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INTRODUCTION - Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain 
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain, edited and with an Introduction by F.A. Hayek (London: George Allen and Unwin, 1939).
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This works appears online with the permission of the Estate of F.A. Hayek. A further annotated version of Hayek’s introduction appears as a chapter in volume 3 of the Collected Works of F.A. Hayek (University of Chicago Press, 1991).
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To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded as his major title to fame. To them the fact that he was a successful banker and a great expert on finance probably appeared as the indispensable but comparatively uninteresting background which put him in the position to be a great philanthropist and the effective advocate of every good cause; certainly it enabled him to provide at his comfortable Clapham home the meeting place for the active and influential group of Evangelicals, who, quite apart from the great rôle they played in their own time, were probably one of the most profound influences which fashioned the outlook and character that was typical of the English upper middle class of the nineteenth century.* It would be an interesting and instructive task to attempt a full-length Life of Henry Thornton, and, considering how many minor figures of the circle of which he and William Wilberforce were the centre have been honoured with biographies,† it is surprising that it has never been accomplished.‡ But the men who became the historians of the late eighteenth and early nineteenth century were on the whole not too sympathetic towards that austere view of life, which in many instances must have overshadowed their own youth, and which perhaps found its most perfect embodiment in the person of Henry Thornton. It may well be, however, that a more detached future historian will recognize that in their immediate influence the “party of saints” of which Thornton may be regarded as the prototype, at least rival their better-known contemporaries, the philosophical radicals. But even if such a complete biography of Henry Thornton would, as seems likely, contribute a great deal to our understanding of the social and economic views, the Wirtschaftsgesinnung, that dominated the nineteenth century, it can certainly not be attempted here. In this essay we can do no more than give an outline of those sides of Henry Thornton’s life which throw light on the circumstances in which the Paper Credit of Great Britain was written, and on the influence which the views of its author exerted on contemporary thought.
“We are all City people and connected with merchants, and nothing but merchants on every side” was Henry Thornton’s own comment on the ambitions of his brothers to become members of high Society.* Although descended from a succession of Yorkshire clergymen, John Thornton, the common ancestor of the London Thorntons, was a merchant in Hull in the late seventeenth and early eighteenth century.† His two sons, Godfrey and Robert, the latter the grandfather of Henry, both went to London and appear to have engaged in the trade with Russia and the Baltic. Both were directors of the Bank of England, as was also the son of the former, the younger Godfrey, in whose counting-house his cousin’s son Henry, the subject of this memoir, was to serve his apprenticeship, “chiefly employed in carrying out bills to be accepted and taking the weight of Hemp, Flax, etc., at the Custome House.”‡ Robert’s son, another John and the father of Henry, was also a “Russian merchant” in the firm of Thornton, Cornwall & Co. He is known as the friend and benefactor of the poet William Cowper* and as a member of the first generation of Evangelicals—that Wesleyan wing within the Established Church who, just because they remained within the Church, probably did more to impress the stamp of Puritanism on nineteenth-century English society than Nonconformism. His father, Robert, had already settled in Clapham, then the country residence of numerous City magnates, and here this branch of the Thornton family resided for another four generations. It was probably the then curate of Clapham, Henry Venn, who in the 1750’s won John Thornton over to the tenets of Evangelicalism. But it was not until many years later, when their sons John Venn and Henry Thornton lived at Clapham, that their circle became known as the “Clapham Sect.”†
John Thornton, “the Great and the Good,” as he was called, was celebrated for his magnificent generosity, and he is reputed to have spent on charity in the course of his life the sum of £100,000 or even £150,000.‡ His charity and his deep piety were fully inherited by his son, and the lines which in an elegy on his death in 1790 Cowper wrote of John Thornton
were equally true of Henry, who also succeeded his father to the friendship with Cowper. But in other respects the simple, passionate and occasionally even violent older man must have presented a curious contrast to his highly intellectual and disciplined son, who regarded enthusiasm and eagerness as grave sins. And although John, in spite of his princely munificence, succeeded in passing on to his children much increased the considerable fortune he had inherited,* his sterner son regarded him as a Jack of all trades who never thrives and as being somewhat too impulsive and unmethodical in his generosity.
