TheStrangeDeathofMercantilistEngland:
GoldandProtectionism,1815‐1846
TimothyAlborn
LehmanCollege/CUNYGraduateCenter
PapertobediscussedattheColumbiaUniversitySeminaronEconomicHistory
Pleasedonotcitewithoutauthor’spermission
In1935thehistorianGeorgeDangerfieldascribedwhathecalled“the
strangedeathofLiberalEngland”toaconjunctionofConservativebacklash,Irish
unrest,suffragettespectacle,andtrade‐unionmilitancyinthedecadebeforeWorld
WarOne.1Acenturyearlier,mercantilistEnglandunderwentsimilarlystrange
deaththroes,renderedstrangerstillbythefactthatmostliberaleconomists
consistentlyclaimed,throughoutthefirsthalfofthenineteenthcentury,thatDavid
HumeandAdamSmithhadalreadykilledmercantilisminthe1770s.2Thesame
conclusionregardingmercantilism’stimeofdeathhaslongbeenreachedbymost
historiansofeconomicthought,whogenerallysettleonHumeandSmithastheend‐
pointoftheirhistoriesofmercantilism.Thefactthatprotectionismremained
Britain’scoreeconomicpolicyforseventyyearsafterSmithhas,ofcourse,notgone
unnoticedbyhistoriansofeconomics;buttheyhavetendedtofollowthoseclassical
economistswho,after1820,reserveddiscussionsofmoneysupplytotherealmof
debatesoverBankofEnglandpolicy,andtendedtoframetradepolicyintermsof
rentandcostofproduction,withRicardo’slawofdiminishingreturnsloominglarge.
1GeorgeDangerfield,TheStrangeDeathofLiberalEngland(NewYork:SmithandHaas,1935).
2AlthoughthetermmercantilismdidnotentercommonparlanceinBritainuntilthelate1838(the
OEDlistsareferencefromTheNewMoralWorldin1838),theclusterofideasthatitimplied(which
weresetoutinAdamSmith’sTheWealthofNations)wereclearlyrecognizedthroughouttheperiod,
andoftenreferredtoas“themercantilesystem”orthe“theoryofthebalanceoftrade.”
1
HistoriansofeconomicswhofocusonBritishmonetarythoughtinthefirst
halfofthenineteenthcenturyhavespentrelativelylittletimeonthecornlaws:
hence,forinstance,FrankFetterdevotedasolitarypagetothecornlawsinhis
historyof“Britishmonetaryorthodoxy”between1797and1875.3Historianswho
focusonthecornlawdebates(whoarefewerinnumber),havespentevenlesstime
addressingthefrequentreferencestobulliondrainsthatbothsidesmadeduringthe
courseofthedebate.D.P.O’Brien’sexhaustivebookonJ.R.McCulloch,forinstance,
providesonlyabrief(albeitcritical)noticeofMcCulloch’sefforttolinkBritain’s
goldreserveswithitstradepolicy.ApartialexceptionisBoydHilton’sCorn,Cash,
andCommerce,whichmakesapointtobringthetwotopicstogether;buthis
analysisendsin1830,beforetheanti‐cornlawcampaignwasofftheground,and
focusesmainlyoninternaldebateswithinParliament.4AnotherisAnnaGambles’s
historyofprotectionistthoughtbetween1815and1852,whichclearlylocatesthe
placeofgoldsuppliesintheseargumentsbutneitherdwellsonthemindetail,nor
connectsthemtoalongermercantilisttradition.5
Nobodydeniedatthetimethatdrainsofbullionwerearecurrentproblem
between1820and1846:goldsuppliesintheBankofEnglandswungbetweenlow
ebbsof£4.6min1826and1839‐41tohighsexceeding£10min1821‐24and1838;
thisaccompaniedswingsinprices,althoughtheoveralltendencywasdeflationary.
3FrankWhitsonFetter,DevelopmentofBritishMonetaryOrthodoxy,1797—1875(Cambridge,MA:
HarvardUniversityPress),176.
4BoydHilton,Corn,Cash,Commerce:TheEconomicPoliciesoftheToryGovernments,1815‐1830
(Oxford:OxfordUniversityPress,1977),esp.108‐126,132‐134,278‐301.
5AnnaGambles,ProtectionandPolitics:ConservativeEconomicDiscourse1815‐1852(London:Royal
HistoricalSociety,1999).Seeinparticular134‐142,andherveryusefuldiscussionofTory
journalistsandpamphleteersat10‐18.
2
Inallcases,moreover,mostcontemporariesrecognizedthattightmoneysupplies
producedconsequencesthatrangedfrominconvenienttodevastating,sincethe
BankofEngland’seffortstoattractgoldbackintothecountryviahigherinterest
ratesinevitablyaffectedeconomicactivity.Notallthegoldthatdrainedfromthe
Bankwasusedtopayforforeigngrain:althoughpoorharvestsprecededdrainsin
1824and1839,bullionalsolefttheBanktopayforAmericancottonin1838and
(bywayofbankruns)inresponsetopoliticalunrestin1832.6
Protectionistsreasonedfromthesedevelopmentstopredictdisastrous
consequencesforthecountryunderfreetrade,owingtotheneedtopayfor
additionalgrainsupplieswithbullion.Theirliberalopponentsmainlyattributed
pricevariationsanddeflationtotheoperationofcornlaws,which(theyargued)
prevented“regular”foreignmarketsfromdevelopingthatwouldbepreparedto
acceptBritishgoodsinexchangeforgrainintimesofdearth.Theyalsodiverted
attentionfromtradetomonetarypolicy,blamingBankofEnglanddirectorsand
jointstockbankersforfailingtocurtailloansintimetopreventdrainsfromgetting
outofhand;andto“overtrading”merchants(bothinBritainandAmerica)whose
demandforaccommodationexceededthenation’smoneysupply.Atbottom,this
debatepittedastate‐centeredtheoryoftrade,whichplacedacentralemphasison
theroleofnationalrivalriesindeterminingspecieflows,againstamoreidealized
internationalmodelthatminimizedgold’sroleinsettlingforeignaccounts.
6ArieArnon,ThomasTooke:PioneerofMonetaryTheory(AnnArbor:UniversityofMichiganPress,
1991),17‐19(tablesdrawnfromMitchellandDeane);M.J.R.HealyandE.L.Jones,“WheatYieldsin
England,1815‐59,”JournaloftheRoyalStatisticalSociety125(1962),578.Pricesfellbyroughly40%
between1819and1850.Asmuchas£10minbullionleftEnglandin1839topayforcorn:Peter
Mathias,TheFirstIndustrialNation:AnEconomicHistoryofBritain,1700‐1914(London:Methuen,
1969),230.
3
1.AdamSmithandtheMakingofaShibboleth
OneofAdamSmith’smostenduringsectionsinTheWealthofNationswashis
spiriteddemolitionof“theMercantileSchool”intheopeningchapterofBookFour.
Onereasonitenduredwasthathisdenunciationenabledfuturegenerationsof
liberalstodescribetheirprotectionistopponentsasholding“exploded”beliefs,and
therebypre‐emptivelydraintheirargumentsofapparentrelevance.Thiswas
WilliamNassauSenior’stacticin1827whenhewalkedhisreadersthroughSmith’s
argumentsonthewaytoconcludingthat“insteadofopposing…experienceto
theory,”nineteenth‐centuryprotectionistswere“opposingthetheoryofa
barbarousagetothetheoryandexperienceofanenlightenedone.”7Identifying
protectionismwithSmith’saccountofmercantilismturneditintoashibboleth,
whichdivertedattentionfromseveralimportantconditionsthathademergedafter
1800andthatmadeithardertodefendSmith’soriginalgroundsforopposing
mercantilistthinking:theseincludedtheriseofprotectionismintheUnitedStates
andEurope,theexponentialgrowthofBritain’snationaldebtandaccompanyingtax
burden,andthethreedecadesofdeflationthatfollowedtheresumptionofcash
paymentsin1821. Withoutadmittingitinsomanywords,Smith’sattackonmercantilism
paralleledDavidHume’searliercritique,spelledoutinhis1752essay“Ofthe
BalanceofTrade.”There,Humehadrecalledthe“universalpannic”thatJoshuaGee
7WilliamNassauSenior,AnIntroductoryLectureonPoliticalEconomy,deliveredbeforetheUniversity
ofOxford(London:J.Mawman,1827),31.Seniorstretchedthistactictoitsbreakingpointin1843
whenhecondemnedRobertTorrens’sdefenseofreciprocalfreetradeasacovertattemptto
resurrect“notinwordsindeed,butineffect,theMercantileTheory”:“FreeTradeandRetaliation,”
EdinburghReview78(1843),8.
