encouraged by success, enabled by the capital 
 he has raised from the fruits of his success, and in- 
 duced by the comparative cheapness of tillage, to en- 
 deavour to extend and improve his system of cultiva- 
 tion ; and as capital judiciously employed on land is 
 often very productive, he frequently makes a permanent 
 increase to its produce. So that a rise in the price of 
 corn is certain to a greater or less extent to increase 
 the quantity produced, by which corn becomes more 
 plentiful, and the labourer gets more of it, through the 
 medium, no doubt, of an increased demand for his la- 
 bour. 
 
 Seeing that the rise in the price of agricultural pro- 
 duce gave the first impulse to those improvements in 
 agriculture, and that extension of tillage, which has 
 gone on so rapidly in the last half century, many have 
 been led to consider that the continuance of the im- 
 proved system of tillage depended in a great degree 
 upon high prices ; and, at any rate, that the cultivation
 
 67 
 
 of poor soils did so. But this is an error. The rapid 
 strides this country has made in agriculture, though 
 much indebted to the rise in prices, in as far as it 
 threw capital into the hands of the farmers, and might 
 generate a spirit of enterprise, was chiefly owing to an 
 increase of knowledge on agricultural subject?. Im- 
 provements have equally taken place in all other em- 
 ployments, from an increase of knowledge, and there is 
 no reason why we should assign to agriculture a differ- 
 ent cause for the same effect. 
 
 The degree of error, indeed, which has so long 
 existed on these subjects, is most surprising. " The 
 friends of monopoly," observes the ingenious writer on 
 Political Economy in the Edinburgh Review, " need 
 " not flatter themselves with the vain and delusive idea 
 " that any system that can be adopted will enable them 
 " to continue the cultivation of all the inferior soils 
 " that were advantageously cultivated in 1813 and 
 " 1814. To effect this, prices would require to be 
 " forced up to 100s. or 120s. per quarter, and long 
 " before they had attained this level, either famine or 
 " rebellion, or both, would be raging through the 
 « country." — No. 81, p. 64. 
 
 As the art of cultivation has gone on improving, 
 it is hardly necessary to observe, that there are more 
 inferior soils in cultivation now, than in 1813 and 1814. 
 But taking the passage as it stands, it would be difficult 
 to find a greater contradiction than it involves. We 
 cannot suppose, as a famine would be raging through 
 the country long before prices had reached to 100s. or 
 120s, the reviewer contemplated that the population 
 would be increased with the rise. It therefore appears, 
 that when our system of cultivation had been extended, 
 the quantity of corn produced had been materially 
 
 i 2
 
 68 
 
 increased, and our soil had been curried by the stimu- 
 lus of high prices, to its highest point of productive- 
 ness, the whole country, without any increase of popu- 
 lation, would, by his account, be on the verge of starv- 
 ation ! It seems much more probable, if suffering at 
 all, that it should be from repletion. 
 
 I do not mean to accuse the ingenious writer of these 
 articles of more erroneous views than the great mass of 
 writers. The price of corn is a subject in which it 
 will, I believe, generally be found that the most think- 
 ing have been the most wrong. 
 
 The Demand for Corn must proceed from the Supjrty. 
 — To return, however, to the examination of the prin- 
 ciples which give rise to the demand for corn. It is 
 evident that a foreign demand for our manufactures can- 
 not give rise to any such demand; though by producing 
 high prices, it may have a tendency to increase the 
 supply : that high prices are merely the result of a 
 depreciation in the value of money, and do not, in the 
 least, increase the demand tor corn : that our foreign 
 trade must on the average balance in commodities, so 
 that the demand for our manufactures cannot exceed 
 the demand we have for foreign commodities; and 
 consequently, that the demand for corn, by means of 
 the foreign demand for our manufactures, never can 
 exceed the demand which would be created by the 
 expenditure of our own income at home, had we no 
 foreign trade whatever. Our inquiry is now con- 
 sequently very much narrowed. It is evident that the 
 demand for corn must proceed from the expenditure of 
 our own income at home; and the question is, from 
 whence is our income derived? We have seen that it 
 is not derived from an increase of manufacturing 
 population ; that it is not derived from improvements
 
 6<J 
 
 in machinery ; that it is not derived from an increase of 
 manufacturing capital ; and that it is not derived from 
 foreign trade. There is, therefore, only one source 
 left from which it can be derived, and that is, from the 
 soil itself It must be the supply of corn which gives 
 rise to the demand that causes its consumption. 
 
 Nor is this at all difficult to conceive. Colqu- 
 houiv estimated in 1812 and 1813, that the amount 
 of value yielded by agriculture in all its branches, 
 was =s£2 16,81 7,624 ; while the gross amount yielded by 
 mines, minerals, and manufactures, did not exceed 
 ■^123,230.000, which places the relative importance of 
 agriculture in a sufficiently important point of view ; 
 and renders it not by any means hard to believe that 
 the produce of the soil should form the basis of the 
 income of the country. 
 
 There ought to be this quality also in that which 
 forms the basis of income, namely, that we can never 
 have too much of it. Neither individuals nor nations 
 ever complain of having too much income. It is the 
 expenditure of income that causes a demand for and 
 gives rise to the production of manufactures; it is the 
 expenditure of income that gives employment to labour, 
 and increases population ; it is the expenditure of in- 
 come which enables us to purchase foreign produce, 
 and thereby enables foreigners to purchase ours in 
 exchange. If we can only obtain income, every thing 
 else will follow. Now, agricultural produce is in this 
 respect different from all other commodities. We can 
 never obtain too much of it. Other trades are frequent- 
 ly overdone. There are often more manufactories built 
 than can find employment — more goods are continually 
 produced than can be disposed of and consumed. 
 Every man is obliged to look at the state of the trade
 
 70 
 
 and the markets before he creates a fresh supply, in 
 every thing but the produce of the soil ; but the farmer 
 has never any doubts of finding a market. He pro- 
 duces as much as ever he can. Whatever be the state 
 of the prices, his object is to increase the supply. He 
 is sure of a market for whatever he can produce. This 
 affords another conclusive argument that agriculture is 
 the origin and basis of income, and of course the cause 
 of the demand which gives rise to the consumption of 
 its own produce. 
 
 Another argument in favor of the proposition that 
 the supply of corn creates the demand which causes its 
 own consumption, may also be deduced from the prin- 
 ciple of population. Mr Malthus has shewn, and all 
 political economists admit, that population increases up 
 to a level with the means of subsistence. Nor can the 
 principle be for a moment denied, whatever may be 
 objected to the modes of checking the too rapid growth 
 of population which have been deduced from it. 
 
 Population in America, where the means of subsist- 
 ence are plentiful, doubles itself in 20 or 25 years. In 
 countries where no improvements have been made in 
 the art of cultivating the soil, and the means of sub- 
 sistence have not increased, population has remained 
 stationary ; and in this country, where the improve- 
 ments in agriculture in the last 30 years, have rendered 
 the soil, say one-half more productive than before, the 
 population has neither doubled itself nor remained sta- 
 tionary, but has just kept pace with the increased means 
 of subsistence. 
 
 Though population thus increases with an increase 
 in the means of subsistence, it increases by means of a 
 demand for labour. A great part of those who con- 
 sume the produce of the soil never see it grow. They
 
 71 
 
 are not induced to marry and rear families to consume 
 its produce, because they see the soil is becoming more 
 productive; they know nothing about it; their means 
 of support are altogether derived from a demand for la- 
 bour. If they can obtain employment at proper wages 
 they never doubt being able to purchase food. It must 
 therefore be obvious that there must be an intimate 
 connection between the supply of food and demand for 
 labour; and that as the means of subsistence increase, 
 the demand for labour must increase. Hence it is 
 further evident that the means of subsistence must form 
 the basis of that income, the expenditure of which 
 causes the demand for labour that gives rise to its 
 consumption. 
 
 Income multiplies itself in its Progress to Consumption. 
 — Income, however, once generated, will multiply itself 
 in its progress, and pass through many hands before it 
 is finally expended in a demand for that produce which 
 gave it birth. One-third, or perhaps a less .portion of 
 the cost of the goods which are purchased by those 
 who first receive the income from the soil, may consist 
 in labour, and the rest in profits of capital. These pro- 
 fits form a new income to the parties receiving them ; 
 and they, after spending a portion in food, will spend 
 the rest in luxuries and conveniences, which will afford 
 incomes to other parties, and so on. In this manner, 
 it is not extravagant to suppose, that the original income 
 may be multiplied half a dozen or a dozen times, and 
 every person have as much spending in the portion he 
 obtains, as if he had derived it direct from the soil. 
 
 Land will yield income to the Community when it yields 
 none to the Landlord. — Nor is the income derived from 
 the soil to be estimated by the rent it yields. Land 
 will yield income to the community when it yields none
 
 n 
 
 to the landlord. Before it yields rent it must pay the 
 expence of cultivation. This expence will consist partly 
 in the wages of labour, and partly in implements, &c. 
 by which the consumption of manufactures will be pro- 
 moted, and from which income in the shape of profits 
 of capital, &c. will be derived. These profits, of 
 course, would be made, if it paid only the expence of 
 cultivation, and yielded no rent. Hence rent is no ex- 
 act criterion of the income derived from the soil. 
 
 Improvements in Machinery do not diminish the Demand 
 for Labour. — We have stated that improvements in ma- 
 chinery diminish the demand for labour. It may be pro- 
 per, therefore, to explain that they only do so in the par- 
 ticular employments in which such improvements take 
 place. They do not do so upon the aggregate. If a 
 person, for instance, invents a machine, which, with ten 
 men, will do the work of one hundred, and exclusive 
 of the raw material, sells the commodity at one half 
 price in consequence, he gains the power of consum- 
 ing income adequate to the support of forty men, and 
 the public, by getting the commodity at one half price, 
 save income adequate to the support of fifty. But this 
 income, as we have before shewn, must be spent; it 
 cannot be saved. Though it pass from capitalist to 
 capitalist twenty times, it must finally come down in a 
 demand for the provisions adequate to the consumption 
 of ninety men at last. That this must be the case will 
 appear evident when we consider what improvements 
 have taken place in machinery, and the art of economis- 
 ing labour in the last thirty years ; and yet the demand 
 for it has gone on increasing with the increase in the 
 means of subsistence, as much as if no such improve- 
 ments had occurred. 
 
 We have thus endeavoured to prove by a variety of
 
 73 
 
 facts and arguments which we believe will be found 
 incontrovertible, that it is the supply of corn which 
 creates the demand for it — a proposition which will 
 necessarily lead to important practical conclusions. 
 Let us, therefore, briefly recapitulate the evidence upon 
 which it rests. 
 
 1. We have shewn in the previous chapter, that if 
 the demand for corn were stationary while the supply 
 fluctuated, the farmer would gain by a bad crop, and 
 lose by a good one ; but, that as the reverse of this is the 
 fact, the demand in good years must increase, and in 
 bad years fall off with the supply; and by consequence 
 that the demand must depend upon the supply. 
 
 2. We have shewn, on the authority of Dr. Adam 
 Smith, and a French writer quoted by him, as well as 
 by reference to the want of demand for labour, which 
 was experienced after the failing crop of 1816, that 
 the demand for labour increases and diminishes after 
 good and bad crops. Thus, shewing the connection 
 between the supply of corn, and that demand for la- 
 bour, by which the consumption of corn is promoted. 
 
 3. We have shewn that a difference of 3,500,000 
 quarters between the crops of 1819 and 1820 did not 
 produce an observable difference in price of more than 
 4s. per quarter; and that a deficiency, in 1823, of 
 2,000,000 quarters, did not produce an observable dif- 
 ference of more than 3s. 3d. per quarter, which is at 
 once, a natural consequence, and a clear proof, of the 
 dependence of the demand upon the supply. 
 
 4. We have shewn, in the present chapter, that a 
 demand for corn cannot be produced either by an in- 
 crease of population, an increase of manufacturing skill, 
 or manufacturing capital, or by a foreign demand for 
 our manufactures ; and that, consequently, it must pro- 
 
 K
 
 74 
 
 ceed from the soil: thus clearly establishing the gene- 
 ral principle stated by the facts adverted to in the pre- 
 vious chapter, namely, that it is the supply which 
 creates the demand, and not the demand which creates 
 the supply, as has been the opinion heretofore. 
 
 5. We have shewn, that if the supply of corn creates 
 the demand, it must form the basis of that income, by 
 the expenditure of which, the demand is caused; and, 
 as we can never have too much income, if corn be the 
 basis of income, it ought to be also consistent with ex- 
 perience that the soil can never be rendered too pro- 
 ductive. This being a well known fact, in which the 
 produce of the soil differs from all other commodities, 
 it is an additional confirmation of the principle, that 
 corn creates its own demand. 
 
 6. We have finally shewn, that it is a fact, admitted 
 by all political economists, and cannot be denied, that 
 population increases up to a level with the means of 
 subsistence; while the apparent cause, at least, of an 
 increase of population, is not the increased supply of 
 corn, of which the population are in general totally 
 ignorant, but the increased demand for labour. If, 
 therefore, it is the increased supply of corn and means 
 of subsistence which give rise to the increase of popu- 
 lation, they must give rise to the increased demand for 
 labour. Hence, those who admit the principle of po- 
 pulation, must likewise admit that the supply of corn 
 creates the demand.
 
 'n 
 
 SECTION IV. 
 
 On the Principle that all Alterations in 
 the Price of Corn whatever, are Changes in 
 the Value of Money. 
 
 From the foregoing, we may consider it reduced 
 almost to mathematical demonstration, that the supply 
 of corn causes the demand. This being the case, it 
 follows that the demand must, at all times, be exactly 
 equal to the supply. If the supply be twelve millions 
 of quarters, there must be a demand for twelve millions ; 
 or if the supply be ten millions, the demand must be 
 the same. Hence it must be evident that there never 
 can be any fluctuations in price from fluctuations in the 
 supply. If the demand be diminished as the supply is 
 diminished, and enlarged as the supply is enlarged, the 
 relative proportion between the supply and the demand 
 will never be disturbed. Suppose I were this year to 
 make a hundred yards of cloth or any perishable com- 
 modity that must be disposed of, and sell them for one 
 hundred pounds, and in doing so supplied the whole 
 demand ; and suppose I were next year to make 1 20 
 yards : if the demand were not increased, I should be 
 obliged to sell the 120 yards for d£l00 — the supply 
 would be increased while the demand remained the 
 same. But if in making the 20 yards, I also created 
 at the same time, a demand for twenty, I should not be 
 obliged to sell at less per yard than the year before; 
 in as much as the demand would have increased in the 
 same proportion as the supply — the relative proportion 
 which previously existed between the supply and the 
 
 k2
 
 76 
 
 demand, would not have been disturbed. And as this 
 is the case with corn — as the supply and demand bear 
 always the same proportion to each other, strictly 
 speaking, no alteration in price from supply alone can 
 occur. 
 
 Were it not for changes in the currency, the price at 
 which corn sold, would always be the price at which it 
 was purchased. The price at which it sells, determines 
 the income in money to which it gives rise. The in- 
 come in money causes the demand for labour in mo- 
 ney. The demand for labour in money determines 
 the amount of money which the labouring class have 
 to give for corn, and what they have to give the 
 farmer gets. It moves in a circle, consumption is pro- 
 moted at the price which the corn produces, and the 
 corn produces the price at which its consumption is 
 promoted. 
 
 Alterations in the Value of Money of two Kinds, ivJiich 
 may be termed Negative and Positive. — Hence altera- 
 tions in the price of corn, must always be alterations in 
 the value of money ; and these are of two kinds, which 
 for the sake of distinction, may be termed negative and 
 positive. Negative alterations in the value of money 
 are caused by the alterations in the supply of corn. If 
 the crop of any year be materially below an average, 
 while the quantity of money in circulation remains the 
 same, it must, at least have a tendency, to produce the 
 same effect in altering the value of money and prices 
 for that year, as if without any deficiency in the crop, 
 an additional quantity of money had been put into cir- 
 culation. But these alterations can only be temporary. 
 They must depend upon the crops. Positive altera- 
 tions in the value of money are caused by variations in 
 the amount of money in circulation. After an altera-
 
 77 
 
 tion in the average prices from this cause is once pro- 
 duced, they will not again vary so long as the same a- 
 mount of money remains in circulation. Prices may 
 fluctuate from year to year, but on an average of years, 
 or in average years, they will be the same. 
 
 Negative Alterations in the Value of Money ; less than 
 Positive. — Between, however, the effect upon price 
 produced by an alteration in the supply of corn, and an 
 alteration in the amount of money in circulation — 
 between a negative and positive alteration in the value 
 of money, there appears to be a considerable difference. 
 The former has a much smaller effect upon price than 
 the latter. 
 
 We have given in the appendix an account of the 
 demand for stamps by the country banks, from 1810 
 (which is as early, I believe, as these accounts were 
 furnished,) up to 1825; also the average prices and 
 the state of the crops from the Farmer's Magazine for 
 the same period. 
 
 By these accounts it will be seen that the prices 
 almost always rose or fell, as money was put into or 
 taken out of circulation, and consisted chiefly of a 
 positive alteration in the value of money. And that 
 where the state of the crops did not correspond with 
 the fluctuations in the total amount of the currency, 
 they had a very trifling effect in arresting the progress 
 of any alteration in prices produced by these fluc- 
 tuations. At the same time', with our currency, it must 
 be admitted that there is no showing with great 
 accuracy, the separate effect upon prices by these two 
 causes, as they, in general, both operate together: the 
 one having a tendency to produce the other. A failing 
 crop produces a scarcity of income, and those, who, in 
 better years, have deposited money with the banks,
 
 78 
 
 draw it out of their hands. As this demand is general, 
 and experienced by all the banks in the country at the 
 same time, they are enabled to enlarge their issues. 
 Hence a bad crop and an increase of issues go together ; 
 and it is impossible to say what portion of the rise 
 which follows, is attributable to the increased issues, and 
 what to the deficient crop. On the contrary, an 
 abundant crop is apt to produce an opposite effect. 
 Farmers have a greater than an average amount of 
 income, the surplus of which they deposit with the 
 banks. These cannot lend it all out again in consequence 
 °f the superabundance of it, except at a reduced rate of 
 interest — a measure they seldom resort to. The cur- 
 rency, therefore, contracts : and prices fall, not so much 
 from the abundant crop, as from the contraction of the 
 currency which it produces. 
 
 Where we have had an opportunity of forming any 
 thing like an estimate of the separate effects of the state 
 of supply, upon the value of money and state of prices, 
 as with the crops of 1819, 1820, and 1823, pointed 
 out in the second section, these effects appear to be 
 small. The difference between the crops of 1819 and 
 1820, was 3,500,000 quarters, and yet there does not 
 appear a greater difference in price than 4s. per quarter ; 
 while the crop of 1823, which was 2,000,000 quarters 
 deficient, did not affect the average price of the succeed- 
 ing year more than 3s. 3d. 
 
 Were it not, indeed, that the currency is an imper- 
 fect instrument, there ought to be no change in price 
 whatever ; the demand should precisely correspond with 
 the supply. But an increase in the quantity of corn 
 cannot increase the amount of a metallic currency, and 
 has a tendency to diminish the issues of banks. Not- 
 withstanding this, however, it does appear that the cur-
 
 79 
 
 rency makes more payments after a good crop, than 
 after a bad one. The demand for labour in a good 
 year, increases in money, without more money being 
 in circulation, and vice versa. Of this fact we are cer- 
 tain ; but how to account for it is more difficult. 
 
 If, indeed, we adopt the hypothesis of Mr Tooke, 
 carried still further by Mr. Burgess, it will let us out of 
 the difficulty. These gentlemen contend, that the 
 enlargement of private credit in the shape of bills, &c. 
 which takes place in periods of confidence, is a practical 
 extension of the currency, and vice versa. Now, periods 
 of confidence, are times when money is plentiful ; and 
 good harvests, when the farmers have large surpluses to 
 deposit with the banks, necessarily produce these 
 periods, and bad harvests the reverse. In addition to 
 this, we may also add, that the surplus of a good 
 harvest being lodged in banks, the money will be lent 
 out by them, so far as they do lend it, at once, to those 
 who will immediately expend it in giving employment to 
 labour. By this means less currency will be required 
 to promote the consumption of such surplus, than if 
 the money had in the usual way, to make the whole 
 circuit of society, which must necessarily be a long one. 
 
 On the other hand, with a bad year it is less difficult 
 to see how prices may be kept down. The loss of in- 
 come would immediately make money scarce ; the agri- 
 cultural class would be unable to pay their tradesmen, 
 and would limit their expenditure and demand for 
 goods ; while those who had money in the banks would 
 draw it out. This latter effect, except in so far as it was 
 met by an enlargement of issues, would compel the banks 
 to withdraw their usual accommodation to trade. The 
 tradesman would consequently find himself unable 
 either to sell his goods, or get payment for those he
 
 80 
 
 had sold ; or get any assistance from the banks, whom 
 he would, on the other hand, be obliged to pay what 
 he was owing them. Under these circumstances he 
 could order no more goods, and what sales he did make 
 would have to be out of his old stock. 
 
 Hence the income by the sale of the corn would not 
 reach the manufacturer in the usual manner. As soon 
 as the money came into the hands of the tradesman, 
 instead of being employed in purchasing more goods, 
 it would, through the banks, come again into the hands 
 of the farmer and landlord, without the income having 
 promoted, in the usual way, the consumption of the 
 corn from which it was derived. Thus the manufac- 
 turers would be thrown out of employment, and the 
 price of corn would be kept from rising. 
 
 In whatever way the fact may be accounted for, cer- 
 tain it is, that in good and bad years, the capacity of 
 the currency, is in one way or another, increased and 
 diminished. At the same time, so far as prices are af- 
 fected by such years, it is still an alteration in the value 
 of money. The change of price arises from no dis- 
 crepancy between the real supply and real demand. 
 These bear the same relative proportion to each other 
 as before. 
 
 A Metallic Currency subject to the same positive Al- 
 terations in the Value of Money as a Paper Currency. — 
 In countries, however, it may be remarked, where there 
 are metallic currencies, to which, it might be inferred, 
 that a bad harvest could not make any positive addi- 
 tion, it is observed, that in bad seasons prices often rise 
 very high ; even higher than with us where the banks 
 increase their issues. This seems to refute the idea 
 of the currency accommodating itself to the seasons; 
 but it is an error to imagine, that a metallic currency
 
 81 
 
 cannot be increased. In Spain, and other countries, 
 where these elevations of price in bad harvests have 
 been more frequently observed, they have very few 
 banks; yet, notwithstanding this, people who can do 
 so, always endeavour to have a certain supply of ready 
 money. This, in England, would be kept in the banks, 
 who would lend it out again ; but, where there are 
 none, it must be kept in chests and boxes. In bad 
 years, of course, when the people's incomes fail, and 
 they have no other resource than these stores to apply 
 to, they are brought out, and put into circulation, and 
 a large addition to the currency, and high prices, are the 
 consequence. But high prices, thus produced, it is 
 obvious, are the result of a positive alteration in the 
 value of money — an alteration produced, not by the 
 deficient supply of corn, but by the addition made to 
 the amount of money in circulation.
 
 82 
 
 SECTION V. 
 
 On the Importation of Foreign Corn. 
 
 Foreign Corn creates its oison demand. — In our pre- 
 vious reasonings we have assumed, that for some cause 
 or other we could not import foreign corn, and that we 
 altogether depended upon what we produced at home; 
 and, we now come to consider how far the principles 
 we have established under that supposition, will apply 
 to corn received from other countries. We have 
 shewn that corn creates its own demand, and that it 
 cannot be produced in too great quantities ; and it is 
 important to know how far these principles, particular- 
 ly the last, are applicable to corn imported from abroad. 
 
 If corn creates its own demand, there can certainly 
 be no reason why it should not do so imported from 
 Dantzic, as well as imported from Yarmouth. The 
 manufacturer knows nothing of where the corn which 
 he consumes, comes from, and there does not appear 
 any reason why the same principles which promote the 
 consumption of the one should not promote the con- 
 sumption of the other. At the same time, if we can 
 shew that foreign corn also creates its own demand, we^ 
 shall still further establish the truth of the principles 
 already laid down. 
 
 We have seen that when a nation experiences a 
 greater foreign demand for its manufactures than it has 
 for foreign commodities in return, at the existing value 
 of money and state of prices in it, and in the countries it 
 deals with, a balance of payments arises in its favour. 
 The effect of this, we have seen, is to raise its prices.
 
 83 
 
 and depress those of the countries it deals with, until 
 their demand for its commodities is reduced to a level 
 with its demand for theirs. An elevation of prices thus 
 produced, it has likewise been proved, is a great ad- 
 vantage, inasmuch as it renders all foreign commodities 
 relatively cheap, and gives the manufacturing nation, 
 with the high state of prices, a greater power of con- 
 suming them. 
 
 These consequences of a great foreign demand for 
 manufactures would arise if foreign corn were exclud- 
 ed; but if the importation of it were allowed, the case, 
 it is well known, would be different. Prices would not 
 rise higher than the level at which it could be imported. 
 
 This, however, would not proceed from the increas- 
 ed supply of corn, as has been generally supposed. A 
 supply of ten millions of corn, added to one hundred 
 and fifty millions, though there were no increase of 
 demand, could not reduce prices below one-fifteenth, 
 or about. 4s. per quarter on 60s. ; whereas a demand 
 for ten millions, produced by an extra foreign demand 
 for our manufactures, we have shewn, would increase 
 the price 12s. per quarter at least, if not twice that 
 amount. Without, therefore, some other means of 
 preventing the rise in prices, a mere supply of foreign 
 corn clearly would not produce that effect. 
 
 It might do so indeed, by taking the money out of 
 the country in payment for the corn on the one hand, 
 as it was received in a demand for manufactures on the 
 other. But this, in a very short time, would put an 
 end to both supply and demand. It would reduce the 
 demand for our manufactures where the money came 
 from, and increase the price of corn where it went 
 to, and in sufficient time would terminate the trade. 
 Whereas the supply of corn we have in view would 
 
 L 2
 
 64 
 
 keep down prices, not by checking the trade, but by 
 extending it. The supply of corn would be increased 
 and the demand too. 
 
 In order to explain this, we will suppose, that with- 
 out the importation of foreign corn, but at such a price 
 as it could be imported, the foreign demand for our 
 manufactures amounted to thirty-five millions, while 
 our demand for foreign commodities amounted only to 
 thirty millions. We should, in that case, have a de- 
 mand, amounting to five millions, that we could not 
 continue to supply; and which would be checked were 
 foreign corn excluded by our receiving the balance in 
 money, by our prices in consequence rising, and those 
 of the countries where the money came from falling, 
 until the trade was brought to a balance. Now, it must 
 be evident, that a mere supply of foreign corn would 
 not be wanted, so far as that supply might be supposed 
 to enable us to furnish the extra five millions of ma- 
 nufactures. We have no difficulty in supplying such 
 an extra demand at any time; we could supply five 
 times the quantity without any more corn. The diffi- 
 culty would be in getting payment for them in commodi- 
 ties ; the only condition upon which we could continue 
 to supply the demand. Observe, for instance, how the 
 demand arises. Foreigners, out of their income derived 
 from the soil, are desirous to purchase and consume 
 thirty-five millions worth of our manufactures. But, it is 
 necessary to the existence of that income, that the pro- 
 duce which gives rise to it should be sold ; and, if we 
 could not take a corresponding amount of their pro- 
 duce, they could not continue to purchase thirty-five 
 millions in value of our manufactures. 
 
 The trade must be a trade of barter, or it cannot be 
 continued. The effect, therefore, of an importation of
 
 85 
 
 foreign corn, must not be to enable us to supply the 
 demand tor manufactures, for that we can do without 
 it, but to enable us to take five millions of foreign 
 commodities in payment for them. 
 
 Now, this it would do in two ways: in the first 
 place, the greater part of the commodities exported to 
 pay for the corn, would, no doubt, consist of foreign 
 commodities ; and in the next, it would furnish an in- 
 come to a considerable population of manufacturers 
 and others, part of which would also be spent in con- 
 suming foreign commodities. Our manufactures would, 
 of course, be exported in purchase of the foreign com- 
 modities re-exported in payment for the corn. But 
 this would amount to the same thing as if they were 
 sent to Poland in purchase of the corn direct. The 
 corn, as we have shewn with regard to that produced 
 at home, would form the basis of the income derived 
 from the sale of them. 
 
 Thus the imported corn would not merely supply a 
 demand, it would create one. It would give rise to a 
 consumption of foreign produce, and thereby promote 
 a demand for our manufactures, adequate to the con- 
 sumption of itself. 
 
 This would equally be the case, did our trade previ- 
 ously balance in commodities, and were corn imported, 
 in the first instance, without any extra demand for our 
 manufactures having arisen, provided payment were 
 taken for it in commodities. These would consist either 
 of our manufactures, or of colonial, or other foreign pro- 
 duce. If they consisted of our manufactures, we should 
 at once derive an income from them, the expenditure 
 of which would cause a demand adequate to its con- 
 sumption ; if they consisted of colonial produce, the 
 property of persons residing in this country, it would
 
 86 
 
 be the same ; or if they consisted of other foreign pro- 
 duce, there is little doubt that the demand for it would 
 re-produce a corresponding demand for manufactures. 
 
 The latter, however, might be some time in being 
 brought about. The corn must have been brought to 
 market and consumed, before the demand for our ma- 
 nufactures could arise. Notwithstanding this, no fall 
 of price would be experienced. The parties who sold 
 the foreign produce with which the corn was paid for, 
 would obtain for it a sum in ready money adequate to the 
 consumption of the corn. This they must either spend 
 themselves or lend to others who would do so; so that 
 the money would be put into circulation, and would in 
 one way or another create a demand, that would pro- 
 mote the consumption of the corn, whether there was an 
 immediately corresponding demand for manufactures or 
 not. This consumptive demand, however, might, and 
 probably would in part be created through the medium 
 of an increased demand for manufactures. The money 
 would be lent out to those who would employ it in 
 increasing their stocks of manufactured commodities. 
 Thus, as it were, creating an additional supply, in an- 
 ticipation of the additional foreign demand that might 
 be expected, in return for the increased demand for 
 foreign commodities which the importation of the corn 
 had caused. 
 
 Thus it is clear, that corn imported, creates its own 
 demand, as well as home corn. That it does so, is in- 
 deed obviously capable of demonstration, by a much 
 less elaborate process of reasoning, than in the case of 
 home corn ; and as the demand for home and foreign 
 corn must necessarily, as we before inferred, be go- 
 verned by the same principles, what is proof in the one
 
 S7 
 
 case is proof in the other. If foreign corn creates its 
 own demand, so must home corn, and vice versa. 
 
 Foreign Corn cannot be sold in Competition with our 
 owi. — Hence it follows, that the idea of foreign corn 
 coming into competition with our own, is altogether 
 erroneous. A trade in corn may alter the value of 
 money, and scale of our prices ; but corn can never be 
 imported from other countries, without a consumptive 
 demand for it, over and above the demand which exists, 
 and must exist for our own. The quality of the land 
 on which it may be produced, either abroad or at 
 home, is of no importance. Cost of production has 
 nothing to do with it. We cannot purchase corn out of 
 our own income, at any price. Our income is derived 
 from corn, by which we of course mean food generally, 
 and it is necessary to the existence of that income, that 
 it should be directly, or indirectly, spent, in promoting 
 the consumption of the identical produce from which it 
 is derived. 
 
 Supposing that at a price at which corn could be 
 imported, with a profit, our trade in commodities ba- 
 lanced, — that while we shall say our demand for fo- 
 reign commodities amounted to thirty millions, the de- 
 mand for our manufactures amounted to thirty mil- 
 lions likewise, and that an importation of corn would 
 not increase this demand. Notwithstanding this, if the 
 price was sufficiently high, corn would be imported, 
 and it would be purchased and paid for out of our own 
 income. Our own income could, in that case, be the on- 
 ly source of the demand ; but it is evident that the corn 
 would have to be purchased with money. The balance 
 of payments would be turned against us, to the extent 
 of the value of the corn imported. If the amount of 
 our exports were not increased, by the corn imported,
 
 88 
 
 the amount of our imports would, to the extent of its 
 value. By this means, the price of corn would fall, 
 and it would go on falling, until it was too low to pay 
 the importer. Thus an importation of corn might alter 
 our scale of prices; but if corn were raised in Poland 
 by the wand of an enchanter, it could never continue 
 to be imported for actual consumption, in competition 
 with our own. Corn must create its own demand, or 
 we cannot receive it. 
 
 A great Demand for Foreign Corn "would diminish the 
 Supply we should obtain. — But on the other hand, sup- 
 posing that an extra demand should arise for our ma- 
 nufactures, and that we should have a great demand 
 for corn, at increased prices, it does not, as some have 
 supposed, follow that we should obtain a larger supply 
 in consequence ; on the contrary, it is probable that we 
 should obtain a much less supply, than at more mode- 
 rate prices. 
 
 The quantity of corn we can obtain from any coun- 
 try, depends not upon the cost of producing it, as has 
 all along been imagined, but upon the demand such 
 country has for foreign commodities. Suppose, for 
 example, that Poland, at a scale of prices, and monied 
 income, corresponding to 25s. for wheat, has a demand 
 for two millions of foreign commodities, and its exports 
 in hemp, timber, corn, &c. amount to two millions, at 
 that level of prices. Let us again suppose, that a great 
 demand for our manufactures should arise, and of 
 course for corn; that the prices, in this country should, 
 consequently, rise to 65s. or 70s., and in Poland, either 
 with a free trade, or under the proposed corn law, to 
 50s. or upwards; and that our demand should continue 
 at these prices. The result would be, that in the course 
 of a little time, the price of hemp and timber would
 
 89 
 
 rise in proportion, and the value of its exports would 
 be doubled, though there should be no increase in the 
 quantity exported whatever. 
 
 Now, it must be remembered that the demand for 
 our manufactures, by which the increased demand for 
 corn would be generated, would not enhance the price 
 of tea, sugar, coffee, tobacco, &c. a shilling, if it had 
 not an opposite effect, while all the evidence we have 
 upon the subject goes to negative the supposition, thai 
 the demand by the Poles for these commodities, would 
 be doubled in less than a quarter of a century, if in that 
 time. We shall suppose, however, that it could at once 
 be increased fifty per cent. Upon this supposition it is 
 evident that the balance of payments would be in favour 
 of Poland one million. Its exports would be four mil- 
 lions, and its imports only three. The result of this 
 would be, that its scale of prices would of necessity rise 
 higher until its exports were reduced to a level with its 
 imports, by a diminution of our demand ; so that the ef- 
 fect of an increased demand at double prices would be 
 a reduced supply. 
 
