Front Page Titles (by Subject) CHAPTER VIII.: PARTICULAR INTERESTS CONCERNED. - The Works of Jeremy Bentham, vol. 3
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CHAPTER VIII.: PARTICULAR INTERESTS CONCERNED. - Jeremy Bentham, The Works of Jeremy Bentham, vol. 3 
The Works of Jeremy Bentham, published under the Superintendence of his Executor, John Bowring (Edinburgh: William Tait, 1838-1843). 11 vols. Vol. 3.
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PARTICULAR INTERESTS CONCERNED.
Of the four distinguishable effects looked for from the proposed measure, that which will probably be regarded as the principal, is the degree of acceleration and assurance promised by it to the redemption of the national debt. To the accomplishment of so desirable an object in a way consistent with existing engagements, no damage accruing to particular interests has ever been considered as opposing any bar that ought to be regarded as insurmountable. That a reduction, say from £4 to £3 per cent. is a tax, and that a proportional one, to the amount of 25 per cent. upon the income of a particular class of men, is a proposition too obvious to be overlooked. Yet the design of effecting a reduction of the same sort, and that to an undefined amount, is a design rooted in the mind of the legislature, evidenced by the practice of preceding parliaments,† and by the express declarations of others.‡
The nation at large, and the stockholder, are borrower and lender. When the money is to be raised, it is the lender’s harvest; and he takes advantage of the borrower and his necessities to the utmost of his power. When debt comes to be paid off, it is the debtor’s turn; and it is neither unnatural nor unjust, nor illaudable, nor ought it to be unexpected, that he, by his agents, should take the like advantage.
The stockholder of the paying-off season is not (it is true) in every instance the same individual as the stockholder of the borrowing season. He is, however, either the very same, or one who, with his eyes open, and for valuable consideration, has put himself in the other’s place:—succeeding to all his rights, it would be in vain to repine at the thoughts of having succeeded to any of his obligations. From a creditor in some cases, and on the score of humanity, mercy may, with more or less reason, be expected—but from a debtor, what mercy was ever looked for? The words merciless and debtor are words scarcely to be coupled with a grave face.
Expressions, however, and the momentary effect they may have on the imagination, are not the proper standards of right and wrong in this case any more than in any other. Human feelings, and the effect of measures upon those feelings, do constitute that standard, in so far as they can be ascertained. A stockholder is as much a member of the community—as great a part of the community—as any other man. Such as his expectations have been, such will his feelings be, when the event takes place. But what have been his expectations? It is from his situation, and that only—from the terms of the contract by which his situation in that respect is constituted—that any judgment can be formed.
Thus stands it with regard to the public creditor—the stockholder, who, on the comparative return or increase of general prosperity and opulence, has in former instances seen that part of his income reduced by one half; and who, within a period already in prospect, may be doomed, by the like cause, to a reduction to the like amount.
But in comparison with the interests of this vast branch of the community, what can be the amount of all the other particular interests put together! and in comparison with the degree of sufferance in this case, how trifling will be the degree of sufferance in any of those other cases!
The destiny of the stockholders is not hypothetical: it originates not in the proposed measure; it has been fixed and made known by the legislature, and built upon for years and years, by determinations several times repeated and brought to view, without a doubt from that or any other quarter on the head of perseverance. It is for want of means, and not of determination, that the redemption with all its consequences has not long ago been accomplished.
In comparison of such interests, whatever lighter interests may be found to stand in the way might therefore appear as scarcely worth a glance. But though all particular interests put together will not prevail for the rejection of a measure beneficial in a superior degree to the whole, yet a view of the particular ways and degrees in which they may respectively come to be affected by it, will not be without its use, were it only by way of warning of the probable sources and grounds of opposition, and of the nature of the obstacles which may be to be combated in the course of the exertions necessary to bring the measure into effect.
During Period I., while no part of the mass of government annuities is taken, but on terms on which the holder is desirous to part with it, benefit to particular interests will run along with, and probably preponderate over the damage. From the commencement of the period when the species of property in question is taken from unwilling hands, the damage, as far as particular interests are concerned, will be apt to outweigh the benefit.
The only interests that belong in strictness to the present inquiry, are those which are affected by the particular mode of operation employed by the proposed measure. The consideration of any such interests as would equally be affected, whatever other mode were employed, is foreign to the present case.
The particular interests on which it bears are of course the several interests concerned in the species of paper money already in circulation. The parties in question are, therefore—1. The Bank of England;—2. The country banking-houses; to which will be to be added (although not concerned in the emission of paper money, but on another account;)—3. The banking-houses of the metropolis.
