Romanticism and the Gold Standard

Money, Literature, and Economic Debate in Britain 1790-1830

A. Dick

• Publisher: Palgrave Macmillan
• Year: 2013
• ISBN:
  9781137292926
• Topic: Literature
• Subtopic: European Literary Criticism
• Index: Literature

Through a close analysis of the pamphlets, reviews, lectures, journalism, editorials, poems, and novels surrounding the introduction of the gold standard in 1816, this book examines the significance of monetary policy and economic debate to the culture and literature of Britain during the age of Romanticism.

1

Realms of Gold

For a hundred years the system worked, throughout Europe, with an extraordinary success and facilitated the growth of wealth on an unprecedented scale. To save and to invest became at once the duty and the delight of a large class. The savings were seldom drawn on and, accumulating at compound interest, made possible the material triumphs which we now all take for granted. The morals, the politics, the literature, and the religion of the age joined in a grand conspiracy for the promotion of saving. God and Mammon were reconciled. Peace on earth to men of good means. A rich man could, after all, enter the Kingdom of Heaven – if only he saved. A new harmony sounded from the celestial spheres.¹

Introduction: Romanticism and the gold standard

In June 1816, the British Parliament did something no one had ever done before: it officially introduced a gold standard. Until 1816, ‘money’ in Britain comprised a massively heterogeneous network of varying exchange practices and social conventions. It existed in a variety of forms: bullion, coins, tokens, bills of exchange, promissory notes, government bills, and banknotes. These were exchangeable in a number of different institutions: goldsmiths, shops, country and metropolitan banks, factories, and agencies. Forgery was a crime and a nuisance, but for many people it was also a way to facilitate commerce where sanctioned practices were inaccessible. Money also had social meanings. In early-modern times, money was conceived metaphorically as blood, food, animals, and birds. Money was life. It could also be death: ill-got riches were wounds; excessive debt was a disease. Francis Bacon once remarked that ‘money is dirt’ in both senses of the term, land and muck. Money was a means for people to calculate their social worth. It was a way to distinguish the rich from the poor, men and women, husbands and wives. Money could be given as a gift, received as a token of gratitude, held up as a pledge of honor, and hoarded as a form of rebellion. The ability to create money was a sign of ingenuity; destroying it meant power. Money was a means of escape and a mark of bondage, a charm and a curse, a ticket to ride and a prison sentence.²

By the middle of the nineteenth century, all that had changed. Most people regarded their bills and coins as means of exchange in a homogeneous system held together by a universal principle: the gold standard. Gold is a durable metal that retains its chemical constitution even at extremely high temperatures. It has thus been revered by many cultures as inherently valuable. But it was not only its physical qualities that made gold precious. Gold was, by tacit consent, the general equivalent for everything, the universal standard of value. Held in reserve, but exchangeable on demand, gold served as the natural limit for credit and debt: the amount of gold held by the banks marked the real boundary beyond which all modes of fiscal speculation could not go. Gold became a symbol of national prudence and individual discipline. God and Mammon were indeed one.³

At least, that was the theory. Although it was sometimes touted as such, the gold standard did not herald an age of sound economic reasoning and free markets. Few people even noticed that the legislation had passed, not even the radical press. Under the gold standard, the British financial system was far from a smooth operation. There were banking and stock crises in 1825, 1833, 1837, 1844, and recurrently thereafter.⁴ Even when times were good, the nineteenth century witnessed poverty and exploitation on a mass scale that belied the stability the gold standard promised. Governments sidestepped the standard whenever extraneous influences affected its price or drained reserves.⁵ Money remained an object of curiosity and of confusion. People held it when they should have spent, and spent it when they should have saved. Some regions adopted the standard, and others did not.⁶ The courts were awash in white-collar crime, the prisons full of forgers and confidence men.⁷ Though to some it was an article of faith, the gold standard was seldom indisputable.⁸

How did an economic principle that everyone knew did not really work come to play such a central role in British national identity and intellectual culture? John Maynard Keynes, whose sardonic account of the gold standard (the epigraph to this introduction) betrays his skepticism toward ‘natural’ market stability, had two answers: (1) protectionist trade policies throughout the British Empire made prices, including that of gold, unusually stable throughout most of the nineteenth century;⁹ (2) heralded by political economists and the popular press alike as the wellspring of market exchange, the myth that gold was the universal, unchanging standard allowed people to forget their own history. ‘When the actual events of a hundred years have not disturbed his illusions,’ Keynes wrote, ‘the average man regards what has been normal for three generations as a part of the permanent social fabric.’ People believed in ‘the future permanence of [their] own happy experiences’ and ‘disregarded the warning of past misfortunes’.¹⁰