 This principle is in part corroborated by an exami- 
 nation of the exports of corn from Dantzic, which have 
 been regularly kept, together with the prices, by the 
 magistrates of that city, since 1651, and are given by 
 Mr Jacob in the Appendix to his Report. During the 
 concluding fifty years of the last century, it is probable 
 that the corn trade was subject to as few interruptions 
 as in any other period ; and it appears that the exports 
 during the first 25 years, namely, from 1751 to 1775 
 inclusive, amounted on the average to 141,080 quar- 
 ters, and the price to the medium average of 20s. 10^d. ; 
 while during the last 25 years, namely, from 1775 to 
 1800 inclusive, the imports amounted to 150,299 quar- 
 
 M
 
 90 
 
 ters, and the price to the medium average of 29s. 4£d. 
 Making an increase of about forty per cent, in the 
 price, without any material increase in the quantity ex- 
 ported. This proves that an increase of price does not 
 necessarily involve any material increase of supply; 
 while it renders it almost certain that had the price 
 been doubled, the supply would have been diminished. 
 
 Any increase of price would, no doubt, have the effect 
 of increasing the supply for a time; but it would be for 
 payment in money by which the supply would be 
 ultimately reduced. The money, of course, would have 
 the effect of increasing the price in Poland, and lessen- 
 ing the demand against another year. 
 
 Thus, it is of no importance whether a nation exports 
 corn, or manufactures, or any other commodity, any 
 material increase of demand will not increase, but dimi- 
 nish, the supply obtained. 
 
 The last Principle only applicable to fully peopled 
 Countries^ and not to North and South America. — This, 
 however, must be understood as only applicable to 
 countries fully peopled. Where the soil has not all 
 been cultivated, as in North and South America, a 
 demand for its produce will always ensure a corres- 
 ponding demand for manufactures. It will give rise to 
 a new income, which must be spent, and which there is 
 no other means of spending, but in the purchase of 
 foreign commodities. Suppose a farmer in Canada, 
 with the money he got for his wheat exported to this 
 country, were to employ labourers to clear fresh land, 
 they would expend their wages in purchasing the 
 luxuries, not the necessaries of life, and these must be 
 foreign commodities. As far as the money might be 
 spent in purchasing corn, it would give rise to a home 
 demand for corn, and the farmer would raise as much
 
 91 
 
 money as that portion of their wages amounted to, from 
 his home sales, independent of what he sold to England • 
 so that the income raised from the corn sold to England 
 must all be spent in the consumption of foreign com- 
 modities. 
 
 This principle is as equally applicable to the pro- 
 duce of South as of North America. Where a country 
 is not fully peopled, there are no means of spending 
 income in the produce of manufacturing labour ; nor 
 any means of creating income except by a foreign 
 demand for the produce of the soil. Population is as 
 necessary to income, as income is to population. 
 Our demand for the produce of the soil of America, 
 is, therefore, tantamount to furnishing it with a manu- 
 facturing population ; and is certain to re-produce a 
 demand for our manufactures, or for other foreign pro- 
 duce by which a corresponding demand for our manu- 
 factures is secured. 
 
 But this increased demand for our manufactures 
 could never be created with a country fully peopled. 
 With it the soil yields as much income as it can be 
 made to produce, according to the best system of culti- 
 vation its inhabitants are enabled, whether good or 
 bad, to apply to it. The mode of spending that in- 
 come is settled, the habits of the people fixed, and their 
 demand for foreign commodities determined, which 
 nothing could alter the amount of, their income re- 
 maining the same, but cheapness. In this state, any 
 increased demand for their commodities, would not 
 make their soil more productive; it would not increase 
 their real income in the least; nor yet have the immediate 
 effect of increasing their consumption of foreign com- 
 modities. But by determining the balance of payments 
 in favour of the country, it would increase its prices, 
 
 m 2
 
 92 
 
 while it reduced those of the countries it dealt with, and 
 make its commodities relatively dear, and theirs re- 
 latively cheap. This we have before explained would 
 not have the effect of increasing its exports, but of 
 diminishing them ; so that the increased demand which 
 led to this alteration in prices, would be met by a 
 diminished, not by an increased supply. 
 
 From this, it is clear that the trade with the Ame- 
 ricas, including that of our West India islands, is the 
 best trade we can cultivate — more especially, where, 
 from the extreme heat, as in South America and our 
 islands; and from the extremely cold and long winters, 
 as in Canada, Nova Scotia, and New Brunswick, no 
 manufacturing population can ever be expected to arise. 
 In our North American colonies, the severity of the 
 cold in winter, which puts an end to all labour, seems 
 to render it unnecessary in agriculture, as it prepares 
 the soil for the production of corn much better than 
 any labour could do. While, on the other hand, the 
 heat in the tropical climates appears to perform the 
 same office for their productions. If it render la- 
 bour less supportable, it renders it less necessary. 
 The produce of the soil is, at all events, the only pro- 
 duce which either very hot or very cold countries can 
 furnish. Manufactures must be obtained from where 
 the climate offers less obstruction to human industry. 
 With the countries above mentioned, therefore, a trade 
 once established will be permanent. 
 
 Gold Jrom South America as much a Commodity as 
 Cotton and Indigo. — It will, perhaps, be proper to 
 mention, in this place, that gold from South America 
 is not received upon the same principles as from any 
 other country. There, it is an article of annual pro- 
 duce, and is as much the subject of regular export
 
 93 
 
 as cotton and indigo. In this character we receive it, 
 and it must be exported again upon the same principles, 
 after deducting the amount of our annual consumption. 
 To a given extent, therefore, the import and export of 
 gold is no more a proof of excess, or deficiency, in our 
 circulating medium, than an import and export of any 
 other article of commerce.
 
 94 
 
 SECTION VI. 
 
 On the Interest of the Working Classes in 
 the Question of the Corn Laws. 
 
 A very important point in considering the corn laws, 
 and which has furnished arguments on both sides of the 
 question, is the effect they are calculated to have on the 
 interests of the labouring class; and on this subject it 
 will be proper to make a few observations. 
 
 The Average Price of Corn of no Importance to the 
 Working Classes. — It will have been clear, from what 
 we have already stated, in the previous Sections, that 
 the average price of corn can be of no importance to 
 the labouring classes as far as regards the supply of 
 food; that they will obtain no more corn at a low price 
 than at a high one, or if any thing, that they will get 
 less. When a high price of bread is the result of ac- 
 tual scarcity produced by a failure in the crops, it is 
 another matter. But that is not the question. All legis- 
 lation has reference to average price. In a scarcity, 
 the laws, whatever they may be on the subject of corn, 
 are generally suspended, and often reversed. Mea- 
 sures are adopted under such circumstances, which are 
 suited only to the period, and which would be extreme- 
 ly impolitic as general laws. It is therefore to average 
 prices and supplies that our attention is more particu- 
 larly directed. 
 
 Higli average prices, as we have seen, never can 
 proceed from want of corn. On the contrary, they 
 generally give rise to an increased supply, and the con- 
 dition of the poor, at least for a season, is consequently 
 improved. That high prices, indeed, can be no injury
 
 95 
 
 to the poor, when not the result of a diminished sup- 
 ply, will be obvious on a moment's consideration; for it 
 is the demand of the labouring class which determines 
 the price; and if they had not the money to give for it, 
 the farmer could never get a high price. The great 
 consumption is by the lower classes. The demand 
 of the rich does not make corn high or low. They 
 consume the same quantity whatever be the price. 
 And so indeed do the poor. But the money they have 
 to give for what they consume determines the price 
 whether it be high or low. They give all they have, 
 and the price depends upon the sum this amounts to. 
 
 If a rise in price benefits the poor, by increasing the 
 supply, so on the other hand, a fall in price injures them. 
 It diminishes the capital of the farmer, and compels 
 him to throw agricultural labour out of employment; 
 and it may be considered that for every agricultural 
 labourer thrown out of employment, two manufacturing 
 or other labourers are thrown out of employment also. 
 Agricultural labour is employed for the sake of the sur- 
 plus produce it yields ; and that surplus creates income, 
 which gives employment to other labour : so that what- 
 ever impoverishes the farmer and checks his operations, 
 injures and impoverishes all. 
 
 As a general principle, however, the average price 
 of corn, whether high or low, is of no importance to 
 the working classes. It neither indicates scarcity nor 
 abundance; but only the existing value of money. It 
 is of more importance to them, that prices should re- 
 main steady, at whatever level it be; for all changes in 
 price take place through the medium of the demand 
 for labour, which is increased and diminished by such 
 changes in particular employments. By this means, 
 one class of labourers are pinched, while the others
 
 96 
 
 have abundance ; and the reverse. It is desirable that 
 employment should be equally divided and regularly 
 obtained, which nothing but steady prices can secure. 
 
 An Increase in the permanent Supply of Food, of no 
 Importance to the Working Classes. — Neither is a per- 
 manent increase in the supply of food of any value to 
 the labouring class, except for the first few years after 
 it takes place. Indeed, unless it takes place very sud- 
 denly, it is scarcely felt. After a country is fully peo- 
 pled, and its soil cultivated, any increase in its produc- 
 tiveness must be the result of increased skill in cultiva- 
 tion. This, compared with the tendency of population 
 to increase, is so very slow, that the immediate benefit 
 to the poor from such increase in the means of sub- 
 sistence, is never observable. 
 
 The demand for labour, compared with the supply, 
 is not greater now than it was thirty years ago, although 
 the kingdom produces one-half more food than it did 
 then. The style of living of the labouring classes may 
 be improved ; but that is the result of improved habits. 
 The style of living of the same classes, in the same pe- 
 riod, has deteriorated in Ireland, though there is no 
 doubt that the productive powers of the soil in Ireland 
 have increased in as great a degree as in England. 
 
 Except, therefore, for a comparatively limited period, 
 the comforts of the poor cannot be increased by an 
 additional supply of corn. It is found, by experience, 
 that with an unlimited supply of food, as in the Ameri- 
 cas, where there is so much good land uncultivated, 
 population doubles itself in twenty-five years. Hence, 
 if we could double our supply of food, the labouring 
 classes would be benefitted for that period ; but would 
 afterwards be in the same state as before. The produce 
 also, of the United Kingdom, is computed to be twelve
 
 97 
 
 millions of quarters of wheat, and other grain in pro- 
 portion, besides butcher meat. We have at once, 
 therefore, a scale by which to calculate the immediate 
 benefits to the poor of an increased supply of food. If 
 the increased supply be equal to one-half the pioduce 
 of the kingdom, the poor will be benefitted for twelve 
 years and six months; if one-third of that quantity, for 
 six years and three months; and, if equal to one-twelfth 
 of it, for two years and one month. 
 
 It can never be for a moment denied that an import- 
 ation of foreign corn would be immediately beneficial 
 to the poor; but that benefit would be limited to the 
 time population would take in increasing up to a level 
 with the increased means of subsistence. And as we 
 can probably estimate the utmost amount of foreign 
 corn we could possibly receive, upon throwing open 
 our ports to the admission of it, we can form some- 
 thing like an idea of the utmost benefit which the la- 
 bouring classes could derive from the measure. 
 
 The greatest amount of foreign corn ever imported 
 into this country was in 1818, when the wheat import- 
 ed amounted to 1,586,030 quarters, and other grain in 
 proportion. This supply was obtained by our giving 
 upwards of eighty shillings, when the average price in 
 Poland, Prussia, &c. without our demand, would not 
 have amounted to forty. It was also chiefly paid for by 
 an exportation of money ; so that there is little doubt, 
 had our ports remained open, the supply in a few years 
 would have been materially reduced, by an elevation of 
 prices in Poland, Prussia, &c. as well as by a reduction 
 of price in this country. But let us assume, that, in 
 the event of the ports being thrown open, we should 
 receive this amount of supply annually. 
 
 It must likewise be remembered, that if we were to 
 
 N
 
 98 
 
 increase our produce of corn at home one million of 
 quarters, there would be a due proportion of butcher 
 meat with it. Suppose we assume this to be equal to 
 one-half of the corn, or one-third of the whole. It will 
 follow that 1,586,030 quarters of wheat imported, 
 would not keep more people than two-thirds of the 
 same quantity produced at home. But we shall not 
 consider this. We shall assume that the amount of 
 corn imported, would be equal, in all respects, to the 
 same amount produced at home. 
 
 Now, it appears that an increase of one million of 
 annual produce would improve the condition of the 
 poor for two years and one month. As our greatest 
 importations never did, in any single year, exceed, ex- 
 cept in a trifling degree, a million and a half, it follows, 
 that if we could count upon such importations annually, 
 which there is no reason to suppose, and making be- 
 sides every other allowance, we could not calculate up- 
 on the population being benefitted more than three 
 years and six weeks, by the opening, under any, the 
 most favourable circumstances, of our ports, to the ad- 
 mission of foreign corn. 
 
 It may indeed be said, that population cannot be in- 
 creased in so short a time, and that the benefit must 
 extend to a longer period, which is no doubt true ; 
 but that would, in the end, lead to an evil which would 
 more than neutralize all the benefits derived from the 
 ease and comfort which the poor would experience in 
 the first instance. Employment would become general. 
 They would all marry, and for the first few years not 
 feel any inconvenience. But the result would be, that 
 three times the children would be reared, who as men, 
 could be properly supported, and many years of priva- 
 tion and misery would have to be endured before popu-
 
 99 
 
 lation would again be reduced to its just proportion 
 with the supply of food. 
 
 Any sudden increase in the supply of food and de- 
 mand for labour, which takes, from a whole popula- 
 tion, for five or six years, that prudence with regard to 
 marriage, which it is necessary to their future comfort 
 should be observed, is much more likely to be an evil 
 than a good. 
 
 Thus, at all events, the immediate benefits which 
 would be derived by the working classes from the im- 
 portation of foreign corn, would be either short-lived 
 or problematical ; while the ultimate benefits would be 
 nothing, inasmuch as population would, in no long 
 time, be certain to increase up to a level with the in- 
 creased means of subsistence. 
 
 Laws are made, however, with reference to their 
 lasting effects, and not with a view to temporary advan- 
 tages ; and this ought to be more particularly the case 
 with reference to population : for, when once called in- 
 to existence, it is not quite so easy to get rid of it again. 
 
 In considering, therefore, the advantages of import- 
 ing corn with reference to the poor, we ought to con- 
 sider its effects on the average, say of a century ; and 
 taking such a number of years, or half the quantity, it 
 is impossible to say that the poor would be in the least 
 advantaged by an importation of corn, if they were not 
 injured by it. The only true interest they have in the 
 question is, not that the supply should be great, but 
 that it should be steady. If we admit foreign corn, 
 which gives rise to a population dependent upon it, we 
 ought to take good care, before we do so, for the sake 
 of such population, that the increased supply is to be 
 depended upon. 
 
 A manufacturing population, dependent upon sup- 
 n 2
 
 100 
 
 port from a foreign soil, is in an unnatural and some- 
 what dangerous situation. Nature evidently intended 
 every man to be fed by the land he lives on : for she 
 has made it as a general rule, the interest of all classes 
 to totally exclude foreign corn. Even the manufac- 
 turing classes, which are dependent upon home supply, 
 are always the greatest sufferers in a bad harvest : 
 those always suffer most, whose labours for a season 
 can be best dispensed with. But when dependent up- 
 on foreign supply, they are in a bad harvest altogether 
 at the mercy of governments, who, if they are not 
 totally devoid of sympathy for the suffering of their 
 own people, will cut off the supply altogether. This 
 was our policy when we were a corn exporting coun- 
 try, and why should not other nations adopt it. 
 
 In reply to this it may be said, that bad harvests sel- 
 dom occur in more than one country at a time; and if 
 our foreign supplies come from different countries, we 
 shall be more certain of a steady supply upon the 
 average. But even admitting this, it would scarcely 
 be desirable to depend upon foreign supplies to any 
 very great extent; except from our own colonies, which 
 are under our own government. All manufacturing 
 nations that have depended much upon foreign sup- 
 plies, have been more or less short-lived. Agriculture 
 is the trunk, and manufactures the head of national 
 wealth ; and the moment the trunk was severed from 
 the head, the latter would droop and die away as a 
 matter of course, both from want of corn and want of 
 means to purchase it. 
 
 Thus we have come to two conclusions, which it is 
 important to keep in view: first, that the price of corn 
 is of no importance to the poorer classes, and next,
 
 101 
 
 that an increase in the average supply of corn from fo- 
 reign importation is of no benefit to them. 
 
 First, the poor will get all the corn there is for them, 
 in return for whatever money they have to give for it, and 
 the price depends upon the amount of that money ; and 
 next, any increase in the average supply from foreign 
 importation, if it does not do harm, will do so little 
 good, that it cannot be set in competition with the evils 
 which would result from any uncertainty with regard 
 to the continuance of the supply, after a population 
 has become dependent upon it. So that as regards 
 the poor, the question is not so much whether foreign 
 corn ought to be imported, as whether it ought to be 
 prohibited. At all events, if we admit the arguments 
 in favour of and against its importation to be equally 
 balanced, we may fairly assume it to be a matter of 
 perfect indifference to the poor, whether its importation 
 be permitted or not.
 
 lOJ 
 
 SECTION VII. 
 
 On the Principle of Taxing Foreign Corn. 
 
 The defective Principle of the Coin Law of 1815. — 
 The effect, we have seen, of excluding foreign corn 
 altogether, is not to create any scarcity, but to enhance 
 the price of corn by depreciating the value of money 
 with reference to every article of home produce. A 
 rise in the price, we have seen, does not indicate 
 a demand on our part for foreign corn, but a demand 
 on the part of foreigners for our manufactures. When 
 a rise takes place, we can take foreign corn, but we can 
 do as well without it. We have a demand for it in 
 money, or rather in foreign commodities, but the nation 
 itself has no demand for it. 
 
 This was not understood when our present corn laws 
 were passed in 1815. It was then supposed that a rise 
 in the price of corn always indicated a scarcity of it to 
 a certain extent; and it was enacted that when wheat 
 reached 80s., our ports should be thrown open to free 
 importation, and that they should be closed after the 
 price, for a given time, had fallen below that rate. 
 
 Eighty shillings was thought, at that time, a price 
 which could be maintained ; and had our manufacturing 
 superiority been such as to have maintained it, our 
 currency would have been kept in a constant state of 
 derangement by those laws. When prices were raised 
 above 80s. by an extra demand for our manufactures, 
 and a balance of payments in our favour, the demand for 
 corn might be trifling ; and, at all events, the few shil- 
 lings which prices had risen above 80s., would be all the
 
 103 
 
 premium requisite to obtain the supply of corn, and by 
 that means create the demand for foreign commodities 
 necessary to bring our trade to a balance at that level 
 of prices. But, if prices rose high enough to open 
 the ports and no more, we might not have had any 
 demand for corn whatever. Now probably the average 
 price at which corn might be landed in England at that 
 period, the English ports being shut, might be 40s. ; so 
 that on the opening of the ports, without any real demand 
 for a single bushel, we should have given a most enor- 
 mous premium for all the corn that could have been 
 imported. This, of course, would have been chiefly 
 paid for in money, prices would have fallen, and the 
 ports been again shut; until the foreign demand for our 
 manufactures had again brought the money back, and 
 opened the ports as before. 
 
 This would have been a total perversion of what 
 ought to have been, and what was intended to be, the 
 object of the law, namely to keep prices steady. The 
 price of corn, however, is determined by the amount of 
 money in circulation, and whatever alters that amount 
 does not keep prices steady, but deranges them. 
 
 Nature points out that a Tax on Corn is the best 
 Mode of keeping Prices at a particular Level. — This 
 naturally leads us to the consideration of what will keep 
 prices steady. If we wish to keep up our scale of prices 
 above the level of Europe, and yet not exclude foreign 
 corn, how can it be admitted in the requisite quanti- 
 ties to keep prices at the level required ? for it must be 
 remembered, that the higher the level, the less will be 
 required. Now, nature herself very clearly points out, 
 that this must be done by levying such a duty upon it, 
 as will, in addition to the import price, prevent its be- 
 ing sold with profit, beneath the price to be maintained.
 
 If we had a free trade in corn, we could not import 
 it, until prices were sufficiently above the level of Eu- 
 rope, to cover the charges of bringing it.. The moment 
 prices would not cover them, with a profit, importation 
 would be suspended. The freight and charges are a 
 natural corn law, by which prices are kept at a certain 
 elevation above the level of Europe. Now, a duty 
 would precisely have the same effect ; and it could not 
 be different in principle. 
 
 A part of the income derived from the sale of the 
 corn, would go to pay the freight and charges, and 
 would be spent, by those who received them, in pro- 
 moting its consumption. A part would go to govern- 
 ment, and would be spent in keeping a navy to defend 
 the ships that brought the corn, and an army to pro- 
 tect the manufacture that made the commodities which 
 paid for it, or would in some way or other be spent by 
 the officers or creditors of government; so that a de- 
 mand for corn, proportioned to the amount of freight 
 and duty would be created, while the remainder would be 
 spent in a demand for manufactures, with which to pay 
 for the original cost of it. 
 
 There can be no distinction in principle between 
 freight and duty. If the freight and duty amounted 
 conjointly to 30s. it could make no difference as regards 
 its effect in keeping up the price in this country, or 
 the effect of the price so kept up in its different bear- 
 ings, whether the 30s. was all freight or all duty. 
 Hence, to impose a duty, is the way pointed out by 
 nature, as the proper one to keep up our prices at any 
 particular level. 
 
 A Tax on Foreign Corn, not paid by the people of 
 this Country, but by the Foreign Consumers of our Ma-
 
 105 
 
 niifactures. — Next as to who pays the freight and duty. 
 In the first place, it must be evident that they would 
 not be paid by the people of this country. Their effect 
 would be to keep up our prices above the level of Eu- 
 rope, and thereby increase the exchangeable value of our 
 produce; and so increase our wealth and power of con- 
 sumption by making foreign commodities relatively 
 cheap. Whether we obtained ten thousand or ten 
 millions by a duty on foreign corn, the nation would 
 feel no other effect from it. The duty could, conse- 
 quently, be no burthen upon it whatever. 
 
 The income from the corn also would give life to a 
 new population quite independent of that which our own 
 soil will support — a population that might as well have 
 been situated on a barren rock. Suppose, that upon a 
 rocky island, now inhabited by sea gulls, a seam of coal 
 should be discovered, and a manufacturing population 
 should arise. They would, of course, have to sell their 
 manufactures to more fertile countries, and from them 
 receive their supplies of corn. Now, wherever there are 
 people there must be a government, and it must have 
 funds to pay its expences with ; and suppose these were 
 raised by a tax upon corn. It is manifest that it could 
 not be paid by the people of the island : for they could 
 pay nothing whatever that they did not receive. They 
 could no more pay the tax than their predecessors the 
 sea gulls, from any resources of their own. 
 
 As regards corn imported, we are precisely in the 
 same situation as if England were a barren rock. All 
 charges the corn is subject to, whether of freight or 
 duty, must be paid by those for whose convenience the 
 manufacturing population is created which consumes it. 
 This, however, is seldom the parties who supply the 
 corn. Suppose the price of the corn delivered without 
 
 o
 
 106 
 
 duty to the inhabitants of the island were 40s., a duty 
 of ten shillings would raise it to 50s., and as much mo- 
 ney would be obtained for the corn by the growers of 
 it as before. Now the price of the manufactures of the 
 island would be raised to a level with 50s. ; but if pay- 
 ment for the corn were taken in tea, sugar, &c. the 
 produce of other countries, these evidently would not be 
 raised by the tax. Hence, the grower of the corn 
 would get as much tea, sugar, &c. for his corn as be- 
 fore ; and the tax, in so far as he took payment for the 
 corn in these commodities, would not be paid by him. 
 It would evidently be paid by those nations who took 
 manufactures at the enhanced prices, in exchange for 
 the tea, sugar, &c. 
 
 This is reasonable. It would be the demand for 
 manufactures that would give rise to the consumption 
 of the corn. The growers of the corn might not want 
 manufactures, though they might want tea and sugar, 
 and upon these they would have to pay all charges. 
 The more the tea and sugar cost, the less they would 
 get of them in return for their corn. Thus the duty 
 levied upon foreign corn imported into this country, is 
 paid by the foreign consumers of those manufactures, 
 the demand for which gives rise to the demand for the 
 corn, and not by the growers of the corn, in as far as 
 they take payment for it in colonial produce, and other 
 foreign commodities. 
 
 The Advantages of a Tax upon Foreign Corn. — 
 Hence, the advantages of a tax upon corn may be thus 
 enumerated. It is a tax exclusively paid by foreigners. 
 It keeps up the exchangeable value of the produce of 
 this country generally, by which our power of consum- 
 ing foreign commodities is increased. It keeps down 
 the price of the hemp, timber, and other produce ob-
 
 107 
 
 tained from the countries from which our foreign sup- 
 plies of corn are drawn ; and finally it increases, in all 
 probability, the quantity of corn obtained from those 
 countries, if this be an advantage. 
 
 At all events, a free trade in corn would not produce 
 what its advocates expect from it in regard to increasing 
 our supplies from the Baltic : the source from whence 
 they have hitherto been chiefly drawn. If the quantity 
 were not less than would be imported with the im- 
 position of a proper duty, it would not be greater; 
 while it is certain that a free trade in corn would, in 
 time, enhance the price of every other article of Baltic 
 produce. It therefore has nothing to recommend it. 
 
 Mr M'Culloch's Objection to Corn Laws examined. — 
 This is rather a different view of the subject than it has 
 been usual to take. Corn laws have always been consi- 
 dered as necessary evils, even by their advocates; while 
 by their opponents, they have been condemned as the 
 greatest, I might almost say, curses, with which a com- 
 mercial nation can be inflicted. So far from a tax upon 
 foreign corn being one which does not fall upon the 
 people of this country, Mr M'Culloch, to use his own 
 words, considers it to be " an incontrovertible position, 
 " that every additional shilling added to the price cf 
 " the forty-eight millions of grain (of all kinds) con- 
 " sumed in the empire, by means of the prohibition 
 " against importation, is really equivalent in its effects 
 " on the consumer to a tax of <s£2, 400,000 laid directly 
 " on corn."-£(/w. Rev. No. 88, p. 340. 
 
 Or in other words, that we might as well impose a 
 direct tax of a shilling a quarter upon all kinds of grain 
 produced in this country. Indeed, it appears we had 
 much better do so ; for he goes on to show that three- 
 fourths of the tax levied by means of prohibition is 
 
 o 2
 
 108 
 
 wasted and thrown away: whereas, a tax of a shilling 
 per quarter by a direct impost, though it might be a 
 burthen upon the public, would be received by one 
 party or other who would be benefitted by it. Our 
 present corn laws he considers to have been equivalent 
 to a tax of eight shillings per quarter, or about nineteen 
 millions. They have, therefore, been a dead loss to the 
 nation of about fourteen millions per annum. 
 
 In the 92nd No. of the Ed hi. Rev. recently publish- 
 ed, he observes, "it is plain that they (the landlords) 
 " would not receive, on the most exaggerated estimate, 
 " five millions of the nineteen which the corn laws 
 " force out of the pockets of the public ! The rest are 
 " wasted without advantage to any individual what- 
 " ever; are, in fact, as much destroyed as if they were 
 " cast into the sea or the fire. The advocates of agri- 
 " cultural monopoly may rail, quibble, and carp at this 
 " statement; but the only objection to which it is li- 
 " able, is, that it depreciates the loss occasioned by the 
 " corn laws."— P. 402. 
 
 If this were true, it is clear that our manufacturing 
 skill and industry must be a great evil, under any cir- 
 cumstances. It has never been denied, that our de- 
 mand for foreign corn is the result of the great sale we 
 have for our manufactures. 
 
 Now, foreign corn cannot be imported into this 
 country under, at least, 6s. per quarter freight and 
 charges — a natural corn law, which we cannot repeal; 
 and which operates in raising prices precisely in the 
 same way as any other corn law. A rise of six shill- 
 ings, according to Mr M'Culloch, would be equiva- 
 lent to a duty, on the people of this country, of 
 .^14,400,000. Thus a demand for our manufactures, 
 which produced a demand for foreign corn, must, be-
 
 109 
 
 fore a cargo could be imported, impose a tax upon the 
 people to that amount, three-fourths of which might as 
 well have been thrown into the sea or the fire. Hence 
 it is clear, that the evil would consist, not in our im- 
 posing a tax upon foreign corn, but in our having any 
 demand for it whatever. To have no demand for it is 
 the only way in which we could avoid Mr M'Cul- 
 loch's tax; and, as the sale we have for our manufac- 
 tures gives rise to this demand, our shortest way would 
 be, to prevent such sale, by throwing them into the sea 
 or the fire. This would strike at the root of the evil, 
 and be as legitimate a remedy as we could adopt. 
 
 The true way to ascertain the correctness of any 
 principle is, to examine to what it leads; and, if Mr 
 M'Culloch's views were correct, to put, in some way, 
 a check, if not an end, to the sale of our manufactures 
 abroad, would be our best policy. But this conse- 
 quence of the truth of his doctrine we are persuaded 
 Mr M'Culloch is not prepared to recommend.
 
 110 
 
 SECTION VIII. 
 
 OiV the Corn Bill of 1827. 
 
 The corn bill of 1827, the particulars of which are 
 given in the first section, (page 13,) thoroughly satis- 
 fied neither the agriculturists on the one hand, nor the 
 advocates of a free corn trade on the other. The latter 
 thought it gave too much protection to agriculture; 
 while the other did not think it would give the protec- 
 tion it proposed. We hope, however, that the prin- 
 ciples we have endeavoured to establish in the foregoing 
 sections, will help to remove the objections of both 
 parties. 
 
 The advocates of a free trade in corn will find, that 
 it would not produce the results they have been led to 
 expect from it. While, on the other hand, the agri- 
 culturists will perceive, they have no reason to appre- 
 hend that any accumulation of foreign corn which could 
 take place in our warehouses, would injure them; that 
 there is no truth whatever in the principle, that a small 
 excess or deficiency in the supply of corn would have 
 a great effect upon the price of it; and that, upon the 
 whole, the views and fears which led them to oppose 
 the bill, were not well founded. 
 
 Having, therefore, proved that the objections to the 
 bill, both by the agricultural and the free trade party, 
 are groundless, we will next endeavour to determine 
 the principles by which it ought to be adjudged, and 
 how far it is perfect or imperfect, according to these 
 principles. 
 
 The Price at isohich Foreign Corn is allowed to be im-
 
 Ill 
 
 'ported, fires the Value of Money, and adjusts the Con- 
 tracts of Society. — In the first place then it must be re- 
 membered, that the price of corn is determined by the 
 value of money, and that corn laws are the means of 
 regulating its value ; — that they keep foreign corn out, 
 until the extra foreign demand for our manufactures 
 has brought money in, sufficient to depreciate it to the 
 extent, and raise prices to the level required. 
 
 Now the transactions and contracts of society, though 
 expressed in money, are in reality contracts for the re- 
 ceipt and payment of commodities. Bank notes are 
 nothing but paper, and gold in itself is of less real value 
 than iron. It is the amount of commodities which the 
 money will purchase, that is received and paid, when a 
 payment in money is made by one person to another. 
 Hence, if a person lends money to-day, which will pur- 
 chase a given quantity of commodities, and receives 
 back money at a future period, which will purchase 
 only half the quantity, though the amount of money 
 may be the same, he in reality has only received half 
 of what he lent, and vice versa. 
 
 This is always the effect produced by an alteration 
 in the value of money. The presumption, in all con- 
 tracts for the payment of money, at a future period, is, 
 that its value is stationary — that it will purchase the same 
 amount of commodities at one time as at another; and 
 when a change in its value takes place, every such con- 
 tract is altered, and one party is benefitted at the ex- 
 pence of the other. 
 
 When, for instance, the value of it is depreciated, 
 and the value of corn and all things rise, every one, 
 whose properly consists in money, loses a portion of 
 it, which some other party gains. Every person, whose 
 property is in money, if he have not hoarded, must
 
 112 
 
 have it lent out in some way; and if a person, we shall 
 say, have money lent on the mortgage of land, and the 
 interest be equal to half the income from it, the mort- 
 gagee is entitled, so long as the rate of interest is not 
 diminished, and the amount of produce not increased, 
 to half what the estate yields, or to money which will 
 purchase other commodities equivalent thereto. But 
 were corn to rise fifty per cent., he would get only a 
 third of the produce of the estate, instead of one-half. 
 He would receive his interest, and his principal, if the 
 mortgage were then paid off, in money, one-half less 
 in value than that which he lent; and his means of liv- 
 ing would be proportionately reduced. The effect 
 would have been the same, had the money been lent 
 on houses or buildings. The increased price of labour 
 and produce would affect the price of all building ma- 
 terials, except in as far as they consisted of foreign 
 commodities, the cost of house building would be 
 thereby increased, and with it the value of house pro- 
 perty. The same with money in the funds. The price 
 of all things, and the monied income of the country 
 rising, the taxes would be paid with a smaller amount 
 of labour and commodities, and the creditors of go- 
 vernment, though they received the same amount in 
 money, would receive so much less in money's worth, 
 namely, the power of living, or of purchasing labour 
 and commodities. If a landlord, also, instead of having 
 to pay a fixed interest, had to receive a fixed rent for a 
 given number of years, he would be injured, while his 
 tenant would be benefitted ; and vice versa. 
 
 A rise in price, therefore, benefits all who owe, and 
 have contracted to pay money ; while, on the other 
 hand, a fall in price benefits all who have to receive it. 
 But whether it be a rise or a fall in price, it is as far as
 
 113 
 
 regards the value of home produce, of which three- 
 fourths of consumption consists, merely taking from 
 one party to give to another, not according to their 
 •contracts, but in violation of them. It is an alteration 
 produced, not by any alteration in the state of the sup- 
 ply and demand for commodities, but by a change in 
 the quantity and value of money in circulation. 
 
 It is clear, therefore, that when we fix a particular 
 price at which corn shall be allowed to be imported, 
 we fix the value of money, and settle the terms for pay- 
 ment in commodities, or money's worth, of all existing 
 contracts. 
 
 The contracts also thus settled, it is obvious, ought 
 never to have been disturbed ; and it is clearly desire- 
 able, that when the price is once fixed, it should be 
 subject to as little alteration as possible. The law 
 ought not to allow one person to be benefitted at the 
 expence of another, as far as it can be prevented. The 
 average prices, therefore, ought to be kept stationary. 
 
 Hence, these are the two chief points for considera- 
 tion, in the proposed, or any other corn law, namely : 
 first, the price of corn, and value of money, at which 
 importation shall be allowed ; and next, the tendency 
 of the law to preserve such price after it is fixed. 
 
 Before these, all other considerations are of trifling 
 importance. The first is to do justice between man 
 and man, and the last to prevent injustice being done. 
 The one adjusts the balance, and the other preserves it 
 after it is adjusted. The landlords have no right, un- 
 der the plea of getting our foreign luxuries cheaper, or 
 on any other plea, to obtain a rise in prices, which 
 shall enable them to rob their creditors ; while those 
 whose property is in money, have no right, under a 
 plea of benefitting the poor, in which there is no foun- 
 
 p
 
 114 
 
 dation, to obtain a fall in prices, by which to rob their 
 debtors. The balance, if possible, between those par- 
 ties, should be evenly struck, and steadily preserved. 
 