4
hadproducedbyinhispredictioninTradeandNavigationofGreat‐Britain
Considered(1729)that,inHume’swords,Britain’stradedeficit“wasagainstthem
forsoconsiderableasumasmustleavethemwithoutasingleshillinginfiveorsix
years.”Hecounteredthiswiththewryreassurancethat“luckily,twentyyearshave
sinceelaps’d,alongwithanexpensiveforeignwar;andyet…moneyisstillmore
plentifulamongstusthaninanyformerperiod.”Healsorespondedwitha
reassuring(ifsketchy)theory,whichsubsequenteconomistswouldcalltheprice‐
specieflowmechanism.Thefallinpricesoccasionedbyadraininbullion,he
argued,wouldimmediately“bringbackthemoneywhichwehadlost,andraiseus
tothelevelofalltheneighbouringnations…where,afterwehavearriv’d,we
immediatelylosetheadvantageofthecheapnessoflabourandcommodities;and
thefartherflowinginofmoneyisstoppedbyourfulnessandrepletion.”8
Smith’sdiscussionofthe“MercantileSchool”reinforcedHume’seffortsto
downplayconcernsaboutbulliondrainsandtradedeficits.InsteadofGee,he
reachedfurtherback,singlingoutThomasMun’sEngland'sTreasureinForeign
Trade(1664;writteninthe1630s)tostandformercantilism.Mun,heargued,had
mistakenlydistinguishedbetweengoldand“anyotherusefulcommodities,which
thefreedomoftrade,withoutanysuchattention,neverfailstosupplyintheproper
quantity.”Theonlymeaningfulfunctionofgoldandsilverwasas“utensils…asmuch
asthefurnitureofthekitchen”;hencestockpilingbullionwas“asabsurdasitwould
betoattempttoincreasethegoodcheerofprivatefamilies,byobligingthemto
8DavidHume,PoliticalDiscourses(Edinburgh:R.Fleming,1752),81‐83.OnSmith’sfailureto
incorporateHume’sprice‐specieflowmechanismintohiscritiqueofmercantilismseeJohn
CunninghamWood(ed.),AdamSmith:CriticalAssessments(London:Routledge,1984),1:xxvi‐xxvii
andaccompanyingarticles.
5
keepanunnecessarynumberofkitchenutensils.”Themovementandsupplyof
bullioninthemid‐eighteenthcenturyappearedtojustifySmith’sassumptionthatits
roleintrade,thoughnecessary,wassubsidiarytoindustrialandagriculturaloutput.
As“themoneyofthegreatmercantilerepublick,”bullioncouldbereliedontoflow
efficientlyamongnationstobalanceaccounts;althoughSmithadmittedthatadirect
trade—forinstance,BritishhardwareandtextilesforFrenchwine—wasmore
profitabletoBritainthana“round‐aboutone”wherebyBritishgoodspurchased
Braziliangold,thenexchangedthatforthewine,heinsisted,followingHume,that
bothsidesstillgainedfromthelattertransaction.9
Fromhisperspectivein1776,Smithfounditrelativelyeasytodispensewith
twooftheissuesthatwouldrevivemercantilistargumentsinthenineteenth
century:adrainofbullionowingtoforeignwars,andtheimpactofatradedeficiton
thedomesticsupplyofmoney.ReferringtotheSevenYearsWar,whichwasupto
thatpointbyfarthemostexpensivewarBritainhadfought,Smithimplicitlyapplied
Hume’sprice‐specieflowanalysistodrainsoccasionedbyforeignwars:“whatever
partofthismoneyofthemercantilerepublickGreatBritainmayhaveannually
employedinthismanner,itmusthavebeenannuallypurchased,eitherwithBritish
commodities,orwithsomethingelsethathadbeenpurchasedwiththem,”which
“bringsusbacktocommodities…astheultimateresourceswhichenabledusto
carryonthewar.”Henceacountrywithsufficientproductionof“thefinerandmore
improvedmanufactures”(suchasBritain)couldeasily“carryonformanyyearsa
veryexpensiveforeignwar.”Smithwassimilarlydismissiveregardinganypossible
9AdamSmith,AnInquiryintotheNatureandCausesoftheWealthofNations(London:W.Strahan
andT.Cadell,1776),2:7‐8,15‐16.,23,78‐80.
6
negativeimpactofabulliondrainonthecirculationofcoin.Atleastpartofhis
optimismonthisscorederivedfromhisrelativelybenignviewofa“wellregulated
papermoney,”whichcouldreplaceadiminishedsupplyofcoin“notonlywithout
anyinconveniency,butwithverygreatadvantages.”10
BytakingSmith’sanalysisastheirstartingpoint,classicaleconomists
effectivelydivorcedgoldfromtradepolicy—orrather,theysubordinatedtrade
policytothedictatesofan“automatic”internationalgoldstandard.InJoseph
Schumpeter’swords,theywere“neithernationalistsorétatistes,”favoring“an
unfetteredinternationalgoldstandard”asa“moralaswellasaneconomicideal,”
andembracinggoldas“thenaughtyboyintheroomwhoblurtsoutunpleasant
truths.”11InthethreedecadesafterWaterloo,theseunpleasanttruthsincludeda
steadydietofdeflationandasharp‐edgedbusinesscycle,whichroseandfellas
interestratesstruggledtokeeppacewithtrade‐inducedbullionflows.
Smith’searlysuccessesinturningthetideagainstmercantilismwere
impressive.Lookingbackfrom1843,WilliamNassauSeniorrecalledthatadecade
afterSmithhad“conclusivelyrefuted”thatdoctrine,ithadlikewisebeen
“abandonedbythescientificandliterarypublicthroughoutEurope,andbythe
mercantilepublicinGreatBritain.”Tosupportthisclaim,hecouldpointtoWilliam
Pitt’sembraceoffree‐tradeprinciples,aswellasthepassagein1786oftheEden
Treaty,whichprovidedunprecedentedaccessforgoodstoflowlegallybetween
BritainandFrance.AlthoughSeniorconcededthat“therevolutionarywarsarrested
ineachcountrytheimprovementofcommerciallegislation,”heconfidentlyasserted
10Ibid.,2:20‐22,9‐12.
11JosephSchumpeter,HistoryofEconomicAnalysis(Oxford:OxfordUniversityPress,1954),732.
7
thatenlightenmenthad,bythelate1820s,returnedtoBritain,ifnotnecessarilythe
restofEurope.12
TheFrenchRevolutionandsubsequentwarsdidmorethaninterruptthis
momentuminthespreadofeconomicliberalism.Thesuspensionofcashpayments
in1793refutedSmith’s(andHume’s)predictionthatnoforeignwarcouldever
drainBritainofsomuchgoldastorendersuchameasurenecessary,Britain’sdebt
burdenrosefrom£262mto£885mbetween1793‐1815,andpricesroseby80%
overthesameperiod.13Therobustdebatesoverthe1815and1829CornLawsand
theresumptionofcashpaymentsin1819reflectedthistransformedfinancial
landscape.Aleadingthemeinthesedebateswastheperceivedneed,by“liberal
Tories,”tobalanceself‐sufficiencyingrainproduction(amajorconcernduringthe
war)withprotectionagainstfamineduringpoorharvests;and,byreturningtothe
goldstandard,toarrestinflationandtherebypaydownthenationaldebtonterms
thatwouldbefairtoBritain’screditors.14
Theresultwasadelicatepoliticalbalancewherebygraindutiesprotected
landowners’interestsandhardmoneyprotectedthoseofcreditors,hencecovering
bothbasesof“gentlemanlycapitalism”withoutanyspecificpolicyinplaceforthe
benefitofindustrialcapitalorlabor.15AstheBirminghamindustrialistandradical
MPGeorgeMuntzwouldcomplainin1840,“provisionhasbeenmadeforthe
12Senior,“FreeTradeandRetaliation,”5;cfJohnA.C.Conybeare,TradeWars:TheTheoryand
PracticeofInternationalCommercialRivalry(NewYork:ColumbiaUniversityPress,1987),138‐156.
13GeorgeRichardsonPorter,TheProgressoftheNation(London:MethuenandCo.,1912),617;
Arnon,ThomasTooke,17.
14Hilton,Corn,Cash,Commerce,esp.chs1and4.
15SeethediscussionbyPeterJ.CainandA.G.Hopkins,BritishImperialism:InnovationandExpansion
1688‐1914(London:Longman,1993),78‐84.