While not a strictly Keynesian study, Romanticism and the Gold Standard takes seriously the idea that the logical contradictions, social inequalities, and variable meanings of money were absorbed into the cultural fabric of British society after the introduction of the gold standard in 1816. While the popular view in the nineteenth century was that the gold standard would ensure Britain’s long-term economic stability, most politicians, radicals, financers, farmers, writers, readers, and consumers of popular literature and intellectual media were aware of the alienation, division, and disharmony in politics and social life that the gold standard in some ways suppressed and in others fomented. At the time of its introduction, more people distrusted than believed in the gold standard and many sought alternatives within and to the bourgeois marketplace in which they lived and worked. The resulting debates and disagreements entrenched a pervasive and complex idea that a standard was possible. The idea that money has a standard enabled the fluidity and freedom of the market that in other respects it seemed to deny: a society as diverse and divisive as Britain in the nineteenth century could be held together by the mediating force of free exchange between individuals, what we in hindsight recognize as the liberal principle of diversity within consensus. The gold standard is thus not a constitutive but a ‘regulative ideal’, projecting a universal or ‘absolute’ value encoded in concepts of divinity, genius, and universality and measuring, though not delimiting, the constantly shifting values of British commerce.¹¹ The standard is a product of practices, regulations, and arguments operating through institutions of exchange and networks of information. These include economic policies, religious beliefs, political debates, and aesthetic productions. The aim of this book is to trace the networks of exchange and information that made up the standard.

By a ‘standard’, I mean a unit or concept that measures things or ideas relative to each other. A meter is a standard of distance. A pound is a standard of weight. A dollar is a standard of money. None of these exists in nature. Gold is a scarce commodity whose market value is always in flux and whose appeal is by no means universal. In fact, to a great extent the appeal of an object like gold has nothing to do with intrinsic qualities but rather with how it looks on beautiful people or associates with certain ideas of glory or wealth – and these will change depending on who is looking at it. The same could be said for the standards used to grade undergraduate essays, rate movies, determine fashions, or elect politicians. What is interesting about standards is the extent to which people believe in their validity while knowing they are arbitrary. In the West, we take pride in endorsing whatever standards we want, changing them if we wish, and claiming them as uniquely our own.¹² Our laws and institutions ensure that differences are respected, if not celebrated. The modern standard is an example of what the philosopher Charles Taylor calls a ‘modern social imaginary’, a general belief about the world that has ‘no ontological status’ but comes to exist through the distinctions and intersections that constitute ordinary life and the various means we invent to appreciate and measure the differences that exist between individuals and cultures.¹³

To clarify this difficult idea, it will be helpful to review briefly the story of the gold standard. It is often said that when Parliament suspended cash payments at the Bank of England in 1797, Britain went off the gold standard. This is not true: there was no gold standard in Britain (or anywhere else) until 1816. In seventeenth- and eighteenth-century political economy the concept of intrinsic value was based on feudal ideals of proprietorship and stewardship. It was represented iconically in monuments, buildings, poems, and coins as the ‘King’s standard’.¹⁴ In mercantilism, the dominant economic discourse of early modernity, intrinsic value referred to the integrity of the economy as a whole, its consistency and order, corresponding at once to a divine order in the cosmos, to a hierarchical order on earth, and to a healthy circulation in the body.¹⁵ In a word, the standard of value was rhetorical, a ‘rule-governed’ instrument of civic administration ‘whose procedures themselves were delimited by the institutions that organized interaction and domination’.¹⁶ In the terms of this rhetoric, too much money or too much bad money was an aberration to the idea of intrinsic value. However, the actual value of the coinage in Britain (as in the rest of Europe) was determined by proclamation. Governments debased their coinages, substituting pure metals for alloys, almost routinely.¹⁷ Decades of economic expansion, increasing demand, and dire mismanagement obviated the fact that the system did not operate in practice as it was supposed to in theory.¹⁸