 Sixty Shillings, Winchester, or 62s. Imperial Measure, 
 a proper Average Price, according to the Rule •which a 
 Nation ought to observe injixing such an Average. — The 
 first point, therefore, which we have to consider, is the 
 price at which this balance is proposed to be struck, 
 namely, 60s. per quarter Winchester measure, or 62s. 
 imperial. The provisions of the proposed bill, it is ex- 
 pected, are contrived so as to preserve this price; and, 
 after first considering the price, we shall next examine 
 how far these provisions are calculated to maintain it. 
 
 Now, in settling the contracts of society, the same 
 rule cannot exactly be observed that would be by a 
 court of justice. If a person were to come into the 
 possession of an estate, and to keep it for twenty or thirty 
 years, and some other person were to discover that he 
 had a legal claim to it, the law would turn out the 
 possessor, were he to starve, and give it to the legal 
 claimant, though he could do just as well without it. 
 Had the party dispossessed of the estate never had it, 
 or expected to have it, he would have learnt to live by 
 some other means, and no harm would have been done 
 him. But this the law would not consider. It would 
 presume, however erroneously, that he had got posses- 
 sion of it wrongfully — that he ought not to have kept 
 possession, and would turn him out, without mercy. 
 
 But this a government could not do. A change of 
 property which has been sanctioned by law for twenty 
 or thirty years, must be sanctioned for ever. The 
 habits of the parties have become accommodated to the 
 existing order of things, and could not be disturbed with- 
 out great sufferings to one party, which would not be
 
 115 
 
 at all compensated for by any addition of happiness to 
 the other. Even in the case of the French nobility 
 who were robbed of their property during the re- 
 volution, no one for a moment ever thought, that on 
 their return to France after a lapse of twenty years, it 
 would be proper to put them in possession of their 
 estates again ; not even though the original purchase 
 money should be restored to the present possessors, and 
 notwithstanding the great majority of these were fully 
 aware, at the time they bought the property, that they 
 were joining in, and giving effect to a robbery. The 
 affair had been too long gone past to be reconsidered, 
 and they received the compensation which was made 
 them out of the public purse, and at the expence of all. 
 
 Much less would it be proper to make any material 
 alteration in the value of money after so long a period 
 had elapsed. There can be little doubt, that of the 
 existing contracts of society, the majority of them have 
 been entered into within the last ten years; and any 
 change from a state of prices within that period to a 
 state of prices beyond it, would do as much injustice to 
 one part of society as it would do justice to another, 
 independent of disturbing the settled order of things. 
 
 Ten years, therefore, is as far back as we can go with 
 any propriety in order to fix a scale of prices at which 
 the contracts of society shall be adjusted. 
 
 Now, if we estimate the average prices for that time, 
 taking in the present year 1827, by which we avoid the 
 year 1817, which, as it was a year of scarcity, should be 
 kept out of any estimate, with a view to obtain average 
 prices depending upon what we have termed the posi- 
 tive value of money, we shall find the average so nearly 
 60s. Winchester measure, as to make no matter. 
 
 p 2
 
 116 
 
 1818, 
 
 
 83s. Winchester measure 
 
 1819, 
 
 
 72s. 
 
 1820, 
 
 
 65s. 
 
 1821, 
 
 
 54s. 
 
 1822, 
 
 
 43s. 
 
 1823, 
 
 
 51s. 
 
 1824, 
 
 
 62s. 
 
 1825, 
 
 
 66s. 
 
 1826, 
 
 
 57s. 
 
 1827, 
 
 say 
 
 52s. 
 
 Average 60s. 6d. 
 
 Going, therefore, as far back as it seems proper for 
 a nation to go in obtaining an average price, the one 
 chosen appears to be a proper one. 
 
 Hoiu the different Classes have been affected by the 
 change of Times. — The ten previous years, however, 
 give an average of 89s., which is nearly 50 per cent, 
 higher than that proposed, and the ten years again 
 preceding, leaving out 1800, which was a year of 
 scarcity, give an average of 71s. There are, of course, 
 contracts now in existence which were made in both 
 those periods. Those made in the period last men- 
 tioned, must be comparatively few, and the difference 
 between 60s. and 71s. is not so material. But it may 
 be well to enquire, how those parties are likely to be 
 affected, who mortgaged their property and came un- 
 der pecuniai'y engagements, in the ten years succeed- 
 ing, when corn averaged 89s. ; as well as what effect 
 the change of times, from that period to this, has pro- 
 duced generally upon all classes of persons. Should 
 there be any whose case is a hard one, if it cannot be 
 remedied, it is very proper it be understood, when
 
 117 
 
 a law is to be made, which will affect the property of 
 all. 
 
 It must previously be observed, that in 1810, 1811, 
 1812, and 1813, when the prices were the highest, 
 the public had become aware that the currency, to a 
 certain extent, at least, was depreciated, and that these 
 high prices would only be temporary. The average 
 without these years was only 76s., and 80s. is perhaps the 
 highest average that prices were expected to continue 
 at. Indeed, it was proved in 1814, that 80s. was to 
 the farmers then, what 60s. is considered now, namely, 
 a remunerating price at the then rent of land, and cost 
 of labour; and 80s. was in consequence fixed upon as 
 the import or protecting price. We should, therefore, 
 take 80s. rather than 89s. as the average of the ten 
 years in question. 
 
 It must also be remembered, that not only was labour 
 and every thing depending upon the price of corn, 
 high in proportion, when prices averaged 80s. or 89s., 
 but the taxes, and what had a still greater effect, the 
 profits of trade, were much higher at that period than 
 at present. These have been reduced from causes in- 
 dependent of* the alteration which has taken place in the 
 value of money. The taxes have been taken off in 
 consequence of the reduced expenditure of government ; 
 while the profits of trade have fallen in consequence of 
 the superabundance of capital which cannot find vent in 
 loans to government, as it did during the war. More 
 is, in consequence, employed in all trades than is 
 wanted ; profits are thereby reduced to the lowest ebb, 
 and the cost of commodities in proportion. 
 
 It makes no difference to the possessor of income 
 whether the cost of living be enhanced by taxes or 
 profits. The burthen of profits is as heavy to bear as
 
 118 
 
 the burthen of taxes; and a reduction in the one is as 
 good to him as a reduction in the other. 
 
 It must, however, be observed, that the reduction of 
 taxation has been, in a great degree, neutralized by the 
 effect of the alteration in the value of money upon the 
 taxes which remain ; and, in mentioning the repeal of 
 the taxes, we do it chiefly for the purpose of illustration. 
 Though the taxes were much higher in figures during 
 the war than at present, they were probably not much 
 higher in fact. 
 
 If we assume that money has increased 25 per cent, 
 in value, fifty millions, about the present amount of 
 taxation, will purchase as much of labour and commo- 
 dities as sixty-six, or say, sixty-seven millions, would 
 have done before the alteration took place. The amount 
 of taxes repealed, on the other hand, is about twenty 
 millions ; so that taxation is, in fact, not much dimi- 
 nished. Without, therefore, descending to nice calcu- 
 lations, we may set the repeal of the taxes, against the 
 enhanced value of money in which the existing taxes 
 are paid ; and, while we consider that the taxes repeal- 
 ed have not diminished, we must also remember that 
 the altered value of money has not increased the cost 
 of living and burthens of the state. 
 
 The profits of trade, however, have been diminished 
 one-half at least; and as they form such an important 
 item in the cost of all commodities, it is important to 
 keep in mind how greatly this has added to the cheap- 
 ness of living, over and above the alteration in the 
 value of money. 
 
 In considering how persons have been affected by 
 the alteration in the value of money, and state of 
 things, since the war, we must divide them into classes;
 
 119 
 
 for different classes hve been affected differently ; and 
 we will commence with the landlords. 
 
 How the Landlords have been affected. — Now, the 
 first point to ascertain is, what difference has the change 
 made in their rents. This is a practical question, 
 better answered by a reference to facts than to 
 theories. We have enquired on the subject, and be- 
 lieve we shall not be wrong in stating, that ten or 
 fifteen per cent, on the average of the kingdom, is the 
 full amount of reduction that has been made, or will 
 be necessary, with prices at the average of 60s. per 
 quarter. The reduction to be in proportion to the 
 change in the value of money, from the average of 80s. 
 to the average of 60s. ought, of course, to be 25 per 
 cent. But a considerable improvement has taken place 
 in agriculture in the last ten or fifteen years; and, from 
 the fall likewise in the rate of profits, the farmer will 
 give a higher rent now, in proportion to the value of 
 money, than he did before. 
 
 It must be remembered also, that the interest of mo- 
 ney has fallen, in some cases, from five to four, and in 
 others to 4>\ per cent. Hence we easily come at a land- 
 lord's situation. If he borrowed money at 5 per cent, 
 previous to 1817, has reduced his rents, say 15 per 
 cent., and obtains money now at 4< per cent., which is 
 reducing the amount of interest he has to pay 20 per 
 cent., he is 5 per cent., upon the amount of interest he 
 pays, better off than before. If he has to give 4| per 
 cent., which reduces the amount of interest he has to 
 pay only 10 per cent., he is 5 per cent, worse off on 
 the amount of interest he has to pay. But as regards 
 the surplus income from his estate, after paying the in- 
 terest, he is in an infinitely better situation. In the 
 purchase of labour, and the necessaries of life, it will
 
 120 
 
 go 25 per cent, further at least, and in many manufac- 
 tured commodities, it will go twice as far. Hence, a 
 landlord, though he should have contracted debts pre- 
 vious to 1817, will, with prices at 60s., be in a better 
 situation than he was, even should the interest he pays 
 not be reduced at all. 
 
 We must of course presume that his debts do not 
 exceed one-half, or one-third of the value of his estates. 
 There is no meeting the case of those whose estates 
 are mortgaged to their full value, and who have no in- 
 terest in them but the name. These should not conti- 
 nue to hold them. They are speculators in land with- 
 out capital, and may be ruined by the turn of a straw. 
 
 But very few landlords are in this situation. If 
 the debts and burthens upon their estates amount to 
 one third or one-half, it is the utmost ; and where they 
 do not exceed one-half, we should be disposed to say 
 that the landlord would be in a much better situation 
 now, with prices at 60s., than during the war, notwith- 
 standing the high range of prices of that period. 
 
 How the Farmers have been affected. — The next class 
 we have to consider are the farmers or occupiers of 
 land. These, it is generally admitted, could continue 
 to pay their present rents, with prices at the average of 
 60s. but not under. With 60s. therefore, they would 
 be content. But at that price they will have nothing 
 to spare ; and it is important to them, not only that the 
 law should fix that rate for the purpose of regulating 
 importation, but that the price, when fixed, should be 
 secured to them. It may be said, indeed, that it makes 
 no difference to the farmer, what may be the average 
 price. No more it does as a general principle. But it is 
 very important to the farmers, that they should not be 
 compelled to pay a higher rent than they have con-
 
 121 
 
 traded to pay. Their present contracts have reference 
 to a value of money corresponding to 60s. at least, which 
 they will be obliged to pay as long as they have the 
 power. Even where a farmer takes a farm without a 
 lease, if the landlord will not reduce his rent when a 
 fall in prices occurs, he, four times out of five, stays up- 
 on the farm until he is ruined. Ke generally has a fa- 
 mily, is fit for no other occupation, and his capital will 
 not support him without the aid of his industry. To 
 be without a farm is therefore ruin, and to take one 
 that another tenant could not live upon, is no better. 
 Hence there is no alternative but for him to stay where 
 he is, and trust to the mercy of his landlord. This, no 
 doubt, often is, but is not always, a safe dependence. 
 It is not the best farmers who are ruined first ; and 
 the landlord is too apt to attribute the farmer's ruin to 
 his bad management, rather than to that change in the 
 value of money by which he has got more than his due, 
 and to be proportionably hard with him. 
 
 The landlords, in general, are slow in raising their 
 rents, and slow in reducing them. There are no con- 
 tracts which ought to be less disturbed than those 
 between landlord and tenant ; while to alter them 
 against the tenant is not only injustice, but cruelty. It 
 is also injurious to the nation. By destroying farming 
 capital, it checks cultivation, and prevents improvement; 
 it diminishes the income of the country, reduces the 
 demand for labour in all employments, and injures the 
 revenue. Agriculture is the basis of national wealth, 
 and the means of general comfort. To injure it by 
 ruining the farmer is quite as impolitic, as it is unfair, 
 and severe upon the individual. The tenant, how- 
 ever, can pay his rent at 60s., and so far as the corn 
 laws can do so, it is proposed to secure him that price. 
 
 -2
 
 122 
 
 How the Owners of Houses and such Property have 
 been affected. — The third class we shall notice are the 
 owners of houses and property raised by the expenditure 
 of capital. These are in a much worse situation. The 
 alteration in the value of money has diminished the cost 
 of building, and the value of such property on the one 
 hand, while the superabundance of capital has reduced 
 the rate per cent, which it yields on the other. Houses 
 not only cost less building, but people are willing to 
 take less per cent, for their money in the shape of rent 
 after they are built. Those, therefore, who borrowed 
 money upon house property twelve or fifteen years ago 
 will find themselves much worse off from the change of 
 times. If their rents have not yet fallen, they will be 
 certain to do so, while they will probably have to con- 
 tinue to pay 5 per cent, as before. The rate of interest 
 on the security of house property has not fallen as it 
 has on the security of land. 
 
 How People in Trade, Annuitants, and People with 
 Jixed Salaries, have been affected. — All those who live by 
 the profits of trade are in a much worse situation than 
 before. Their income, upon the aggregate, is reduced 
 one half. Those who have most benefitted by the 
 change, are the fundholders, annuitants, people with 
 fixed salaries, and mortgagees, who obtain the same 
 rate of interest as they did. These can live much 
 better. But these as a class are composed chiefly of 
 people of small incomes, widows, children, unmarried 
 daughters, and people of limited means. The rich who 
 have money in the funds have generally more of other 
 property. The number of great capitalists who have 
 their property chiefly in the funds, is comparatively 
 few. The great mass of funded property is held by the 
 class above-mentioned. The same with annuities pay- 

 
 123 
 
 able out of private property, &c. Now, if there is any 
 class we should least grudge benefitting by a change in 
 the value of money, it is this. The monied men in the 
 city, who have no land, are no doubt of this class, but 
 they do not form a drop in the hogshead it is com- 
 posed of. 
 
 From a Review of the Situation of all Parties, 60s., 
 Winchester Measure, appears to be a fair Average. — 
 Thus it briefly appears that the change in times has 
 produced the following effect: — 
 
 1st. Landlords, who are in debt, have lost by the 
 alteration in the value of money ; but they have gained 
 by the fall in interest ; they have gained by improve- 
 ments in cultivation ; they have gained by the diminish- 
 ed profits on farming capital, and they have gained in 
 the diminished cost of living; so that all things consi- 
 dered, they will, with prices at 60s., be better off than 
 before ; and those who are not in debt will, of course, 
 be infinitely better off. 
 
 2nd. The farmers, with prices at 60s., will be worse 
 off upon the whole, but more as capitalists than as far- 
 mers. They will obtain less profits, not because prices 
 have been reduced, but because a general reduction 
 has taken place in the profits of capital. If better pro- 
 fits could be obtained in other trades, there would be 
 fewer farmers, not such competition for farms, such 
 high rents would not be given, and more would be 
 made by farming, by those at least who did not take 
 their farms ten or fifteen years ago, but have taken 
 them within the last eight or ten years. 
 
 3rd. The owners of houses, and all property raised 
 by the expenditure of capital, previous to 1817, are 
 worse off by the alteration in the value of money, if in 
 debt; if not, it makes no difference to them. But they 
 
 2 2
 
 124< 
 
 are worse off by the fall, in the profits of capital. 
 Their rents, &c. will, in consequence, be diminished. 
 
 4th. All tradesmen, and people who live by the pro- 
 fits of capital, expressed in money, are worse off; not, 
 however, by the alteration in the value of money — for, 
 by that, they have been benefitted, but by the fall in 
 the rate of profits. 
 
 5th. All annuitants and people of fixed incomes are 
 better off, both from the alteration in the value of mo- 
 ney, and from the fall in profits. 
 
 We have not noticed the labouring classes, for they 
 can neither be affected by an alteration in the value of 
 money or rate of profits. There is a certain income, 
 which will be expended in a demand for labour, who- 
 ever may possess it, and it makes no difference to them 
 in what proportions it may be distributed amongst the 
 classes we have mentioned. If it be not possessed by 
 one class, it will by another; and, whoever has it, must 
 spend it. This is all their concern in the matter, and 
 it is properly taken care of, not by human laws, but by 
 the law of nature. 
 
 Thus, the landlords and the annuitants have chiefly 
 benefitted by the change of times, while the other 
 classes have been injured. But that injury has not re- 
 sulted from the alteration in the value of money so 
 much, as from a reduction in the rate of profits. The 
 change in the value of money indeed must, in a majori- 
 ty of cases, have relieved the injury sustained from the 
 fall in profits, though, in others, it may have aggra- 
 vated it. 
 
 Hence, upon a review of the situation of the different 
 classes, we cannot perceive any reason for wishing to 
 alter the existing average state of prices, which may
 
 125 
 
 be considered to be fairly struck at 60s. Winchester 
 measure. 
 
 A higher Price than 60s. Winchester Measure could not, 
 in all probability, be obtained by Corn Laws, if it were de- 
 sired. — The principal opposition to that price was, how- 
 ever, made by the landlords, though we believe it was 
 only the mode in which they expressed their general 
 hostility to the principle of the bill, from its tendency to 
 promote speculation, as already explained. They only 
 proposed the price to be about 4s. higher, and it can- 
 not be supposed that they contemplated any rise in 
 rents founded upon this trifling difference. Their im- 
 mediate object, therefore, was rather to protect their 
 tenants than to benefit themselves. There is, however, 
 another argument against fixing the protecting price 
 higher than 60s. more conclusive than any we have yet 
 offered ; and that is, that it is not probable that a high- 
 er price can be obtained. 
 
 We cannot maintain any particular price by corn 
 laws, without we have an extra demand for our manu- 
 factures at that level of prices ; and by consequence, 
 without we have a balance of payments in our favour, 
 whenever they are beneath that level. In order, there- 
 fore, to see whether there is a probability of our main- 
 taining 60s. by corn laws, we must examine how the 
 balance of payments has stood when prices were be- 
 neath 60s. — whether it was always at such periods in our 
 favour. 
 
 Now, it appears, that in 1824, when our prices rose 
 above 60s., the balance of payments was turned against 
 us to a considerable extent ; and, at the present time, 
 the balance of payments is against us, after the scale of 
 prices has been for more than two years under 60s. 
 
 It must, however, be considered, that our foreign
 
 trade has lately run all in extremes. We have had 
 either unusually great importations, or importations 
 unusually small ; we have had a great foreign demand 
 for our manufactures, or a trifling demand. The mar- 
 kets, both at home and abroad, have been alternately 
 starved and glutted. This state of things has been 
 produced by the shocks which have been given to con- 
 sumption and demand, by our currency ; for, while our 
 currency is, or ought to be, regulated by our foreign 
 trade, it must also be kept in mind, that our foreign 
 trade is regulated by our currency. The consequence 
 has been, that we have sometimes had the balance ten 
 or twelve millions in our favour, sometimes that amount 
 against us, and continuing either the one way or the 
 other for years together. We have only to reflect, 
 that our foreign trade, in a natural state, consists in an 
 exchange of commodities, without the balance of pay- 
 ments being either for or against us, to see at once 
 how unnatural a state our ti*ade for sometime must 
 have been in. 
 
 In order to ascertain whether the balance of pay- 
 ments has upon the whole been for or against us, it is 
 necessary in consequence of our trade running in these 
 extremes, to take in an average of years ; and if we go 
 back for ten years, we shall find that the balance of 
 payments has been in our favour to a very great extent, 
 while 60s. 6d. has been the average price of that period. 
 
 Now, had the balance of payments not been so much 
 in our favour, the evidence would have been conclusive 
 that we could have maintained 60s. But unfortunately 
 the extent to which the balance has been in our favour, 
 has rendered it improbable that we can count upon the 
 same demand for our manufactures again. It must 
 have lowered the prices on the continent, and in the
 
 127 
 
 countries dealing with us, and diminished their power 
 of purchasing thein. It ha9 impoverished them by re- 
 ducing their scale of prices, though it has failed to in- 
 crease ours. The manufactures of other countries, at 
 the same time have also been improving. This, 
 coupled with the comparatively low state of prices 
 which our draining the continent of its metallic cur- 
 rency has caused, has enabled the continental manufac- 
 turers to compete with us. If we cannot, however, not- 
 withstanding this, manufacture cheaper than they can, 
 we cannot have a demand for our manufactures that 
 will keep the level of our prices at 60s. in spile of any 
 corn laws that we may think proper to enact. 
 
 Hence, we should be disposed to say that the balance 
 of payments being against us at the present moment, 
 is, to say the least of it, a suspicious circumstance; and, 
 though we should not altogether despair of being able 
 to maintain our prices at 60s., yet it seems very im- 
 probable that we should be able to maintain a higher 
 level, supposing it to be proper to fix our prices higher 
 if we could. 
 
 Thus, there are three reasons in favor of 60s., Win- 
 chester measure, being the import price : — 
 
 1st. It is the average of the last ten years, and there- 
 fore may be taken as the existing average to which all 
 things have become accommodated, and which could 
 not be disturbed without doing as much injusiice as it 
 remedied. 
 
 2nd. It is a price, which upon revievving the state of 
 the different classes of society, and the change that has 
 occurred since the war, no one class has any right to 
 complain of. 
 
 3rd. Were we to set aside all considerations of 
 justice and expediency, and be desirous to raise the price
 
 128 
 
 as high as possible, it is the highest price there is any 
 reason to think could be maintained. 
 
 And we may add, as a fourth reason, that it is the 
 price that the great majority of all classes will be satis- 
 fied with. 
 
 Having thus endeavoured to show that the price 
 proposed to be secured by the bill is a proper one, we 
 shall proceed to consider the provisions for securing it. 
 
 No fixed Price could be secured by Prohibition. — 
 Now, it is obvious, that as it is necessary to fix a par- 
 ticular price in order to adjust the contracts of society, 
 this could not be done by prohibition. With prohibition 
 our prices would rise as high as our manufacturing 
 superiority would carry them ; but how far that would 
 be, we have no means of judging; and there is certainly 
 no particular reason to think it would be 62s. imperial 
 measure* more than any other price, at least between 
 52s. and 72s. Neither would the price remain steady, 
 it would probably rise to its highest point, and then 
 afterwards gradually decline as the manufacturing skill 
 of our neighbours improved. Or it might fluctuate. It 
 might rise as any new improvements in machinery gave 
 us the advantage, and then fall again as soon as these 
 improvements were obtained by our neighbours, and 
 the comparative advantage was lost. 
 
 * The different measure may confuse. But in speaking of past prices, 
 we are obliged to speak of Winchester measure, as all past prices are in that 
 measure; whereas, in calculations with regard to present prices, we must 
 refer to imperial measure, as we have given the table in that measure. It 
 would be well if the next committee on the subjects of either corn or cur- 
 rency, would order a new set of tables to be calculated in Imperial mea- 
 sure ; and let the yearly averages be computed from October to September 
 inclusive. At present the effects upon prices of any particular harvest can- 
 not be known with precision, as the yearly averages comprehend two har- 
 vests. They refer to it nine months of the one and three of the other.
 
 129 
 
 Nor yet could a fixed Price be secured by a fixed Duty, 
 — Neither, on the one hand, could we, with any pre- 
 cision, fix a price, by admitting foreign corn at a par- 
 ticular duty : for we neither know the demand we shall 
 have, nor the supply we shall obtain, at any particular 
 price. Corn can be grown, as we have already shewn, 
 at any price. The quantity we can obtain of any na- 
 tion, at a particular price, does not depend upon the 
 cost of producing it, but upon the opposite demand 
 which such nation has for foreign commodities. 
 
 There is indeed a price, below which we could ob- 
 tain no supplies from any nation that had a trade in 
 other commodities. This price, for instance, with Po- 
 land, would correspond with the level at which its ex- 
 ports of hemp, timber, &c. would pay for its imports. 
 At a particular scale of prices, its monied income would 
 be sufficiently low to keep down its demand for foreign 
 commodities to a level with the value of its exports in 
 hemp, timber, &c. ; and below this, its prices would 
 not fall. What this level is, it is impossible to say ; 
 but the probability is, that it is under 20s. per quarter. 
 By an account of the prices of wheat, at different fo- 
 reign ports, in 1826, when a demand for exportation 
 was anticipated, given in the Appendix to the Lords' 
 Report of last session (1827) on the prices of foreign 
 corn, the prices, imperial measure, were as follows : — 
 
 
 s. 
 
 d. 
 
 Memel 
 
 20 
 
 2 Imperial measure. 
 
 Koningsburg 
 
 19 
 
 8 
 
 Dantzic 
 
 21 
 
 6 
 
 Upon this, the calculation of freight and charges to 
 
 R
 
 130 
 
 this country is from 10s. to 12s. per quarter, which we 
 believe, however, is much above the truth. 
 
 Corn has been imported and sold in this country, it 
 is said, at 24-s. per quarter, Winchester measure; in 
 which case, the point of total prohibition, inclusive of 
 freight and charges, is probably not above 22s. impe- 
 rial measure. 
 
 Now, suppose the foreign demand for our manufac- 
 tures would not raise our prices above 62s. imperial 
 measure, we should, of course, have no demand for 
 corn at that price. Hence, a duty which would admit 
 corn when above, and prohibit it when beneath, that 
 price, must be 40s. a quarter. If, in such case, we im- 
 posed a duty of only 30s. we should not keep our prices 
 at 62s. They would fall sufficiently to produce an ex- 
 tra demand for our manufactures, and our demand for 
 corn would rise sufficiently to produce a corresponding 
 supply. The ten shillings would be divided between 
 our prices and the prices in Poland. Our prices would 
 be reduced, say 5s. below 62s., and theirs increased in 
 the same proportion. 
 
 On the other hand, if we were to impose a fixed 
 duty, on the supposition of a very limited demand for 
 foreign corn, and should have a very extensive extra 
 demand for our manufactures, in that case, we should 
 have our scale of prices elevated above its proper level. 
 We might have it probably at 72s. instead of 62s. 
 
 The Bill under present Circumstances founded on right 
 Principles. — In the state of uncertainty we are in with 
 regard to both demand and supply, it is thus evident, 
 that no fixed duty could be named which would keep the 
 level of our prices at 62s. Any duty, or scale of duties, 
 which would have that effect, must necessarily be con- 
 tingent. They must be high, if we have no demand for
 
 
 131 
 
 corn at 62s., moderate, should we have a moderate de- 
 mand, and low, should we have an excessive demand at 
 at that price. 
 
 Now, this is the principle of the proposed bill ; and 
 if ministers are right in their anticipation of a demand 
 for foreign corn at 62s. the bill will have the effect of 
 keeping prices at that level. 
 
 There are three views, however, under which the 
 bill may be examined : namely, under the supposition 
 of an extra demand for our manufactures, which will 
 have a tendency to raise prices above 62s., of a mode- 
 rate extra demand at 62s., and of no extra demand at 
 62s. ; and these we will consider separately. 
 
 The Bill isoill prevent Coin rising in the Event of a great 
 Demand. — Supposing we had such an extra demand 
 for our manufactures, as would raise the price of corn, 
 notwithstanding the average supply, to 67s. or 72s., and 
 by consequence to reduce the duty to 10s. or to nothing ; 
 so that instead of giving the Poles and other nations we 
 dealt with, 30s. or 40s. for their corn, we were to give 
 them 62s. or 72s. we have seen that the almost certain 
 consequence of this would be, not to obtain an increas- 
 ed but a diminished average supply. The supply, how- 
 ever, would be at first considerably enlarged, and for 
 this money would be paid : for it is by payments in 
 money, in the first place, that the average supply comes 
 eventually to be diminished. 
 
 Nor would the immediate supply be obtained 
 from those countries only, from whom we were in the 
 habit of importing corn regularly. If our prices were 
 to rise sufficiently high, we might obtain a supply from 
 France and other countries, although we should not 
 import a bushel from them at any other time, or for 
 payment in any thing but money. Two neighbouring 
 
 r 2
 
 \3^ 
 
 nations who may naturally have no trade in corn, will, 
 for the mere purpose of bringing their respective scales 
 of prices to the level at which the trade must of itself 
 terminate, import and export corn when any inequality 
 in their respective prices shall arise. If we imported 
 nothing from France besides, and the French took no- 
 thing but money in return, we should import corn from 
 them the moment their prices and ours would permit it 
 to be done with profit. Hence we should have a tem- 
 porary supply from other countries for payment in mo- 
 ney, whenever corn (our prices being much above the 
 level of Europe) was admitted at a low duty, or duty 
 free, although our average supplies might be received 
 from the north of Europe alone. 
 
 The effect of this would be, not to extend our trade, 
 but to check it, and keep down our prices at their 
 proper level. The money received in demand for our 
 manufactures would diminish the monied incomes of the 
 consumers in the countries it came from, and with it 
 their power of consuming them ; while, on the other 
 hand, the money exported in payment for the corn, 
 would reduce the price of it with us. The extra de- 
 mand for manufactures would be checked on the one 
 hand, while our demand for corn would be checked on 
 the other, and we should finally have no greater extra 
 demand for our manufactures than we could obtain 
 corn at, or about 62s. to enable us to supply. Thus 
 our prices would be kept at, or near, the proper level ; 
 a consideration paramount to every other. 
 
 The Bill will practically shut the Ports when Corn is 
 below 60s. Imperial Measure, in the Event of a moderate 
 Demand. — Let us next suppose that we had only a 
 moderate extra demand for our manufactures — a de- 
 mand which would have no tendency to exceed the
 
 133 
 
 supply of foreign corn we could obtain at the average 
 of 62s. In this case the prices would sometimes be a 
 little above, and sometimes beneath that price. This is 
 inferred by the term average price. It is not the 
 highest, nor yet the lowest, but the medium price. 
 Having, therefore, assumed the price to average 62s. 
 with an importation of corn, we have on that point, 
 nothing more to say. But let us examine to what 
 extent the fluctuations in price would take place so far 
 as they would be governed by the bill. 
 
 We have shewn, in the first section, page 14, that 
 the prospect of a rise of 20s. on the average of 5 years, 
 would be sufficient to induce speculators to hold corn 
 in bond for that time. This, a rise of 7s., under the 
 proposed bill, would secure. Now, if there were only 
 a moderate demand for corn at 62s., the extra demand 
 for our manufactures, upon which it would be founded, 
 must be sufficient to raise our prices at least 3s. or 4s. 
 above 62s., were importations suspended. This would 
 come to be known by experience, and whenever the 
 average price fell to 59s., making a difference of 21s. 
 to the importer between it and 66s., the foreign corn 
 would not be brought into market : the speculators both 
 at home and abroad would hold ; and practically, at least, 
 our ports would be shut, as it is technically termed. 
 The importer, if he entered his corn for consumption 
 at 59s., would get 33s. for it; if he kept it until prices 
 were at 66s., he would get 54s. No one can for a mo- 
 ment suppose, that with the remotest chance of getting 
 the latter price, he would sell at the former. Hence, 
 prohibition would take place at 59s., if not at a higher 
 price. The probability, indeed, is, that if there were an 
 average demand for any quantity of foreign corn, at 
 62s., very little would, at any time, be entered for con-
 
 134 
 
 sumption under that price. The prospect of a rise of 
 2s. or 3s. per quarter in the price, or from 6s. to 9s. to 
 the importer, would be sufficient to induce him to hold 
 sufficiently long to obtain that rise. 
 
 At all events, we may assume that when the price 
 fell below 60s., imperial measure, the ports would be 
 practically shut; and that the fluctuations, so far as 
 they depended upon the importation of foreign corn, 
 could not exceed 6s. or 7s. per quarter. 
 
 The Bill will not prevent Corn falling below 605., Impe- 
 rial Measure, in the Event of a limited Demand, and for 
 •which a Remedy suggested. — The third supposition is, 
 that we have no extra demand for our manufactures at 
 60s. Winchester, or 62s. Imperial Measure. Now, it 
 is probable that total prohibition would take place at 
 about 55s. or 56s. ; that is to say, if more than 22s. 
 or 25s., Imperial Measure, could not be obtained in 
 this country, corn would not be imported. But it is 
 not improbable that corn might be imported at 57s. or 
 58s. Imperial, sufficient to keep our prices down at 
 that level, although, with total prohibition, prices might 
 be raised to the level of 62s. ; 58s. would leave 30s. to 
 the importer, and there can be little doubt that a regu- 
 lar supply might be had at that price. 
 
 Hence, the bill will be more effectual in keeping 
 prices down to 62s. in the event of an excessive demand, 
 than in keeping them up at 62s. in the event of there being 
 no demand, or only a very limited demand for foreign 
 corn at that price ; and in so far it will not fully ac- 
 complish the object it proposes. The bill is founded 
 upon the assumption of a demand for foreign corn at 
 62s. imperial measure. In which case, the ports would 
 practically close when prices were more than 2s. be- 
 neath that level ; and, in order to make the bill, under
 
 135 
 
 all circumstances, precisely what it is intended it should 
 be, it will be necessary to introduce a clause to the 
 effect, that the ports shall be shut by law, when prices 
 fall below 60s. imperial measure. 
 
 This is the more necessary, when we consider that 
 we shall probably have a trade in corn at whatever 
 price we chuse to receive it. We have all along 
 reasoned upon the supposition, that our supply of corn 
 would be preceded by an extra demand for our manu- 
 factures. Whereas the probability is, that the supply 
 of corn will precede and give rise to the extra demand 
 for our manufactures ; and in this case, it will probably 
 not come at one shilling higher than the lowest price 
 at which we shall chuse to receive it. We shall say, 
 for instance, that it is imported, and sold at 58s., impe- 
 rial measure, which would leave 30s. to the importer, a 
 price which, in 1826, we have little doubt would have 
 paid him very well ; that a quantity equal in value of 
 foreign commodities be taken in return ; and that this 
 gives rise to a corresponding demand for our manufac- 
 tures. Now, we may easily see, that the trade in this 
 way, may increase to a great extent at any given price, 
 without reducing that price ; but it can never raise it, 
 inasmuch as the demand for our manufactures will take 
 place at the price at which the corn sells. 
 
 It must also be kept in mind, that the greater the 
 demand the Poles have for foreign commodities, the 
 cheaper their corn will be. If they were to send us this 
 year a million of corn, and have a demand for a million 
 and a half of colonial produce, &c. the balance of pay- 
 ments would be against them half a million. This sum 
 they would have to pay in money, and against next 
 year their prices would be lower. As there is a grow- 
 ing taste for foreign luxuries and comforts in the north
 
 136 
 
 of Europe, it may therefore be expected, that their 
 prices will have a tendency to fall, unless met by a cor- 
 responding foreign demand for our manufactures, and 
 consequently increased demand for corn on our part. 
 