8
fundholderbykeepingthestandardinitsoldposition…and,toagreatextent,the
landedinterestshavebeenmaintainedintheirpositionbythecornlaws;butIdo
notseethatanyfaithhasbeenkeptwiththeworkingclasses.”16Althoughfewother
peopleatthetimeopposedboththecornlawsandthegoldstandard(mostassailed
oneortheother),Muntz’sobservationisausefulreminderthatthesetwopillarsof
Britisheconomicpolicybetween1815and1846establishedtermsofdebatein
whichgoldsuppliesandforeigntradeconsistentlycrossedpaths.
ToresurrectSmithianideasintheaftermathofthewar,liberalsdidtheir
besttodivertalldiscussionofgoldtotherealmofmonetarypolicy,wherethey
wagedalargelyinternecinebattleovertheproperfunctionoftheBankofEngland
underthegoldstandard;andtolabelanyonewhoinsistedonconnectinggoldback
totradepolicyashopelesslybehindthetimes.Towardthisend,theyrepeatedly
citedSmith’sargumentsagainstmercantilism,bywayofdismissingany
contemporaryconcernsregardingbulliondrainsortradedeficitsasrestingon
groundsthathadlongsincebeen“exploded”or“abandoned.”17IncaseSmith’s
originalmessagewasnotclearenough,J.R.McCullochprefacedhis1828editionof
TheWealthofNationswithalengthyadditionalrebuttalofmercantilism,focusing
(asSmithhaddone)onThomasMun’sdefenseoftheEastIndiatrade.18When
liberalsturnedfromthe“self‐evident”claimsofHumeandSmithtotheiropponents’
16ReportfromtheSelectCommitteeoftheHouseofLordsappointedtoconsiderofthePetitionofthe
EastIndiaCompanyforRelief.London:HMSO,1840),1141.
17See,e.g.,JohnAshtonYates,ALetteronthePresentDepressionofTradeandManufactures
(Liverpool:G.andJ.Robinsonetal.,1841),16;WilliamWaterston,ACyclopaediaofCommerce,
MercantileLaw,Finance,andCommercialGeography(Edinburgh:OliverandBoyd,1843),43.
18AdamSmith,AnInquiryintotheNatureandCausesoftheWealthofNations(Edinburgh:Adam
BlackandWilliamTate,1828),1:xii‐xviii.McCullochborrowedthispartoftheintroductionfromhis
DiscourseontheRise,Progress,PeculiarObjects,andImportanceofPoliticalEconomy(Edinburgh,
1824),21‐29.
9
arguments,theydidqualifytheirverdictregardingthedemiseofmercantilism.Jane
Marcetlamentedin1816that“theoldpopularerrorrespectingthebalanceof
trade…stillprevails,evenamongstourlegislators,”andanEdinburghEncyclopaedia
articleonexportbountiespresentedmercantilism’sstayingpowerasaproblemof
irrefutabletheorybattlinginsufferablepractice:“Nonebutpersonsofobtuse
intellectare,nowadays,blindtotheabsurdityofitsprinciples;whilstitspernicious
operationisstillpermittedtogratifyamercantileandmanufacturingavarice,atthe
expenseofthegeneralcommunity.”19
Inthisway,mercantilismpersistedasapopularfoilinwhatemergedasa
typicalrhetoricalstrategyamongadvocatesoffreetrade:toeducatean
underinformedpublicopinionwiththeclearscienceofpoliticaleconomy.An
exampleofthiswasadialoguebetweenafarmerandhisenlightenedlandlordin
JohnHopkins’sNotionsonPoliticalEconomybyJaneMarcet.WhenHopkinsworried
thatsending“moneyinsteadofgoods”forrawmaterialsthatwereunavailablein
Britain“wouldnotencourageourmanufactures,”hislandlordrespondedwith
Smith’spointthataroundabouttradewasalsobeneficial:“it’sallonewhetherwe
sendthegoodstoAmericatopayforthegold,ortoFrancetopayforthesilks,”since
ineachcase“thelabouringmanufacturerwillhaveemployment.”20
WhentheIrisheconomistMountifordLongfieldponderedthesurvivalof“the
falseprinciplesofthemercantilesystem”in1835,hethoughthecameupwithan
19JaneMarcet,ConversationsonPoliticalEconomy(London:Longman,Hurst,Rees,Orme,and
Brown,1816),413;EdinburghEncyclopaeida4(1832):364.Seealso,e.g.,ThomasPerronet
Thompson,“M’Culloch’sEditionof‘TheWealthofNations,”WestminsterReview17(1832),273.
20JaneMarcet,JohnHopkins’sNotionsonPoliticalEconomy(London:Longman,Rees,Orme,Brown,
Green,andLongman,1833),167‐168.
10
answer,whichdoubledasastrategyforfree‐traders.Protectionistshadturnedto
“differentandmoreplausiblearguments”thanthe“explodederrorsofthemore
ancientsystemofthebalanceoftrade,”whentheyarguedthatdrainsofgold
diminishedindustrial(aswellasagricultural)productivitybydeprivingEnglandof
investmentcapital.Hiscounter‐argument,however,wasnotreallyanydifferent:the
pricemechanismwouldeventuallyattractgoldbackintoBritain,pullingpricesback
upandrestoringeconomicactivity.Whatwasdifferent(andrareenoughfor
classicaleconomistsbetween1815and1846)washisaccompanyingqualification:
“Theseoperationsarenotconstantlyperceptible,buttheforcewhich,ifnecessary,
wouldleadtothem,isalwaysactiveenoughtopreventanynationfromhaving
eithertoomuchortoolittlegoldinitspossession.”21Thetrick,inotherwords,was
togetprotectioniststoseebeyondmerelytemporarydrainsofgold,tothelong‐
termequilibria.Thiscapturedthebasicformofthedebate,whichwasaboutshort‐
termdrainsversuslong‐termgrowthandstability.Therealpointofcontention,
however,concernedtheprotectionists’additionalargumentthatalthoughdrains
seldompersistedformorethanayearortwo,theycarriedwiththemlong‐term
outcomesthatweredeleteriousfromtheperspectiveoftheBritisheconomy.
2.AnOrientalistPrologue
WhenBritishprotectionistsworriedabouttheimpactoffreetradeongold
supplies,theyseldomdidsoinwaysthatdirectlymirroredoldermercantilist
arguments.Buttheydidappealtoassumptionsthatoldermercantilistshad
21MountifordLongfield,ThreeLecturesonCommerce,andOneonAbsenteeism(Dublin:Millikenand
Son,1835),14‐17.
11
originallyexpressed,andthatwerealmostentirelyabsentinclassicalpolitical
economy:specifically,theconcernthatBritain’stradingpartnershadreacheda
saturationpointintheircollectivedemandforBritishgoods,andthatanyfurther
grainimportscouldonlycomeattheexpenseofBritain’smoneysupply.This
sectionsurveyssomeexamplesoftheseconcernsastheyappearedineighteenth‐
centurydiscussionsofIndia,whichareusefulforshowingcontinuitiesandcontrasts
withlaterprotectionistdiscourse.Thesealsorevealanenduringsuspicionthat
Hume’sconceptofaprice‐specieflowmechanismdidnotnecessarilyapplywhere
“Asiatic”customsandpoliticalrulepersisted.Totheextentthatnineteenth‐century
protectioniststransferredthisperspectivefromIndiaandChinatoRussiaand
Poland,itispossibletore‐readthedebateoverthecornlawsasaremakeofan
earlierperformancepittingSmithagainstMontesquieu.
Inclaimingthatgrain‐supplyingnationswereunlikelytopurchaseBritish
goods,protectionistsrevivedseveralargumentsthathadcommonlyaccompanied
oldermercantilistcritiquesoftheIndianandChinatrade,whichforegroundedthe
unidirectionaldrainofbullionfromwesttoeast.AccordingtotheEastIndia
CompanyofficialJohnHenryGrose,whoservedinBombayintheearly1750s,India
was“abottomlesspitforbullion,whichcannevercirculatebacktoEurope”;the
OrientalistThomasMauriceclaimedthat“thegreattreasuresingoldandsilver,
producedbytheminesofSpain,flowed[toIndia],tobethereswallowedupina
vortexthatneverregurgitatedtheshiningspoil.”22
22JohnHenryGrose,AVoyagetotheEast‐Indies,beganin1750;withObservationscontinuedtill1764
(London:S.Hooper,1766),324;ThomasMaurice,IndianAntiquities:or,Dissertations,relativeto…
Hindostan(London:H.L.Galabin,1800),7:492.