1. If the paper of the Bank of England should be accepted by government in payment for annuity-note paper issued at the annuity-note offices, on the footing of cash, as it is at present at the other existing government offices, the circulation of bank-notes would not (it should seem) experience any diminution from the proposed measure. It might even receive assistance, since, in virtue of the same properties by which bank paper is rendered preferable to cash for all other purposes, it will be no less so for this purpose.
Should the public in general testify the expected preference for annuity-note paper as compared with cash, the Bank, by keeping that paper as the stock in reserve to answer calls for change for their own notes, might keep so much the less cash, and derive £2: 19s. interest from a portion of their stock which at present yields them none. But the profit from the present state of things is simple and certain: the result of the proposed measure, as touching its effects upon the affairs of the company, would appear wrapped in clouds. The Bank, according to their intelligent censor, Mr. Allardyce,* have not been forward to step out of the beaten track, where the step has been ever so obvious, and increased emolument ever so certain a fruit of it: the probability, therefore, seems to be, that the plan of the proposed rival paper would not be viewed from that superb edifice but with a rival’s eye.
Should damage eventually accrue to the corporation, and should the case be regarded as calling for compensation, the profit would afford an ample fund, and the situation of the party damnified is such as would render it easy to reserve compensation in a variety of shapes. But to put the public to any expense in rendering any such compensation, would be a departure from former practice. When by threats of forced redemption government has compelled the Bank to accept of a reduced rate of interest, and made a defalcation to the amount of 25 per cent. upon the greatest part of its income, compensation has neither been granted by one party, nor demanded by the other.*
To government, whose own manufactory of paper money† is of no less standing than that of the bank, it will be difficult to say why it should be forbidden to follow the example of the bank, and cut down its paper into as many smaller sizes as it found convenient. To government which for the benefit of the community at large has made no scruple of restricting the dealings of other manufacturers of paper money, it would be strange, if in the same view it were not allowable to take its own course in the manufacture of its own paper, in the management of its own affairs.
But the resource afforded by loans from the bank (it may be asked,) shall government deprive itself of such a resource? The answer is short and simple. The resource cannot be taken away by the measure, till profits have been produced to a greater amount than the fee-simple of it. Bank paper need not—would not begin to be withdrawn out of the circulation, till the paper of the country banks had been driven out of it altogether. But before this would have happened, a profit would have been made by the sale of annuity-note paper, more than equal to the usual advances made by the bank.
It is only in time of war that the resource is of any value. The quantity of money in the country will not be lessened at any rate by the proposed measure: the great and only danger is, lest it be increased too much. Upon any emergency, the same quantity of money would therefore be to be had, and always to be had only through a channel perhaps different, and at a rate of interest possibly, though not certainly, a little higher. At the worst, to set against the gain of the twenty, thirty, or forty millions, two or three times in the course of ten or twenty years, an extra expense to the amount of £50,000 or £100,000, might be incurred. Upon these occasions, a quantity of money might come to be raised upon bills in the nature of exchequer bills, under powers previously and regularly obtained from parliament, instead of being raised by treasury bills without powers from parliament.
The resource, such as it is, might or might not be reduced; but at the worst, would be but reduced. Even now, profit by paper issued is but a part of the profit of the bank.
2. As to the country bankers, the effect of the measure upon their interests appears by no means clear. On the one hand, if the quantity of cash in the country be not lessened by the proposed government paper, the demand for banker’s service in keeping that cash will not be lessened. Should the proposed government paper come to be universally received in preference to cash, the supply of cash kept by these banks for answering draughts may be made to assume that form, yielding £2 : 19s. per cent. while kept at home, while an equal amount in cash is sent abroad in the way of discount in exchange for bills. On the other hand, the money which is now attracted to a country bank by the nominal 3 per cent. or whatever interest it is that is paid for it at present will no longer find its way thither, being turned aside by the full £2 : 19s. a-year, with so many other advantages that attend the proposed paper in comparison with the paper of country bankers.
The loss, if there be any, to which this species of trader would be thus exposed, is at any rate among the slightest and least to be regretted of any to which man is exposed by the vicissitudes of trade. It is a mere cessation of gain, or rather of gain in this particular shape. A banker’s capital is all in money. It is not with a banker as with a manufacturer: no loss by removal of stock, or by forced sale in the lump, and thereby to a disadvantage, to avoid another greater loss. A banker steps into his trade without trouble, and goes out of it without loss.