 As it seems, therefore, within the bounds, at least, of 
 possibility, that the bill, as it now stands, may not be 
 effectual under every supposition, in keeping prices at 
 or near sixty-two, Imperial measure, it seems proper 
 to amend it in that respect. 
 
 The foregoing observations with regard to the opera- 
 tion and effect of the bill on the price of corn, presume 
 that our trade is nicely balanced, and our currency 
 rightly governed, neither of which is the case. Our 
 prices ought to be regulated by our foreign trade, but 
 they seldom are; and with our present system of bank- 
 ing and currency, will be subject to great fluctuations 
 in spite of any corn laws that can be framed. 
 
 Nor would it be proper to consider this or any other 
 bill perfect. We cannot pass a corn law at present that 
 will not be subject to revisal as our knowledge and ex- 
 perience increase. All that can be said of it is, that it 
 appears the best which, in the present situation of cir- 
 cumstances, has been devised.
 
 137 
 
 SECTION IX. 
 
 On our Systems of Banking and Currency. 
 
 The Corn Bill can only affect Prices, in as far as by 
 Means of the Balance of Payments it affects the Issues 
 of the Country Banks. — With every nation, but parti- 
 cularly with a great commercial nation like this, where 
 the transactions of society expressed in money are so 
 numerous and complicated, an unchangeable value of 
 money and steady prices, are, as we have before men- 
 tioned, more important than any oilier consideration. 
 
 So far as the corn bill goes, it will have the effect of 
 producing steady prices ; but we have stated that our 
 prices will fluctuate in spite of the corn bill; and it will 
 be proper to make a few observations on those causes, 
 by which it will thus, to a certain extent, at least, be 
 rendered of no effect. 
 
 The corn bill can only regulate the price of corn, by 
 regulating the quantity and value of the money in cir- 
 culation, — by keeping out corn, until there is a suffi- 
 cient quantity of money in the country to raise prices 
 to the level required ; and when they are too high, by 
 letting it in, in sufficient quantities to take off the sur- 
 plus currency, and reduce prices to their proper level 
 again. But the circulation by which the price of corn 
 is regulated with us, as we explained in section 2nd, 
 consists of the notes of the country bankers. The corn 
 bill, therefore, can only regulate prices, in as far as the 
 money which comes into or goes out of the country, 
 produces a corresponding enlargement and contraction 
 of their issues. Should their issues enlarge and con- 
 
 s
 
 138 
 
 tract, independent of, and unconnected with, the ba- 
 lance of payments, to the extent that this independent 
 action takes place, the corn bill can have no effect 
 whatever in preventing our prices from fluctuating. 
 
 The proper Amount of Paper in Circulation is 
 such an Amount as "will preserve Prices at the level at 
 which our Foreign Trade will balance. — It, indeed, has 
 always been assumed that the banks correctly supply the 
 country with the proper amount of currency. If this 
 were the case, the amount of their notes current would, 
 at all times, be equal to the sum of metallic money which 
 would be in circulation, were there no bank notes. A 
 nation within itself has no occasion for one particular 
 quantity of money more than another. It is of no 
 importance to it whether corn be a penny, or a pound 
 a bushel, whether gold be the value of copper, or 
 copper the value of gold. The relative value of all 
 things would be as well preserved at one scale of prices 
 as at another. It is only with reference to the adjust- 
 ment of its foreign trade that a particular quantity of 
 money in circulation and scale of prices, can be requisite. 
 This quantity must be sufficient to keep prices at the 
 level at which its foreign trade will balance in commo- 
 dities. Had we no bank notes, this quantity would, of 
 course, be the sum of metallic money current; and if our 
 banks correctly supply the country with the currency 
 proper for it, the sum in circulation will always be equal 
 to this quantity. 
 
 The Balance of Payments the Rule by which to know 
 whether our Circulation be deficient, or redundant. — Now, 
 with a metallic currency, were the prices too high, the 
 balance of payments would be against us, and they 
 would fall in consequence; were prices too low, the 
 balance would be in our favor, and they would, in con-
 
 139 
 
 sequence, rise. It would only be by means of the 
 balance of payments that we could know whether the 
 currency was redundant, or deficient ; and if our paper 
 currency is as perfect as has been supposed, it will, of 
 course, follow, that with a balance of payments in our 
 favor, it will enlarge, and our prices rise ; that with a 
 balance against us, it will contract, and our prices fall ; 
 and that when the balance is neither for nor against us, 
 the amount in circulation will be stationary and prices 
 steady. This is an infallible test by which to know 
 whether the banks supply the country at all times with 
 a proper amount of money or not ; and by which also, 
 we shall know, whether the corn bill would have the 
 effect expected from it in keeping prices steady. 
 
 The Balance of Payments since the War, proves that 
 the Amount of our Currency is not regulated by our 
 Foreign Trade. — Let us, therefore, examine how far our 
 currency is perfect, or imperfect, according to this test, 
 commencing with the end of the war, when our trade 
 was thrown open to the world at large. 
 
 The following gives the annual demand for stamps by 
 the country bankers, and average prices of wheal, from 
 vear 1813 : — 
 
 1813, 
 
 ^12,615,509 Wh 
 
 leat 106 s. 
 
 1814, 
 
 10,773,375 
 
 72s. 
 
 1815, 
 
 7,624,949 
 
 63s. 
 
 1816, 
 
 6,423,466 
 
 76s. 
 
 1817, 
 
 9,075,958 
 
 94s. 
 
 1818, 
 
 12,316,868 
 
 83s. 
 
 1819, 
 
 5,640,313 
 
 72s. 
 
 1820, 
 
 3,574,894 
 
 65s. 
 
 1821, 
 
 3,987,582 
 
 54s. 
 
 1822, 
 
 4,217,341 
 
 43s 
 
 1823, 
 
 4,657,589 
 S 2 
 
 51s
 
 140 
 
 1824, .£6,093,367 Wheat 62s. 
 
 1825, 8,532,438 66s. 
 
 In 1826, the further issue of stamps for one pound 
 notes to the country bankers was suspended. This, 
 together with the effects of the panic, in substituting 
 bank of England paper and gold for their notes, has 
 destroyed, in some measure, the value of the late 
 returns, as means of ascertaining correctly, the progress 
 of their issues. But there can be no doubt, that the 
 circulation generally, has been materially reduced. 
 
 Now, by this table it appears, that our currency be- 
 gan to contract and prices to fall in 1814. The fall, 
 indeed, which occurred, was out of proportion with 
 the amount of reduction in the circulation ; but there 
 would have been a fall without any contraction of the 
 currency, from the sudden enlargement of our commer- 
 cial transactions, which would render it impossible for 
 the same amount of money to keep up the same scale of 
 prices. The question, however, at present is, not what 
 fall any contraction in the currency did produce, but 
 whether the contractions or extensions which did take 
 place, were produced by our foreign trade or not. 
 
 Now, had this contraction been produced by our fo- 
 reign trade, it must have been the result of a balance of 
 payments against us — of a quantity of money actually 
 sent out of the country, and this did not and could not 
 at that time have occurred. The banks were not then 
 compelled to pay their notes in gold, and there was no 
 gold whatever in circulation, and none to be obtained 
 for the purpose of sending out of the country. The 
 contraction was consequently produced by some cause 
 quite unconnected with our foreign trade. 
 
 Besides this, the contraction appears to have gone on 
 until 1816. By the report on cash payments, however,
 
 141 
 
 in 1819, we are informed that the balance of payments 
 became favourable, and money began to flow into the 
 country in July, 1815. From and after this time con- 
 sequently prices would have risen, had the previous fall 
 been at all produced by our foreign trade. 
 
 By the same report, it appears that the balance turn- 
 ed against us in October, 1817, and continued against 
 us until the commencement of 1819. Notwithstanding 
 which, it appears that in 1818, the issues of the banks 
 materially increased. 
 
 In 1819 the balance turned again in our favour, and 
 continued so until 1824, in which time it is understood 
 that we received in gold and silver between twenty and 
 thirty millions, an amount almost incredible ; yet our 
 currency continued to contract the principal part of that 
 time to an extent never before known. 
 
 In 1824, however, the balance turned against us, and 
 continued against us to a great extent until the latter 
 end of 1825. Notwithstanding this, our currency in 
 both these years was very much enlarged. 
 
 After that the balance became favourable, and has 
 continued so until lately, although it is evident that our 
 currency must have contracted. 
 
 We thus have the clearest possible evidence, that 
 our paper currency does not faithfully represent a me- 
 tallic currency; that it is increased and diminished by 
 the influence of causes that would not effect such a 
 currency ; that it increases when a metallic currency 
 would decrease, and decreases when a metallic cur- 
 rency would increase ; and that it is not regulated by, 
 or with reference to our foreign trade: the only means 
 of determining the amount of money which a nation 
 requires, when no particular scale of prices is fixed 
 upon.
 
 112 
 
 The Balance of Payments since the War, the Effect 
 as well as Proof of Derangements in the Currency. — In- 
 deed, it is pretty evident that these balances of pay- 
 ments were not the cause, but the effect of the fluctu- 
 ations in the currency. Our foreign trade will balance 
 at only a particular level of prices; and, when they 
 fall below that level, the natural effect is to produce a 
 balance of payments in our favour ; when they rise 
 above it, to produce a balance against us. When 
 the balance of payments therefore became favour- 
 able, in 1815, it was a proof that the previous con- 
 traction of the currency had been too great. On 
 the other hand, in 1818, the balance against us was a 
 proof that our prices were too high, whether resulting 
 from the enlargement of the circulation, or from throw- 
 ing open our ports to the admission of foreign corn, 
 duty free ; and the immense sums of money we receiv- 
 ed during the great fall in prices which followed, 
 proved that fall, beyond all question, to have been 
 most unnatural and improper ; and so with every suc- 
 ceeding balance for and against us that we have since 
 had. 
 
 A balance of payments in our. favour, naturally and 
 legitimately arising, would always precede and produce 
 a rise in prices : and, a balance against us, would al- 
 ways be succeeded by a fall. When this is not the 
 case — when a balance of payments in our favour is 
 preceded and followed by a fall in prices, it is as clear 
 a proof of derangement in the currency as can be given. 
 When, likewise, a balance of payments against us is 
 preceded and followed by a rise in price, the proof of 
 derangement in the currency is equally conclusive. 
 
 The Balance of Payments, but for the Influence of 
 other Causes, would have a greater Effect upon our Paper
 
 143 
 
 than upon a Metallic Currency. — We do not, however, 
 mean to infer, that a balance of payments has no effect 
 upon our currency. It would have a greater effect up- 
 on it than upon a metallic currency, were it not for 
 the superior and over-ruling effect of other causes. 
 
 Money, which comes into the country, is imported, 
 in payment for our manufactures exported, the basis of 
 which consists in agricultural produce, represented by 
 labour and the profits of capital. Hence, the money is 
 due to, and is received by the nation at large. But 
 gold has hitherto, with the exception of one county, 
 not circulated out of London ; and is either imported 
 direct into London, or is sent thither after being receiv- 
 ed in other parts of the kingdom. The person, however, 
 to whom the money is ultimately due in the country, does 
 not want the money in London — he wants it in the 
 country. If, therefore, it be imported into London on 
 his account, he draws upon his correspondent in Lon- 
 don to whom it is consigned, for the amount of it. 
 This bill he discounts with the country banker, who 
 gives him his notes for it. These notes are, to him, 
 the same as the gold would be ; while the country cir- 
 culation, in as far as not counteracted by other causes, 
 is as much increased as if the gold had itself been cir- 
 culated in the country. The correspondent in London, 
 on the other hand, to whom the gold would be con- 
 signed, would pay the bill drawn upon him for the 
 amount of it, with the gold itself, or the proceeds of it. 
 He would either send it to the mint, and have it coin- 
 ed, or he would sell it to the hank of England for its 
 notes, and with these would pay the bill to the agent 
 of the country banker. If the gold, instead of being 
 imported into London on behalf of the person in the 
 country, was received in the country direct, it would
 
 144 
 
 be placed in the bands of the country banker, who 
 would, when the money was wanted, give his notes for 
 it; and, by him, it would be sent up to London. This 
 would amount to the same thing as if it had been sent 
 to London in the first instance. In either case the 
 country banker would obtain the possession and use of 
 the gold in London, for which he would give his notes 
 in the country. 
 
 Should the gold be received by a London merchant, 
 the goods must come from the country which it pays 
 for ; or if by a London manufacturer, the necessaries of 
 life and articles of consumption in which the wages of 
 labour, &c. consist, must be received from the country, 
 and in both cases, bills upon London must be drawn 
 for them, which would be discounted with the country 
 banker, and be paid with the gold or the proceeds of it. 
 So that by whomsoever gold is received, it finally comes 
 into the possession of the agent in London of the country 
 banker on the country banker's account, and gives rise 
 to a corresponding issue of country bank notes, as well 
 as to an increase in the circulation of London. 
 
 The reverse of this occurs when the balance is against 
 us. The money is due to foreign nations by the 
 country at large. Bills upon London are obtained in 
 the country of the country banker by those who have to 
 remit money abroad. With these bills, gold, by the 
 agency of Mr Rothschild and others, is obtained from 
 the bank of England and sent abroad; and the country 
 bank circulation and that of the bank of England, if 
 not counteracted by other causes, are both contracted to 
 the extent of the sum exported. 
 
 A metallic currency would only be increased, or 
 diminished, in the amount of the sum exported, or 
 imported. Whereas, ours is evidently increased, or
 
 145 
 
 diminished in double the sum. A balance of payments 
 either for or against us ought, therefore, to have double 
 the effect in raising or depressing our prices, whereas, 
 we can hardly perceive that it has any effect at all. 
 This must, of course, arise from the superior and more 
 potent influence of those other causes by which our 
 currency is affected. 
 
 The Principles upon 'which the Banks issue their 
 Notes. — We have thus shewn that the circulation of 
 the country banks is not governed by the foreign trade 
 of the country, and that, consequently, their notes can- 
 not be issued upon right principles. We will now, 
 therefore, proceed to examine the principles upon 
 which they are issued. 
 
 The Bank of England. — The issues of the bank 
 of England, and the country banks, are made upon the 
 same general principles ; and it will assist us in under- 
 standing the latter, to examine the former in the first 
 instance. 
 
 The Demand for the Notes of the Bank, of two Kinds, 
 external and internal. — There are two classes or modes 
 of demand for money experienced by the bank of Eng- 
 land. It issues its notes, either in the purchase of gold, 
 or in loans to government and the public, and it con- 
 tracts its issues, either by supplying a demand for gold, 
 or by withdrawing its loans from government or the 
 public. These are the only two ways in which it can 
 issue them. It must either buy gold with them, or lend 
 them at interest. 
 
 Its issues can only be increased or diminished upon 
 gold, when our foreign trade brings it into, or takes it 
 out of the country. Its issues upon gold must, there- 
 fore, be regulated by external causes, which, for bre- 
 
 T
 
 146 
 
 vity of expression, may be termed the external demand 
 for money. 
 
 Its loans to government, and the public, on the other 
 hand, are the result of the demand which they have for 
 interest money, or the savings of income, at the rate of 
 interest which the bank charges, or is willing to lend 
 at. This is altogether an internal demand for money. 
 It is neither affected by, nor has it reference to, our 
 foreign trade and payments. It depends upon the 
 amount of income saved, compared with the demand 
 for such savings, either in trade, or by government, 
 and persons, who occasionally spend more than their in- 
 come. Hence, it may be termed the internal, in con- 
 tra-distinction to the external demand for money. 
 
 Money lent at Interest always the Savings of Income. 
 — The notes of the bank thus issued always represent 
 the savings of income, or answer the same purpose. If 
 the issues of the bank are not increased by any loan it 
 makes at interest, an equal amount of money must have 
 been previously saved out of income, and paid into 
 the bank, in which case, the party borrows the income 
 previously saved ; but if not, and the issues of the bank 
 are increased by the loan, prices rise, and the party 
 who has borrowed the money obtains value for it by 
 depriving the holders of the money in previous circu- 
 lation, of a proportionate power of purchasing com- 
 modities. An economy is thus created, though a forced 
 economy, but it answers all the purpose of a voluntary 
 one. It makes no difference to the party borrowing 
 the money, whether the value he obtains for it, be pre- 
 viously and voluntarily saved, or saved by the power of 
 consumption on the part of those who held the money 
 in previous circulation, being limited. Hence, when 
 the bank lends money at interest, it always lends the
 
 147 
 
 savings of income ; it lends savings which either have 
 been, or will be made. On the other hand, if money 
 be saved and paid into the bank, and be not lent out 
 again, it is cancelled, the savings are done away, prices 
 fall, and a power of consumption adequate to the money 
 cancelled, is acquired by those who possess the money 
 left in circulation. 
 
 The Bank cannot issue to Excess in supplying the 
 external Demand for its Notes. — The external demand 
 for money being a mere exchange of gold for notes, the 
 bank cannot issue to excess in supplying it. Money 
 comes into the country only when the circulation is 
 deficient, and leaves it when it is redundant, and when 
 the bank purchases gold with its notes, it substitutes them 
 for money which would be coined at the mint and put 
 into circulation, if not purchased by it. And when, on 
 the other hand, it contracts its issues in supplying a 
 demand for gold, it only reduces the circulation to the 
 extent that it would otherwise be reduced did the bank 
 not supply the demand. Gold is obtained at the bank, 
 only because it is more convenient than to take it out 
 of circulation. Therefore, in issuing its notes upon 
 gold imported, and in contracting them in supplying a 
 demand for exportation, it cannot be wrong. 
 
 The Bank can only issue to Excess in supplying the 
 internal Demand for Money. — Hence, it is only in sup- 
 plying the internal demand for money, that an excess 
 of issues can be made. This demand, however, is un- 
 limited. If the bank, for instance, were to charge only 
 one per cent., it might issue as many notes as it thought 
 proper. There would be hardly any limits to the de- 
 mand for money at so low a rate of interest. On the 
 other hand, it can withdraw its advances at pleasure, — 
 it can take all its notes out of circulation which are lent 
 
 t 2
 
 148 
 
 at interest, when it pleases to compel their re-payment, 
 and thus reduce the circulation to nothing, in as far as 
 it depends upon the internal demand for money. Thus 
 the issues of the bank in supplying the internal demand 
 for money are altogether arbitrary, and can cither be 
 raised above their right level or be reduced beneath it 
 at any time. 
 
 The Policy of the Bank Directors in regulating its Is- 
 sues. — The difficulty, however, is to ascertain this right 
 level. The plan of the Directors, we infer, is to keep 
 its issues or loans at interest, at, or nearly at a fixed a- 
 mount, and allow whatever fluctuations occur in the a- 
 mount of its notes current, to arise from the supply or 
 demand for gold. 
 
 In dealing with the public, it charges a fixed rate of 
 interest — either 4 or 5 per cent. But it cannot always 
 keep its issues steady at either of these rates ; and when 
 there is not a sufficient demand for money upon com- 
 mercial bills, it is obliged to take less. This it does, 
 not by lowering its rate of interest to its commercial 
 customers, but by purchasing exchequer bills in the 
 market, which generally yield fully one per cent, less 
 than commercial bills, or by advancing money upon 
 them to government. When the demand for money, 
 at interest, exceeds the amount the bank is disposed to 
 lend, it can easily keep its issues down at the right level 
 by declining to lend more than this amount. But when 
 the demand falls off, the only way in which the bank is 
 thus able to keep its issues at the proper level, is by re- 
 ducing the rate of interest it charges. 
 
 The Effect of a Balance of Payments on the Money 
 Market of London. — Any enlargement or contraction 
 of issues by the bank, however, though it be in conse- 
 quence of a supply or demand for gold, and, there-
 
 149 
 
 fore, an enlargement and contraction, which would 
 take place in the amount of the circulation of London, 
 whether the bank purchased and sold the gold or not, 
 is apt to produce a great sensation, and to call down 
 upon the heads of the directors no small degree of 
 blame, of which they are not in the least degree de- 
 serving. 
 
 This arises from the effect which the importation of 
 gold has upon the money market of London. Not 
 probably more than one- tenth of the gold imported 
 ought to remain in London ; that portion only ought 
 to remain which the consumptive circulation of London 
 bears to the rest of the kingdom. The remainder 
 ought to be sent into the country to pay for the com- 
 modities which were exported in purchase of it. But, 
 the country bankers, by substituting their notes for it, 
 obtain the power of circulating it in London. This 
 they do by purchasing stock with it, or by lending it 
 at interest; and the effect is just the same as if, with- 
 out a balance of payments in our favour, the bank of 
 England had increased its issues by doing the same 
 thing. When, therefore, the balance of payments is 
 in our own favour, interest money becomes very plenti- 
 ful in London, the bankers can only obtain a low rate 
 for it, and the funds rise. A capital is created, for 
 which there is no particular demand ; and the money 
 can only be kept in circulation by the low rate at 
 which the bankers are willing to lend it upon any safe 
 description of securities which can be had. On the 
 other hand, when the balance of payments turns against 
 us, and the money is required for exportation, the 
 bankers are obliged to sell the stock they had before 
 purchased, and draw in the loans they had made. The 
 capital, which had been before created, comes now to
 
 be cancelled — the interest of money rises — the price of 
 stocks falls, and a considerable degree of pecuniary em- 
 barrassment is felt. The persons who had been induced 
 by the previously low rate of interest to borrow money, 
 and of course to employ it in some way, find themselves 
 unable to repay it. The bankers, on the other hand, 
 cannot do without it, and are, in consequence, put to 
 much inconvenience. So that, when a considerable 
 balance of payment against us succeeds a considerable 
 balance in our favour, a great deal of commercial em- 
 barrassment is always felt in London, which isu nknown 
 in other parts of the kingdom. 
 
 On these occasions the bank directors are sure to be 
 blamed, as they must necessarily have increased and 
 diminished their issues on gold. Whereas, the whole 
 is the consequence of a defect in our system of curren- 
 cy, for which they are not accountable, and with which, 
 as bankers, they are not obliged to trouble themselves. 
 When gold comes into the country the circulation is 
 deficient, and ought to be increased ; when it goes out, 
 it is redundant, and ought to be diminished. The 
 effect upon the value of the currency produced is a 
 proper one. But if, in addition to this, a great and 
 improper alteration takes place in the value of interest 
 money, or savings of income in London, and commer- 
 cial embarrassment is the consequence, it is a subject for 
 the consideration of the legislature, and not of the. di- 
 rectors of the bank. 
 
 The private Bankers of London deal in Interest Mo- 
 ney only. — The bank of England being the only bank 
 which issues notes in London, the private bankers deal 
 in interest money, or the savings of income, only. 
 What money, therefore, is placed in their hands, they 
 lend out again. They have no power of creating or
 
 J51 
 
 cancelling the savings of income, by an enlargement or 
 contraction of issues. They can only lend what money 
 has been previously lent to them. Neither can they fix 
 a particular rate of interest. London is peculiarly, as 
 we have pointed out, liable to the fluctuations in the 
 supply of interest money. The demand, however, va- 
 ries as well as the supply, and they lend what they 
 have to lend, on the best terms they can obtain. These 
 have occasionally varied within the year, from two to 
 five per cent, on the best securities. But the amount 
 of money in circulation is not in the least affected by 
 their operations. They make their profits by lending 
 it, and not by keeping it in hand. Hence, they are 
 certain to keep it in circulation, at one rate of interest 
 or another. 
 
 The Hate of Interest cannot be arbitrarily fixed. — 
 Great and sudden variations in the rate of interest in 
 such a country as this, are probably not natural, and 
 those which occur in London, are no doubt to be 
 attributed to the causes we have just pointed out as 
 peculiar to the money market of London. But assuming 
 the average rate of interest to be ever so steady, it 
 cannot be arbitrarily fixed. Whether it ought to be 
 three, four, or five per cent, can only be determined by 
 the proportion which the supply of the savings of in- 
 come bears to the demand in the market. It can no 
 more be fixed at any particular rate than the price of 
 sugar, coffee, or any other commodity. 
 
 This, the bank of England has discovered : for, 
 though it fixes a particular rate in dealing with the 
 public, it can never, as we have before mentioned, keep 
 its advances steady at that rate ; and is frequently 
 obliged to take less, by purchasing exchequer bills or
 
 152 
 
 otherwise. It is important, however, that it should 
 keep its issues stead)' in supplying the internal demand 
 for money, in whatever way, or at whatever interest its 
 loans are made ; and this it no doubt generally endea- 
 vours to do. 
 
 The Issues of the Bank would fluctuate were they 
 governed by the Demand for Money at any given Rate of 
 Interest. — But it may easily be perceived, that if the 
 bank were to regulate its issues by no other rate than 
 the demand it had for money at four per cent, or any 
 particular rate of interest, that its issues would always 
 be above or below what they ought to be. Sometimes, 
 interest money in London, is not to be had at five per 
 cent., and the public could take most readily a few 
 millions of additional capital at that rate. At other 
 times, the bank has hardly any demand for money 
 whatever at four per cent. Nor could these fluctuations 
 have any reference whatever to the balance of payments. 
 They would be governed by the state of the economy 
 of the nation, compared with its expenditure ; and men 
 neither save money nor spend it with reference to the 
 balance of payments. 
 
 One effect, no doubt, would be produced by the 
 bank regulating its issues by the demand for money at 
 a particular rate of interest, namely, that the rate of in- 
 terest would be kept steady. Instead of the savings of 
 income rising above four per cent., the enlargement of 
 issues would create an additional quantity sufficient to 
 supply, at four per cent., the increased demand. On 
 the other hand, when the savings of income were not in 
 such request, and the demand at four per cent, fell off, 
 the notes of the bank would be withdrawn, and the 
 supply of such savings, to a corresponding extent, 
 would be cancelled, by which the rate of interest would
 
 i5S 
 
 be kept up. The alteration in the demand for capital 
 would not affect its value. The supply of it by means 
 of the enlargement and contraction of the currency, 
 would be created and cancelled as it was required. 
 Prices would fluctuate instead of the interest of money. 
 
 The Monopoly of the Bank of England cannot be done 
 away until our System of Currency be otherwise improv- 
 ed. — This would, of course, be a very improper effect, 
 which the bank, in consequence of being the only esta- 
 blishment in London that issues notes, is enabled to 
 prevent. Were its monopoly done away before the 
 adoption of a better system of currency, and the circu- 
 lation of London thrown open to the competition of 
 rival establishments, they could not regulate their issues 
 by any other rate than the supply and demand for mo- 
 ney at some fixed rate of interest. They would know 
 nothing of each others operations ; and each bank 
 would lend as much money as it could. They might 
 be so far a check upon each other, as to prevent one 
 bank exceeding its proportion with the rest. But the 
 increase and decrease of demand for money would be 
 felt by all the banks at the same time, in proportion to 
 the business they did, and the share of the circulation 
 they possessed. They, therefore, would all increase or 
 decrease their issues together. 
 
 Hence, it is clear, that throwing the circulation of 
 London open to competition, as has been proposed, 
 would be injudicious. The system is bad enough as it 
 is, but that would make it infinitely worse. 
 
 Having thus explained the principles upon which 
 the issues of the Bank of England are made, we shall 
 next proceed to consider the issues of the country 
 banks. 
 
 The Country Banks. The external Demand for 
 u
 
 154- 
 
 Money experienced in a Supply and Demand for Bills 
 upon London. — The issues of the country banker, like 
 those of the Bank of England, are founded upon an 
 external and internal demand for money. lie is 
 obliged to pay his notes in gold as well as the Bank of 
 England. But so long as his credit remains good, he 
 is never called upon to do so in the country. All, or 
 nearly all, gold is exported from London, and when 
 gold is wanted of him for exportation in exchange for 
 his notes, instead of paying them in gold he pays them 
 by a bill upon London. 
 
 Nor is it necessary for him to keep a dead stock of 
 gold in London to pay these bills with. If he have go- 
 vernment stock or other securities in London, which 
 he can convert into money without loss, it answers his 
 purpose quite as well. If he can only meet the pay- 
 ment of his bills, it makes no difference in what man- 
 ner. The party to whom he gives them can obtain 
 gold from the Bank of England at any time. 
 
 When, therefore, he obtains gold, and sends it up to 
 London, or obtains a bill upon London (which is the 
 same thing to the country banker as obtaining gold) and 
 sends it to his agent, he orders him to purchase stock 
 with the proceeds, or otherwise lend the money for him 
 on such securities, as will afford him the best interest 
 which can be had, consistent with their being re- 
 convertible into money, without loss, at a short notice. 
 
 A banker's funds in London are to him consequent- 
 ly, what gold is to the bank of England. It cannot 
 increase its issues too much upon gold, nor does he 
 consider that he can do so in discounting bills upon 
 London. It cannot diminish its issues too much in 
 supplying a demand for gold, nor he, as he supposes, 
 in supplying a demand for bills upon London.
 
 15.5 
 
 A Banker, as regards his oiim Security, cannot issue to 
 Excess in Discotinting Bills upon London. — It must be 
 obvious indeed, that, as a banker, he is quite safe in 
 making advances upon good bills upon London. So 
 long as he can keep his funds in London available, 
 that is, so long as he can at any time obtain money in 
 London upon these bills, or upon any stock, or other 
 securities he may purchase with the money obtained, 
 for them, he has the means ready to re-pay the notes 
 issued upon them. If, therefore, he should fall into 
 discredit, and the public should bring in the notes for 
 payment; or, if a demand should arise for bills upon 
 London, provided he have previously issued them in 
 discounting bills upon London, he has nothing to fear. 
 
 Thus, a banker may advance his notes upon bills 
 upon London, with the same facility and safety against 
 the consequences, as the bank of England can do in 
 the purchase of gold. 
 
 The Supply and Demand for Bills upon London, may 
 result from the internal, and the local, as well as from the 
 general Balance of Payments, or external Demand for 
 Money. — But the country banker does not obtain a 
 supply, and experience a demand for London bills, 
 only when the balance of payments is for or against the 
 nation. There are other causes which give rise to such 
 a supply and demand ; and of these there are first, the 
 internal, and next, the local balance of payments. 
 
 The first of these, is the balance which arises between 
 different parts of the country. It must be remembered, 
 that there is a balance of payments between counties, 
 as well as between kingdoms. Not only must the cur- 
 rency of the kingdom, and its scale of prices, be at that 
 level, which will bring its trade to a balance in commo- 
 dities with foreign nations, but the currency and prices 
 
 u 2
 
 1.56 
 
 in each county must bear that proportion with the rest, 
 which shall bring its trade with them to such a balance; 
 and, when any inequality takes place, an internal ba- 
 lance of payments must arise, by which to adjust it. 
 With a metallic currency, money would be remitted 
 for that purpose. There would be a rise and fall in 
 the exchanges, or price of bills, between different 
 places, as there is between different kingdoms. But, 
 with us, a banker's bill upon London answers all the 
 purpose. The banker who grants the bill, contracts 
 his issues, and the currency is diminished in that part 
 of the country from which the money is to be remitted, 
 and from which the bill is sent; while, on the other 
 hand, the banker enlarges his issues who discounts the 
 bill, and the currency is enlarged in that part to which 
 the balance of payments is due, and by which the bill 
 is received. 
 
 The next is the local balance of payments. This is 
 that which arises between the bankers themselves. The 
 circulation is divided amongst the banks, and the share 
 which each banker has, is determined by the business 
 which he does with the public. A banker cannot en- 
 large his issues out of his usual proportion with his 
 neighbours, without he increases his general business. 
 Were he to attempt it, the notes would, in the regular 
 course of business, come into their hands, and he must 
 pay them by a bill upon London — the manner in 
 which, of course, the bankers settle with each other. 
 
 The Local and Internal Balances of Payments quickly 
 arise. — These balances must also quickly arise. Every 
 man in business, or of property, has an account with a 
 bank, and never keeps any great amount of money in 
 his house or his pocket. The moment he receives any 
 quantity, he puts it into his banker's hands, and the
 
 157 
 
 increased issues of any bank are thus immediately re- 
 turned into the hands of some bank or other, and the 
 original issuer has to repay them. No banker can 
 increase his issues out of his usual proportion with his 
 neighbours, without he enlarges his trade, and can sus- 
 tain the increase by obtaining an equal quantity of his 
 neighbour's notes in return ; otherwise the moment his 
 notes are issued in excess, he has to repay them by a 
 bill upon London, and take them out of circulation. 
 Thus, the local balance against him, in event of his 
 issues being above his due proportion with his neigh- 
 bours, is almost instantaneous. 
 
 Neither can the internal balance of payments be long 
 in arising, when any inequality in the circulation exists. 
 The country bank notes in consumptive circulation 
 cannot exceed ten millions, while the agricultural pro- 
 duce alone, the consumption of which they promote, 
 must amount to a hundred millions. This is seldom 
 consumed where it is grown. A great portion of it is 
 transported from one part of the country to another ; 
 and, a shilling or two per quarter, or a halfpenny a 
 pound upon meat, will turn the stream of supply in 
 any direction. This difference, a very small inequality 
 in the circulation would cause, and a proportionably 
 small excess of supply would correct. The inequalities 
 in the course of the year must be confined to three or 
 four millions on the ten; and, an alteration in the sup- 
 ply, of three or four in the hundred millions, divided 
 and spread throughout the year over the whole king- 
 dom, will be sufficient to adjust it. 
 
 There are, however, an immense number of London 
 bills crossing and re-crossing each other. But every 
 London bill does not diminish, nor every one received, 
 increase the circulation. The circulation is only in-
 
 creased, or diminished, if the balance upon the whole 
 be in favor, or against the district. The great mass of 
 receipts and payments balance each other, and they 
 must altogether do so upon the aggregate. When the 
 balance of payments either for, or against a district 
 arises, and an altei'ation in prices takes place, it is for 
 the very purpose of bringing the internal trade to this 
 balance. 
 
 Thus, besides the general balance of payments for, 
 or against the nation, by which a supply and demand 
 for London bills is produced, there is the internal 
 balance of payments, or that balance which arises for, 
 or against the town or district, and the local balance 
 which arises between the different banks. 
 
 From the Internal and Local Balance of Payments no 
 general Increase or Diminution of Issues can take place. 
 — It will be proper, however, to keep in mind, that from 
 the two last mentioned balances of payment, no general 
 increase or diminution of issues can occur. When 
 money is remitted from one part of the country to 
 another, by means of a bill upon London, if the 
 circulation be extended on the one hand, it is con- 
 tracted on the other ; and the same when by the local 
 balance. As the issues of one bank are increased, 
 those of its neighbours are diminished in an equal 
 proportion. The internal and local balances of pay- 
 ments only equalize the circulation, they can neither 
 enlarge nor contract it. 
 
 A Supply and Demand for Bills upon London, also 
 generated by the Demand for Interest Money or Income. 
 — A demand and supply of bills upon London, is not, 
 however, confined to the sources above mentioned, they 
 are also produced by the demand for interest money, 
 or the savings of income.
 