Of John’s three sons† Samuel (1754-1839), the eldest, became like his father a “Russian merchant,” was M.P. for Hull and later for Surrey; and as a director and, from 1799 to 1801, Governor of the Bank of England, he was a figure of considerable importance in the City.‡ As he outlived his younger brother Henry by eighteen years and after the latter’s death gave important evidence on monetary problems to the Commons Committee on the Resumption of Specie Payments in 1819, he seems to have been the more familiar figure to the economists of the ’twenties and ’thirties. It must be due to a confusion with him that J. R. MacCulloch started the legend, since copied by practically everyone who ever mentioned Henry Thornton, that the latter was a director and Governor of the Bank of England.*
Robert, the second son, M.P. for Colchester and at one time Governor of the East India Company, although by residence a member of the Clapham circle, seems to have been rather different from the rest of the family. He collected a magnificent library, his “villa in Clapham was celebrated for the beauty of its garden and conservatory,” and he “lavishly entertained royalty and many others” there with the result that he outran his fortune, tried to recoup it in daring speculations in the funds, failed, and ultimately died in America.†
Henry, the youngest son, was born on March 10, 1760. The parents apparently had rather unusual ideas about education, and while they seem to have spared no expense, and even sent their eldest son for three years to the Royal Pedagogue in Halle, Saxony,‡ they took a somewhat unfortunate line in the case of Henry. After eight years at a fairly efficient school run by a Mr. Devis in Wandsworth, where he began to learn Latin at five, he was sent to a Mr. Roberts at Point Pleasant, who
“professed to keep a school different from other Schools, and seemed a sort of miracle from the circumstance of his being himself the teacher of every thing. He taught Latin, Greek, French, Rhetoric, drawing, arithmetic, reading, writing, speaking, geography, bowing, walking, fencing. He also gave us a few lessons in Hebrew, and in mathematics.”*
Henry resided in this academy from his thirteenth to well into his nineteenth year, but because of his superior previous knowledge of Greek and Latin he was tempted to be very idle during the whole of this period. He complains later that he left school with an extremely small stock of knowledge and that he knew little or nothing of English, History, Mathematics, Natural Philosophy, Belles Lettres, and Politics.
His school years had only been interrupted, in the interval between the two schools, by a family visit to France, where in the company of Cowper’s friend, the Rev. Mr. Unwin, they spent some weeks in Paris in 1773.
The two years from the spring of 1778 to the spring of 1780 Henry spent in the firm of his relative, Godfrey Thornton, and then he entered his father’s counting-house, that is, as he explains,
“a counting house in which he conducts some business in his own name, apart from that of the House of Thornton, Cornwall & Co. There is a proverb that ‘Jack of all trades never thrives.’ This proverb was verified in my father’s case. He was in his private capacity a merchant in general. He made, that is to say, occasional and sometimes large speculations in any article which happened to take his fancy. During the two or three years in which I was his partner he embarked on a great speculation in wheat by which he lost £2,000 or £3,000—in a speculation in Tobacco by which he also lost money; in the sale also of British articles sent to the West Indies. . . .”