12
Thedrainofbullionthatthesewritersweredescribingwasnotafigmentof
theirimaginations.Between1600and1800,asteadyflowofgoldandsilverfound
itswayfromLatinAmericatoIndiaandpointseast:bullionexportswereworth
around£200,000in1600,risingto£750,000ayearin1700and£1.3mby1800.
SpainandPortugaltypicallypaidofftheirtradedeficitswithEngland,France,and
theNetherlandsoutofthebulliontheyreceivedfromLatinAmerica,andwhatthe
lattercountriesdidnotkeepathometheysentontoEastAsia(aswellastheBaltic
StatesandtheMiddleEast).23Bullionincludedsilveraswellasgold,andespecially
intheseventeenthcentury(priortonewgolddiscoveriesinBrazil),theBritish
shippedmuchmoresilverthangoldtoIndiaandpointseast.Asevereshortageof
silvercoininLondonin1620wastheproximatecauseofthefamousmercantilist
debatesthatSmithwouldrefertoinTheWealthofNations:EdwardMisselden’s
critiqueoftheEastIndiatradeasthe“specialremotecauseofourwantofmoney”
spurredMun’sresponseinEngland'sTreasureinForeignTrade.24
Todiagnosethisdigestionofbullion,Britishwritersidentifiedfourrelated
culturalandpoliticalconditions,allofwhichconvenientlysetIndiaapartasdistinct
fromNorthernEuropeanhabitsandpolicies.Firstwasasuperstitioustendencyto
adorntheirtemplesandidolswithgold.Secondwastheirproclivitytoadorntheir
bodieswithgold.Third,oftenlinkedtothefirsttwo,wasapoliticalsystembasedon
tyrannyandplunder.Andfourth,theSouthAsianclimatecurtailedIndiandemand
23ArturAttman,AmericanBullionintheEuropeanWorldTrade,1600‐1800(Göteborg:Kungl.
Vetenskaps‐ochVitterhetsSamhallet,1986),5‐8,77‐78.Factoringinthepreciousmetalsthatwere
smuggledoutofLatinAmerica,theactualvolumewasperhapstwiceaslarge
24Misselden,FreeTrade(1622),citedinBarber,BritishEconomicThoughtandIndia1600‐1858
(Oxford:ClarendonPress,1975).
13
forwesterngoods,leavingbullionastheonlydesirableitemintrade.Inallthese
cases,thefocuswasonculturaldifferenceasanexplanationofaperceived
economicproblem.MichaelSymes,whoaccompaniedanembassytoBurmain1795,
depictedtheuseofgoldthereasaninversionofBritishpriorities:“althoughhighly
valued,itisnotusedforcoininthecountry;itisemployedsometimesinornaments
forthewomen,andinutensilsandear‐ringsforthemen;butthegreatestquantityis
expendedingildingtheirtemples,inwhichvastsumsarecontinuallylavished.”
Britishwritersspentevenmoretimecataloguingthewidespreaduseofgoldin
adorningIndianbodies,accountsofwhichservedthesimilarfunctionofmarking
SouthAsiansasaraceapartfromEuropeans.WilliamHodges,describingMadrasin
1780,identified“themomentinwhichanEuropeanfeelsthegreatdistinction
betweenAsiaandhisowncountry”asthepointwhenhenoticed,enteringthe
harbor,acrowdof“blackfacesadornedwithverylargegoldear‐rings.”25
ManycommentatorspairedthesedescriptionsofIndiansuperstitionand
adornmentwithenvironmentalorpoliticalexplanationsforwhyIndiansaccepted
onlybullioninexchangefortheirgoods.Montesquieu,whoseobservationsonIndia
inSpiritoftheLawscastalongshadowoversubsequentaccounts,claimedthatthe
Indianclimate“neitherdemandsnorpermitshardlyanythingwhichcomesfrom
ours.”Followinginthisvein,theBritishhistorianAlexanderDowascribedthedrain
ofbulliontoIndiatothefactthatitsinhabitants’wants“weresuppliedalmost
spontaneouslybythesoilandclimate,”andanotherBritishOrientalistcited“the
25MichaelSymes,AnAccountofanEmbassytotheKingdomofAva,sentbytheGovernor‐Generalof
India,intheYear1795(London:W.Bulmer,1800),260;WilliamHodges,TravelsinIndia,quotedin
AnalyticalReview15(1793):241.
14
peculiarbenignityoftheclimateinwhichtheylived”asthereasonwhyIndians“had
norelishfortheproductionsofanyothercountry.”26ThetravelwriterMaria
Grahamprovidedatypicalpoliticalexplanationin1813:“Wherethepeoplewere
dailyexposedtotheravagesofbarbarousarmies,itwasnaturaltoendeavourto
keeptheirlittlewealthinthatforminwhichitcouldwithmosteasebeconveyed
outofthereachofplunderers.”27
SuchdiagnosesofAsianabsorptionofbullionstartedtorecede(althoughit
neverwhollydisappeared)after1760,whentheEastIndiaCompanystartedtorely
ontaxrevenuesinsteadofbullionimportstopurchasegoods.Fromashareoffour‐
fifthsofitsexportstoIndia,bulliondeclinedtoaone‐eighthshareinthedecade
after1757.28Thisreversalmadefree‐tradeadvocatesoptimisticthatnineteenth‐
centurydrainsinthewouldalwaysbemoremoderatethanhadbeenthecasewhen
Asiahadabsorbedwesternbullion.McCulloch,forinstance,defendedunilateral
freetradewithFrancein1819onthegroundsthattheflowofbullionwasless
stickyamongEuropeantradingpartnersbecausethevalueofgoldandsilverin
neighboringcountrieswas“alwaysextremelynearapar”:indistinctcontrastto
Asia,wheretransportcostsandanassymetryinthevalueofthepreciousmetals
madeanindirecttradelessefficient.29
26CharlesdeMontesquieu,TheSpiritofLaws(trans.ThomasNugent;London:J.NoyrseandP.
Vaillant,1750),2:21,328;Dow,xliv;CriticalReview38(1803):146.ThomasMunalsoappealedto
climatetoexplainthedrainofsilvertoIndiainEngland’sTreasurebyForraignTrade(1668):see
Barber,BritishEconomicThought,12.
27MariaGraham,JournalofaResidenceinIndia(Edinburgh:GeorgeRamsay,1813),3.
28RamaDevRoy,“SomeAspectsoftheEconomicDrainfromIndiaDuringtheBritishRule,”Social
Scientist15(1987):40‐41.
29J.R.McCulloch,“CommercialEmbarrassments—TradewithFrance,”EdinburghReview32(1819),
59.
15
Atamorebasiclevel,thereversalofspecieflowsfromeasttowestfreedup
bullionforotheruses,nottheleastofwhichincludedwagingwaragainstthe
AmericancoloniesandFranceafter1776,andmaintainingthegoldstandarddespite
recurrentdrainsofbulliontoEuropeandAmericaafter1820.McCullochcitedthis
asoneofseveralreasonstobehopefulthatthedeflationthathaddoggedBritainin
the1820swouldsoonbeathingofthepast.30Severalliberalcommentatorsalso
citedthiseventasindicativeoftheability(ifnotinevitability)ofanindustrialnation
tobreakintoeventhemostresistantmarkets—typicallyneglectingtomentionthe
importantroleplayedbythecoercivepowersoftaxcollectionandmilitaryinvasion
inproducingthisoutcome.31ThefactthatIndia(andlaterChina,aftertheOpium
Wars)onlybeganacceptingmanufacturedgoodsinsteadofbullionfromBritain
followingmilitarydefeatmaybethereasonwhyalmostnoliberalsappealedto
thosecountriesbynamewhentheypredictedthatEuropeanswouldwarmtothe
ideaoftradewithBritain.
Britishprotectionists,fortheirpart,drewaverydifferentsetoflessonsfrom
therecenthistoryofAnglo‐Asiantrade.Withdueallowanceforapparent
differencesinnationalcharacterandpoliticalsystems,theyrecurrentlyinvoked
ethnographicandpoliticalargumentsthatparalleledearlier“Asiatic”discoursesin
30J.R.McCulloch,ADictionary,Practical,Theoretical,andHistorical,ofCommerceandCommercial
Navigation(London:Longman,Rees,Orme,Brown,GreenandLongman,1832),57.Healsocited
increasedoutputofgoldandsilverinSouthAmerica(relativetothedipinproductionbetween1810‐
25)andRussia.