 159 
 
 Suppose a person in the country had a thousand 
 pounds in the funds, and wished to build with it, or 
 spend it in any other manner, he would give his banker 
 a power to enable him to sell the stock, and as he want- 
 ed the money he would cheque upon him for it. The 
 banker would sell the stock through his agent in Lon- 
 don, and employ the money in London on his own ac- 
 count — perhaps purchase the stock himself; and he 
 would pay the cheques of the party on whose account 
 the stock was sold, with his own notes. 
 
 Thus his funds in London would be increased a 
 thousand pounds, and so would his issues. In as far, 
 however, as such increase rendered his issues out of 
 proportion with his neighbours, the local balance of 
 payments would be turned against him, which he 
 would have to settle by drawing upon London. 
 To this extent, therefore, his circulation and funds 
 in London would be again decreased. But the 
 circulation of the district, would still be enlarged, 
 and the funds in London of the bankers of the dis- 
 trict would also be enlarged a thousand pounds. By 
 this means, however, the circulation of the district 
 would be raised one thousand pounds above its proper 
 level, and an internal balance of payments against it 
 would be created, which would have to be met by 
 drafts upon London. So that finally, though the circu- 
 lation generally would be enlarged a thousand pounds, 
 and the funds in London of the country bankers would 
 be increased in that amount, yet it would come to be 
 distributed over the whole kingdom, while the banker, 
 through whom the operation was first effected, and 
 through whom the inci'ease first took place, might not 
 enjoy five pounds of additional circulation by it. 
 
 On the other hand, if a person were to take to a
 
 160 
 
 banker, a thousand pounds which he had saved, and 
 order him to purchase stock with it, he would have to 
 furnish the money in London to purchase it with. — 
 This would reduce his funds in London, and he would 
 contract his issues to that extent, that is, he would not 
 re-issue the notes again. This would make first, a lo- 
 cal balance in his favor, and then an internal balance 
 in favor of the district. The circulation would be con- 
 tracted a thousand pounds, but it would be spread over 
 the kingdom, and the reduction in his issues might not 
 be five pounds. 
 
 The expansion and contraction thus produced would 
 chiefly be made by means of a supply and demand for 
 London bills. The first banker only could have any 
 chance of knowing that the operations were founded on 
 a sale and purchase of stock. But any distinction 
 between a demand for money on stock, or on bills, the 
 result of an importation of gold, the bankers are not 
 aware of, and could not make if they were disposed. 
 The only guide a banker can have in reference to his 
 circulation, is the slate of his funds in London. With 
 him there is not a more safe and legitimate foundation 
 for an increase of issues than a sale of stock. 
 
 A demand, however, for money upon, or by a sale of 
 stock, is an internal demand. There is no difference in 
 principle between a banker issuing his notes, on a sale 
 of stock, and the bank of England issuing its notes in 
 purchasing exchequer bills. There are no limits to 
 such issues but the discretion of the parties. The bank 
 of England could, at any time, by a fresh issue of notes, 
 purchase exchequer bills to any extent ; and the country 
 bankers could buy up the whole national debt with their 
 notes upon the most legitimate principles of country 
 banking.
 
 161 
 
 Every order for a sale of stock is a transfer to the 
 banker of the money in London, which it produces, and 
 he becomes, consequently, a buyer of as much stock as 
 is sold. If the bankers had orders to sell the whole 
 national debt, it would not make any difference in the 
 money market; they would purchase to a shilling the 
 same amount as they disposed of. It would practically 
 be nothing but a transfer of securities in exchange for 
 their notes. They might as well, with reference to the 
 currency, advance the same money on the mortgage of, 
 or in the purchase of land. The only difference would 
 be, that the interest upon stock is payable in London, 
 while the rent of land is payable in the country ; an 
 important difference, no doubt, to the banker, but none 
 as regards the principles on which the notes would be 
 issued. 
 
 The Country Bankers are unable to disti?iguish the 
 Principles upon which their Issues are made. — Thus it 
 will appear evident, that bankers generally cannot have 
 the power of distinguishing from their own experience 
 any difference between a demand for their notes result- 
 ing from an importation of gold or a sale of stock. 
 Neither can they, from their own experience, distin- 
 guish whether a contraction or enlargement of the cur- 
 rency takes place, by money being placed in their hands, 
 and not lent out again, or by being drawn out of their 
 hands, without a corresponding amount having been 
 previously lodged with them. The moment a person 
 lodges money with a banker, which the banker cannot 
 lend out again, his circulation being reduced beneath 
 the level of his neighbours, the local balance of pay- 
 ments is determined in his favour, in the first instance, 
 and next, the internal balance is determined in favour 
 of the district, and vice versa. Except, therefore, by 
 
 x
 
 162 
 
 the first bank, the contraction or enlargement thus pro- 
 duced, is the result of a demand or supply of London 
 bills, the same as if it were produced by an exportation 
 and importation of gold. 
 
 Thus it will be seen that it is quite impossible for the 
 bankers to know practically, the causes by which their 
 issues are increased and diminished. All they know is, 
 that they can neither increase nor diminish them out of 
 proportion with their neighbours in the regular way of 
 their business. Hence, they have been led to infer, 
 that they have always correctly supplied the country 
 with the proper amount of money. And as bankers, 
 it was hardly possible for them to have formed any 
 other conclusion. 
 
 All the Issues of the Country Banks made in supplying 
 the Demand for the Savings of Income. — This conclu- 
 sion, however, is very far from being a just one. Their 
 notes are lent over the counter to persons who give se- 
 curities for them, which must be of two kinds; either 
 local securities — such as mortgages, bonds, or bills 
 payable at home, or money lent to individuals upon 
 their own personal responsibility ; or London securi- 
 ties, — such as bills upon London, a transfer of stock or 
 other property in London, or bills upon other places, 
 which will be finally paid by bills upon London. 
 
 A demand for money upon home securities is evi- 
 dently a demand for the savings of income, and as we 
 have before seen, bills upon London may arise from a 
 transfer of stock, as much as upon an importation of 
 gold. 
 
 But it must also be observed, that when the country 
 banks issue their notes in the discount of London bills, 
 founded upon an importation of gold, and their notes 
 come to represent the gold in the country, it, on the
 
 163 
 
 other hand, represents their notes in London, by which 
 they, in point of fact, supply a corresponding interest 
 demand for money in London. The gold, in represent- 
 ing their notes, produces the same effect as if they 
 had issued the same amount of notes in London, in the 
 purchase of stock, &c. without an importation of gold. 
 
 All the issues of the country banks, therefore, are, 
 directly or indirectly, made in supplying the demand 
 for the savings of income. 
 
 The Causes of the Fluctuations in the Amount of 
 Country Bank Notes, since the War. — There are, how- 
 ever, only two principles upon which the issues of the 
 country banks can be increased and decreased, namely, 
 by an importation and exportation of gold, or by an 
 alteration in the supply and demand for the savings of 
 income. 
 
 We have only to determine, by reference to the ba- 
 lance of payments, that any fluctuation in the amount 
 of their issues, did not proceed from the former, in or- 
 der to determine that they did proceed from the latter 
 cause. 
 
 Now we have already seen, by an examination into 
 the fluctuations in the issues of the country banks, 
 which have occurred since the war, that they were not 
 produced by importations and exportations of gold, and 
 they consequently must have proceeded from fluctua- 
 tions in the demand and supply of the savings of in- 
 come : except, indeed, in so far as they have resulted 
 from want of confidence. It is absolutely necessary, in 
 order for the banks to issue notes at all, that they 
 should have confidence in the securities offered them 
 by the public, and that the public should have confi- 
 dence in the stability of the banks. When this mutual 
 confidence is destroyed, a very powerful cause for a 
 
 x 2
 
 104 
 
 contraction of the currency, at least, is immediately 
 produced. 
 
 The fluctuations, since the war, have proceeded from 
 both these causes ; though chiefly from the former. 
 This is easily accounted for. The country banks al- 
 ways charge a fixed rate of interest, and never lend 
 money, except at that rate. This we have seen in the 
 case of the bank of England, could not fail to produce 
 great fluctuations in the amount of its issues ; and it is 
 
 o 
 
 obvious, that it must have the same effect upon those 
 of the country banks. Hence, the fluctuations in their 
 issues, since the war, may probably be thus accounted 
 for. 
 
 During the war, the borrowings of government kept 
 the savings of income scarce, and interest high. But, 
 on the return of peace, the demand for money began 
 to fall off, and the currency to contract. This, how- 
 ever, was in part counteracted, by the extension of de- 
 mand for capital in trade, from the new channels that 
 were opened ; and had it not been for the failures 
 amongst the banks in 1815 and 1816, and the want of 
 confidence by the public in the banks, and by the 
 banks in the public, the currency, at that time, would 
 not have contracted so much as it did. That the con- 
 traction in 1815 and 1816, was greatly the result of 
 want of confidence, is sufficiently proved by the evi- 
 dence of the bankers, taken by the committee on the 
 resumption of cash payments, in 1819. 
 
 In 1816 we had a bad harvest, and a great loss of 
 income. This produced a great demand upon the 
 banks for money, and a corresponding extension of 
 issues ; a demand, which was no doubt increased by 
 the commercial activity to which the extension of issues 
 gave rise. This extension took place in 1817 and 1818.
 
 165 
 
 In 1819, our currency began again to contract. 
 This, we have no doubt, was still the effects of our re- 
 turn from war to peace. The economy and expendi- 
 ture of the country must always be accommodated to 
 each other. What one part of the community spends, 
 the other must save. When, therefore, government 
 borrowed so largely duiing the war, it raised the rate 
 of interest and profits, and enabled the commercial 
 classes to save the money it borrowed ; but when it 
 ceases to borrow, they must cease to save. This, 
 on the other hand, would be brought about by a 
 reduction of interest and profits. The savings, for 
 which there did not exist the usual demand, would 
 have to be lent at less interest, or be employed in 
 trade, where the capital was already as great as was 
 necessary, and where, by competition, the scale of pro- 
 fits would be reduced. By this means, the commercial 
 classes would be deprived of the power of saving, until 
 the economy of the nation was reduced to a level with 
 its expenditure. This, no doubt, would take a few years 
 to accomplish, and we are disposed to consider the un- 
 precedented contraction of the currency which occurred 
 from 1819 to 182-', — in which time, it is probable, that 
 the issues of the banks were annihilated, and replaced 
 by fresh issues on the gold imported, to have been the 
 result of the effort of nature to restore the savings of 
 the nation to a level with the reduced demand for them, 
 consequent upon the cessation of borrowing by go- 
 vernment. 
 
 When things run to extremes, one is apt to beget 
 another; and, in 1823, it is probable, that the banks 
 began to experience a demand for the money previous- 
 ly deposited with them, in consequence of the economy 
 of the nation having been reduced below its proper
 
 166 
 
 level. They began, in consequence, to increase their 
 issues, notwithstanding the balance of payments was, 
 shortly after, turned against the country. 
 
 That the sum of our currency should increase and 
 decrease in spite of the balance of payments, will not 
 appear surprising, when we reflect that government 
 alone has borrowed, in one year, nearly as much inte- 
 rest money, or the savings of income, as the whole of 
 the currency amounts to. So long as it is affected, 
 therefore, by the savings of income, the balance of pay- 
 ments must have a very secondary influence. It may, 
 in time, heal the wound or fluctuation caused, but can 
 never prevent it. 
 
 Since 1825, the contraction has evidently proceeded 
 from the panic, and its consequences. But the econo- 
 my and expenditure of the nation, must now be pretty 
 much upon a level ; and, there is no doubt, that as 
 soon as trade is restored to its proper state, the issues 
 of the banks will again increase. 
 
 A Reform in our Systems of Currency and Banking 
 required. — It must be unnecessary to repeat, that all 
 these causes of fluctuations or derangements in our 
 currency, were illegitimate, as their effects were evi- 
 dently injurious. No alterations in the amount of the 
 currency, and scale of prices, ought ever to be pro- 
 duced by any internal cause. The only object of any 
 one particular scale of prices more than another, is to 
 regulate our foreign trade, and bring it to a balance in 
 commodities, which can never be accomplished as long 
 as the prices vary, from fluctuations in the value of 
 money, and from want of confidence in the banks. It 
 is clear, therefore, that our monetary system is defec- 
 tive, and that a reform in it is required ; and we shall 
 next proceed to consider the nature of this reform.
 
 167 
 
 The Power of issuing Notes at Pleasure ought to be 
 taken from the Banks, and the Currency be made to 
 regulate itself without human Interference, on the same 
 Principles as a Metallic Currency.— These are of two 
 kinds, first, as regards the mode in which the currency 
 is issued, and next, as regards the stability of the banks 
 that issue it, and by which the money operations of the 
 country are conducted. 
 
 In the first place, then, it must be obvious that our 
 currency is issued on wrong principles. A metallic 
 currency is evidently the proper model for a circulating 
 medium. The amount of it would be regulated by the 
 foreign trade of the country : banks could not increase 
 it, as they do notes; and they evidently would not 
 destroy it. When our trade balanced, our prices would 
 be steady, and the balance could not be disturbed. 
 The savings of income would have no effect in altering 
 the amount of money in circulation. When they ex- 
 ceeded the demand for them, the interest of money 
 would fall ; when they were scarce, it would rise. The 
 economy and expenditure of the nation would not affect 
 the price of commodities ; nor would the amount of 
 money current be determined by any human agency. 
 It would be determined by our foreign trade alone, 
 regulated, no doubt, by the corn laws. 
 
 Now, this is precisely what should be the case with 
 our currency. It can never be perfect until the power 
 of issuing notes at pleasure be taken from the banks 
 altogether, and the system be made to regulate itself 
 without human interference, in the same manner as a 
 metallic currency. 
 
 And this is quite practicable. A gold circulation is 
 neither necessary, nor desirable. Gold, as money, is a 
 much less perfect instrument than paper, or, at least,
 
 168 
 
 than paper may be rendered ; while, it may be made to 
 regulate itself with equal precision and greater facility. 
 It is the abuse, and not the use of paper money, that is 
 objectionable. Gold is a rude and clumsy instrument 
 compared with paper ; and, we have no doubt that 
 when the subject of currency is better understood, paper 
 will be adopted in preference to gold by every civilized 
 country. 
 
 In each of our former publications on corn and 
 currency, we have pointed out the manner in which the 
 currency may be made to regulate itself. But it is our 
 intention to take the first leisure opportunity to devote 
 a pamphlet exclusively to that subject, and we shall 
 confine the few observations we have to make at pre- 
 sent, chiefly to the banks, by which the currency is 
 issued. We shall merely observe, with regard to that 
 plan, that in one respect, it is imperfect. It proposes 
 that our currency shall be issued by joint stock banks 
 exclusively. Whereas, whenever it is regulated, it 
 must be taken as it stands. Any further improvements, 
 of whatever nature they may be, must be afterwards 
 made by slow degrees. 
 
 A Change in our System of Currency practicable with- 
 out Injury to the existing Banks, which must be dealt with 
 cautiously. — This, however, does not present any in- 
 surmountable difficulty. We are persuaded, that by a 
 succession of proper steps, taken at the proper times, 
 our currency may be put upon the right footing almost 
 without discussion in parliament ; and without any 
 change, for which any one banker would find it neces- 
 sary to prepare by calling in his issues, or in any other 
 way altering his course of dealing with the public. 
 
 We have, indeed, been taught, by recent experience, 
 the frailty of our system, and the necessity of dealing
 
 169 
 
 with it cautiously. Every banker's operations are of 
 great importance to his customers, and not only ought 
 nothing to be done, which would make him suddenly 
 alter his course of dealing with them ; but even his 
 mind ought to be kept at ease on the subject. The 
 dubious nature of the credit on which he depends, keeps 
 him at all times under a certain state of apprehension, 
 and he might easily be worked upon in anticipation or 
 fear of any change, to take steps which could not fail 
 to be hurtful to the public. 
 
 Private Banks never enjoy a rational public Confi- 
 dence. — This state of apprehension, in which bankers 
 exist, is the natural consequence of the system of private 
 banking. Our banks do not consist on the average of 
 more than three partners. These are in general 
 wealthy. But the public have no evidence of their 
 wealth, and frequently form very erroneous opinions 
 on the subject. It often occurs, that a bank which has 
 been supposed immensely rich, has been insolvent for 
 10 or 20 years. There are perhaps amongst the upper 
 classes of commercial men, a few who have the power, 
 from their knowledge of the parties, to exercise a pro- 
 per discrimination. But should these doubt the sol- 
 vency of a bank, they always keep it to themselves. 
 The public at large have no means of discriminating 
 with any accuracy, between one bank and another. 
 They have, therefore, no rational ground of confidence, 
 and consequently, in periods of confidence, they con- 
 fide in all — in periods of distrust, they distrust all. 
 
 The History of the Panic. — This latter was sufficient- 
 ly proved by the general panic which occurred in De- 
 cember, 1S25. The balance of payments in our favour, 
 which had existed between 1819 and 1824, had made ca- 
 pital plentiful in London, and it had been lent out by 
 
 Y
 
 170 
 
 the bankers on any kind of good security, upon which 
 interest could be had, and people had been induced to 
 borrow, by the easy terms upon which money could be 
 obtained. But when the balance of payments was 
 turned against us in 1824, a change began to be 
 produced. But this change was not felt at first. The 
 bank of England had previously accumulated a great 
 stock of gold, and instead of allowing the circulation 
 to contract, when the demand for it for exportation be- 
 gan first to be experienced, they re-issued their notes 
 in loans at interest, by which they created as much 
 interest money on the one hand, as the balance of pay- 
 ments cancelled on the other. By this means, the effect 
 of the balance of payments upon the money market, 
 was for some time averted. But the bank was obliged, 
 at last, to let the balance of payments against us take 
 its natural course; and, in the space, we believe, of 
 less than twelve months, their issues were contracted 
 three or four millions, independent of the gold cur- 
 rency which might be taken out of circulation. All 
 this, of course, was taken out of the money market. 
 
 For this contraction of their issues, the directors in- 
 curred much censure. But those who blamed them, 
 were probably not aware that it was not a voluntary 
 act on their part. 
 
 The effect of it was, to produce much pecuniary 
 embarrassment in the city of London ; and when 
 this is the case, a mutual suspicion is certain to 
 arise between the banks and their customers. The 
 bankers ruin some of their customers by withdrawing 
 their usual accommodation, and embarrass them all; 
 and they, in consequence, begin to doubt and suspect 
 the credit of all. The customers of a banker, on the 
 other hand, always begin to think him poor, when he
 
 371 
 
 is pinched. They never consider that he does not lend 
 his own money, but the money that is lent to him ; and 
 that if he has not as much lent him as usual, he cannot 
 be as liberal as usual in lending to others. They do 
 not reflect, that his title to their confidence rests upon 
 the amount of his property, and the solvency of his 
 bank, and not upon the state of his funds as a banker. 
 But when he is poor in funds, they begin to doubt 
 whether he be the wealthy person they took him for ; 
 or, at any rate, if there be the least circumstance to 
 hang a doubt upon, the doubt is very apt to be magni- 
 fied. In this state of feeling, the least alarm will pro- 
 duce a run upon a bank ; and thus matters stood in 
 London in the latter end of 1825. 
 
 In the country, things were different. A demand for 
 money had arisen ; but, the banks had enlarged their 
 issues, and supplied that demand, and no want of mo- 
 ney was felt. The balance of payments was, no doubt, 
 against the nation, and the funds in London of the 
 country banks had been diminished; but, as these had 
 previously been increased to a far greater extent, by 
 the much greater balance which had before been so 
 long in favour of the country, none of them that were 
 at all solvent were inconvenienced. 
 
 A few insolvent banks, however, did stop payment. 
 When a country bank is insolvent, and is obliged to 
 push its notes into circulation, in order to raise funds, 
 the local balance of payments is so frequently against 
 it, that it seldom has any large surplus of money in 
 London, and there is nothing so likely to stop such a 
 bank, as a balance of payments against the country, by 
 which a general demand upon all the banks for bills 
 upon London is created. In such case, its resources 
 in London soon become exhausted, and its agents in 
 
 Y 2
 
 172 
 
 London refuse to accept its bills, or it is reduced to a 
 course of dealing in the country, which betrays its 
 weakness, and destroys its credit. 
 
 The failure of each of these banks produced distrust, 
 and runs upon the other banks in the neighbourhood 
 where they were situated, but communicated no fur- 
 ther. Panics in the country seldom extend beyond the 
 neighbourhood where they occur. But the banks gene- 
 rally throughout the kingdom, were, in consequence, 
 induced to increase their stock of gold and bank of 
 England notes, in anticipation of the possibility of their 
 part of the country being visited by similar runs, from 
 failures more near them. 
 
 This demand for money, coming in addition to the 
 previous exportation of gold, increased the scarcity of 
 it in London to a great degree. The difficulties of the 
 bankers' situation began to be understood, and the 
 people to be alarmed for their safety, and smart runs 
 took place upon some of them. These were promptly 
 met. One, however, took place on the house of Sir 
 Peter Pole, Bart., and Co., and it stopped payment. 
 It met the run upon it, for two or three days, up to the 
 Saturday night; but did not open on the Monday 
 morning. Sir Peter Pole's was a very great house, and 
 its stoppage caused an immediate distrust, more or less, 
 of every bank in London, which was increased to a 
 general panic by five other banks stopping payment 
 also — being six in all. Three of these were wealthy 
 houses, and resumed ; and two of the others paid, or 
 will pay twenty shillings in the pound. But this was, 
 of course, not known for a day or two. 
 
 Between forty and fifty country banks drew on Sir 
 Peter Pole's house, and at least as many upon the others 
 which stopped; and upon all these a run, in consequence,
 
 173 
 
 was certain to take place, as well as upon the banks m 
 the immediate neighbourhood where they were re- 
 spectively situated. 
 
 Besides, a panic in London is readily communicated 
 to the rest of the kingdom by means of the press. 
 When a panic takes place in any part of the country, it 
 is never heard of by the nation at large until it is over; 
 and then the details respecting it are few, and leave 
 nothing for the mind to dwell upon. But when such a 
 crisis takes place in London, every circumstance re- 
 specting it is daily recorded, and the fears and hopes it 
 excites, are communicated by the press to every part of 
 the kingdom, almost with the vividness of oral commu- 
 nication, independent of the circumstance, that every 
 letter which leaves London speaks of it more or less. 
 As fear is infectious, this itself is sufficient to dis- 
 seminate distrust throughout the kingdom. But, 
 coupled with the failure in London, of banks which the 
 country establishments draw upon ; and, subsequently 
 by the stoppage of many of these establishments, it is 
 not difficult to conceive that a panic in London must 
 soon become a panic throughout the kingdom, at least, 
 as far as the system of private banking extends. 
 
 In such a state of things, it is not difficult to foresee 
 the consequences. There are seventy London banks, 
 who, upon the average, have probably half a million 
 each deposited with them, or ^35,000,000 in the whole. 
 There are between six and seven hundred private 
 banks in the country ; and, if we assume their engage- 
 ments to amount to only twice that sum, it will make 
 the total upwards of one hundred millions. Now, in 
 ordinary, there never can be more than five or six 
 millions of actual cash in the money market of London. 
 The rest of the circulation is distributed in small
 
 174 
 
 amounts in different hands ; and if we suppose that not 
 more than one-fourth of the creditors of the banks par- 
 ticipated in the fears of the panic, there would be a 
 demand upon them for four times the money that it 
 was possible to obtain in London on any terms. It 
 might, therefore, have been expected, that one half, at 
 least, of the banks in the kingdom, would, in con- 
 sequence, have been compelled to stop payment, with 
 all the train of consequences that would have resulted 
 from such a convulsion. But this was prevented by a 
 circumstance which shews the value of a right idea 
 when it is wanted. 
 
 It may naturally be supposed that the Bank Direc- 
 tors were all this time pressed upon to enlarge their 
 issues, and they probably did so to a small extent. 
 But there were strong reasons against their doing so in 
 any considerable degree : — first, their stock of gold, by 
 the previous balance of payments against the country, 
 had been much reduced, and they found, that no sooner 
 did they issue their notes, than a considerable portion 
 were returned upon them in a demand for gold, to send 
 into the country: the country banks wanting gold with 
 which to pay their one pound notes. Next, the balance 
 of payments had been against the country, to an extent 
 which had placed the bank in a state of considerable 
 alarm, and an increase of issues would eventually 
 either create a fresh balance against the country, or 
 render it necessary for them to draw their notes in 
 again, and this would create a fresh panic; for they were 
 conscious that the contraction of their issues had led to 
 the existing one. Therefore, however pressing the de- 
 mand for money might be, consideration for the safety 
 of the bank, as well as for the public, prevented their 
 supplying it : for to have enlarged their issues would
 
 175 
 
 only be to put off the evil, and not to prevent it. Be- 
 sides, though there never had been a panic so simul- 
 taneous and general, they had occurred repeatedly be- 
 fore, and the bank had always on such occasions rather 
 contracted than enlarged their issues. There was, 
 therefore, neither precedent nor principle to justify a 
 very opposite course in the present instance. 
 
 They, notwithstanding, more than once, when mat- 
 ters were becoming very bad, applied to ministers on 
 the subject, and the uniform answer they were under- 
 stood to have received was, that they, the ministers, 
 could not direct them, that they must do what appear- 
 ed to them, as bankers, most adviseable under the cir- 
 cumstances, or to that effect. 
 
 Fortunately, however, before it was too late, a view 
 of the subject occurred to ministers, and was communi- 
 cated by them through the Courier newspaper to the 
 public, or otherwise was suggested by the Courier to 
 government and the bank, and acted upon by them, 
 which, had it occurred a little sooner, would have pre- 
 vented much of the mischief that did happen, but as it 
 was, it averted the almost fatal consequences to the na- 
 tion which appeared inevitable. 
 
 It was undoubtedly very simple, as most useful ideas 
 are, though it had never been before promulgated. 
 An issue of notes, the Courier observed, in supplying 
 a demand for money produced by panic, would not 
 have the same effect, as an issue under other circum- 
 stances. It would not, for instance, have the effect of 
 turning the exchanges, or balance of payments against 
 the country. To do this, the money must be spent in 
 a demand for manufactures, or in consumption, by which 
 an elevation of prices would be produced ; and this 
 must be a work of time : whereas at that moment the
 
 prices of all things were falling, and there was not the 
 least disposition for increased commercial operations. 
 The demand for money, on the contrary, was the mere 
 result of fear for the stability of the banks, and the 
 money would be returned to them as soon as confi- 
 dence was restored. The persons who kept money 
 with them, kept it there for their own interest, and not 
 for the sake of their bankers. When therefore confi- 
 dence was restored, the same motives which had in- 
 duced them to place it with the banks before, would in- 
 duce them to return it again. When this was done, 
 the bankers would, for their own sakes, repay what 
 they had borrowed of the bank ; while both the Bank 
 of England notes, and gold sent into the country, 
 would soon be replaced by country notes, and be re- 
 turned to London, after the credit of the banks was re- 
 established. Hence the bank might supply the demand 
 resulting from the panic to any extent, and take its 
 notes out of circulation afterwards without any incon- 
 venience to the public whatever; and finally, that the 
 only way to restore confidence was to enable the bank- 
 ers to satisfy all demands upon them by prompt pay- 
 ment. The Courier, therefore, urged the propriety of 
 the bank increasing its issues at once to the full extent 
 of the demand, upon any kind of good security. 
 
 This doctrine was clear and obvious, when once 
 suggested, and most of the other papers promulgated 
 it; and there could be no doubt that the directors 
 would have been sanctioned, at least by public opinion, 
 in acting upon it, though the course recommended was 
 a new one. But there was still this difficulty — that 
 the bank could not increase its issues without incurring 
 the risk of stopping payment; though such a stoppage.
 
 177 
 
 if not the result of a balance of payment against the 
 country, might be of no importance. 
 
 The bank loses no credit, by stopping payment, as 
 in the case of private banks. When it does so, in 
 consequence of a demand for gold for exportation, the 
 value of its notes merely become depreciated, compared 
 with gold. The directors, in consequence, endeavour 
 to keep its circulation sufficiently low, to prevent the 
 balance of payments going against us to too great an 
 extent. 
 
 But in supplying an internal demand, from panic, 
 gold is wanted only for a temporary purpose, and the 
 principal part is certain to find its way back again. 
 There can no possible harm result, therefore, if its 
 supply of gold be exhausted, and it should stop pay- 
 ment. There is a good deal of mistaken opinion, how- 
 ever, extant on these subjects, and the directors would 
 not have been justified in placing the bank in a situa- 
 tion that would render such an event probable; al- 
 though, if properly understood, it might be seen that 
 no harm could result from it. 
 
 Now, the country bankers all wanted gold; but so long 
 as the directors did not increase its issues, more than 
 three or four millions of its notes could not by any 
 possibility have come into the country bankers or their 
 agents' hands ; and the bank could not have had a 
 demand for gold which it could not have supplied. But 
 if it increased its issues, the case would be different. It 
 would then give the country bankers a power of de- 
 manding gold beyond the amount that it might be able 
 to supply, and its being obliged to stop payment would 
 be rendered very probable. 
 
 The consequence was, that ministers took the affair 
 on their own shoulders. It is understood they agreed, 
 
 z
 
 178 
 
 that in the event of the bank being drained of its gold, 
 and being obliged to suspend cash payments in point 
 of fact, they would issue an order in council to require 
 it to do so by authority, and thus take the responsibility 
 of the whole proceeding on themselves. 
 
 On this assurance the bank acted, and acted so 
 decidedly, that in three days, namely, on Thursday, 
 Friday, and Saturday, it is believed to have issued all 
 the notes and all the coined gold it had in the bank. 
 By this, the panic in London was effectually stopped ; 
 and all the clerks in the bank, as well as the mint, being 
 employed night and day, Sunday inclusive, in making 
 more money, the demand by the country banks was also 
 supplied, and in a very few days the panic was over 
 without the bank having had occasion to resort to the 
 order in council; yet, in six or eight days, it had increased 
 its issues eight millions in notes, besides, probably half 
 that amount in gold. As was predicted, the bank was 
 afterwards enabled to withdraw those increased issues 
 without the least inconvenience, or even consciousness 
 on the part of the public ; while the nation was saved 
 by them from the most awful commercial convulsion it 
 was ever threatened with. 
 
 The proceedings of the bank, more especially with 
 regard to its issues, are always the subject of much 
 public discussion both in and out of Parliament. It is 
 a curious fact, however, that this extension of issues 
 was hardly ever adverted to after the panic had ceased, 
 though it was necessarily continued for some months. 
 
 This was doubtless an evidence of the public satis- 
 faction. At the same time, very few people are 
 aware of the danger the country was in, and the 
 extent of the calamity avoided. So little so, that when 
 Mr Huskisson had occasion to mention, in parlia- 
 ment, that ministers took an active part in the mea-
 
 179 
 
 sures that were adopted by the bank during the panic, 
 or to that effect, not a single observation, commenda- 
 tory or otherwise, we believe, was elicited by the re- 
 mark. None seemed to be aware that ministers were 
 entitled to any credit ; yet, had Bonaparte landed, 
 and taken possession of London, he would not have 
 given so great a shock to commerce as was averted by 
 these measures. Corn, ere this, must have been un- 
 der forty shillings a quarter, and houses would have 
 been ruined by the bankruptcies of others, and fall in 
 the price of goods that would have followed, who would 
 not now admit, or even suppose, such an event possible. 
 
 The Bubble Mania without Cause or Effect, as regard- 
 ed the Currency and Banks. — It may be proper to ob- 
 serve by the way, that the bubble mania, or rage for 
 joint stock companies, which occurred in 1824 and 
 1825, was attributed in a great measure to the country 
 bankers, and was supposed to have been the chief 
 cause of the panic. But the country bankers could 
 only have given rise to it by purchasing the shares of 
 these companies, which subsequent enquiries have 
 proved they did not do in any greater, if in so great a 
 degree, as other classes of the community. Nor yet 
 could it have caused the panic, unless the public had 
 been induced to suppose, that the London bankers had 
 injured themselves by purchasing or lending money on 
 these shares, which was never insinuated. 
 
 The money, or savings of income, actually employed 
 by these companies in 1824 and 1825, was very trifling 
 — not more than a million or two. This was not spent 
 in London itself, so that it could not affect the London 
 money market. With the exception of the money 
 actually spent in the employment of labour, every other 
 sale or purchase, whether of shares or property, was a 
 
 z 2
 
 180 
 
 mere transfer of property, — of probably stock into 
 shares by the losing party, and shares into stock by the 
 party that gained, &c. 
 
 It makes no difference to the nation at large, whether 
 property be held by A. or B. If a man loses his estate 
 at play, the nation is neither richer nor poorer for it. 
 Nor is gambling on the stock exchange of a different 
 character. The money market cannot be affected by 
 any transaction, in which the savings of income are not 
 created or consumed. Neither of these effects, to an 
 extent worthy of notice, had been produced in 1824 
 and 1825, by the bubble mania, and it had therefore 
 no connection with the currency. It was a mere mad- 
 ness, for which no rational account can be given, and 
 which was without cause, and without effect, as regard- 
 ed the nation at large. At the same time, there can be 
 no doubt that the panic had a great effect upon it, 
 though it had none upon the panic. 
 
 The second Panic, produced by the Letter of Ministers 
 to the Bank, a further Proof of the Necessity of a Re- 
 form in the Banking System. — It might have been sup- 
 posed, after the solvency of those banks which had 
 stood the test of the panic, had been so fairly tried, 
 their credit with the public would be established be- 
 yond all question. Sixty or seventy, and amongst them 
 some very strong banks, had stopped payment, and 
 these sixty or seventy, it was fair to infer, contained all 
 those not fully entitled to public confidence. So that 
 whatever might be said of the system generally, there 
 could be no doubt that, for some time at least, the faith 
 of the public, in the goodness of the existing banks, 
 had become firmly rooted. 
 
 It was natural also to imagine that, on the meeting 
 of parliament, after such a convulsion, something would
 
 181 
 
 be said on the subject, and that some steps would be 
 taken by ministers, if not to relieve the existing com- 
 mercial embarrassment and distress which the panic had 
 caused, at least to prevent the recurrence of such pa- 
 nics in future. With this view, it was proposed by 
 ministers, to encourage the establishment of joint stock 
 banks. These panics had never extended to Scotland, 
 where the banks are chiefly joint stock companies; 
 and the establishment of such companies in England, 
 was evidently the simplest and most effectual mode of 
 guarding against a return of such panics. Their esta- 
 blishment had been hitherto prevented, by the charter 
 of the bank of England, which limited the number of 
 partners in all other banks to six. 
 
 Ministers, therefore, wrote a letter to the bank, con- 
 trasting the instability of our banks, with those of Scot- 
 land, strongly pointing out the necessity for an im- 
 provement in our system, and calling upon the bank to 
 give up that privilege of its charter which excluded 
 other banks from having more than six partners, a re- 
 quest which was partly acceded to; but, very much to 
 the surprise of every one, this letter produced another 
 panic, which had it extended to London, as well as the 
 country, would, in all probability, have been quite as 
 bad as the former one. As it was, a very severe, though 
 gradual demand for gold and bank of England notes, 
 was experienced by a great majority of the country 
 banks, from which they of course suffered much incon- 
 venience. 
 