In November 1792 (according to Mr. Chalmers,‡ ) the number of country banks was upwards of 400 before the month of March 1793; according to the evidence given on the 1st April 1797, to the Committee of the House of Lords,∥ they had decreased to about 280: on that same 1st of April 1797, according to the same evidence, they did not exceed 230. If, in consequence of the proposed measure, the numbers of these banks should experience a further reduction, or were to be swept away altogether, the change is of a sort that threatens not to be either preceded or followed by distress. Failure cannot be among the consequences. The banks will have had ample warning, time for getting in their debts, and contracting their issues. Of the issue of the proposed paper, the progress, from the very opening of it, will be known day by day, the whole island over, to a penny.§ Months at any rate, not to speak of years, will have intervened between the first authentic mention of the measure, and the establishment of it.
From withdrawing without failure—from withdrawing, should it take place in consequence of the advancement of the proposed annuity-note paper—little damage would ensue to the few individuals particularly concerned, and none to anybody else. From failure, as often as it happens, ruin ensues to the individuals concerned, and much mischief to the community at large. An entire substitution of the proposed government paper to the paper of country bankers, would prevent the recurrence of this mischief, and that ruin. It is no light matter—out of the four hundred and odd country banks above spoken of (according to an account taken by Mr. Chalmers,) a full fourth had failed:* of more recent failures I say nothing, having nobody to quote.
By expulsion from this branch of trade the whole body of the trade would thus be secured from failure. By the failure of a part, though it were but a tenth part, more distress would at any time be produced, reckoning that of the trade alone, than by the expulsion of the whole.
3. For the banking-houses of the metropolis, there seems less cause of apprehension than for the country banks. They have no paper for the government paper to annihilate. True it is, that on the one hand many persons who now keep their money at a banker’s, because, by keeping it themselves, they could make no interest, would not keep their annuity-note paper at the banker’s, if by keeping it there they could make no interest on it, while by keeping it at home they could make £2 : 19s. per cent. of it. But the inducement to keep money at the banker’s does not consist solely in the consideration of safe custody, but in that and other advantages put together: in the saving in point of time and trouble in regard to the counting of money, and doubts and disputes about the goodness of money offered, together with the convenience of a man’s having the account of his expenditure kept by other hands. For these remaining conveniences, some might be willing to waive their claims to the small and unusual gain of 2d. per £100 per day upon expenditure: others, though unwilling to give up the whole, may be willing to give up some part of it; and in this way a man might keep his annuity-note paper at his bankers, as he does his cash, but upon terms; and the profit by interest on the paper might thus come to be shared between the owner of the paper and the keeper of it. Capital sums, however, which now are in so many instances suffered, through indolence, and while waiting for a distant and undetermined employment, to lie dead to the owner at a banker’s, would not be quite so apt to lie there, when in the shape of annuity notes they might be productive of interest to the owner, without prejudice to such their destination, and without any increase of trouble.
Here, then, we see two new sources of profit opened by the measure to the banking-houses of the metropolis:—1. Profit by interest of annuity-note paper kept in reserve, instead of cash to answer drafts; and 2. Profit by annuity-note paper kept for customers upon terms. Suppose the quantity of cash in the metropolis to be undiminished by the measure, the amount of the above profits will even be neat. Will it remain undiminished? The affirmative seems highly probable.
Among the effects of the measure is one, that to a certain degree cannot fail to increase that quantity. The cash which now remains, and would otherwise have remained in the hands of the frugal poor—in unproductive hands, being now poured into the hands of the commissioners for the redemption of the national debt in return for annuity-note paper, will be restored to the circulation, and add to the quantity put into the hands of bankers.
[† ]In the compass of thirty-three years, viz. from 1717 to 1750, interest on divers parcels of the national debt was reduced from £6 to £3 per cent.—(Sinclair, II. p. 214.)
[‡ ]One instance, 32 Geo. III. c. 55.
[* ]Address to the Proprietors of the Bank, 1798.
[* ]By the reduction of interest on government annuities from 4 to 3 per cent. in Mr. Pelham’s time, 1749 to 1750; 23 Geo. II. ch. 1 & 22.
[† ]Exchequer bills.
[‡ ]Estimate, &c. edition 1794. Dedication, p. lii.
[∥ ]By Mr. Ellison, agent to the Association of Country Banks.—Lords’ Report, p. 87.
[§ ]By Article 18, Chap. I.
[* ]Estimate, &c. ib. 62.