31SubstanceofaDebate,intheHouseofCommons…onEastandWestIndiaSugar(London:J.S.
Brickwood,1823),13(WilliamHuskisson);ReportofthePublicMeetingatLiverpool…[on]the
RestrictionsimposeduponCommercebythePresentCharteroftheEastIndiaCompany(London:W.
Lewer,1829),36(motionbyJohnEwart).OntheroleofpoliticalforceinIndiandeindustrialization
seePrasannanParthasarathi,TheTransitiontoAColonialEconomy:Weavers,MerchantsandKingsin
SouthIndia,1720‐1800(Cambridge:CambridgeUniversityPress,2001).
16
ordertorefutetheclaimthatforeignerswouldcondescendtotakeBritishgoods,as
opposedtobullion,inexchangefortheirgrain.Boththeparallelsandthe
departuresweresignificant.Byinvitingearliercomparisonstodecidedlyun‐
EnglishpeasantsandOriental‐styledespotism,protectionistspaintedBritain’s
would‐betradingpartners,andforeigntrademoregenerally,asafarriskier
propositionthanliberalsallowed.Theydepartedfromearliermercantilist
argumentswhentheyponderedwhateasternEuropeanswerelikelytodowiththe
bulliontheyabsorbed.IncontrasttoAsiaticdespots,who(accordingtothe
Orientalistnarrative)wastedgoldandsilveronpompousdisplayandterrorized
theirsubjectsintoburyingit,Europeanautocratsallegedlyhadfarmoresinister
plansforthegoldtheyabsorbedinexchangefortheirgrain:toinvestin
manufacturing,therebybringingBritishindustrydownalongwithitsagriculture.32
Anotherdeparturefromeighteenth‐centurymercantilism,towhichIwill
returnintheconclusion,relatedtotheimpactofgoldandsilversuppliesonprices.
Intotheearlynineteenthcentury,defendersoftheEastIndiaCompany’smonopoly
celebratedthedrainofbulliontoAsiaasusefullybluntinginflationintheWest;in
DavidMacpherson’swords,Europehadbeen“happilypreservedbytheexportation
ofsilvertoIndiafrombeingoverwhelmedbytheinundationofthepretious
metals.”33Instarkcontrast,mercantilistsinthefirsthalfofthenineteenthcentury
32Anotherparallelthatonlypartlyheldupconcernedthewaynineteenth‐centuryprotectionists
depictedpeasantsincentralandeasternEurope,whichtendedtobelimitedtonegativeassertions
regardingtheirincapacitytodevelopatasteforBritishgoods.DepictionsofEuropeanpeasants
wastinggoldonadornmentfocusedonsouthernEurope,tradewithwhichdidnotfeaturein
protectionistwriting.
33DavidMacpherson,TheHistoryoftheEuropeanCommercewithIndia(London:Longman,Hurst,
Rees,Orme,andBrown,1812),337.
17
fearedthedeflationaryimpactofbulliondrains,againstthebackdropofthe
increasingscarcityofgoldandsilver.
3.MercantilistWineinProtectionistBottles
Sinceliberaleconomistsstudiouslyignoredanyandallprotectionistappeals
tonationalcharacterandpoliticalmachination,thedebatesurroundingthese
concernsseldomprogressedmuchfartherthanadirepredictionononeside,
followedbyanassertionontheotherthatthepredictionwentagainstthelawsof
politicaleconomy.Atbottom,theeconomiclawinquestionwasSay’sLaw,which
refutedthepossibilityofageneralglut,inthatliberaleconomistsclaimedthatthe
price‐specieflowmechanismwouldalwayseventuallyregeneratedemandfor
Britishgoods.Totheextentthateithersidegotbeyondthisstalemate,theground
shiftedtotheargumentthatevenatemporarydeficitinthebalanceofpayments
wouldhavearedistributiveimpact,sincedeflationfavoredthefinancialsectorover
the“productive”classes.
Fewprotectionistmanifestosthatappearedbetween1825and1846lacked
somevariantonthedoomsdayscenarioinwhichanopengraintradewouldleadto
a“ruinousdrainuponthemetallictreasuresofthecountry”or“drainthebullion
coffersoftheBankofEnglandtotheverydregs.”34Tosupportthis,theyneededto
meethead‐ontheliberalclaimthatAmericansandEuropeanswouldacceptBritish
34ArchibaldAlison,ThePrinciplesofPopulation,andtheirConjunctionwithHumanHappiness
(WilliamBlackwoodandSons,1840),2:443;JamesCharlesDalbiac,AFewWordsontheCornLaws
(London:JamesOllivier,1841),53.SeealsoEdwardDaviesDavenport,TheCornQuestion,inaLetter
addressedtotheRightHon.W.Huskisson(London:J.Ridgway,1825),3‐4;RemarksupontheCorn
LawsoftheUnitedKingdomofGreatBritain([London[,1828),37‐38;OughttheCornLawstobe
Repealed(Edinburgh:A.Cannon,1840),23.
18
manufacturedgoods(insteadofgold)inexchangefortheirgrain;and,failingthat,
wouldacceptbillsofexchangedrawnoncountriesthatdidbuyBritishgoods.They
counteredthefirstargumentbyproclaimingtheincapacityofEuropeanpeasantsto
acquireatasteforBritishexports,andbypointingtothetendencyofgrain‐
exportingautocraciestoprotecthomemanufacturesattheexpenseofBritishgoods.
Theywerelesssuccessfulataddressingthesecondclaimuntilafterthecommercial
crisisof1836‐38,whenthefailureoftheUSeconomytoabsorbexcessBritish
exportsprovidedthemwithhardevidencethattheglobalmarketforthosegoods
wasnotreliablyelastic.
Thetermsofthisdebatewerealreadywellestablishedbythelate‐1820s,as
rumorsswirledconcerningHuskisson’sdesignsonthe1815cornlaw.Anearly
examplewasLaytonCooke’sclaimin1827that“itcouldscarcelybeexpectedthat
theserfsofPolandandRussiawouldrequiretheluxuriesoflifeessentialonlyto
thosewhohavearrivedatahighstateofcivilization.”Answernumbereighteenona
listofTwentyQuestionssubmittedbytheGeneralAgriculturalCommitteethesame
yearpredictedthatliberalizingthe1815CornLawwould“takethegoldoutofthe
country”topayforcorn“frompoor,thinlyinhabited,orsemi‐barbarouscountries,
whoimportfewmanufacturedgoods.”35Suchclaimspersistedintothe1830s,as
whentheBuckinghamshireMPGrenvillePigottarguedin1832that“theywhoare
acquaintedwiththeconditionofthepeasantryorfarmers(fortheyarethesame)in
north‐easternGermany,Poland,andRussia”knewthatitwould“require
35LaytonCooke,PracticalObservationsontheImportationofForeignCorn,underaGraduatedScale
ofDuty(London:JamesRidgway,1827),24;TwentyQuestionssubmittedbytheGeneralAgricultural
Committee…andAnswersReturnedfromVariousPartsoftheKingdom(London:byOrderofthe
Committee,1827),10.
19
generationstogivethemevenatasteforthemanufacturesofthiscountry,”as
opposedtogoods“suppliedbytheirownhousehold.”36
Sofar,protectionistsonlyprovidedreasonswhypeasantsontheContinent
wereunlikelytotakeBritishgoodsinexchangefortheirgrain.Thenextplankof
theirargumentturnedtowhatthesecountrieswoulddowiththebullionthat
Britainsentthem.Here,thepresidingfear(asaCarlislefarmerexpresseditin
1829)wasthat“thegoldwepayforforeigngrainwillactasabountytoextendtheir
manufactures.”37Fuelingthisfearwastherapidemergence,almostimmediately
followingtheCongressofVienna,ofindustrialprotectioninAmericaandEurope:
startingwiththeTariffof1816intheUS,followedbyPrussianCustomsUnionof
1818(whichevolvedintotheGermany‐wideZollvereinby1834)andaRussian
tariffonover200importsin1822.38
Sinceittooktimefortheeconomicimpactofthesenewtariffstobefelt,
protectionistsinthe1820sinsteadextrapolatedfromthewaryears,whenBritain
“promoted[foreigners’]capabilityofcreatingmanufacturingestablishments”by
sendinggoldtoherEuropeanalliestopayforgrain.39Bythelate1830s,two
decades’worthofexperiencewithforeigntariffshadhardenedtheirstance.One
36GrenvillePigott,ALetterontheNatureoftheProtectionaffordedbythePresentCornLaws,andon
theProbableResultofaFreeTradeinCorn,addressedtotheLand‐Owners,Farmers,andElectorsof
Buckinghamshire(London:RoakeandVarty,1832),48.