 For this second panic, the ministers were severely 
 censured by the country bankers; but it was not pos- 
 sible for ministers to have supposed that they enjoyed 
 so little of the public confidence. This second panic 
 certainly shewed the necessity of dealing delicately
 
 with the banks, but it was an additional evidence of 
 the truth of the arguments contained in the letter com- 
 plained of. It did not prove that no reform ought to 
 be made, the practical inference which the bankers 
 were willing to draw, but it proved more strongly than 
 before, if that could well be, the necessity for improve- 
 ment, even though it should be obtained, which is not 
 requisite, with some present inconvenience to the pub- 
 lic. 
 
 Money in a Bank consists in Houses, Lands, Goods, 
 Sfc. and not of Money, and it is a Defect in Principle, that 
 there should ever, from Panic, be a Demand for that 
 which has no Existence. — This necessity will appear 
 still more apparent, if we only examine into the nature 
 of banking — we mean of banking unconnected with the 
 issue of notes, which is not the legitimate business of a 
 banker. Many persons have thought that the evils of 
 private banking arise chiefly from the power of issuing 
 notes ; whereas, it must be apparent, that had our cur- 
 rency been exclusively metallic, more than one-half the 
 banks in the kingdom must have stopped payment du- 
 ring the late panic. The very existence of a system of 
 private banking, is compatible only with a currency 
 which can be issued to meet the demands of those pa- 
 nics to which it is liable. 
 
 The proper and legitimate business of a bank is to 
 borrow and lend the savings of income. Many people 
 have money which they do not wish to lend out perma- 
 nently, and yet would be glad to turn it to some ac- 
 count. There are many, on the other hand, who do 
 not wish to borrow money permanently, and yet are de- 
 sirous to do so for short periods. The party who has 
 money to lend for a short period, has matters of his 
 own to attend to, and has not the opportunity of know-
 
 183 
 
 ing the parties who may wish to borrow for short pe- 
 riods, nor the value of the securities they may have to 
 offer. The borrower for short periods, on the other 
 hand, could not spend the time necessary to find out 
 the individual who might be willing to lend the precise 
 sum, for the precise time he wanted it. Hence, a mid- 
 dle person is required between them. The one is will- 
 ing to take less interest of a third party, who will take 
 the risk and trouble of lending his money, off his hands; 
 and the borrower is willing to give a little more inte- 
 rest, in order to be accommodated with the money he 
 requires, without the trouble and inconvenience of find- 
 ing and dealing with the original lender. Thus the 
 business of the banker arises. He is this middle party. 
 The party who has money to lend, places it in his 
 hands, and he lends it out again to those who wish to 
 borrow, and he makes a profit by doing so. 
 
 Every extensive business, in time, comes to be con- 
 ducted on such general principles, as ai*e found, by ex- 
 perience, to be best suited to the convenience of the 
 public. The general rule with bankers is, to borrow 
 without fixing any day of re-payment ; but they engage 
 to re-pay the money lent or deposited with them when- 
 ever it is wanted. Experience teaches them how far 
 they may calculate upon the permanency of these loans; 
 and they, on the other hand, lend the money out on 
 such securities, and for such periods, as shall enable 
 them to meet the demands upon them by their depositing 
 customers as they arise. What they can, they lend in 
 general for short periods, and the rest for longer pe- 
 riods, or they employ the money in the purchase of 
 stock, &c. 
 
 The interest given by bankers differs in different 
 places. The London bankers give none in money. The
 
 184< 
 
 interest they pay, is in the labour and trouble of paying 
 the checks, and collecting the bills and checks of their 
 customers. For this, they receive no other compensa- 
 tion than the balance which they may find it conveni- 
 ent, for their own purposes, to keep in their hands. 
 The interest they charge, on the other hand, is in 
 general five per cent, to their regular customers who 
 may wish to borrow, and whatever they can get, when 
 they are obliged to resort to other means of lending, in 
 order to employ the money in their hands. 
 
 The Scotch banks allow one per cent, less interest 
 than they charge. But they make a profit by issuing 
 notes, which the London bankers do not; and every 
 person who keeps an account with them, and is in the 
 habit of paying in and taking out money, gives them a 
 proportionate share of the general circulation of the 
 country. 
 
 In Lancashire, the banks do not issue notes, and yet 
 allow as much interest as they charge ; but they charge 
 a commission on the amount of business done; which 
 is the fairest and most proper mode of charging. In 
 that case every man pays according to the trouble he 
 gives ; which we believe is found, in the long run, to be 
 the best, both for the banks and their customers. 
 
 One of the great uses of a bank, it must be obvious, is 
 to lend the savings of income to those who wish to bor- 
 row, with greater facility than could be done by the 
 party who saved them. The money placed in a bank 
 does not remain in it, but is lent out again. It must be 
 equally obvious, that the party who borrows, and pays 
 interest for money, does not do so to make no use of it. 
 His object is in some way or other to spend it. He 
 may do this, either in building houses, in buying or 
 manufacturing goods, or in consuming them, or in some
 
 185 
 
 other way. But it is of no importance to the banker 
 in what way the money is spent. He does not look to 
 the use that is made of it, but to the security lie has for 
 it. At the same time it is certain, that the money ceases 
 to exist as money or the savings of income, as soon as 
 it passes out of his hands. If it be spent in consump- 
 tion, and he obtain a mortgage on an estate for it, it 
 is in that case converted into land ; or if it be lent on 
 personal security, it is converted into the property of 
 the parties who are security for it, whatever that pro- 
 perty may consist of; or if stock be purchased with it, 
 the seller of the stock will consume the money in the 
 way that best suits his interest or inclination, but the 
 money will cease to exist, and as regards the bankers, 
 be cor.verted into a mortgage on the property of the 
 nation at large. 
 
 Hence, it is clear that the phrase that is generally 
 used to express the quantity of money lent to a bank, 
 namely, that there is a great deal of money in it, is a 
 misnomer. The money deposited with a bank is 
 neither in it, nor yet in existence. It consists of land, 
 houses, goods, &c. 
 
 But, notwithstanding the money has no existence, the 
 banker feels no hesitation in engaging to pay every 
 depositor his money at a moment's notice. 
 
 This, the banks are collectively quite safe in doing, 
 so long as their credit remains unimpeached. Upon 
 the aggregate, the savings of income are equal to the 
 spendings ; and when one party draws money out of 
 their hands, another generally places an equal amount 
 with them. But when this is not the case, money spent 
 in consumption must be gradually spent, and the banks 
 have time to withdraw their loans from trade to meet 
 the growing scarcity of money, without inconvenience 
 
 2 A
 
 186 
 
 to any one. The tradesmen being obliged to repay the 
 banker, must reduce his stock. The increased con- 
 sumption, therefore, so far as it extends to goods, must 
 take place out of the stock on hand ; and, while the 
 tradesman is compelled to reduce his stock to furnish 
 the money on the one hand, the increased consumption 
 on the other, enables him to do so, by increasing the 
 demand for his goods. But, in as far as the increased 
 consumption extends to agricultural produce, the 
 tradesman will be obliged to reduce his orders to the 
 manufacturer. This will throw the manufacturing 
 labourer out of employment, and the demand for 
 agricultural produce will be diminished on the one 
 hand, as it is increased on the other. As the stocks of 
 the tradesmen were thus reduced, capital would become 
 scarce and profits would rise, until the savings of 
 income became as much greater as to meet the extra 
 demand that had arisen for them. 
 
 These changes must necessarily be so gradual, that 
 neither the banks who promise to pay on demand, nor 
 the public, could be inconvenienced by them. 
 
 Should a person draw money out of a bank, not to 
 spend, but to purchase property with it, and should the 
 party selling the property, not spend it, nor yet any 
 person he might pay it to, it would evidently find its 
 way back into the banks again, for people do not keep 
 money in their pockets. This must be the case with 
 all money which is not spent. It may change hands, 
 or it may change banks, but though drawn out by one 
 party, it is certain to be paid in again by another. 
 
 If one bank gains the deposits of another, and the 
 latter is obliged to sell its funded property, or withdraw 
 its accommodation to trade, the other is enabled to 
 purchase its stock and extend the accommodation to
 
 1S7 
 
 trade, which one is obliged to withdraw; so that this 
 amounts only to a change of securities from one bank 
 to another. 
 
 Thus, though the banks when they promise to pay 
 all the money they owe at a moment's notice, may seem 
 to come under a fearful responsibility, yet, it must be 
 evident, that so long as their credit remains good, the 
 responsibility is merely nominal. The Scotch banks, 
 whose credit has never been shaken, are said to have 
 twenty millions of money lent to them on these terms; 
 while the whole circulation of that kingdom is only 
 about three millions and a half, exclusive of small 
 change, and they have never suffered any inconvenience 
 thereby, except they may have occasionally suffered loss 
 by the panics of this country. 
 
 In a panic, all banks suffer more or less, however 
 great their credit. Stocks experience a temporary fall, 
 of which all persons with money are desirous to avail 
 themselves, and people draw their money out of the 
 banks for that purpose. Thus, the Scotch banks, 
 during the panic, would have a demand for bills upon 
 London at sight, or for bank of England notes, to be 
 sent up to London to purchase stock with; and the 
 banks would have to pay these bills, or obtain the 
 notes, by perhaps selling the very stock purchased with 
 them. What the public make at these periods, the 
 banks lose ; and banks that are far removed above the 
 fear of panics, generally feel these consequences in a 
 greater or less degree. 
 
 As it thus appears that the money in banks consists 
 in houses, lands, goods, &c. and not in money, it is 
 clearly a defect in principle that they should ever be 
 called on to pay that which has no existence. At the 
 same time, it is so suitable to the public convenience, 
 2 a 2
 
 188 
 
 thai banks should stipulate to pay on demand, that 
 none can obtain business that will not do so, and out 
 country banks engage to do so, whether such demand 
 proceeds from panic or not. 
 
 Had our Country Banks been Joint Stock Companies, 
 their Issues would not have fluctuated as they have done. 
 — Out of this a great practical evil arises, which has 
 perhaps contributed as much as any thing to the fluc- 
 tuations in the amount of their issues, which we have 
 experienced. As they never can know when a panic 
 or run upon them may take place, they must always be 
 provided for it, and can only lend the money deposited 
 with them, upon what is termed convertible securities ; 
 that is, securities which can be sold and converted into 
 money — such as stock ; or can be at once transferred 
 over to others and money borrowed upon them — such 
 as bills. If they were to lend upon mortgage, or per- 
 sonal bonds, or any other security in short, but stock 
 or bills of exchange, when a panic came, they would 
 be unable to raise the money to meet it, mortgages, 
 bonds, &c. not being convertible securities. All bank- 
 ers do lend money upon such securities to a certain ex- 
 tent. But their doing so is attended with hazard to 
 themselves, and it is technically termed an illegitimate 
 mode of banking. 
 
 But that banking is the most legitimate to the na- 
 tion by which the money is kept in circulation. It is 
 necessary if a banker cannot lend out money deposited 
 with him on one description of security, that he should 
 not be prevented from lending it upon any other, 
 whether mortgage, bond, or otherwise, that he may be 
 able to obtain. If he cannot do this, he cannot do that 
 which is required of a bank by the interests of the 
 country.
 
 189 
 
 Were banks properly constituted, they would have 
 no difficulty in doing so. The great Scotch banks 
 have not much hesitation in lending on any kind of 
 security, when they cannot get bills, and would have 
 none at all, were they not liable to be affected by the 
 sudden changes in the value of money to which our 
 system of banking gives rise. 
 
 Now, in the country, there is no other description of 
 convertible securities than commercial bills, and hence 
 it is of vast importance that the country banks should 
 have credit enough to lend money upon securities 
 which are not convertible. A bank requires more cre- 
 dit in the country than in London, where convertible 
 securities are so much more plentiful ; and had our 
 country banks possessed the degree of credit requisite 
 to lend money on inconvertible security, their issues 
 would not have suffered such fluctuations as they have 
 done. 
 
 The leading Scotch banks, as we have just observed, 
 enjoy this necessary degree of credit. They possess 
 large paid-up capitals, are managed by boards of di- 
 rectors, chosen by the shareholders, in whose prudence 
 and integrity the public have confidence, and it is 
 known whether these capitals are entire, and the banks 
 are successful or not, by the division of profits they 
 annually make. Public confidence in them is conse- 
 quently never shaken. They are under no fear of 
 panics, and are under no necessity to consult in lend- 
 ing money, any other rule than their own interest, and 
 the public welfare. 
 
 Hence, their issues are not liable to fluctuate in the 
 same degree as the English banks. It is true, no 
 doubt, that they do fluctuate. But this they are com- 
 pelled to, by the internal balance of payments. They
 
 190 
 
 cannot for any time, keep their issues either above or 
 below those of the English banks ; but we can ascer- 
 tain whether, or not, any contraction or enlargement of 
 them was produced by the same cause as the corres- 
 ponding enlargement or contraction in those of the 
 English banks, by observing whether they took place 
 at the same time. If they were both the effect of one 
 cause, the effect would be simultaneous; whereas, if 
 the fluctuations in Scotland were consequent upon 
 those in England, and were produced by means of the 
 internal balance of payments, the latter would precede 
 the former. 
 
 Three of the great Scotch banks furnished scales of 
 their issues, from 1810 to 1818 inclusive, to the com- 
 mittee of 1819, on the resumption of cash payments. 
 The chief business of one of them — the Royal Bank, is 
 confined to Glasgow ; but the other two — the Bank of 
 Scotland and the British Linen Company, have agents 
 in every town of the least importance in Scotland ; and, 
 from the scales of their issues, a very fair idea may be 
 formed of the fluctuations in the circulation of Scot- 
 land in the period to which they refer. Let us, there- 
 fore, compare the scales of their issues with the demand 
 for stamps by the country banks, from the war, up to 
 the date they are furnished to. 
 
 For every d£l000 in notes which each of these banks 
 had in circulation in the last quarter of 1809, they 
 had the amount in circulation in the undermentioned 
 years : — 
 
 
 British Linen 
 
 Bank of 
 
 Demand for Stamps by 
 
 Year. 
 
 Company. 
 
 Scotland. 
 
 the Country Banks. 
 
 1813 
 
 1303 
 
 839 
 
 12,615,509 
 
 1814 
 
 1337 
 
 833 
 
 10,773,375 
 
 1815 
 
 1104 
 
 725 
 
 7,624,949
 
 191 
 
 Bank of 
 
 Demands for Stamp by 
 
 Scotland. 
 
 the Country Banks. 
 
 691 
 
 6,4-23,466 
 
 732 
 
 9,075,958 
 
 769 
 
 12,316,868 
 
 British Linen 
 Year. Company. 
 
 1816 940 
 
 1817 918 
 
 1818 1171 
 
 From this table, it will appear evident, that the con- 
 traction and enlargement of issues by the Scotch banks 
 followed, and that much more slowly than it might 
 have been supposed they would, the fluctuations of the 
 English banks. Hence, it is clear, that they were 
 caused by these fluctuations, and it may reasonably be 
 inferred, that their issues would have remained com- 
 paratively steady had it not been for the English banks. 
 Had the latter, therefore, been as solid, and been en- 
 abled to conduct their business on the same principles 
 as the Scotch banks, the fluctuations in the circulation 
 of this country, from which we have suffered so much, 
 would not have occurred : although, it must be ad- 
 mitted, that the power of issuing notes at pleasure is 
 not a power that ought to be possessed by any banks 
 whatever. 
 
 Private Banking should, in strictness of principle ; be 
 prevented by Lai®. — That a reform in our system of 
 country banking is absolutely necessary under any 
 system of currency, need hardly be further insisted upon. 
 It is convenient for the public that the banks should 
 engage to pay all money lodged with them on demand; 
 but most injurious to the public, that they should be 
 required to do so from want of confidence, or panic; 
 and no bank ought to be allowed to exist, that could not 
 preserve the confidence of the public, without deranging 
 the circulation by attempting to pay its creditors with 
 money. A run upon a bank arises from a doubt of its
 
 192 
 
 solvency ; remove the doubt, and the run ceases ; and 
 every bank that cannot do so without resorting to an 
 expedient so hurtful in its consequences to the public, 
 as paying in money, ought to be put down as a public 
 nuisance. 
 
 When there was a run upon the bank of England, 
 confidence was restored by investigation into the state of 
 its affairs. This clearly points out the manner in which 
 all similar cases should be treated. Confidence should be 
 restored by proving the distrust to have been groundless. 
 We are persuaded that none of the principal Scotch 
 banks would ever attempt to meet a panic in any other 
 manner. They would otherwise injure both the public 
 and their shareholders. The one by deranging the 
 currency, and the other by the sacrifices they would 
 have to make in order to obtain money in London. 
 
 But it is better to prevent evils than to cure them. 
 The same evidence which will restore confidence will 
 prevent distrust, and it is clearly desirable that no bank 
 should be allowed to exist, the capital and management 
 of which are unknown to the public. It is, therefore, 
 evident that all private banking should, in strictness of 
 principle, be prevented by law. It is so in some of the 
 States of North America, from which the most bene- 
 ficial consequences have resulted. 
 
 Our Banking System may be sufficiently improved by 
 an intermixture of Joint Stock Banks as in Scotland.*— 
 By the foregoing we have clearly established, that all 
 the fluctuations in prices we have experienced, have 
 been caused by the defective nature of our systems of 
 banking and currency ; that any corn law must be 
 perfectly inoperative in keeping prices steady, so long as 
 they remain in their present state ; that the banks ought 
 not to have the power of issuing notes at pleasure, and
 
 193 
 
 that in strictness of principle no bank ought to be al- 
 lowed to exist, that the public could ever distrust, or 
 in which confidence could not be restored without re- 
 sorting to the expedient of paying in money. We have 
 further seen that a good system of banking, in itself, 
 would be a great practical improvement in the curren- 
 cy; inasmuch as the issues of the Scotch banks would 
 not in all probability have suffered any great fluctua- 
 tions, had it not been. for those of the English. 
 
 Now, to put down private banking in this country 
 would be impracticable; and, to put down, had we the 
 power, one system, until we had another, and a better, 
 would be absurd. But, happily, no violent remedies are 
 necessary. The system of banking in Scotland works 
 "well in practice; yet, in point of number, there are 
 more private than public banks in that country. The 
 charter of the bank of England never extended to 
 Scotland. Banking has, from the infancy of such 
 institutions, been free, either to private or to public 
 companies, and they have both arisen together. But 
 the consequence is, that the private banks, having to 
 compete with public companies, cannot do so without 
 a superior degree of credit; while, being entitled to 
 such credit, they are upheld and supported by these 
 companies, to whom they apply for that purpose when- 
 ever they find occasion. 
 
 In applying to a public bank, in the event of a run 
 upon it, a private bank asks no favour, — it confers 
 one. The object of the public bank being to get 
 its notes into circulation, it is glad of such an op- 
 portunity. The great Scotch banks assist any bank 
 that requires it, with the greatest readiness, not on 
 public principle only, but from a desire to benefit 
 their respective establishments. 
 
 2 B
 
 194 
 
 The propriety of bringing our system into this state, 
 and the means of doing so, are evidently objects enti- 
 tled to, if they may not be said to demand, the imme- 
 diate consideration of both ministers and parliament. 
 
 If large public banks were established in every part 
 of the kingdom, they would first have the effect of 
 purifying the system of private banks, by bringing them 
 into competition with banks of superior credit ; next, in 
 the event of a panic or run upon any private bank, it 
 would have a public bank, as in Scotland, to apply to 
 for a supply of notes, without sending all the way to 
 London, and obtaining such supply by a great sacrifice 
 of property, on the stock exchange ; and finally they 
 would, as we have seen, also contribute to prevent those 
 fluctuations in the currency, from alterations in the value 
 of money, to which the present system is so liable. 
 
 Were our banking system once in this state, the go- 
 vernment, should it appear necessary, might proceed to 
 the l'egulation of its issues upon right principles with 
 the greater confidence. To found a sound system of 
 currency on such an unsound system of banking as the 
 present, would undoubtedly be commencing at the 
 wrong end. Both prudence and common sense point 
 out, that to give greater stability to the banking system 
 of the country, in the first instance, is at once the 
 safest and most proper mode of proceeding, as well as 
 the most practicable : for nothing, in a matter so im- 
 portant, can be done without public opinion be in its 
 favour, and there does not appear to be two opinions 
 as to the propriety of increasing the stability of our 
 banks. 
 
 The Steps taken by Government to improve 
 our Systems of Banking and Currency. — Besides 
 this, government has already taken steps to improve 
 both our systems of banking and currency, though not
 
 i#5 
 
 sufficiently effectual ones; and these steps we will next 
 proceed to examine. They are as follows : — 
 
 1st. The bank of England, at the instance of go- 
 vernment, has proceeded to establish branch banks in 
 different parts of the country. 
 
 2d. The charter of the bank of England has been 
 altered, so far as to permit the establishment of joint 
 stock companies, at the distance of sixty-five miles 
 from London, the partners in such companies being 
 responsible to the whole extent of their fortunes for 
 the engagements of such banks. 
 
 3d. The one pound notes of the country banks are 
 to be withdrawn from circulation, and they are not to 
 be allowed to issue notes under the value of five 
 pounds. 
 
 The Branches of the Bank of England. — With re- 
 gard to the first of these — the establishment of branch 
 banks, much more importance has been attached to it, 
 than it deserves. It was a measure, we have under- 
 stood, of Lord Liverpool's. It was undertaken by the 
 bank with great reluctance, and can lead to no practi- 
 cal results of any consequence either to the bank or the 
 country. Or at all events, there can be no question 
 that it will not produce those results which there is rea- 
 son to believe were expected from it by Lord Liverpool. 
 In his speech on the bank charter amendment bill, 
 Feb. 17, 1826, he stated that " the private bankers 
 " in London had it in their power to circulate their 
 " own notes — a privilege which they all, however, in- 
 " variably waved, because the public would not take 
 " them, so long as they could get those of the bank of 
 " England, in the solvency of which they had more 
 " confidence. So if there were chartered joint stock 
 " banks in other parts of the kingdom, there could be 
 2 b 2
 
 196 
 
 " no doubt that they would immediately absorb the 
 " whole circulation of the kingdom." — Hmisard's par- 
 liamentary debates. 
 
 From this it is evident that his lordship must have 
 thought that the moment the branch banks were esta- 
 blished, they would absorb the whole circulation, and 
 that the measure would be a very substantial improve- 
 ment in our system of currency. 
 
 It is unnecessary to observe that experience has 
 sufficiently proved this expectation not to have been 
 well founded. The branch banks can only get that 
 proportion of the circulation which their general bu- 
 siness will command, and it has hitherto been a very 
 small one. At the same time also, the branches were 
 proposed, not only with a view to the improvement 
 of the currency, but in order to give increased stability 
 to the banking system generally ; and we will examine 
 more in detail the practical results that may be ex- 
 pected from the measure, both to the bank itself and 
 the public. 
 
 In the first place then, the bank can establish branches 
 only in principal towns, where the system of private 
 banking is in its greatest state of perfection — where the 
 profits of banking are such as to induce men of large 
 property to be bankers. These branches also, must 
 necessarily confine their transactions to the town in 
 which they are situated. Whereas, what is most wanted 
 is, public banks in these large towns, that can, by 
 means of branches, extend their operations to smaller 
 towns where the banks are not so stable, and where the 
 business of a banker is frequently coupled with other 
 trades, and not unfrequently rendered subservient to 
 purposes of commercial speculation. 
 
 In the next place, it must either transact the business 
 of borrowing the savings of income on the same terms
 
 197 
 
 as other banks, and lending them out on such securities 
 as it can obtain, or it must, in dealing with the public, 
 confine its mode of lending money, as in London, to the 
 discounting of commercial bills. 
 
 If it were to transact business in the manner first 
 mentioned, the management often or twelve — its present 
 number of branches, would take more attention than the 
 directors could spare under the most improved system 
 of management that could be adopted. The Provincial 
 Bank of Ireland, established in London, has not more 
 than that number, which are managed by local boards 
 of directors, consisting of the most respectable and able 
 commercial men in the respective towns where they are 
 situated, and by a set of the most competent agents that 
 any establishment can boast of. In these local boards 
 of directors and their agents, the directors in London 
 have the greatest possible confidence ; and practically 
 the business of each branch is managed in Ireland, — and 
 well managed. But the directors in London feel that 
 so long as the responsibility rests with them, they 
 cannot repose a blind confidence. Hence they not only 
 direct the general financial arrangements of the bank, 
 but examine into and understand the nature and pro- 
 priety of every individual transaction of any importance. 
 For this purpose, they have to meet every day to 
 inspect the returns and determine the matters referred 
 to them ; and without this laborious attention, they could 
 not hold themselves responsible to the public for the 
 successful management of the concern. It is probable 
 that the management of the Provincial Bank of Ireland 
 occupies as much time and attention as that of the bank 
 of England. 
 
 Hence, if the branches of the bank did the ordinary 
 and legitimate business of banking, they would, in all
 
 198 
 
 probability, require much more attention than the 
 directors could give to them. 
 
 The directors have, consequently, confined their 
 operations to the discounting and granting of bills upon 
 London, and to receiving deposits without interest. As 
 the acceptors reside, and all the bills come to maturity 
 in London, they are, of course, remitted to the bank as 
 soon as discounted, and the directors have thus an 
 opportunity of ascertaining their character the same as 
 if they had been discounted in London in the first 
 instance. 
 
 Assuming that the directors should alter the mode of 
 dealing at their branches as they gain experience, no 
 one can doubt that this was, at least, as prudent a mode of 
 commencing operations as they could adopt. 
 
 As they charge no commission on their discounts, 
 the bank has to depend for its profits on the circulation 
 exclusively. No one, it is evident, will place money in 
 its hands, without interest, when they can get interest 
 for it of the wealthy private banks, which are to be 
 found where its branches are established ; nor can it 
 make any thing by selling bills upon London, at 20 
 days, its date of drawing. The profit upon these bills, 
 say 14 days interest, at 2§ per cent., will not leave 
 more than sufficient to cover the expence of clerks, to 
 pay them in London, allowing nothing for the stamp 
 for which a commutation must be paid to government. 
 Upon the circulation of its notes, therefore, it has, ex- 
 clusively, to depend for its profits. 
 
 But it is only in places where there is a wide agri- 
 cultural district, with few banks, that the circulation is 
 depended upon by the country banks, as a source of 
 profit. Taking an average of the banks of the king- 
 dom, the circulation of five pound notes and upwards,
 
 199 
 
 does not pay half their expences. There are from 
 six to eight hundred country banks amongst whom 
 the circulation is divided — suppose six hundred. The 
 expences of these, estimating the managing part- 
 ner as a salaried clerk, will be at least ^1000 per an- 
 num each, or ^600,000 in the whole. Now, if we take 
 the circulation of five pound notes and upwards, at ten 
 millions, and calculate that three per cent, is made by 
 it, which is the outside, it will leave only three hun- 
 dred thousand pounds. Hence, it is clear that the 
 aggregate profits of country banking do not at all 
 depend upon the circulation ; and how the branches of 
 the bank of England are to make money by depending 
 upon it, it would be difficult to discover. 
 
 Where the circulation will not yield a profit, the 
 private banks charge a commission of five shillings per 
 cent, on the transactions of their customers; where it will 
 yield one, they charge no commission. 
 
 Now, as the branches neither give interest upon depo- 
 sits, nor make advances at any time, in any other way than 
 upon commercial bills, they are not depended upon as 
 a regular bank. People only discount with them for 
 cheapness. Where the circulation is profitable, there- 
 fore, and the banks charge no commission, and the 
 public have not the inducement of cheapness, people, 
 except in times of panic, will generally prefer the 
 private banks, where they can now get as many bills 
 discounted as they wish. The consequence will, of 
 course be, that the bank will get business where the 
 circulation does not pay, but where it does pay, it will 
 get none. 
 
 The circulation also cannot be maintained by dis- 
 counting bills alone. The customers of the bank must 
 keep their accounts with it, and be in the constant ha-
 
 1200 
 
 bit of paying in the notes of other banks, and drawing 
 out those of the bank of England, in order to keep 
 them in circulation. But this, we presume, they are 
 not in the habit of doing. Where the bank has obtain- 
 ed business, therefore, it may not have obtained even 
 what small profit the circulation would yield; and 
 hitherto its branches have been, in all probability, a 
 dead loss. 
 
 The bank will, no doubt, in time, improve its sys- 
 tem of business. But, if its system were ever so per- 
 fect, and its branches realized the very beau ideal of a 
 bank, it must be evident that the operations of any one 
 company can never be of any material importance as 
 an improvement in the banking system of this great 
 country. Banking is any thing but a mechanical busi- 
 ness. It requires mind as well as money. The capital 
 of the bank of England might be sufficient to enable 
 it to undertake the business of the whole nation; but 
 it requires banking skill and an intimate knowledge 
 of individual credit to get it, and turn it to account. 
 This, indeed, might be obtained by means of agents 
 and local directors ; but it is obvious that the directors 
 in London must have some knowledge of what is going 
 forward also, if they are to be responsible for what is 
 done. More than a given amount of business they 
 could not of course superintend, and this amount must 
 be very trifling compared with the business of the 
 kingdom. 
 
 Assuming, therefore, the branches of the bank to 
 realize all that could ever be expected from them, their 
 establishment can be of little importance as a practical 
 improvement in the banking system of the country. 
 At present, they do neither good nor harm. In so far, 
 therefore, the expectations entertained by Lord Liver-
 
 201 
 
 pool, of benefit from the measure, either as an im- 
 provement in the systems of currency or banking, have 
 not been realized. The noise which has been made 
 about them has arisen from the annoyance they give 
 the country bankers, by doing business without profit. 
 
 The Alteration of the Bank Charter. — The next mea- 
 sure we have to consider is, the alteration of the bank 
 charter, by which the establishment of joint stock 
 banks is permitted 65 miles from London, provided 
 each partner be responsible for the engagements of the 
 bank, to the whole extent of his fortune. 
 
 Joint stock banks have proved a very safe and pro- 
 fitable medium for the employment of capital; and few 
 people have any doubt that their establishment in this 
 country would prove as advantageous to the share- 
 holders, as to the public. Four such banks, notwith- 
 standing, and these not very extensive ones, are the 
 whole number that have been formed under this act. 
 
 This has chiefly arisen from the clause, which pro- 
 vides, that each partner shall be responsible for the 
 engagements of the company beyond the amount of the 
 capital subscribed. 
 
 It is the law of private partnerships, that the respon- 
 sibility of partners should be thus unlimited, and a very 
 proper one ; but it may be very much doubted whether 
 it is a sound or a useful principle of law as applied to 
 public companies, more especially to banks. 
 
 In private partnerships, the amount of capital em- 
 ployed is unknown, except to the partners ; and with- 
 out personal responsibility the public would have no 
 security. The success of the business, likewise, de- 
 pends upon the prudence of the managing partner, who 
 must be chosen by the other partners ; and if they were 
 not responsible for his acts, the public would have no 
 
 2 c
 
 202 
 
 guarantee for the prudence of their choice in the first 
 place, or for their looking after his management in the 
 next. They must be made to do so for their own 
 sakes, or they would never do so for the sake of the 
 public. 
 
 The law, consequently, makes every partner person- 
 ally responsible ; but, at the same time, it secures them 
 the power of constantly inspecting the books and state 
 of the concern, and of interfering, when necessary, in 
 the management of it. 
 
 Men will only enter into private partnerships, who 
 have a thorough knowledge of the parties with whom 
 they are connecting themselves, and have the means 
 and opportunity of ascertaining, from time to time, the 
 state of the management, so as to interfere with it, 
 should they see it to be necessary for their own interest 
 or safety. 
 
 A man who would enter into such a partnership, 
 without knowing before hand, whether his partners 
 were equally responsible with himself, to meet any loss 
 that might be incurred, and who would entrust the 
 management of the business to others, and engage, by 
 a voluntary act of his own, not only not to interfere 
 with it, but not even to inspect the books, and ascertain 
 whether the concern was doing well or ill, would be 
 considered little short of an ideot; yet, all this, a per- 
 son, who enters into a joint stock company, is obliged 
 to do. He cannot, in general, know any thing of his 
 other partners, and must, of necessity, sign a deed, by 
 which the power of the management is entrusted to the 
 directors, without his being allowed any interference, 
 or being permitted to know more about the manage- 
 ment, than they are pleased to tell him. 
 
 Few persons, notwithstanding, would have any ob-
 
 203 
 
 jection to take a share in a company on these terms, 
 provided he knew the extent of his adventure in the 
 first instance, and in the next, thought the prospect of 
 gain more than balanced the chance of loss. But he 
 would do so, not upon the principles on which he 
 would enter into a private partnership, but on the 
 same principle that he would play a game at cards. 
 He would put the chance of gain against that of loss ; 
 but he must know before-hand, that the amount of the 
 stake is what he can afford to lose. 
 
 Men take shares in joint stock companies, not as a 
 serious business which they are to have either the trou- 
 ble of looking after, or which they are to be anxious 
 about, as with a private partnership ; but having no 
 objection to embark a given sum in any adventure, 
 with the chances of profit in their favour, they are will- 
 ing to take shares in such companies, on the same 
 grounds as they would take a ticket in the lottery. The 
 expectation of profit may be better founded in the one 
 ease than in the other : but the principle upon which 
 the speculator engages is the same in both instances ; 
 and, in neither, will prudent people embark more than 
 they can afford to lose without being ruined. 
 
 Hence they will not generally enter into joint stock 
 companies, without their responsibility be limited to 
 the amount of the capital embarked, either practically 
 from the nature of the business, or by law. 
 
 There are many undertakings in which, by the na- 
 ture of them, this limitation is secured. People, for 
 instance, have no objection, though they be responsi- 
 ble beyond the amount of the capital subscribed, to 
 take shares in companies for the building of bridges, 
 cutting of canals, or even for the sinking of mines. In 
 2 c2
 
 c 204> 
 
 such undertakings, the money is applied to a specific 
 purpose. It is converted into property ; and, though 
 the speculation may be a bad one, more than the capi- 
 tal embarked in it cannot well be lost. But, in trading 
 upon credit, and more especially in the trade of bank- 
 ing, the case is different ; and, if it be the interest of 
 the public to encourage the formation of joint stock 
 banks, this limitation must be secured by law, or peo- 
 ple will be deterred from embarking in them. 
 
 Banking is a very safe trade when well managed — a 
 very unsafe trade when ill managed. It is likewise a 
 trade that can be conducted without capital. In cut- 
 ting canals, building bridges, mining, &c. as soon as 
 the capital is spent, if the undertaking be incomplete, 
 the works are brought to a stand, and the shareholders 
 are aware of the capital being exhausted. But a bank 
 may go on twenty years in a state of insolvency, if it 
 have credit, and many have done so. Capital is 
 only wanted by the public to guarantee them against 
 loss j and if they be amply guaranteed by personal re- 
 sponsibility, they will give the bank the same credit as 
 if guaranteed by paid-up capital. 
 