“Mortified to find that little pecuniary advantage was to be expected from my connection with my Father, I gave a very willing ear to a proposition made to me by Mr. Poole of Woodford for entering into a Banking concern with Mr. Down, my present partner. My Father was averse to it, and my Mother also. I did not, however, very greatly respect their judgment and they did not forbid my becoming a Banker. My Father as I suspect chiefly feared that I should be placed under peculiar temptation to keep improper Company by my being a Banker, a point in which he was mistaken. My Mother’s prejudices led her to think that to cease being a Merchant in order to become a Banker was to descend in life. She was well read in the Spectator, and had learnt to think that Sir Andrew Freeport was one of the first characters in the world.”*
It was in 1784 that he joined the banking house of Down and Free,† which soon became Down, Thornton, and Free, and of which he remained an active partner till his death. Two years earlier, however, he had entered the House of Commons and it was, as he records, partly this fact which recommended him to his partners. He had, indeed, made an even earlier attempt to enter Parliament when he was little more than twenty-one. Such an early entry into political life was at that time by no means uncommon. At the elections of 1780 the two friends, William Pitt and William Wilberforce, had both been successful at the age of twenty-one—Wilberforce, a second cousin‡ of Henry Thornton, at Hull, where Wilberforce senior and the father of Mrs. John Thornton were both eminent merchants. When a year later the second seat for Hull became vacant, Henry’s ambitious mother urged him to become a candidate. But after a little canvassing he discovered that he was universally expected to give two guineas to every voter, a custom with which he was neither willing nor able to comply, and consequently withdrew. In the autumn of 1782 another vacancy occurred, however, by the death of the member for Southwark, and again his mother urged him on, and prepared the way for him through her connections in Dissenting circles. His father, Henry, records,
“appeared to me not at all opposed to my mother’s propositions and he gave me a recommendatory letter to Mr. Ellis, the only person in Southwark with whom he was acquainted. My father, however, observed that according to his opinion the only mode in which it was right to enter into Parliament was that of Sir John Barnard, who was riding about Clapham Common while his election was going on, and who instead of soliciting his Electors was solicited by them. I perceived so plainly the impossibility of success in my own case if a principle of this kind was to be prescribed to me, that I considered my father’s objections as extravagant, and the evil of the two guineas not subsisting in Southwark I thought little of any other Evils and committed my cause to the hands of a large and self-created Committee which took upon itself to manage my election for me. A very able Lawyer Mr. Serjeant Adair was my opponent. Mrs. Thrale at whose house I dined on this occasion in company with Dr. Johnson, gave me her support.* The dissenters in general were favourable to me. The Thrale party† who had supported Lord North in the American war, were most of them also on my side, and the popular sentiment was in favour of a Merchant rather than a Lawyer. Some religious people moreover sided with me for my father’s sake, and the known largeness of his charities were a further recommendation. I carried my election by a great majority. . . .”‡
“The first vote I ever gave in Parliament,” he writes somewhat later in his diary, “was in favour of the treaty of peace with America. I immediately became in some measure enlisted with the friends of Mr. Pitt and an opponent of the Coalition party. I divided against Mr. Fox’s India Bill (November 1783) and again supported Mr. Pitt on his return to power, except in a few instances.”
Thornton’s active participation in the debates of these years seems in the main to have been confined to questions of taxation, particularly the discussion of the receipts tax and the shop tax. Even then, as he suggests, his allegiance to Pitt was by no means absolute, and in these years that little but influential group of independent members, the “party of the Saints,” gradually formed, of which Thornton and Wilberforce were for many years to be the leading figures.
In the winter of 1785-6 Wilberforce, after his final conversion to the views of the Evangelicals, had found a retreat in the house of John Thornton, and there the two young men drew close together and round them the “Clapham Sect” began to form. Looking back many years later,* Thornton writes:
“Few men have been blessed with worthier and better friends than it has been my lot to be. Mr. Wilberforce stands at the head of these, for he was the friend of my youth. I owed much to him in every sense soon after I came out in life, for my education had been narrow, and his enlarged mind, his affectionate and understanding manners and his very superior piety were exactly calculated to supply what was wanting to my improvement and my establishment in a right course. It is chiefly through him that I have been introduced to a variety of other most valuable associates, to my friends Babington† and Gisborne‡ and their worthy families, to Lord Teignmouth* and his family, to Mrs. Hannah More† and her sisters; to Mr. Stephen‡ and to not a few respectable members of Parliament. Second only to Mr. Wilberforce in my esteem is now the family of Mr. Grant.”§
For the early years the names of T. Clarkson∥ and Granville Sharp,¶ while somewhat later Zachary Macaulay,** John Venn,†† William Smith,‡‡ and John Bowdler§§ would have to be included, to give a fairly complete list of Thornton’s closer associates. It was a truly remarkable group of people, whose connections were made even closer by numerous intermarriages between their families,∥∥ and who to the present day show the strength of their native gifts by the extraordinarily long list of their famous descendants.*
Early in 1792 Henry Thornton bought a house at Battersea Rise,† on Clapham Common, which had formerly belonged to Lubbock, the banker, and for the next five years, till they both married, Wilberforce shared it with him, “contributing so much toward expenses.” Two other houses on the estate which Thornton had acquired, Glenelg and Broomfield, were let to two friends, Charles Grant and Edward Eliot, the latter the brother-in-law of Pitt. After Eliot’s death in 1797 Broomfield was taken by Wilberforce. Thornton added to his house and it is said that Pitt on one of his visits to his brother-in-law designed the oval library of Battersea Rise, which became the famous meeting-place of the group. It was here that the campaign for the abolition of slavery was planned and directed and that the numerous other activities of the Evangelical party were discussed.