The response to such practical inconsistencies was a drive to rethink the ‘King’s standard’ in a new form. If moral unity or royal authority could be imagined and encouraged perhaps the system might right itself. Such views did have some practical effects. Writers contemporary with the financial revolution – Locke, Davenant, Petty, Barbon, Rice, and others – understood that the use of cheaper instruments of exchange such as debased coinages and paper money was a necessary, indeed inevitable, consequence of economic expansion: their aim, in campaigning for full-bodied coins (in the case of Locke), land-based fiscal management (Petty), or tight government control (Barbon and Davenant) was to ensure that the system retained a modicum of order in keeping with the broader demands of the state rather than just the local interests of individuals.¹⁹ In 1717, Isaac Newton established a firm price for the guinea, 21 shillings, in an effort to prevent good silver from being melted down and shipped abroad and a plethora of foreign coins from circulating in Britain. But Newton overvalued the guinea and the exodus of silver continued until the small change of the nation was more or less a token economy, paper money became, almost necessarily, practically and legally acceptable as cash, and the country found itself on a de facto gold standard.²⁰ After the South Sea Bubble and the failure of various other schemes, debates periodically resurged about how the government was managing the national finance, how best to control or consolidate it, and how to understand the principles by which it ran.

What is impressive about these debates is the extent to which they assumed that commerce was a fluid and dynamic system that operated, like the human body, through the power of its own circulatory drives and operations.²¹ For most merchants, already used to dealing with bills of exchange and other practical modes of transfer and identification, the state’s demands for centralization were an annoyance while, ironically, the state itself was coopting these very methods to ensure its own ‘liquidity’.²² By the middle of the eighteenth century, most of the national debt had been consolidated in ‘the funds’ and it was rare for members of the upper classes not to invest to some extent in government bonds. A series of significant decisions in the 1750s and 60s established the legality of paper money. What critics objected to was not so much the expansion of national wealth but rather the way the credit system was moving the seat of power away from the country and into the city. Yet, even those who distrusted paper credit understood its benefits. A paper system could flourish, writers like Richard Cantillon and David Hume argued, as long as it served a free market of commodities that would circulate around the body of the nation rather than stagnate in the organs of state. Eighteenth-century economics thus conceived of a double standard: on one hand, money, especially coin, embodied traditional virtues of honesty and strength; on the other, as paper, money represents the imaginative foresight and resilience of the new entrepreneurial spirit.

Not until the 1790s did the idea of a completely de-personalized objective standard, one we associate with modern finance, begin to take hold – and even then it was highly contentious. Many in finance and government did not believe it was practicable to impose an arbitrary limit on commercial activity. British finance operated through a balance between credit expansion – loans, informal credit, small city and country banks – and convertibility: at any point, holders of credit could exchange their notes at the Bank of England for gold or silver. A sufficiency of coin necessary to redeem all the notes (and other forms of credit) circulating in the country was neither necessary (as Adam Smith argued, the ideal ratio of paper to gold is about 18 to 1) nor possible. Britain’s national debt had already begun to rise at a steady rate through the eighteenth century; the war against France starting in 1793 caused it to increase exponentially. A sudden reduction of credit would devastate an economy largely reliant on credit and notes. So when the British government decided to disallow the exchange of paper and gold at the Bank of England in February 1797, following an invasion scare and a demand for hard cash, it did so not to adopt a new paper money system but rather to extend a paper money system that already existed.

Of course, there was considerable outrage mainly from the opposition, who decried the suspension as a travesty of Britain’s so-called ‘ancient standard’ and from currency traders who had been enriched by the administration’s earlier efforts to enhance the nation’s gold reserves. The attacks against the suspension renewed in 1809 when, after a decade of relative stability, the price of gold shot up and the country was gripped in a panic over inflation. Seizing an opportunity to criticize the government on fiscal grounds, the opposition called for a committee to investigate the suddenly high price of gold. Two years later the committee reported that the high price of gold had been caused by the Bank of England’s untenable expansion of credit; the only way to bring the price of gold and everything else back down was to reinstate convertibility. The government refused, and the recommendations of the Bullion Committee, as it was called, were defeated. In the ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Illustrations
• Preface and Acknowledgements
• 1 Realms of Gold
• 2 The Bullion Controversy
• 3 The Idea of Paper Money
• 4 Monetary Forgery and Romantic Poetics
• 5 Standard Novels
• Conclusion: A Romantic Economy
• Notes
• Bibliography
• Index