 A joint stock banking company could not indeed be 
 carried on, after it had lost its capital, without great 
 fraud or negligence on the part of the directors, which 
 might be properly guarded against in a properly con- 
 stituted bank. But people in this country are not suffi- 
 ciently acquainted with joint stock banking. They pic- 
 ture to themselves the ruin that has fallen upon the 
 partners in private banks, and with the law as it now 
 stands, are deterred from embarking in such undertak- 
 ings. Hence the law defeats its own object. 
 
 But were this not the case, it is still a bad law. The 
 public do not want more security than enough, and
 
 205 
 
 where the capital of a bank is sufficiently large, the 
 responsibility of the partners is of no use to the public. 
 There are five public banks in Edinburgh. The 
 partners in two of these — the Commercial, and the 
 National Bank of Scotland, are responsible for their 
 engagements to the whole extent of their fortunes. 
 The first has a paid-up capital of six — the last of five 
 hundred thousand pounds. The other three are char- 
 tered banks,, and the partners are not responsible 
 beyond the capitals paid up. Two of them — the Bank 
 of Scotland and the Royal Bank, have each a million of 
 capital and upwards ; while the other one — the British 
 Linen Company, has only half a million. Now, the 
 chartered banks enjoy as much credit as the other two, 
 although the united properties of the partners in each 
 of them must be five or ten millions at least, and the 
 British Linen Company enjoys as much credit and 
 business as any of the five, although it offers the least 
 security to the public. It, is found by experience that 
 half a million of capital, under the management of a 
 board of directors, who make a general statement of its 
 affairs, and a dividend every year, is sufficient for the 
 trade of Scotland. All that people want is, to be safe. 
 They do not get more out of a bank than they put in, 
 let its capital be ever so large. Hence, the personal 
 responsibility of the shareholders in the Commercial and 
 National banks is of no benefit either to the banks 
 themselves, or to the public, as regards the additional 
 security it affords. 
 
 Although it is of no importance to the public, with 
 respect to their ultimate security if it be sufficient, 
 whether it consists in the personal responsibility of the 
 shareholders, or in paid-up capital, it makes a wonder- 
 ful difference in the proceedings of the directors. Had
 
 206 
 
 the Commercial and National Banks none, or a very 
 trifling capital, though the public would give them the 
 same credit, the directors would be more timid in their 
 mode of doing business than the most timid private 
 bank ; and if there is one bank that proceeds more upon 
 principle than another in lending out its money and 
 regulating its issues, it is the Bank of Scotland, in 
 consequence of its having twice the capital of its other 
 three competitors : for the chief business of the Royal 
 Bank is in Glasgow — it has no other agencies, and is 
 not brought so much in competition with the rest as 
 they are with each other. 
 
 Now, the particular wants of this country are, 
 banks with large paid-up capitals, to correct by their 
 steadiness of proceeding those vacillations to which 
 our system is so peculiarly liable. But the tendency of 
 the present law is to prevent such banks being formed. 
 
 As a general principle, every bank will call up as 
 little capital as it can dispense with. Private banks call 
 up none. If we set the sum that the partners are 
 indebted to the private banks, on the average of the 
 kingdom, against the sum of capital subscribed by them, 
 there can be little doubt that, on the average, there is 
 no capital whatever employed in private banking. 
 Indeed, partners as frequently go into private banks for 
 the purpose of getting capital out, as of putting it in. It 
 is this facility of entering into a business of great profit, 
 without capital, that tempts country gentlemen so fre- 
 quently to become partners in such banks, to their ruin. 
 
 The same principle operates with Joint Stock Com- 
 panies. The directors are always willing to conduct 
 the business with as little capital as they can dispense 
 with. Calling up capital does not increase the profits 
 of the trade; it only diminishes the per centage on the
 
 207 
 
 amount of the capital employed; whereas, the directors 
 are naturally desirous to make the largest dividends 
 possible. Hence in banks, even where it is not the 
 wish of the directors to call up insufficient capitals, they 
 call up as little as they can. But where the partners 
 are known to each other, their personal responsibility 
 has frequently the effect of inducing the directors to call 
 up less than is desirable; or what is worse still, it leads 
 to the establishment of banks upon personal respon- 
 sibility alone, in places where the business would not 
 justify the calling up a proper capital. 
 
 This is the chief defect of the Scotch system. In 
 every little place there is a joint stock, or rather a joint 
 credit banking company : in some places, even where 
 they cannot find proper people as directors to manage 
 them. To commercial men their management is very 
 simple. But it would be as proper to set a ship to sea 
 with a landsman for a pilot, as to entrust the manage- 
 ment of a bank to people unacquainted with accounts 
 and business. 
 
 Two of these companies have within these few years 
 stopped payment. Many of their poorer shareholders 
 were ruined, while the rich were compelled to make up 
 the share of loss which the poorer partners were unable 
 to pay. Neither of them had more than twenty thousand 
 pounds capital. Neither of them were established in 
 towns where a suitable board of directors was to be 
 had. Both of them, in consequence, left the manage- 
 ment exclusively to the cashier or managing clerk ; and 
 in both cases these officers were tempted to abuse their 
 trust, speculate with, and squander away the bank's 
 money, and dupe and blind the directors and share- 
 holders. The result was, that they lost some way about 
 one hundred thousand pounds each.
 
 208 
 
 Sums as large as that, have been lost by the great 
 banks ; but no one, not even the shareholders, ever felt 
 the loss. These banks always take care to have a large 
 reserved fund of previously accumulated profits, out of 
 which such losses are paid, and no alteration is in con- 
 sequence made in the dividends. But if a bank has no 
 reserved fund, the loss of one hundred thousand pounds 
 upon a capital of five times that amount, would only 
 reduce the real value of the shares one-fifth ; where- 
 as the loss of that sum on a capital of twenty thousand 
 pounds would render it necessary for the shareholders 
 to pay up, in addition, four times the sum they had 
 previously advanced. 
 
 This is a thing the poorer shareholder would not 
 calculate upon, and he would, in consequence be ruin- 
 ed. He would think he could not be wrong in doing 
 what his richer neighbour did, and would perhaps em- 
 bark all his surplus wealth in his share of the concern; 
 so that, when called upon for more money, the little 
 capital would have to be taken from him, by which he 
 supported his family. The rich man, who paid his de- 
 ficiency, might lose a greater sum than him ; but, he 
 would not be so great a sufferer : for he would not lose 
 his all. In those cases, it is not always those who lose 
 the most money, that are the most to be pitied. 
 
 Any law must be defective, which enables men to set 
 up banks upon personal responsibility, rather than 
 paid-up capital ; and this is the tendency of the act in 
 question. It introduces into public companies one of 
 the chief vices of private banks. It makes them, as far 
 as it can, joint credit, instead of what they ought to be, 
 joint stock companies, or companies in which each 
 shareholder is represented by his capital. It induces 
 banks to be set up without capitals, and transfers the
 
 209 
 
 loss from the public as creditors, to the public as share- 
 holders in them. 
 
 In point of principle, it is more correct that the loss 
 should fall upon the shareholder; but, in point of fact, 
 the hardship is as great in one case as in another. The 
 shareholder, who lost a thousand pounds, would not 
 expect to make more than twenty or thirty pounds per 
 annum additional by his share. The creditor, who lost 
 a thousand pounds, must have had but few dealings 
 with the bank, if he did not derive annually a greater 
 advantage than that from it. The object of the legis- 
 lature should be, to prevent as much as possible, the 
 public from suffering in either character; and this 
 would be best attained by limiting the responsibility of 
 the shareholders to the amount of the capital paid up. 
 
 In such case, no banks could get business without 
 large paid-up capitals. The shareholders may deceive 
 themselves as to the amount of capital requisite — they 
 may be misled by their desire to make profit without 
 capital. But the public would not be so deceived. 
 They have no interest to blind them. They would only 
 deal with those banks whose capitals offered ample se- 
 curity; and if their capitals did offer such security, 
 more would be quite superfluous. 
 
 Hence it must be obvious, that the personal respon- 
 sibility secured by the act for altering the charter of the 
 bank of England, can never be any thing but injurious. 
 If banks be set up with sufficient capitals, it is of no 
 use to the public. If they be set up with insufficient 
 capitals — it, in the first place, cramps their operations, 
 and diminishes their efficiency to the public, as dealers 
 in the savings of income; and in the next, it involves 
 the shareholders in a risk, which the law ought rather 
 to prevent, than induce them to incur. 
 
 2 D
 
 210 
 
 We admit that this risk is not very great. We may 
 venture to say, that since the publication of the Essay 
 on Banking, the nature, constitution, and internal ma- 
 nagement of banks, have become better understood ; 
 and it is not at all likely that banks in any place will 
 be intrusted to directors, who will not look after them, 
 and understand how to do so. But it is on every ac- 
 count desirable that banks should be as large as they 
 can be, consistent with an intimate personal knowledge 
 of their customers. Large banks must be situated in 
 large towns, where there is a better choice of direct- 
 ors. They pay their officers better, and diminish the 
 temptation to fraud — by increasing their respectability 
 in society, they offer a greater inducement to honor- 
 able conduct. By the division of labour also, which 
 takes place in a great bank, the checks are rendered 
 more perfect, and fraud less practicable. 
 
 Tn small places where they have branches, and 
 where the checks would otherwise be less perfect, all is 
 kept right by the strict inspection and controul exer- 
 cised by the parent bank — an inspection which small 
 banks in such places would not enjoy. A large bank 
 likewise, as we have seen, keeps its issues steadier. 
 The surplus funds of one branch is lent out to another. 
 The expenditure and savings of income are thus made 
 to balance each other, without producing so much de- 
 rangement in the currency. 
 
 A bank indeed may be too large. To be very use- 
 ful to the public, it must have an intimate knowledge 
 of individual credit; and one board of directors can 
 only know the people of a very small part of the king- 
 dom. But the public soon discover whether a bank 
 can attend properly to them or not, and when it has 
 more business than it can manage its business leaves it :
 
 211 
 
 so that there is a very effectual restraint upon the bu- 
 siness which any bank can undertake — it cannot ob- 
 tain more than it can properly transact. But the larger 
 it is, consistent with good management, the better. 
 
 It will thus be evident, that the act does not pro- 
 vide properly for the wants of the country. First, 
 while it permits the establishment of joint stock banks, 
 it throws a stumbling block in the way of their being 
 formed ; and next, it has the tendency, so far as it may 
 prove a practical measure, to encourage the formation 
 of banks without sufficient capitals; while, what the 
 country particularly wants, is a number of large banks, 
 in different parts of the kingdom, to sustain and support 
 our system of private banking, and also to give the pub- 
 lic in every place, by means of their branches, a choice 
 of dealing with a public bank, if they think proper. 
 
 Not that we have any idea that the public banks 
 would so materially injure the private banks as some 
 imagine. Private banks, in good credit, have an 
 advantage over public companies, in the secrecy and 
 greater civility and attention they pay to their cus- 
 tomers. The intermixture besides, of the public com- 
 panies, would practically have the effect of increasing 
 the confidence of the public in the private banks. 
 What those which enjoyed public confidence lost in 
 amount of their business, would probably be fully made 
 up by the increased security and comfort with which 
 they would afterwards do it. 
 
 The act was, no doubt, a very valuable step towards 
 the improvement of our banking system, when passed. 
 But, it was admitted, on this very point, of imposing 
 unlimited responsibility on the shareholders, to be 
 defective. Parliament ought, no doubt, to have been 
 allowed to do what it thought best for the interests of 
 2 d 2
 
 212 
 
 the public without any such restraint. But the clause 
 was imposed by the bank of England when it consented 
 to the relaxation of its charter. 
 
 As it has rendered the act, in a great measure in- 
 operative, it seems now desirable that the bank should 
 be requested to waive it. But if the directors are still 
 unwilling to do so, we have no idea that it will be 
 of much consequence, provided ministers think proper 
 to grant charters to banks with the express condition, 
 that the limitation of responsibility shall commence as 
 soon as the bank charter expires; presuming them of 
 course to have called up, in the mean time, a certain 
 amount of capital. 
 
 This we believe, with a decided opinion expressed, 
 and a disposition shown by ministers, to promote by 
 their influence and patronage the formation of these 
 companies, would be effectual in bringing about that 
 improvement in our banking system, which appears not 
 only desirable, but absolutely necessary to the well- 
 being of the country. 
 
 It has been thought that in the event of limiting the 
 responsibility of the shareholders in banks, they ought 
 to be obliged to publish annually a statement of their 
 affairs, or that some check for the public security should 
 be imposed upon the amount of their transactions. One 
 extreme is apt to beget another in legislation as in other 
 things. From allowing private banks to exist without 
 any regulations at all for the public safety, it is thus 
 proposed to make surety doubly sure. But, let us con- 
 sider what are the natural, if we may so term it, guaran- 
 tees offered by a joint stock company, with the respon- 
 sibility of the shareholders limited to the capital paid 
 up. First, there is the capital which every body knows 
 and can trust to, or not, as they please. Next, they are
 
 213 
 
 managed by men well known, in general, as men of 
 character, knowledge, experience, and ability, who can 
 have no motive but a desire to give general satisfaction ; 
 and these men publish every year a statement of the 
 affairs of the bank, as explicit as to whether the capital 
 be entire or not, as any statement can be. This they do 
 by making dividends of profits ; and if the capital be 
 not entire, and there be no profits, there can be no 
 dividend. 
 
 The chief object of any check must be to secure the 
 public against the fraud of directors: for if they be ho- 
 nest, or any one of them be honest, the- public can 
 never be in danger. The only fear is, that they may 
 unite to deceive the public, by making dividends with- 
 out profits; and that they should do this until the whole 
 of a large capital was sunk. As if it were possible for 
 the shareholders to be so far mistaken, as to chuse 
 from ten to twenty men of fortune, character, and ex- 
 perience for directors, and yet there should not be one 
 amongst them who did not prove, not merely a knave, 
 but an egregious fool : for what could men of fortune 
 gain by such conduct? But if we admit that the share- 
 holders could get so far wrong, as to chuse such a 
 board of directors, and the public, as to confide in a 
 bank under their management, we do not believe that 
 they could lose the capital without its being known. 
 
 A large capital in banking is not so easily thrown 
 away. The losses of a bank are generally known, and 
 always magnified. Any capital sufficiently large to ob- 
 tain the bank business, we are persuaded could not be 
 lost without the public knowing of it long before it was 
 gone, or even materially diminished, in spite of any 
 thing that a board of directors could do. Hence it 
 does appear to us that while we allow private banks to
 
 214 
 
 be set up without any known capitals, without any 
 knowledge of the parties to whom their management is 
 intrusted, and without any evidence whatever being 
 furnished of their success, that it would be a very in- 
 consistent piece of legislation, to clog joint stock banks 
 at their outset with a number of inconvenient and em- 
 barrassing restraints, in order to provide against such 
 improbable suppositions — restraints which can have but 
 one practical effect, and that is, to prevent their being 
 formed altogether. 
 
 Time no doubt, will point out improvements, which 
 may be made with advantage, in the laws relative to 
 these companies. But it seems desirable that they 
 should be suggested by experience, and future consi- 
 deration. A law framed to meet every speculative and 
 suppositious difficulty, is certain to create a great many 
 xeal ones. 
 
 We have thus ventured to explain the principles on 
 which charters to limit the responsibility of the share- 
 holders ought to be granted, in preference to banks 
 being established on personal responsibility; and we 
 have been more explicit on this subject than we should 
 otherwise have deemed necessary, from our having per- 
 ceived that an opposite opinion was gaining ground. 
 At the same time, it is proper to mention, that the 
 desirableness of granting such charters has been fully 
 admitted by government. 
 
 Lord Liverpool (Feb. 17, 1826), in the debate on 
 the bank charter amendment bill, states : — 
 
 " But, what was the system of banking in existence 
 " at present? Why, the most rotten, the most inse- 
 " cure, the very worst, in every respect, that could 
 " possibly be conceived. Any petty tradesman, any 
 " grocer, or cheesemonger, however destitute of pro-
 
 215 
 
 " perty, might set up a bank in any place; whilst a 
 " joint stock company, however large their capital, or 
 " a number of individuals exceeding six, however re- 
 " spectable and wealthy they may be, were precluded 
 " from doing so by the present system. One more 
 " absurd, therefore, he repeated, could not be con- 
 " ceived." 
 
 " The beneficial consequences resulting from the 
 " full liberty for banks to have any number of part- 
 " ners, was manifested by its effects in Scotland. He 
 " knew he might be told that it was in vain for him to 
 " look to the example of that country, because they 
 " had not the power of granting charters. But the 
 " Bank of England had consented to allow the restric- 
 " tion as to the number of partners in country banks 
 " to be removed. But, he trusted, that if they did not 
 " think it prudent to establish branches themselves, 
 " they would not suffer the people to wait until the 
 " year 1833, exposed to the consequences of the pre- 
 " sent system, but set the public free, by allowing the 
 " crown to grant charters to public banks. He be- 
 " lieved that it would not, in any respect, injure them ; 
 " but, on the contrary, while it would be attended with 
 " the greatest advantages to the country at large, it 
 " would be beneficial also in its consequences to the 
 " bank itself." — Hansard's Par. Debates. 
 
 Mr Huskisson stated (Feb. 13, 1826) in the debate 
 on the bank charter and promissory note acts, that " He 
 " allowed that it would be a great improvement, if, 
 " under a proper system, chartered banks were esta- 
 " blished with only a limited liability." — Hansard's 
 Parliamentary Debates. 
 
 Mr Peel in the same debate observed that " He 
 " confessed himself sanguine in the hope, that gentle-
 
 216 
 
 « men of property would be found, many more than 
 <c enough to execute the proposed plan, who would be 
 " actuated not by the mere desire of profit, but by the 
 " wish to see a better, firmer, and more useful system of 
 " banking in their districts, and that they would lend the 
 " assistance of their capital and their exertions to ensure 
 " the success of such establishments. He most 
 " sincerely trusted the great obstacles to such insti- 
 ** tutions, the want of a charter, would be removed. 
 " He hoped that the directors of the bank would 
 *' seriously consider whether any great advantage could 
 " result to themselves from the absence of charters in 
 " the proposed establishments ; and whether, on the 
 " other hand, great advantages would not be afforded 
 " to the country by their having that facility afforded 
 them." — Hansard's Parliamentary Debates. 
 
 Should the present government be actuated by the 
 same desire to improve our banking system, as was 
 thus felt in 1826, there can be little doubt that 
 such an improvement may be accomplished, even 
 though the bank should persist in refusing to grant 
 charters ; and that the present government should not 
 be influenced by the same desire cannot be conceived. 
 
 The Act for the withdrawal of all Notes under the 
 value of Five Pounds from circulation. — Having thus 
 examined the second measure proposed by Ministers for 
 the improvement in our systems of banking and 
 currency, we will now proceed to consider the third — 
 the withdrawal of all notes under the value of five pounds 
 from circulation. By this act, " all promisory notes 
 payable to bearer on demand, issued by licensed 
 bankers in England, or by the bank of England, for any 
 sum less than £5, bearing a date previous to the 5th of 
 February, 1826, or which may have been stamped
 
 217 
 
 previous to that day, shall and may, continue to be 
 issued or re-issued, and circulated until the 5th day of 
 April, 1 829, and no longer." 
 
 Hence, on the 5th of April next year, all the small 
 notes of the country banks must be withdrawn from 
 circulation. 
 
 From the speeches of ministers on proposing this 
 measure, it appears they considered that the increas- 
 ed issues of the country banks, in 1824 and 1825, 
 had led to the over-trading and bubble mania of that 
 period ; that this spirit of speculation had produced a 
 re-action, which had led to the panic ; that it again 
 had been increased by the groundless fears of the hold- 
 ers of small notes; and that the withdrawal of these 
 from circulation would contribute to prevent the re- 
 currence of such evils in future — it would place in the 
 hands of the lower classes, a currency in which their 
 confidence could not be shaken, and take from the 
 banks in a degree, at least, the power of increasing and 
 diminishing their issues. It had also become evident, 
 that gold and notes would not circulate together ; and 
 it was desirable to withdraw the notes, in order to ob- 
 tain, and maintain in the country, a larger quantity of 
 gold coin. 
 
 We have already pointed out, what appears to us 
 was the cause of the panic; and we will not stop, at 
 present, to analyze the views which ministers entertain- 
 ed on the subject. We will, at once, proceed to con- 
 sider how far the withdrawing the small notes from 
 circulation is likely to have the effect of preventing 
 such evils in future, and also what other consequences 
 may be expected from the measure. We have no 
 doubt that the ministers will be glad if it be proved, 
 either by argument or experience, that the measure is 
 
 2 E
 
 218 
 
 calculated to produce the good expected from it. But 
 
 we are equally convinced, it would be betraying 
 
 great suspicion of their integrity to have any doubts 
 upon the subject, — that if it should really be an objec- 
 tionable one, they will be equally desirous to have the 
 objections to it pointed out, in order that they may be 
 considered before it receives its final accomplishment: 
 for, though the act was passed two years ago, it has 
 still, in a great degree, to be carried into practical effect 
 — ver} r few notes having, as yet, been withdrawn from 
 circulation. 
 
 Thus, the three chief purposes expected from it are 
 — 1st, that it will contribute to prevent fluctuations in 
 the currency and prices, which lead to panics; 2nd, 
 that it will take away the chief fuel of panics, so that 
 when they do occur, they will not so easily spread, and 
 become general ; and, 3rd, that it will preserve a larger 
 quantity of gold in the country. 
 
 1st. With regard to preventing fluctuations, it must 
 be obvious that, so far as the currency consists in gold, 
 it can neither be increased nor reduced in quantity, by 
 internal causes. It was, therefore, only reasonable to 
 suppose that, so far as substituting gold for paper went, 
 the measure would have the effect desired; but the mi- 
 nisters did not, at the time, sufficiently understand the 
 workings of the currency. 
 
 We have already explained, that the proportion be- 
 tween the circulation in notes and in gold, must be at 
 all times preserved. People pay into the banks what 
 money they have, but they take out what they want ; 
 and they will not take gold when they want notes, nor 
 notes when they want gold. 
 
 Now, so long as the circulation chiefly consists in 
 bank notes, the banks must charge a fixed rate of inte- 
 rest; and so long as they are exclusively private banks,
 
 219 
 
 they can lend money on no other securities in the coun- 
 try than bills. Hence, their issues must continue to 
 enlarge and contract. It' the currency were entirely 
 gold, the savings of income could not be lent out above 
 their value, more especially to only one class of bor- 
 rowers. Much less likely is it to be so lent with the 
 chief part of its paper issuable at pleasure. Let us 
 then examine how the system will work, with the pro- 
 posed intermixture of gold. 
 
 Suppose, for instance, I were to give a banker in the 
 country an order to sell me a thousand pounds worth 
 of stock, or say nine hundred, to avoid fractional parts. 
 At present, he would get the stock or funds in Lon- 
 don equivalent thereto, and I would take his notes, and 
 his issues would be increased nine hundred pounds ; 
 but if the circulation consisted of only two-thirds of his 
 notes, I should of course take only six hundred pounds 
 in his notes, and three hundred in gold. 
 
 To supply the increased circulation of gold, he 
 would, consequently, have to bring a proportionate 
 quantity from London, and the transaction would 
 stand thus — With three hundred pounds of the pro- 
 ceeds of the stock, he would obtain gold in London, to 
 bring into the country, and the other six hundred he 
 would keep himself, and supply me with his notes, in 
 return for it. On the other hand, if I took in nine 
 hundred pounds, two-thirds of which would consist in 
 his notes, and the other third in gold, and ordered him 
 to purchase stock for me, to that amount, six hundred 
 pounds of the stock, or funds in London to purchase 
 it, he would have to supply himself, and his issues 
 would be contracted to that extent, while he would 
 purchase three hundred pounds worth, by sending the 
 gold up to London for that purpose. 
 2 e 2
 
 220 
 
 If, instead of ordering him to purchase or sell stock, 
 I, in the first instance, deposited the money with him, 
 and he could not lend it out again ; and, in the next, 
 drew it out of his hands, without some other party hav- 
 ing placed an equal amount with him, the effect would 
 be the same. In the first place, his issues of notes be- 
 ing contracted six hundred pounds, he would have 
 three hundred pounds more gold than he had any use 
 for, which - he would send up to London, to be employ- 
 ed on the Stock Exchange. In the next, his issues be- 
 ing increased six hundred pounds, he would have a 
 demand for three hundred pounds worth more of gold 
 to circulate with them, and would have to obtain that 
 amount from London, and raise the money in the Lon- 
 don money market, by the sale of stock, or otherwise 
 to obtain it. 
 
 It is obvious, therefore, that though the gold in the 
 kingdom would not be increased or diminished, yet the 
 contraction and enlargement of issues, and fluctuations 
 in prices, which, as we have seen, depend upon the 
 country circulation, would still occur; with this addi- 
 tional evil — that, with a contraction of the currency, the 
 gold would be driven up to London, and would create 
 an abundance of money on the Stock Exchange; and 
 on the other hand, when the currency was enlarged, a 
 demand for money on the Stock Exchange, in order to 
 obtain gold, would be experienced, and a scarcity of it 
 be produced. 
 
 Now, it is this abundance and scarcity of money in 
 London, that is the immediate cause of panics. Had 
 the currency in 1824- and 1825 partly consisted in gold, 
 it is evident that the scarcity of money which produced 
 the panic, would have been very much increased. 
 
 Nor would the enlargement of issues in any material
 
 <221 
 
 degree have been prevented. It was not a voluntary 
 one, as the ministers were led to suppose. If I chuse 
 to sell out stock and take out the banker's notes, he 
 cannot object if he mean to continue a banker; and if 
 I draw money out of his hands, he must supply me, 
 though he have, in part, to obtain money from London 
 for that purpose. Should he in doing so have to make 
 any great sacrifice by selling stock at a loss, he might 
 be induced to prevent the enlargement of his issues, by 
 withdrawing, in an equal degree, his advances made to 
 other persons. But he must have managed his Lon- 
 don account very ill if he were under any such necessi- 
 ty. Every banker reserves a sum in London sufficient 
 to cover all such fluctuations. This he does not make 
 any purchases of stock with ; but lends it, from time to 
 time, for short periods, at the best interest he can obtain. 
 Out of this balance he would purchase the gold requir- 
 ed ; and neither lose the opportunity of extending his 
 issues, nor incur the risk of disobliging any of his 
 customers. Hence it is by no means probable, that 
 the substitution of gold for the small notes, would have 
 any material effect in preventing fluctuations in prices ; 
 while it would, by producing fluctuations in the money 
 market of London, lead directly to the production of 
 those panics which it is the very object of the measure 
 to prevent. 
 
 Indeed a currency, entirely metallic, would not be 
 totally free from objections, so long as our country 
 banks have not credit to enable them to lend money on 
 other securities than commercial bills. 
 
 When money, for example, became abundant, and 
 could not be lent out on these securities, instead of the 
 currency contracting in the country as at present, and 
 no effect being produced in London, the surplus would
 
 222 
 
 be all sent up to London to be employed on the Stock 
 Exchange at any rate of interest that could be had; and 
 on the other hand, when a demand for money, by a 
 bad harvest or otherwise, arose in the country, instead 
 of an increase of issues taking place, without the Lon- 
 don money market being in any way affected as at pre- 
 sent, the increased circulation of the country would 
 occur at the expence of that of London, effected 
 through the medium of the Stock Exchange, and a 
 panic might be added to the other afflictions of the 
 period. The value of the soundest system of currency 
 would be subverted by such a system of banking as we 
 have at present. 
 
 At all events, there can be little doubt the withdrawal 
 of the one pound notes from circulation, will not prevent 
 fluctuations, and so far from preventing panics, it will 
 have a direct tendency to cause them. 
 
 2nd. As to the tendency of the measure to prevent 
 the spreading of panics, as well as to remove that 
 which is frequently an original cause of them, it must 
 be evident, thai the small notes are chiefly in the 
 hands of the lower classes, who are easily alarmed 
 and induced to run upon a bank; while, a panic thus 
 begun is too apt to communicate itself to the other 
 classes. With a gold circulation, they, of course, 
 could not either take root, or be aggravated from this 
 cause. There could be no want of confidence in it. 
 Hence, the substitution of sovereigns for small notes 
 could not fail to be so far useful. It would take away 
 the chief fuel, or most combustible material, by which 
 panics are fed. 
 
 But taking away the one pound notes, is by no 
 means coming at the root of the evil. The panic in 
 the country was generated by the panic in London,
 
 223 
 
 where the private banks do not issue any notes at all. 
 There is no instance of a general panic originating with 
 the holders of small notes. Besides which, there are 
 no panics in Scotland, although the banks do issue one 
 pound notes. An improvement in the stability of the 
 banking system is evidently, therefore, what is required 
 to prevent general panics ; and if private banks should, 
 in consequence of issuing one pound notes, continue to 
 exist under the apprehension of, and should experience 
 occasional runs, neither they nor the country will be the 
 worse for it. A run which stops a weak bank before it 
 becomes a rotten one, does no evil to the community; 
 more especially if, as in Scotland, there is always a 
 strong bank ready to take up its trade and supply its 
 place. 
 
 It may be a good thing to remove the fuel of panic, 
 but it is a better to extinguish the fire ; and this is to 
 be done by the establishment of public banks in 
 different parts of the country — a measure which was 
 contemplated at the passing of the bill in question; but 
 which has hitherto been prevented for the reasons al- 
 ready pointed out. 
 
 And 3rd. As regards the effect of the measure, in 
 keeping gold in the country. 
 
 In determining the value of this effect of the measure 
 — an effect which it will undoubtedly have, it seems 
 proper, in the first place, to ascertain the use of gold, 
 when we have it. Now we know no other use of mo- 
 ney, than as an instrument of circulation. When gold 
 imported, has the effect of elevating the scale of our 
 prices, and of enabling us to sell dear, and buy cheap, 
 in trading with foreign nations, we can understand the 
 value of gold, as a means of national wealth ; but how 
 we are, in the least, to be advantaged by having gold
 
 224 
 
 instead of paper, when it merely answers the same pur- 
 pose, we are at a loss to conceive. Were gold substi- 
 tuted for notes, it would become a fixture ; it would 
 never leave the country, but merely answer the same 
 purpose that the paper had done before. It would add 
 no more to the wealth of the nation, than golden leaves 
 in his ledger would add to a merchant's profits. Any 
 given scale of prices is as well produced by a paper, as 
 by a golden instrument of exchange, provided the fo- 
 reign demand for our manufactures will enable us to 
 maintain it. 
 
 Hence, keeping gold in the country can be of no 
 advantage as a means of national wealth. 
 
 But it may be advantageous as a national conveni- 
 ence — it may be a more practically useful instrument 
 of exchange. Let us therefore determine whether it 
 be so or not. 
 
 With this view, the most important point for consi- 
 deration is, whether gold coin, or the bank notes it will 
 supplant, be the most liable to be counterfeited. 
 
 Gold is not, or at least has not hitherto been, so li- 
 able to be counterfeited as silver. But the coiners are 
 obtaining more skill in imitating it every day. The 
 Times of the 18th of February says, " Scarcely a day 
 ff passes but numerous informations are received at the 
 " different Police offices, from tradesmen, of having 
 •" taken bad sovereigns. Females, respectably dressed, 
 " are generally described as the utterers, and with 
 ff considerable success, the base coin being uncommon- 
 " ly well executed." 
 
 Now, if base coin can be passed in the shops of Lon- 
 don, where suspicion is always alive, the best means of 
 trying its quality exists, and the knowledge of the dif- 
 ference between good and bad is improved by hourly
 
 225 
 
 experience, how much more likely is it to be passed 
 with success at country fairs and other places, amongst 
 comparatively simple and inexperienced people. There 
 can be no doubt that if the circulation of gold were ge- 
 neral throughout the country, that the crime of coun- 
 terfeiting it would be most materially increased. 
 Whereas, it is very well known, that the forgery of 
 the English country bank notes, which generally have 
 a limited circulation — easily as many of them might be 
 forged, is not by any means a matter of common oc- 
 currence; nor is it too much to say that the forgery of 
 bank notes may be altogether prevented. The enqui- 
 ries upon the subject have hitherto been directed to the 
 obtaining of a note which could not, by any possibility, 
 be forged ; and this was found impracticable. But it 
 was entirely overlooked, that notes might be had which 
 •would not be forged, and this would do quite as well. 
 
 We were led by an official situation, into a practical 
 acquaintance with the subject, and in another publica- 
 tion,* have succeeded, we believe, in satisfying every 
 reasonable mind, that the prevention of forgery is not 
 so very impracticable as has been supposed. It is, we 
 understand, the intention of a member of considerable 
 talent, who represents a northern county, to bring the 
 subject before parliament, and we hope he will do so. 
 If the crime of forgery can, it ought to be prevented ; 
 and though the enquiries on the subject have hitherto 
 led to no useful result, improvements are continually 
 making in every art, and what was impossible some 
 years ago may be very possible now. 
 
 At all events, as regards the English country bank 
 
 * Essay on Banking, 6th edition, pages 117 to 133. 
 2 F
 
 2Z6 
 
 circulation, there cannot be any doubt, that substituting 
 gold for notes, would increase rather than diminish the 
 crime of counterfeiting. 
 
 The next point of comparison is, with regard to the 
 integrity of their value. This, bank notes preserve en- 
 tire, and never require any other trouble than counting. 
 Whereas, gold coin wears down after it has been some 
 time in circulation, and not only loses its original value, 
 but comes to have different values. It therefore be- 
 comes necessary to weigh every piece of coin ; for which 
 purpose, every man who has much money to receive, 
 must carry a pair of scales in his pocket; while those 
 who do not do so, frequently find themselves in 
 possession of light money, which they cannot pass with 
 honor, or get rid of without trouble, independent of the 
 loss. Hence gold after it has been a few years in 
 circulation, becomes, compared with paper, an in- 
 tolerable nuisance. Besides this, paper is lighter, and 
 in other respects more portable and convenient. 
 
 The measure, therefore, will not introduce a more, 
 but a less useful and convenient instrument of circu- 
 lation, and has nothing to recommend it on that head. 
 
 We have thus seen — 1st. That the measure will not 
 prevent fluctuations in the currency and prices. 2d. 
 That it will not be so effectual a means of preventing 
 panics, as establishing public banks; and 3rd. That while 
 gold, as a substitute for paper, adds nothing to national 
 wealth, it is an infinitely worse instrument of circu- 
 lation. 
 
 And thus far, we believe, we have answered, or 
 furnished an answer to almost every argument that has 
 been, or can be used, in favor of the measure. How 
 far the reasoning is conclusive we must leave to the
 
 2&7 
 
 reader to determine. But we have by no means ex- 
 hausted the objections to it. There are others which 
 we have not yet stated, and these are — 
 
 1st. The gold currency will cost us, at least, two 
 hundred and twenty-five thousand pounds per annum. 
 