It is quite impossible to make more than a mere mention in this sketch of the more important movements which the Clapham Sect initiated and in which Henry Thornton took a leading part. Their main achievement is, of course, the abolition of the slave trade,‡ and from the beginning of the association of Thornton and Wilberforce up till the passing of the Act of 1807,* the greater part of their energies were devoted to this leading goal. If Wilberforce was the driving spirit, Thornton was the wise and practical counsellor on whom Wilberforce placed absolute reliance. When in 1791 the experiment of settling a number of liberated slaves in St. George’s Bay led to the foundation of the Sierra Leone Company, the first of the African Chartered Companies, Henry Thornton became its Chairman; and through all its vicissitudes, till Sierra Leone was taken over as a Crown Colony in 1808, he remained Chairman of the Company, and devoted much of his time to its business and the many Parliamentary discussions to which its problems gave rise.† And when in 1798 the abolitionists almost despaired of ever succeeding, Henry Thornton revived their hopes by successfully piloting a bill for the exclusion of the slave trade from certain parts of the African coast through the House of Commons, although it eventually failed to pass the Lords.‡
If this is the best known of the achievements of the group, there are others of not much less importance. Faith in popular education, and sabbatarian zeal, led in 1785 to the foundation of the Sunday School Society of which Henry Thornton was the first President.* He provided for twenty-five years the means which enabled Hannah More to run her schools for the poor.† And when in 1795 the same old friend‡ embarked upon her Cheap Repository tracts, in addition to writing some of the tracts§
“Mr. T[hornton] and two or three others condescended to spend hours with the hawkers to learn the mysteries of their trade; the result is, we purpose next month to print two different editions of the same tract, one of handsome appearance for the rich, the other on coarser paper, but so excessively cheap by wholesale, as fully to meet the hawkers on their own ground”∥
With such advice the group succeeded in selling no less than two millions of the Cheap Repository Tracts during the first year of their existence. Out of this grew in 1799 the Religious Tract Society;¶ in the same year the Church Missionary Society,** and in 1804 the British and Foreign Bible Society†† were founded by the Clapham group, and in all three organizations Henry Thornton served as Treasurer. And the Charity of the Sect did not remain confined to the English on the one side and the Heathen on the other. When during the Napoleonic wars news came of frightful destitution in Germany, it was again Henry Thornton and Zachary Macaulay who organized public meetings and subscriptions to raise funds for relief.‡‡
But we must leave the activities in which Henry Thornton participated mainly as a leading member of a group, and return to the main events of his life and his more personal views and activities in Parliament He had entered the banking business at the beginning of a period of ten years of great prosperity and rapid expansion of the credit system of England. At the death of his father in 1790, Henry inherited a substantial sum which may well have helped him in building up what appears to have been a comparatively small banking house into one of the largest in the City. Of the three older partners two, of whom he says that
“they both were very kind to me—both however lent no very willing ear to the religious observations which I sometimes endeavoured to press upon them,”*
died in the first few years of the new century, and, the third being an invalid, left him as the dominant figure in the business. Looking back over his career as a banker he writes in 1809:
“My Banking business has been very profitable to me. I discovered before I entered that the antecedent gains had been extremely small; probably they were not more than £1,500 or £2,000 per year in all of which half had belonged to Mr. Down. The business gradually increased when my name and that of Mr. Free were added to the firm. We owed much to the kindness of our friends and much also to the circumstance of many country banks rising up at the time, with which we were wise enough to become connected. In the year 1793, a season of great commercial distress, we experienced greater difficulties than most other bankers in consequence of the sudden reductions of very large sums which we had held at interest for some very considerable banks. The evil partly consisted in the inadequacy of our capital. Mr. Down was not at that time very rich and my savings had been far from considerable.