37ARefutationofaCatechismontheCornLawsbyaCumberlandFarmer(London:JamesRidgway,
1829),22.
38C.EdwardSkeen,1816:AmericaRising(Lexington:UniversityofKentuckyPress,,2003),62‐
65;ToniPierenkemperandRichardH.Tilly,TheGermanEconomyduringtheNineteenthCentury
(NewYork:BerghahnBooks,2004),31‐37;BorisAnanich,“TheRussianEconomyandBanking
System,”inDominicLieven,TheCambridgeHistoryofRussia:Vol.2,ImperialRussia,1689‐1917
(Cambridge;CambridgeUniversityPress,2006),400.
39ThomasGardnerBramston,ThePrincipleoftheCornLawVindicated(London:J.HatchardandSon,
1827),76;
20
pamphleteerin1843predictedthatunilateralfreetradewouldenableEuropeansto
“growrichbybringingcorn,pork,andbeeftoyourshoresandtakingbackgold;and
thesurplusoftheirwealth…willbelentoutatfullusancetotheyoungand
enterprisingmanufacturerswhowantcapital.”JohnGladstonesimilarlyopposed
theliberals’“vapid,frothydeclamation”thatEuropeanswouldtakeBritishtextiles
inexchangefortheirgrainbyarguingthattheyhad“beenengagedforyearspastin
originatingandadoptingmeasuresfortheexclusionofourmanufacturesandthe
promotionoftheirown.”40
ImplicitinmanyoftheseargumentswastheconcernthatPrussianand
Russianautocratswoulduseanymeansnecessarytofoilfree‐traders’hopesthat
Europeanconsumerscouldeverbeconvincedtovotewiththeirpocketbooks.A
“PracticalFarmer”paintedthispictureinthebleakestpossiblecolorsin1839,
worryingthatunderfreetrade,
themoneyedcapitalists,andtheEmperorofRussia,wouldthenhaveitall
theirownway.Russiaalonewouldthenraise,betweenWoronetzand
Odessa,quitesufficientcorntosupplythisempire…Thefirstthingthe
Emperorwoulddo,inthiscase,wouldbe,tobuildGovernmentwarehouses
toagreatextent,andinsistuponallthecornbeingthereplaced;andaduty
wouldbeimposedforrent;andanadditionaldutyuponexportation,when
thiscountryrequiredthecorn.Goldwouldberequiredforthepurchaseof
thecorn:anditisabsurdtoexpect[that]Russiawouldtakeyour
manufacturesforcorn.Theywouldsay,“Bringgold;orgoback,andletyour
peoplestarve.”Fewpersons,exceptthosewhohaveresidedinRussia,are
awareoftheeffectofanukaseissuedbytheAutocrat:disobedience,inthe
mosttriflingparticular,byalandowner…wouldinsurehimajourney,gratis,
toSiberia:andhispropertywouldbeconfiscated.”
40ReflectionsontheDesignsandPossibleConsequencesoftheAnti‐Corn‐LawLeague(London:
Marchant,SingerandSmith,1843),15;JohnGladstone,FourLettersaddressedtotheEditorofthe
MorningPostontheObjectsoftheMinisterialBudget(London:WilliamBlackwoodandSons,1841),5.
SeealsoJosephHubback,ALetterontheCornLaws(Liverpool:LaceandAddison,1843),29,where
hecites“thehostiletariffsoftheUnitedStates,France,Germany,SpainandPortugal.”
21
Addinginsulttoinjury,someprotectionistspredictedthatonceEuropeandespots
hadruinedBritishfarmersandcaughtupwithBritishindustry,theywouldbeina
positiontolureawayBritishartisans,deliveringthedeath‐blowtoindustryaswell.
Oneprotectionistpamphlettookthisreasoningtodesperateextremes:“Englishskill
andinventiveingenuitywillbeplantedinaforeignsoil,inwhichtallchimnieswill
everywheremeettheview:ourownlandwillbedesolate,andouroncevaunted
manufactorieswillbeturnedintoreceptaclesforthestarvingmillionsthusthrown
outofemployment.”41
ProtectionistsalsoneededtoconfrontthescenarioinwhichBritain’sgrain
providerswouldacceptbillsofexchangeissuedonthesecurityofotherBritish
exportmarkets,henceremovingtheneedtosendthemgold.Theymetthisclaimby
arguingthatdemandwasnotelasticinthosepartsoftheworldthatpresently
purchasedBritishtextiles.Suchassertionsbecameeasiertomakeafterthe
commercialcrisisof1838,whenAmericansprovedtohaveasatiableappetitefor
Britishgoods.Writingin1840,theIrishjournalistR.N.Kellywaswillingtoallow
thatbeforethecrisisBritishgrainimportswere“actually,thoughindirectly,
purchasedwithourmanufactures”viaAmericanbills;butsincethen,“muchmore
goldhasgoneoutofEngland,…thanwouldhavegone,hadourcommercial
relationswithAmericabeenuponasoundandwholesomefooting”;andconcluded
that“whatmaybeconsideredthecommercialinsolvencyofthatcountryhastotally
derangedtheordinarycourseofourowndealingswithothernations.”ADoncaster
41LettertotheDukeofBuckingham,ontheCornLaws(London:T.Cadell,1839),16‐17;Fallaciesof
thePhilanthropists!ACandidAppealtoCommonSense,inSomePlainTalkingtotheManufacturersand
ArtisansaboutThemselvesandtheAgriculturists(London:W.HDalton,1841),18‐19.
22
protectionistspecificallyblamedthe1838crashonBritishcapitalists’“desireto
multiplybeyondallpastprecedent,theproductivepowersofmanufactures,“and
citedthedramaticincreaseinBritishexportstotheUSinthefouryearsleadingup
tothecrashas“factswhichcornlawrepealersshouldkeepinmind.”42
Adifferentprotectionistargument,whichalsotappedintoamercantilistfear
ofunrequitedtrade,focusedontheredistributiveeffectsofdrain‐induceddeflation.
ThiscameoutmostclearlyinanexchangebetweenThomasPerronetThompson
andananonymousFraser’sreviewerin1833‐1834,focusingonthesilktradewith
France.WhenFraser’slinkedfreetradewiththe“continuallesseningofour
circulatingmedium,”andThompsonansweredwiththeusualappealtothe
“counteractingoperations”effectedbytheprice‐specieflowmechanism,Fraser’s
respondedthatthis“wouldanswertolerablywelliftherewerenonationaldebt,no
‘deadweight,’nomortgages,pensions,fixedsalaries,settlements,andother
immoveablepayments,interwovenwitheveryman’saffairs…Bytheirtwo
nostrumsof‘metalliccurrency’and‘freetrade,’oureconomistshavecontrived,in
littlemorethantenyears,toreducethepricesofallkindsofcommodities.”43
Notallprotectionistswereasreadytoabandonthegoldstandardasthis
writer(althoughmanywere),butmostwouldhaveagreedthatthecornlaws
performedtheessentialserviceofproppinguppricesinthefaceofgold’s
deflationarytendencies:especiallyinlightofthehightaxesthatBritain’sdebt
42R.N.Kelly,AReviewoftheCornLawQuestion(Edinburgh:WilliamBlackwoodandSons,1840),48;
G.CalvertHolland,LectureontheCornLaws(Doncaster:R.Hartley,1840),12‐13.CfMauriceLévy‐
Leboyer,“CentralBankingandForeignTrade:theAnglo‐AmericanCycleinthe1830s,”inC.
KindlebergerandJ.P.Laffargue(eds.),FinancialCrises:Theory,HistoryandPolicy(Cambridge:
CambridgeUniversityPress,1982),66‐113.
43“OnNationalEconomy,”Fraser’sMagazine9(1834),359,361.