 The ministers computed the circulation of small 
 notes to be, at least, six millions. But in this com- 
 putation they did not make any allowance for the stock 
 which the banker finds it necessary to keep on hand. 
 The amount obtained was computed from the average 
 consumption by the wear and tear of actual circulation ; 
 but if we assign to each bank, a stock of 5,000 sovereigns 
 over and above this amount, which is no great allow- 
 ance, and take the number of banks at six hundred, it 
 is evident that it will require three millions in addition 
 to the six, to supply the place of the notes to be with- 
 drawn, so that the total sum required will be nine 
 millions. 
 
 Presuming each note to cost three half-pence, and to 
 last only two years, it will make the cost in wear and 
 tear of maintaining a paper circulation to be about 6s. 
 per cent., which will not be more than the cost in the 
 wear, tear, and loss, of a gold currency. Now, money 
 permanently lent, is worth about 4 per cent; but pre- 
 suming that the nation would only save 2\ per cent, by 
 a paper currency, the cost of nine millions of gold 
 must be considered a standing charge upon the country 
 of two hundred and twenty-five thousand pounds per 
 annum. 
 
 2nd. The measure is objectionable, because it has a 
 tendency to undermine our corn laws. 
 
 Ministers, when they proposed the measure, compu- 
 ted there would be sufficient gold in the country to 
 supply the place of the one pound notes. They com- 
 2 f 2
 
 228 
 
 puted the quantity in the country to be seventeen mil- 
 lions ; and this they thought would be sufficient for 
 every purpose. 
 
 But whatever surplus of gold there was, must have 
 been in the bank of England ; and if it had not nine 
 millions to spare, the ministers were wrong in their 
 estimate. 
 
 In London, as we have before mentioned, a greater 
 proportion of gold cannot circulate, so long as the bank 
 does not refuse to receive it, than sufficient to furnish 
 small change for its notes. All money is continually 
 passing through the hands of the different banks, and 
 though the people always take in what description of 
 money they have, they always take out that description 
 which is most convenient to them, and they never trou- 
 ble themselves with sovereigns, when notes will answer 
 their purpose. Hence, whenever the gold in circula- 
 tion becomes excessive, compared with notes, the bank- 
 ers come to have an undue proportion of it, which they 
 send to the bank to be exchanged for its notes, and 
 vice versa. 
 
 The gold, in Lancashire, by the same rule, is remit- 
 ted by the banks up to London, when they have too 
 much of it, and sent from London to Lancashire, when 
 a greater proportion is required. In other parts of the 
 kingdom, there was no gold in circulation. Hence, it 
 is clear, that whatever surplus of gold there was, at the 
 time, was in possession of the bank. There was no 
 more in circulation than the circulation required* 
 
 But, it is well known, that the seven millions of gold 
 exported previous to the panic, had reduced the stock 
 in the bank below what it considers a fair average a- 
 mount for it to possess, and that it had no surplus 
 whatever. It is, therefore, clear, that so far from hav-
 
 229 
 
 ing a sufficient supply, to fill up the vacuum that would 
 be caused by the withdrawal of the one pound notes, 
 we had not a spare sovereign to apply to that purpose. 
 It is therefore evident, that the whole of the nine mil- 
 lions required, must be obtained from abroad. 
 
 Now, we cannot obtain such a sum of money from 
 abroad, without lowering the scales of prices in the 
 countries in commercial connexion with us; and, by 
 consequence, without increasing the difficulty we shall 
 have, in maintaining by corn laws, our scale of prices 
 at 62s. per quarter. 
 
 We know of no sufficient reason why, in our trade 
 with other countries, 60s. Winchester measure, should 
 be as high a price in 1828, as 80s. was in 1815, except 
 that we have taken from those countries, since the war, 
 upwai'ds of twenty millions of their circulating medium, 
 and reduced their scale of prices so low, that they can- 
 not purchase our manufactures, unless at a level of 
 prices reduced in a corresponding degree. Their im- 
 provements in manufacturing skill, combined with the 
 lower price of labour, and most other things which en- 
 ter into the cost of manufactures, by enabling them to 
 furnish themselves with some articles cheaper at home, 
 may have in part contributed. But whether they have 
 not the means of purchasing our manufactures at a 
 higher price, or whether they can supply themselves 
 cheaper at home, is of no consequence. By drawing 
 more money from them and reducing their scale of 
 prices still lower, we at once contribute to both these ef- 
 fects. We not only diminish their power of purchas- 
 ing our manufactures, but we increase their power of 
 under-manufacturing us in those articles in which a ri- 
 valry exists. 
 
 Now, to do this would be very inconsistent, while we
 
 230 
 
 are attempting to keep up our scale of prices by corn 
 laws. It is important, with a view to the adjustment 
 of all internal contracts, that our prices should be kept 
 up at 62s. ; and it is somewhat doubtful, that our ma- 
 nufacturing superiority will enable us to keep them at 
 that level. We ought rather, therefore, to be desirous 
 to part with some of the gold we have, in order that 
 the level of prices in other countries might be raised, 
 and our scale of prices keep at 62s. with less difficulty. 
 With a proper system of currency, one half the gold 
 we have would be ample. The rest would be of no 
 more real value to us, than as much old iron ; and it 
 would be a folly not to let it circulate in other countries, 
 if we could render effective by it, any laws which we 
 conceive it desirable to enact for the general good. 
 
 At all events, to pass one law to keep our prices up, 
 and another to undermine and keep them down, could 
 never be intended. The measure is, therefore, objec- 
 tionable, because it must have the latter effect. 
 
 3rd. The measure is objectionable, because it cannot 
 properly be carried into effect without another agricul- 
 tural distress. 
 
 In the first place, gold cannot be purchased in other 
 countries, and imported, merely because we want it. 
 The bank, indeed, can never purchase gold in any 
 other place than London ; and it can always purchase 
 it in London when the balance of payments is in our 
 favour. When it is imported it is taken to the bank, 
 because it is less troublesome than taking it to the 
 mint ; and, because large notes are wanted for it in the 
 first instance. The gold is, therefore, brought to it 
 when the balance of payments is in our favour, without 
 any trouble on its part. 
 
 But we shall suppose the balance not to be in our
 
 231 
 
 favour — that our exports amounted to 30 millions, and 
 our imports to the same; so that the balance was 
 neither for nor against us. Let us then suppose, that 
 this being the case, the bank wished to purchase nine 
 millions of gold in France and Holland. If we consi- 
 der for a moment, we shall find that the bank could 
 not, under such circumstances, make any such pur- 
 chase. 
 
 It is clear, that if it did make the attempt, the gold 
 must be paid for with commodities exported. The 
 bank would purchase bills upon France or Holland, 
 drawn for commodities ; and these bills it would remit 
 to purchase the gold with. But this would not increase 
 our exports. It would only add nine millions to our 
 imports. Our imports, inclusive of gold, would be 39 
 millions, while our exports were only 30 millions. The 
 balance of payments would be consequently turned 
 against us to the extent of nine millions: and the bank 
 would experience a demand for gold to be sent out of 
 the country to the extent of the sum of gold it had im- 
 ported. The whole would, therefore, be sent back to 
 the places from whence it came. 
 
 It is clear, that without the balance of payments be 
 in favour of the country, in consequence of the amount 
 of its imports being less than the amount of its exports, 
 that the bank cannot increase its stock of gold. 
 
 Hence, in order to obtain nine millions of gold, our 
 imports must be diminished, and our exports increased; 
 and we come to the question, how is this to be pro- 
 duced ? How shall the people of this country be com- 
 pelled to consume a smaller quantity of foreign com- 
 modities, while foreigners shall be induced to purchase 
 a larger amount of our manufactures? 
 
 There is but one way in which this can be brought
 
 !232 
 
 about, and that is by producing a general fall in prices. 
 This would, at once, cheapen our manufactures to fo- 
 reigners, and diminish our power of purchasing foreign 
 commodities. It was the way in which we obtained 
 the importation of gold in 1815 and 1816, and in the 
 years 1819, 1820, 1821, 1822, and 1823. The agri- 
 cultural class, and those dependent on them, being half 
 ruined, were compelled to reduce their consumption of 
 foreign commodities; while the amount of our exports, 
 if they did not materially increase in their value, did 
 not fall off. They increased in quantity adequate to 
 their fall in price. 
 
 It is very well understood by the bank directors that 
 their only way to cause a balance of payments in our 
 favour is, by a contraction of their issues; and they 
 must be equally conscious that a contraction of their 
 issues, if it have the effect they expect upon the coun- 
 try banks, must produce a general fall of prices. It is 
 clearly the result of all experience, as well banking as 
 otherwise, that we can only obtain gold by reducing 
 our scale of prices sufficiently low for that purpose. 
 The next question, therefore, is, how low that must be, 
 to obtain the amount required. 
 
 By a fall in price, from the average of 106s. in 1813, 
 to 63s. in 1825, we obtained seven or eight millions of 
 gold. By a fell from 83s. in 1818, to 43s. in 1822, we 
 obtained about twenty-five millions. But as part of 
 this was re-exported, it will be more proper to say, 
 that, by a fall from the average of 8Cs. to the average 
 of from 50s. to 60s., we obtained about sixteen or eigh- 
 teen millions, which did not leave us. Making a rough 
 estimate from this, and, taking into account that the 
 balance is not in our favour, if it be not against us at 
 the present time, when prices are not much above 50s.,
 
 <233 
 
 we are warranted in the inference, that we cannot ob- 
 tain nine millions more of gold as a permanent addi- 
 tion to our stock, without the scale of our prices be re- 
 duced for a iew years at least to 40s. or 35s. ; and this 
 of course would produce another period of agricultural 
 distress. 
 
 4th. The measure is objectionable, because it must 
 produce another panic, or a suspension of cash pay- 
 ments. 
 
 The amount of notes in circulation, previous to the 
 panic, was estimated to be at least six millions, besides, 
 of course, the stock of notes on hand, and the stock of 
 stamps unused. We may estimate the stamps unused, 
 at a million. The banks have also, since they could 
 obtain no more stamps, re-issued many of their old 
 notes, which they had laid by as done with. These 
 we may also estimate at a million — making a supply of 
 two millions, in addition to the stock of notes on hand, 
 and in circulation. Now, we do not imagine that the 
 quantity worn out, in the last two years, will exceed 
 two millions, or one year's ordinary consumption : for 
 the bankers, in consequence of not being able to re- 
 place them with new ones, have kept the old notes in 
 circulation, until they are ready to fall in pieces in the 
 hand. There is probably, therefore, not a much less 
 amount of small notes in circulation now than six mil- 
 lions ; but, to be within the truth, we will suppose the 
 amount to be only four millions. These will have to 
 be taken out of circulation, and replaced with gold, 
 before April, 1829; and, besides this, allowing, as be- 
 fore stated, to each bank only five thousand sovereigns, 
 as the stock in its drawers, they will have to supply 
 themselves with at least three millions more. So that, 
 on the most moderate computation, seven millions of 
 
 2 G
 
 234 
 
 gold will have to be obtained by the country banks, in 
 little more than twelve months from this time. 
 
 Their only way to obtain this supply is to send up to 
 London for it. Stock or other securities must be dis- 
 posed of on their account in the money market, and 
 with the proceeds the gold must be obtained of the 
 bank of England. 
 
 Without stopping at present to consider whether the 
 bank can supply seven millions oi' gold or not, let us 
 first consider whether seven millions of money can be 
 raised in the money market ; presuming, of course, 
 that the bank can supply the gold, and that on doing 
 so, it will cancel its notes, which is, strictly speaking, 
 its most legitimate course. 
 
 Except what is hoarded, all the money in London 
 must either be in circulation, or in the bankers' hands. 
 There is none on the Stock Exchange. It is merely the 
 place where the bargains for the purchase and sale of 
 stock are concluded. Now, neither money hoarded 
 nor yet in circulation is in the money market. The 
 money in the money market is that which may be 
 borrowed or is applicable to the purchase of stock, and 
 this is always obtained by cheques on bankers. Hence, 
 the only money in the money market is that which is 
 in the bankers' hands, or rather in their drawers; for 
 the chief part of that, which in common parlance is 
 said to be in their hands, is not, as we have before 
 stated, in existence. 
 
 But bankers in London do not find it necessary to 
 keep so large au amount of cash in their drawers in 
 proportion to their business, as if situated in the coun- 
 try — as the bankers in Lancashire do for instance. 
 The facility of borrowing and lending on the Stock Ex- 
 change, almost from day to day, prevents this necessity.
 
 285 
 
 The greater part of the transactions of the bankers 
 amount to a mere change of securities. A cheque up- 
 on one bank for any amount, is sure to be paid into 
 another ; and if the funds of one are reduced thereby, 
 those of another are increased. If one has in conse- 
 quence to borrow money, or draw in money lent upon 
 the Stock Exchange, another has an equal surplus to 
 lend; so that all cheques for money not wanted to be 
 sent out of London, merely produce a change of secu- 
 rities amongst the bankers. 
 
 But when gold is wanted to be sent into the country, 
 the money is not taken out of one bank to be put into 
 another — it is taken to the bank of England to obtain 
 the gold with ; and the notes are cancelled. Hence 
 the question is, have the bankers in London seven mil- 
 lions in their drawers to spare for that purpose ? If 
 they have not, the money cannot be raised in the mo- 
 ney market. 
 
 Seven millions would be a hundred thousand pounds 
 for each bank ; and we should conceive, for the reasons 
 stated, that not only have they not a hundred thousand 
 pounds to spare, but that they cannot have more than 
 that sum altogether. It is even probable twenty 
 thousand pounds each, upon the average, would reduce 
 the money in their drawers below the amount they 
 would like to have there. It is not the business of a 
 banker to have an unnecessary stock of money in his 
 bank. When any party means to draw a very large 
 cheque, he generally gives him a day or two's notice. 
 
 Hence, as the country bankers drained the London 
 banks of money, which they could not replace on the 
 Stock Exchange, they would be obliged to withdraw 
 their loans to their customers ; and thus take the mo- 
 ney out of current circulation. Their customers, in or- 
 2 g 2
 
 236 < 
 
 der to raise it, would be obliged to bring their stocks 
 of goods into market ; while there being no mercantile 
 buyers, or buyers to hold, in consequence of the scarci- 
 ty of money, which all would feel, the consumptive de- 
 mand would be forestalled, and the goods would have 
 to be forced on to the market at any price. This being 
 the case, all orders would be suspended until the stocks 
 on hand were disposed of, and a general stagnation of 
 trade, and want of demand for manufactured goods, 
 would be experienced throughout the country. These 
 would also be accompanied b} ? a great fall in the price 
 of stocks, and universal embarrassment. 
 
 There are always some banks that are worse off than 
 others upon such occasions. These would stop, and 
 then there would be a run upon all ; by which others 
 would be compelled to stop, and a general panic would 
 be brought on. 
 
 Thus, it is not difficult to perceive, that if funds for 
 the purchase of seven millions of gold, have to be ob- 
 tained by the country bankers in the money market of 
 London, in the next twelve or thirteen months, that 
 another panic is quite inevitable, unless indeed the 
 bank should re-issue its notes at interest in the purchase 
 of exchequer bills, &c. as fast as they come in upon it 
 in a demand for gold. 
 
 This would, no doubt, prevent the evil. While the 
 bankers on the one hand disposed of securities for notes 
 in order to purchase the gold, the same notes would be 
 re-issued directly or indirectly in the purchase of secu- 
 rities. It would make but little difference in which 
 way the bank re-issued the notes, they would come di- 
 rectly or indirectly into the London bankers' hands ; 
 who, in consequence, would feel no inconvenience 
 whatever from the operations of the country banks.
 
 237 
 
 It practically would amount to this — the country banks 
 would turn over seven millions of securities to the Bank 
 of England, and would obtain gold for them. While 
 the circulation of London and money in the money 
 market, would remain as before. 
 
 But it is not probable that the bank has 7 millions of 
 gold. If we assume that it had 5 millions at the panic; 
 that 2 millions of the amount issued at that period was 
 hoarded, and has not yet been returned to it ; (for we 
 understand that some of the country banks paid away 
 large sums in gold, which they cannot perceive has 
 been returned into circulation) and also assume that it 
 has increased its stock three millions since then, it will 
 have only six millions. At any rate, it does not seem 
 unreasonable to suppose it very possible, that the bank 
 at this moment has not seven millions of gold ; and 
 that such a demand upon it would render a suspension 
 of cash payments inevitable. Besides, with a balance 
 of payments against the country, or with the possibility 
 of its going against the country, the bank could not 
 allow itself to be drained so low, as supplying a de- 
 mand for seven millions of sovereigns would drain it, 
 without a previous order of government to suspend 
 cash payments whenever its safety required it so to do. 
 
 But it may be enquired, how could the bank prevent 
 such a demand, should the g6vernment not give such 
 an order ? Nothing would be more easy. All it has 
 to do, is to allow its circulation to contract; and the 
 country bankers could not, by any sacrifice upon the 
 Stock Exchange, obtain seven millions of its notes. So 
 long as the bank maintains its credit, and has no run 
 upon it from it from distrust, three or four millions is 
 probably the largest demand for gold it can, in that 
 case, experience. The demand for gold, which led to
 
 238 
 
 the last panic, was for seven millions. But the bank 
 re-issued its notes to the extent of half that amount, 
 and the panic was produced by a contraction of its 
 issues to the extent of the other half only. 
 
 By allowing its issues to contract, the bank, of 
 course, would save itself at the expence of the nation. 
 It might, by such a course, keep clear of danger, but 
 the nation would be convulsed from end to end. Still 
 that would not be the fault of the bank, if the nation 
 would not render it safe in the event of its adopting a 
 different course, by authorising it to suspend cash pay- 
 ments. The bank must take care of itself; and must 
 be guarded against the consequences of measures which 
 it does not adopt for its own sake, but that of the 
 country. 
 
 Hence the measure, as it now stands, must lead 
 either to another panic, or to a suspension of cash 
 payments, and that too, not for a very limited period. 
 
 It thus appeal's that the act for withdrawing the small 
 notes from circulation will not be a beneficial, but a 
 very hurtful measure. While it will not prevent fluc- 
 tuations and panics in the way ministers expected, and 
 will substitute an expensive and inconvenient for a 
 cheap and convenient instrument of circulation, it will 
 also, in the way which ministers certainly did not ex- 
 pect, undermine our corn laws, produce another agri- 
 cultural distress, and either another panic or another 
 suspension of cash payments. 
 
 It is unnecessary, therefore, to observe, that it ought 
 without delay to be either modified or repealed. It 
 appears to us, indeed, that it would be better to repeal 
 it altogether. 
 
 The circulation is at present deficient, and it is de- 
 sirable to increase it. The sooner our prices are at
 
 239 
 
 62s. the better for all classes — for the labouring poor 
 as well as for the agriculturists. A low price of corn 
 can only be desirable when it is the result of abund- 
 ance ; and not when it both checks its production at 
 home, and prevents its importation from abroad. 
 Nothing can be more mistaken than to suppose, that 
 the working manufacturers, and poor in towns, benefit 
 by the ruin of the agriculturists. Quantity is what they 
 want. It makes no difference at what price. As we 
 have before explained, the price must always be deter- 
 mined by the money which the working classes them- 
 selves have to give for it. 
 
 It must also be evident to the advocates of a free 
 corn trade, that since the importation of foreign corn 
 is not to be allowed under a given price, the sooner it 
 is at that level, and we enjoy the extent of corn trade 
 the law will permit, the better. They will, no doubt, 
 admit that half a foreign loaf is better than none. 
 
 We are not, as has been seen, amongst the advocates 
 of a free corn trade ; but we think that there can be no 
 doubt that the sooner prices are at their proper level 
 the better ; and it is evidently the duty of the legisla- 
 ture, as far as it is in its power, to restore them to that 
 level as soon as it can. 
 
 One means of doing so would be to repeal the small 
 note bill. The effect might not be very considerable; 
 but it would be beneficial so far as it went, indepen- 
 dently of avoiding the prospective evils which we have 
 ventured to point out. At the present moment, in- 
 deed, every measure with reference to the currenc}', 
 clearly ought, as far as possible, to contribute to its 
 enlargement, and not to its contraction. 
 
 There is also another reason for its total repeal, 
 which it may be proper to mention, and it is — that the
 
 240 
 
 introduction of gold into circulation, can only be tem- 
 porary. 
 
 We may venture, perhaps, to assume, that as soon as 
 ever the currency can, without danger or inconveni- 
 ence, be put upon a solid basis, and be regulated on 
 the principles of a metallic currency, it will be so ; and 
 we have no idea that the time will be very long before 
 this be effected. The Duke of Wellington is not a 
 young man ; yet we have little doubt that it will be ac- 
 complished under his auspices. Nor is it unworthy his 
 attention. Our currency is our great inward enemy, 
 which it is necessary to our prosperity as a commercial 
 nation, should be subdued ; and though the undertak- 
 ing may not be so difficult, nor the achievement so 
 brilliant, as those his grace has been accustomed to; 
 its accomplishment will confer a lasting benefit on the 
 country, do no discredit to his administration, and be 
 at all events, a source of pleasing satisfaction to himself. 
 
 Now, when this event is accomplished — when our 
 currency is put upon a solid basis, and issued upon 
 right principles, and when as money it becomes quite 
 as valuable to the public as gold, it is highly probable 
 that all gold will be taken out of circulation, for two 
 reasons. 
 
 1st. Paper is, or may be rendered, and will become a 
 better instrument of circulation than gold — and when 
 this is the case, government will be induced to o-ive the 
 public the option of having either gold or paper — as 
 they, in fact, have at this present moment, except in 
 London and Lancashire — and the gold will cease to 
 circulate, because notes will be preferred; and 
 
 2nd. Because a gold currency is calculated to in- 
 crease the evils resulting from scarcity; whereas with 
 a paper currency this tendency of a gold currency may 
 be counteracted.
 
 Ml 
 
 When a scarcity occurs, and our population is starv- 
 ing, it becomes the only consideration how we can ob- 
 tain the largest supplies of corn from abroad. With 
 this view our ports are thrown open to the importation 
 of it, duty free ; and frequently a bounty is superadded 
 to what other encouragements to importation, we are 
 enabled to afford. The result of this is, that we ge- 
 nerally get a large additional supply. But as it does not 
 at all follow, that a scarcity of corn in this country, is 
 to increase the consumption of our manufactures abroad, 
 it generally happens, that the greater part, at least, of 
 the additional supply thus obtained, has to be paid for 
 with money. 
 
 The community may also be divided into two classes. 
 Those who have fixed incomes in whatever way derived, 
 or incomes which, though affected by circumstances, 
 are sufficient to command the necessaries of life ; and 
 those whose means of subsistence depend upon the re- 
 gular demand for manufactures, &c. &c. the consump- 
 tion of which is certain to fall off upon any diminution 
 of annual income. 
 
 It is not difficult to perceive that this latter class 
 must always suffer most in a bad harvest. If a consi- 
 derable portion of the former class should be in some 
 degree pinched, in consequence of the rise in price that 
 may occur, that will be all they will suffer. But a great 
 portion of the latter will be thrown out of employment 
 either in part or altogether. 
 
 It is clear, that the less the first mentioned or richer 
 class have the power of consuming, the better for the 
 other ; and as the only means of diminishing their 
 power of consuming is by an elevation of price, it must 
 follow that the dearer corn is, in a scarcity, the better 
 for the poorer class. 
 
 2 H
 
 242 
 
 For example, suppose that one-half the means of 
 support be destroyed ; that no rise in price should, in 
 consequence, take place; and that one-half of the com- 
 munity should just consume as much as before, it is 
 clear that the other half would be starved to death. 
 
 Whereas, if the price of corn were to rise so high as 
 to reduce the consumption of the richer class one-half, 
 it is equally clear that the poorer cla'ss would get the 
 other half. Hence, there is no exception to the ge- 
 neral principle we endeavoured to establish in the 
 former part of this work — that the higher the prices 
 the better for the poor. It appears to be an advantage 
 to them, even in years of famine. 
 
 The price of corn, in fact, is determined by the 
 quantity of money the working classes have to give for 
 it. The higher it is, therefore, the greater monied de- 
 mand there must have been for their labour; and, of 
 course, the greater demand there is for their labour, in 
 a scarcity, the greater proportion will they obtain of 
 the existing supply. 
 
 But, when foreign corn is paid for with money, 
 though corn falls in price, the demand for manufactur- 
 ing labour is diminished. An amount of income, which 
 must, of necessity, have given employment to labour, 
 at home, is spent, in giving rise to a foreign income, 
 which is not consumed in this country. Hence, the 
 manufacturing labourer is in a worse situation than 
 before. Corn becomes cheaper; but his power of ob- 
 taining it is diminished in a still greater degree. The 
 very act of increasing the supply, takes from him the 
 power of purchasing it. 
 
 The importation, of course, benefits all those who 
 have incomes, independent of labour, or who have 
 fixed wages, not dependent upon the varying demands
 
 M3 
 
 of trade, or whose incomes are not so far reduced as to 
 do more than curtail their expenditure in the luxuries 
 of life. But the sufferings of that class, who were pre- 
 viously in the worst state, are not relieved, but render- 
 ed still greater, by the large importations of corn, which 
 generally occur in a scarcity. 
 
 The bad effects of an importation of corn, thus paid 
 for, do not end here. The farmer, in the first place, 
 loses the price he would otherwise get for his crop, in 
 the year of scarcity; while, in the next, the exportation 
 of money produces a permanent depression of prices, 
 from which they do not recover, until the money is, by 
 degrees, re-imported, in consequence of the reduced 
 scale of prices, diminishing our consumption of foreign 
 commodities, and turning the balance of payments in 
 our iavor. 
 
 At present, as a scarcity of corn produces a scarcity 
 of money, or the savings of income, the issues of our 
 banks are generally increased, and the currency en- 
 larged in a scarcity, although the balance of payments 
 be against us at the time. But we can never get the 
 gold back again, without a fall occurring afterwards to 
 as great an extreme. By this, what is very properly 
 termed a revulsion, is always produced; and both the 
 manufacturing and agricultural classes in their turn 
 suffer the greatest distress. So that if the currency be 
 not contracted during the years of scarcity, with our 
 present system, this is more than counterbalanced by 
 the subsequent fall which generally takes place, and in 
 fact, must take place before the gold can be re-imported. 
 
 Now, if our currency were paper payable in gold, 
 
 but without any in circulation, the proper course in a 
 
 scarcity would be to throw open the ports to corn, 
 
 duty free, and hold out every possible encouragement 
 
 2 h 2
 
 244 
 
 to its importation ; but at the same time suspend cash 
 payments, and prevent the gold from being exported, 
 and the currency from contracting. 
 
 The effect of this would be, to prevent, in the first 
 place, any money from being diverted from the em- 
 ployment of manufacturing labour at home. By this, 
 injury would be prevented, both to the manufacturing 
 labourer and farmer. The one would have more mo- 
 ney to give, and the other would get more money for 
 his corn. In the next place, as gold could not be ob- 
 tained with which to pay for the corn, foreign bills of 
 exchange would rise in value. 
 
 For example, suppose I were to send a thousand 
 pounds worth of manufactured goods to the Continent, 
 I should draw a bill upon the party for them to whom I 
 sent them. This bill, if it could be obtained by a per- 
 son importing corn from the Continent, would pay for 
 a thousand pounds worth ; and as corn could be im- 
 ported duty free, and would bring so high a price be- 
 sides, a great many persons would be desirous to im- 
 port it, provided they could obtain the means of paying 
 for it. They all consequently, as they could not get 
 gold with which to pay for it, would be desirous to 
 have my bill, and instead of offering me a thousand 
 pounds for it — the sum for which it would be payable 
 in gold upon the Continent, they would bid one against 
 another, until I should perhaps obtain eleven or twelve 
 hundred pounds for it. They would calculate, that 
 the loss they would thus have upon the bill, would be 
 much more than made up by the extraordinary profit 
 they should make upon the corn. 
 
 The effect of this would be, that I should immedi- 
 ately ship off another adventure of goods to the Conti- 
 nent : for though I should sell them considerably be-
 
 245 
 
 low prime cost, I should still make a profit by the sale 
 of my bill. 
 
 A premium would by this means be given for the ex- 
 portation of manufactures. The manufacturing la- 
 bourers would thereby obtain additional employment, 
 by which they would acquire the means of purchasing 
 the foreign corn imported. Instead of its coming to 
 aggravate, it would come to relieve the distresses of that 
 class upon whom the scarcity would press hardest ; 
 while the relief would be afforded without injury to any 
 other class of the community. 
 
 This policy is so obvious, that there cannot be any 
 doubt, when our currency is put on a right footing, 
 and the subject properly understood, all gold will be 
 taken out of circulation ; and as extremes are apt to 
 beget each other, it is by no means improbable that 
 the present pretty general feeling, in favor of excluding 
 notes, under five pounds, will be superceded by an 
 equally strong desire to try the experiment of issuing 
 them for five shillings. 
 
 If, therefore, our currency, which no one can doubt, 
 must, and that too, at no very distant period, be made 
 secure, and be put under proper regulations, the intro- 
 duction of gold into circulation, at present, must be, 
 comparatively speaking, a very temporary measure, 
 both for the above reason, and because paper, as be- 
 fore mentioned, is a better instrument of circulation. 
 Hence, if it were, so far as it went, an improvement, it 
 would still not be worth obtaining by any sacrifice. 
 For this, therefore, as well as the different other rea- 
 sons pointed out, we venture to submit that a total re- 
 peal of the act in question, or, a modification of it 
 equivalent thereto, would be desirable.
 
 APPENDIX. 
 
 An account of the state of the crops, from 1819 to 
 1824, abstracted from the Farmer's Magazine; toge- 
 ther with the state of the prices, and demand of the coun- 
 try bankers for stamps, in each succeeding year : the 
 crop of each year, it being remembered, affecting the 
 prices of the year following. 
 
 'Annual Demand 
 
 State of the Crops from the Farmer's J* s i a '"Pf b 'J 
 Magazine. 
 
 , — Wheat, in many districts of") 
 id, is not superior as to quantity, 
 
 1809. 
 Scotlan< 
 
 and much coarser as to quality, than the ! 
 preceding year; but, in England, it is i 
 generally inferior, perhaps to the extent | 
 of 5 below a common average. J 
 
 1810. — Taking it as a whole, the crop ") 
 maybe estimated as of superior quality. 
 To be more particular, wheat, almost in | 
 every case, is excellent as to grain ; but, ! 
 in many districts, it was thin on the f 
 ground, especially on clay soils, and by I 
 no means so productive as the years | 
 1804, 5, 6, and 7. 
 
 1811. — The wheat crop is, more or'} 
 less, defective in every district, but more I 
 so in some districts than in others. By | 
 our accounts, it can hardly be estimated ! 
 above 5-8ths of an average; but what is | 
 surprising, the quality of the grain is I 
 generally good, which seldom occurs | 
 when the crop is a failing one. J 
 
 Aver. Price 
 
 of Wheat 
 
 per Quarter 
 
 10,517,519 
 
 8,792,433 
 
 10,577,134 
 
 105s. 
 
 93 
 
 125
 
 24? 
 
 1812. — Perhaps it might not be far") 
 from truth to state wheat generally as I 
 an average crop. That which was se- | 
 cured in September, was very good, ! 
 both in quantity and quality; but that ; 
 which was not gathered before October, I 
 has suffered from the wiud, rain, and | 
 frost. J 
 
 1813. — The crop, over the whole] 
 island, abundant in quantity, and excel- ! 
 lent in quality. Wheat is everywhere [ 
 above an average crop. J 
 
 1814-. — There is every reason to be-] 
 lieve, that the late crop of wheat and j 
 oats is considerably below an average [ 
 one in regard to quantity ; and that f 
 wheat, in particular, is still more infe- | 
 rior in quality. J 
 
 1815. — A most abundant crop of all ) 
 kinds of grain has been secured in the / 
 best condition. ) 
 
 1816. — Wheat is universally reported 
 as a defective crop, both in quantity and 
 quality; probably still more in the lat- 
 ter than the former, but altogether to 
 the extent of one-third, and in many in- 
 stances one-half. 
 
 1817. — The wheat of this year though " 
 greatly superior to that of last year, is 
 not so far as we have seen, to be com- 
 pared with the produce ot favourable 
 years, for plumpness, colour, or weight. 
 It is beyond all doubt, that the crop is 
 not equal to an average one. 
 
 1818 Although the stack-yards are" 
 
 certainly defective in bulk, the produce 
 in grain will be found fully equal to an 
 average crop. 
 
 1819. — In shallow hot soils, and in" 
 more early situations, the grain is in 
 many respects of an inferior description. 
 In districts where crops do not fully 
 ripen but in very favourable seasons, 
 and on deep moist soils, the produce 
 good and abundant. In Scotland, the 
 crop fully equal to an average one. 
 
 AnnualDemand 
 
 for Stamps by 
 
 the Country 
 
 Bankers. 
 
 Aver. Price 
 
 of Wheat 
 
 per Quarter 
 
 12,615,509 
 
 10,773,375 
 
 7,624,949 
 
 6,423,466 
 
 9,075,958 
 
 12,316,868 
 
 5,640,313 
 
 3,574,894 
 
 107s. 
 
 74 
 
 64 
 
 75 
 
 94 
 
 83 
 
 72 
 
 65
 
 248 
 
 Annual DciHanrt 
 
 for Stamps by 
 
 the Country 
 
 Bankers. 
 
 1820.— Taking all kinds of grain to- 
 gether, there can be no doubt that the 
 produce is at least equal in quantity 
 to that, of seasons of medium fertility. 
 Wheat especially is represented as an 
 abundant crop, though it has suffered 
 in some situations from mildew, and 
 from being laid by heavy rains in the 
 early part of the autumn; but in point 
 of quality, it is perhaps rather inferior 
 to the produce of the former years, even 
 where no reason is assigned. The want 
 of heat during the ripening is, perhaps 
 sufficient to account for this. 
 
 1821. — In quantity, taking all kinds 
 of grain together, it will probably not 
 be below an average; but in quality, it 
 will. The wheat is the best crop of all, 
 but smut, rust, and mildew, have 1 been 
 more general than usual. 
 
 1822. — -Wheat seems to be every- 
 where a good crop; but, in Scotland, it 
 is rather below that of last year, both 
 in quantity and quality. 
 
 1823. — All crops have suffered, more 
 or less, from the bad weather, but wheat 
 has suffered the most, and must be be- 
 low an average by 20 or 25 per cent., as 
 far as it is yet possible to ascertain the 
 deficiency. 
 
 1824. — It is now generally believed, 
 that the crop is not much short of a 
 fair average, and the quality excellent. 
 
 Aver. Price 
 
 of Wheat 
 
 per Quarter 
 
 3,987,582* 54s 
 
 4,217,341 
 
 4,657,589 
 
 6,093,367 
 
 8,532,438 
 
 43 
 
 51 
 
 62 
 
 66 
 
 * If the notes or 1816 and 1817, were worn out in this and the following 
 fear, which is probable, the demand for stamps does not indicate the con- 
 traction of the currency which occurred. 
 
 NEWCASTLE : PRINTED BY EDW. WALKER.