“The world naturally expects that a House trusted so largely and conducting such expensive operations, should have funds of its own either in hand or within call, bearing some proportions to its concern and there is something, as I now think, like want of honesty in claiming an almost unbounded credit without laying a proportional foundation for it. The banking business is an extremely desirable one. It is remarkably suited to my infirmity of health, and the Providence of God has dealt most mercifully with me in thus accommodating my profession to my circumstances. My eldest son seems well qualified by nature to take my place in this concern. A little good sense, regular attendance, a spirit of liberality and kindness not degenerating into profusion and servility, together with an exact integrity are the chief points to be regarded.
“There is no necessity for becoming an intimate acquaintance of all who are disposed to be the good customer of the house Many of them may be very unfit to be friends. It may be, on the other hand, expedient to cultivate the friendship of a few respectable connections of the House and it will not be difficult to discover which of these are in point of private character the most desirable as guest at our table, or intimate associates in our family. . . .”
“I have, by the blessings of good Providence, enjoyed a considerable and generally increasing income for the last twenty years But I have made it my rule not to amass any large fortune When my father died, I received from him about £40,000, having antecedently derived from him only the very moderate sum of £6,000 My income has grown to £8, 10, or even 11 or 12,000 per an. of which £4 or £5,000 generally suffices for my expenses and about £2 or £3,000 is given in charity. My bounty was much larger before I married and now and then perhaps approached to profusion. The number of my children (now 8) and the infirmity of my health, together with the consideration that some may derive from me a tender constitution, which may be the source of more than ordinary expense, disposes me now to lay by £2 or £3,000 per an. for, in the midst of my compassion for the poor, I desire always to remember that saying of the Apostle ‘He that provideth not for his own household is worse than an infidel.’ ”
It is recorded that till his marriage in 1796 Thornton had made it a rule to give away as charity six-sevenths of his income.* His work at the Banking House does not appear to have taken up too much of his time. If we may trust his Diary, to attend there regularly from 11 a.m. to 3 p.m. seems to have been a good intention rarely achieved. And even so, we find occasionally entries as the following: “I did little yesterday at my Banking House except correcting a Sermon on Self Denial.”*
Of his business habits two anecdotes have come down to us, one of them referring to an embarrassment similar to that reported above, which occurred during the crisis of 1810. In the autumn of that year
“he was on his road with his family to Scotland. It was a time of severe pressure upon banks and trading interests. Straitened by the obstacles of the war, hampered by the embargoes by which Napoleon had deranged the course of trade, many commercial houses, long reckoned safe, sunk; others could only save themselves by flying to the banks for accommodation. The bank in which Mr. Thornton was a partner felt the pressure, and felt it severely, just after their most able partner had left London for the North. Had Mr. Thornton known what was impending, he would not have absented himself. The news reached him on his route to Scotland, and caused him some embarrassment. To return from a journey undertaken and generally known, would have spread rumours which might have brought on the very crisis that was to be feared. This course, therefore, could not be thought of. He decided to continue his journey, but he opened himself in confidence to one valued friend, and stated his wish that some thousands of pounds might be placed at demand at the disposal of his partners in the bank. No sooner was the hint given than it was met by ample support. Funds poured in from all quarters—Wilberforce, with generous ardour, hastening to lead the way; and the money came in such a flood, that his bank saw itself lifted above the sands on which it was settling, and floated into deep waters with abundant resources.”*
The other anecdote is told by the younger James Stephen without a date:
“Tidings of the commercial failure of a near kinsman embarked him at once on any enquiry—how far he was obliged to indemnify those who might have given credit to his relative, in reliance, however, unauthorized, on his own resources; and again the coffers of the banker were unlocked by the astuteness of the casuist. A mercantile partnership (many a year has passed since the disclosure could injure or affect any one), which without his knowledge had obtained from his firm large and improvident advances, became so hopelessly embarrassed, that their bankruptcy was pressed upon him as the only chance of averting from his own house the most serious disasters. He overruled the proposal, on the ground that they whose rashness had given to their debtors an unmerited credit, had no right to call on others to divide with them the consequent loss. To the last farthing he therefore dissolved the liabilities of the insolvents, at a cost of which his own share exceeded twenty thousand pounds. Yet he was then declining in health, and the father of nine young children.”*
As will be seen more fully in the second part of this essay, it was probably the experience of the crisis of 1793 which directed Thornton’s mind to credit problems. And in 1797, when the suspension of cash payments by the Bank of England led to separate enquiries by the House of Commons and the House of Lords, we find him prepared to give in his evidence before both committees a most lucid outline of the main ideas, which shows that by this time his thoughts had already crystallized. It immediately attracted wide attention and established his reputation as the foremost authority on these matters.† This side of his activities will, however, be taken up in the next section and we must now bring this general account of his life to a close.