23
burdenimposedonlandlordsandfarmers.44Thiswasespeciallythecaseduringthe
shortperiodoftimewhenthecornlawscoexistedwiththemorestringent
requirementsunderthe1844BankCharterAct,whichpeggednoteissuetothe
BankofEngland’sbullionreserves.AprotectionistwriterfortheEnglishReview
arguedthatthemorerigidpost‐1844goldstandardneededsuchalawmorethan
ever:“themonetarysystemofthecountryisdependentforitsveryexistenceupon
thepreventionofanyconsiderableimportationofforeigngrain.”Or,asanother
protectionistproclaimedin1846,theBankCharterActmadeitallthemoreclear
that“freetradeincornandmonopolyinmoneycannotpossiblyexisttogether.”45
4.BuryingTreasure:GoldandFreeTrade
Themostcommonresponseamongadvocatesoffreetradetoprotectionist
fearsaboutadrainofbullionwastofocusintentlyonoutcomesratherthan
processes.Withmorethanalittleimpatience,theycontinuallyreminded
protectioniststhatgoldwouldanddidreturntoEnglandintheend,justasHume
hadpredicteditwould;andthatwhenitdid,overalloutputalwaysincreased.When
stoppedtofocusontheproblemscausedbydrains,theyeitherblamedthisonthe
cornlaws,which(theyclaimed)preventeda“regulartrade”withgrainexporters;or
divertedattentiontomonetarypolicy,andspecificallythenumerousmistakes
committedbytheBankofEnglandandjointstockbanks.Allthesearguments
followedSmithinde‐emphasizingthesignificanceofgoldintheinternational
44See,e.g.,AlarmingStateoftheNationConsidered;theEviltracedtoitsSource,andRemedies
PointedOut(London:JamesRidgway,1830),37‐39.OnthispointmoregenerallyseeGambles,
ProtectionandPolitics,chs.4‐5.
45“Wellington,”EnglishReview4(1845),304;“CurrencyandCorn,”Hood’sMagazine5(1846),87.
24
economy.LikeSmith,theypresentedgoldandsilverasusefulutensils(possessing
“scarcelyanyvaluebutasinstrumentsofexchange,”asonejournalistputitin
1823),alwaystherewhenpeopleneededit,butnotnearlyasimportantasmany
protectionistsseemedtothink.46 Free‐tradersmostoftenrespondedtofearsaboutbulliondrainsby
bemoaningtheinabilityofprotectioniststounderstandbasiceconomics.Manyof
themledwiththeclaimthattalkofgolddrainswasaredherring:“aperfectly
irrelevantconsideration,whichhasnothingwhatevertodowithfreetrade,butwith
whichithasbeenfoundpeculiarlyconvenient,bycertainsophists,toencumberthe
matter,”asonepamphleteerarguedin1839.47Mostappealed,directlyorindirectly,
toHume’sprice‐specieflowmechanism,aswhenRichardBadnallofferedthe
assurancein1830that“acountryexportingherproduce,andonlyimportinggold,
cannotcontinuetodosowithoutcausingaglutofthatcommodity,whichissureby
eventuallyfindingitsownlevel,toreturnthroughonechanneloranother,tothat
countryfromwhichitwasoriginallyexported,inexchangeforothercommodities.”
Elevenyearslater,theliberaljournalFactsandFigurescounteredtheargumentthat
“foreignerswillonlytakeourgoldinpaymentfortheircorn”byinsistingthatthey
“candonothingofthesort,”since“underafreetradesystemeveryarticlefindsits
levelinprice,andsodoesgold.Ifwehavetoolittlepettycashtocarryonourtrade,
andanothercountryhastoomuch,wecangiveahigherpriceforit,andbackit
comes.”Thatlinessometimesblurredbetweeneconomicargumentsandarticlesof
46EdinburghAnnualRegister16(1823):116.
47JelingerC.Symons,ArtsandArtisansatHomeandAbroad:withSketchesoftheProgressofForeign
Manufactures(Edinburgh:WilliamTait,1839),262.
25
faithisapparentfromafree‐tradetractin1838,whichsimplyproclaimedthat“the
exchangeswouldatalltimesputthemattertorights.”48
Atitsmostutopian,thisargumentrestedonaprofoundfaithinthecapacity
ofBritishingenuitytogenerateaninfinitedemandfortheirproducts.Returning
fromEasternEuropein1839,theagriculturalreformerJohnPagetsawnoreason
whygrainimportsnecessarilyimpliedadrainofbullion:“What,inthesedaysof
universalmovement,steamandrailroads,istohinderatasteforEnglishluxuries
andEnglishenjoyments,tospringupamongsttheownersofthevastplainsof
Europe;and,insteadofgoldgoingoutforcorn,suddenlycripplingeverybranchof
commerce,andimpoverishingtheentirecommunity,EnglishingenuityandEnglish
manufacturesstimulated,advanced,andexchanged,inreturnforcontinentalgrain.”
Forthefree‐traderGeorgeBrowning,Britainpossessed“akindofnaturalnational
monopoly”onintelligenceandindustry,whereby“thenaturalcurrentofher
commerceis,tomanufactureforthosecountrieswhosupplyherwithraw
materials.”49
Amoresophisticatedvariantonthisargumentwastheclaimthata“regular,”
asopposedtosporadic,demandforcornonBritain’spartwouldsustainaregular
demandformanufacturesontheotherside.Inotherwords,mercantilismwasonly
48RichardBadnall,LettertotheLordsandCommons,onthePresentCommercialandAgricultural
ConditionofGreatBritain(London:Whittaker,TreacherandCo.,1830),129‐130;FactsandFigures1
(1841),14‐15(paraphrasingaletterbyHamerStansfieldofLeeds);TheInjuryInflicteduponthe
PeoplebytheCornLawsandtheProsperitythatwouldresultfromtheirRepeal(NewBrentford:
CharlesJamesMurphy,1838),15.SeealsoWilliamAnderson,NoticesonPoliticalEconomy(J.M.
Richardson,1821),67;J.C.Ross,AnExaminationofOpinionsmaintained[byMalthusandRicardo]
(London:J.M.Richardson,1827),42‐43;HenryBooth,FreeTrade,asItAffectsthePeople(Liverpool:
WalesandBaines,1833),16.
49JohnPaget,HungaryandTransylvania(1839),quotedinLondonSaturdayJournal3(1840),121;
GeorgeBrowning,TheDomesticandFinancialConditionofGreatBritain(London:Longman,Rees,
Orme,Brown,Green,andLongman,1834),.
26
arelevantconcernunderthecornlaws,whichcreatedconditionsinwhichgold
suppliesmatteredmorethanwouldbethecaseunderfreetrade.Removethem,and
goldwouldsoonrecedetothemarginsjustasHumehadpredictedwouldbethe
case.“IftherewerenorestrictionsontheimportationofforeignCorn,”arguedthe
HuddersfieldministerEdmundKellin1840,“foreignnationswouldgrowcorn
regularlytosupplyanydeficiencyinourharvests,andwouldthenpayusinCornfor
ourmanufactures,andallthatwouldbenecessarytocarryonourcommercewith
suchcountrieswouldbeasmallportionofgold,toactlikecounters,inadjustingthe
triflingbalances.”50Thiswasanespeciallypopularargumentagainstthesliding
scalethatHuskissonhadintroducedin1829,which,manyargued,madeBritish
demandforgrainlesspredictableforforeignsuppliers.Onelecturerarguedin1843
thatundertheslidingscale,“wecomepouringinonthemwithourgoldlikean
invadingarmyoflocusts,layourhandsoneverybushelofcornthatallthebullionof
theBankofEnglandcanbuy,sweeptheirmarketsbare,andleavefaminebehind.”
Noneofthiswouldhappen,heconcluded,ifwewouldonly“letnaturealone.”51
Thesetypesofarguments,whichessentiallywishedawayanypossible
negativeeconomicconsequencesofadrainofbullion,wereeffectiveenoughwhen
50EdmundKell,TheInjuriousEffectsoftheCornLaws,onAllClassesoftheCommunity,includingthe
FarmerandtheLandowner(London:SmallfieldandCo.,1841),23.SeealsoJamesS.Buckingham,An
AddressontheProposedReformsintheCommerceandFinanceoftheCountry(London:Simpkin,
MarshallandCo.,1841),231‐232;J.E.Elliot,LettertotheTeviotsideFarmer(London:T.Brettell,
1841),7‐8;TheIncubusoftheNation,andEffectsofItsRemoval(JamesPattie,1841),8;ThomasPlint,
Speech…attheWest‐RidingMeetingofAntiCornLawDeputies(Leeds:JohnBarr,1841),11;Reportof
theConferenceofMinistersofAllDenominationsontheCornLaws,heldinManchester(Manchester:J.
Gadsby,1841),43,97,107.
51PhilipHarwood,SixLecturesontheCorn‐LawMonopolyandFreeTrade(London:JohnGreen,
1843),104‐105.OntheimpactoftheslidingscaleonsupplyanddemandseeWrayVamplew,“The
ProtectionofEnglishCerealProducers:TheCornLawsReassessed,”EconomicHistoryReview33
(1980):382‐395.
27
liberalswerepreachingtotheconvertedatAnti‐CornLawLeaguemeetings.They
werelesseffectivewhentheyfoundthemselvesinParliament,wheretheywere
expectedtodosomethingaboutthenegativeimpactofrecurringeconomic
downturns.Oneoptionwastoblame“overtrading”bymerchantsandbankers,a
conceptthatatleastdivertedblameforcommercialcrisesfromthelandlordswith
whomtheylegislatedinparliament.ThiswasthefavoredapproachofMalthusian
financialreformerslikeLordOverstone,whoassumedthatthatbusinessmenwho
recklesslyspeculatedbeyondtheirmeansweredoomedtoexperienceendless
wavesofself‐deceptionandbankruptcy.52McCullochsimilarlyblamedthedrainin
1837onAmericanmerchants,who“grosslyovertraded”andshuttheireyestothe
inevitable“scarcityofmoney”thattheiractionshelpedtobringabout.53
Asecond,moreconstructive,liberalresponsetocommercialinstabilitywas
totinkerwithmonetarypolicy.Oneinterpretationforthevastamountofinkspilled
on“thecurrencyquestion”between1820and1846,themajorityofwhichwas
producedbypeoplewhowereunitedintheiroppositiontothecornlaws,isthatit
divertedattentionfrommercantilistdiagnosesoffinancialcrises.Thesedebates
focusedontheallocationofresponsibilityamongbankersandtherelevant
instrumentsofcreditthatshouldbesubjectedtoregulation;theyculminatedinthe
victoryofthe“currencyschool,”whichresultedinthe1844BankCharterAct.Aless
successfulproposal,whichDavidRicardofirstintroducedin1816andMcCulloch
revivedin1828,servestoillustratethetendencyofliberalstoembracecurrency
52BoydHilton,TheAgeofAtonement:TheInfluenceofEvangelicalismonSocialandEconomic
Thought,1795‐1865(Oxford:OxfordUniversityPress,1988),131‐136..
53J.R.McCulloch,“CrisisintheAmericanTrade,”EdinburghReview66(1837),234.
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reformasanalternativetomercantilism.Theschemeconsistedinapapercurrency
backedexclusivelybybullion,withonlytokencoinsincirculation.Notonlywould
thisgreatlyreducetheriskofdomesticbankruns,McCullochargued,itwouldalso
enabletheBanktoregulatepriceswithsufficientprecisiontoenticetrading
partnerstopreferBritishexportsovergold“underalmostanyconceivablestateof
ourcommercialrelations.”54
Asisoftenthecaseinpersistentcontroversies,bothsideswerecorrect
regardingdifferentaspectsoftheirarguments.Theliberalclaimthatgolddid
alwaysreturnfollowingadrainwas,ofcourse,trueforthefirsthalfofthe
nineteenthcentury,andtheeconomydid,bymostaccounts,achievesignificant
overallgrowthduringthesameperiod.Ontheotherhand,thatperiodwasalso
markedbyboutsofdevastatingunemploymentandpersistentdeflation,which
couldatleastinsomecasesbetraceddirectlytodrainsofgold,andwhichcame
withaclearsetofwinnersandlosers.Oneofthesecretstoliberalsuccessinthe
battleforfreetradewastheirabilitytokeepattentionfocusedonconsumerprices
and“monopoly”rentschargedbylandlords,andfocusedawayfromthecreditor
interestthatgainedsubstantiallyfromdeflation.PeriodicallydemonizingtheBank
ofEnglandand“overtrading”speculatorshelpedtheircause,asdidthereticence
withwhichmanyprotectionistsdirectlyattackedthe“fundholder”interest,forfear
ofbeingassociatedwithBirminghamradicals.
54J.R.McCulloch,supplementtoAdamSmith,WealthofNations(1828ed.),4:249.McCulloch’s
proposal,whichoriginallyappearedinTheScotsmanin1826,builtonasimilarproposalinRicardo’s
ProposalsforanEconomicalandSecureCurrency:seeD.P.O’Brien,J.R.McCulloch:AStudyinClassical
Economics(NewYork:BarnesandNoble,1970),167‐177,forafulldiscussion.
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5.Conclusion
ReportinghomefromatourinFrankfurtin1848,theToryjournalistWilliam
AytountooktheopportunitytoprovidereadersofBlackwood’sMagazinewitha
grimpost‐mortemoftherecentlydepartedcornlaws:
Istrolledonfromshoptoshop,gleaningeverywhereasIwentstatistics
touchingthemannerinwhichourfree‐tradeinnovationshaveaffectedthe
industryofGreatBritain.Forayearandahalf,thebootandshoetradehas
beenremarkablythriving;theLondonmarketbeingthemostprofitablein
theworld,andnothingbutBritishgoldexportedinreturn….Whenwecouple
thosefacts,whichmaybelearnedineveryContinentaltown,withthestateof
ourfallingrevenue,andthegrievousdirectburdenwhichisimposeduponus
intheshapeofpropertyandincometax,itisdifficultforanyBritonto
understanduponwhatgroundsthefinancialreputationofSirRobertPeelis
based,ortocomprehendthewisdomofadheringtoasystemwhichsacrifices
everythinginfavouroftheforeigner,andbringsusinreturnnoearthly
recompenseorgain.
AytounlinkedPeel’spolicies,andthe“adversestateoftheforeignexchanges”that
theyhadbroughtabout,with“thecalamitousmonetarypanicof1847,”which,he
claimed,hadbeen“occasionedbythedemandforgoldtomeetthelarge
importationsofforeigngrainconsequentuponthe[Irish]famine.”Thefactthat
goldhadsoonreturnedtotheBank,heargued,hadonlytakenplaceatthecostof
forcedsales“atpricesruinouslylowtotheproducers”and“bythesuddenlimitation
oftheemploymentoflabour.”55
Bytheearly1850s,manyprotectionistsweresingingaverydifferenttune.
Whathadchangedintheinterveningyearswasthediscoveryofmajornewsupplies
ofgoldinCaliforniaandAustralia,whichwouldincreaseworldgoldoutputfrom
55W.E.Aytoun,“AGlimpseofGermanyanditsParliament,”Blackwood’sEdinburghMagazine64
(1848),534;Aytoun,“Agriculture,Commerce,andManufactures,”Blackwood’sEdinburghMagazine
67(1850),372.
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justoverfortytonsayearinthe1840stoaround800tonsin1860.56Awashingold,
protectionistsbaskedintheanticipationofgrainpricesrisingwiththemoregeneral
inflationarytide,andnolongerworriedifsomeofthenewgolddepartedthe
countrytopayforadditionalstocksofgrainfromabroad.ArchibaldAlison,
referringtotheCaliforniagoldrushas“thecurrencyextensionactofnature,”
predictedthatthis“giftofProvidencetoasufferingworld”would“arrestthe
generalandcalamitousfallofpriceswhichtheFree‐tradershavelabouredso
assiduouslytointroduce,andthusdiminishinamostmaterialdegreetheweightof
debtsandtaxes.”EdwardCayley,whohadbeenaleadingprotectionistduringthe
1840s,putitevenmorestrongly:“Givemegold—givemecheappaper—andIdon’t
careforprotection.WehaveAustralia—wehave,thankstoabeneficentProvidence,
California,andthatsettledthequestionoffreetrade.”57
Totheextentthatthenewsuppliesofgoldprovidedprotectionistswitha
deusexmachinathatwouldundothebanefuleffectsoffreetrade,thegoldrushes
alsostruckthefinaldeathknellofBritishmercantilism,atleastinitsandearly
nineteenth‐centuryincarnation.Thereasonforthiswasthat,after1800,
mercantilistdiscoursehadhingedontherelativescarcityofgoldandsilver,which
enabledprotectioniststoforecasteconomicdisasterfollowingthepredicted
diversionofthosepreciousmetalstopayforgrain.AsAytoun’sgloomydispatch
fromFrankfurtsuggests,suchforebodingsmightverylikelyhavecontinuedto
56NiallFerguson,TheCashNexus:MoneyandPowerintheModernWorld,1700‐200(NewYork:Basic
Books,2001),331.
57ArchibaldAlison,“TheCurrencyExtensionActofNature,”Blackwood’sEdinburghMagazine69
(1851),19;YorkHerald,11April1857,quotedinH.I.DuttonandJ.E.King,“AnEconomicExile:
EdwardStillingfleetCayley,1802‐1862,”HistoryofPoliticalEconomy17(1985),215.
31
accompanycritiquesoffreetradewellintothesecondhalfofthenineteenth
century,hadnotthepromiseofasufficiencyofgoldsuddenlyappearedonthe
scene.
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