Henry Thornton had married in the spring of 1796 Marianne Sykes, like his mother the daughter of a “Russian merchant” in Hull. It seems that she was a woman of considerable intelligence and education, but like her husband of very delicate health. In spite of this, however, Battersea Rise was soon peopled with nine children who all survived their parents. In the education of his children Henry took a great interest, and it is said that he “endeavoured to interest them at the earliest possible age in politics, and even in currency. He wrote a paper, advocating this practice, in the Christian Observer.”‡
To the busy father the country house in Battersea Rise served, however, only as a retreat from his labours in the City and in Parliament, and during the months when he resided at Clapham he would daily ride on horseback into town. He spent most of his time at a house in King’s Arms Yard, Coleman Street, near the seat of his Bank in Bartholomew Lane, and later, when his increasing parliamentary duties made it desirable to live in Westminster, at a house in Old Palace Yard which he had taken over from Wilberforce. His activities and his influence in Parliament, and at the same time his political independence, had been constantly growing since the evidence of 1797 had established his reputation. In that same year he supported Grey’s motion for parliamentary reform, and on questions such as abuses in elections and the general abolition of sinecures he frequently found himself in disagreement with the Government. His reformatory zeal led him to support Catholic emancipation at an early stage (1805) and to take a lively interest in questions such as debtors relief and prison reform. In the great struggle with France all his efforts were directed towards the restoration, and later to the maintenance of peace. On questions like the attack on Copenhagen he differed not only with the Government but also with the members of his closest circle, his brothers, Wilberforce, Babington, and Grant. In the discussion of Pitt’s income tax he strongly advocated a graduation of the rate according to the character of the income, and when he failed to carry his point, he silently raised his own payment to the figure to which it would have amounted under his scheme.* In the new century, however, his parliamentary activity became more and more connected with the problems of currency and banking. He was a member of the Committee of 1804 on the Irish exchange,† he was elected in February 1807 a member of the committee of 21 “to examine and control the several branches of public expenditure,” and there took “a considerable lead in the report made by them on the Bank affairs, by which £240,000 a year has been saved to the state. I had in this case to oppose the views of my family and city connection.”* In 1810 at last he took a leading part not only in the work of the Bullion Committee, of which we shall have to speak more fully later, but also in the work of the Committee on the State of Commercial Credit appointed by Perceval’s Government a little later in the same year. His active years in Parliament extended just long enough not only to be a member of the Committee of 1813 “to enquire into the Corn Trade of the United Kingdom,” but also to speak in the great debate on the Corn Laws in June 1814. This was almost his last speech in Parliament; it was followed by only one a little later in the same month on a bill on London Prisons.
During these fourteen years which Henry Thornton lived into the nineteenth century, his work in Parliament and his literary activities must have taken up almost all his time. In the repeated elections of these years, in 1802, 1806, 1807, and 1812 he found it harder and harder to retain his seat with declining majorities. He was not a figure who appealed to the popular imagination, and even though the universal respect in which he was held secured him his seat till his death, his diary shows that he was greatly worried by his declining support. Yet we need hardly be surprised that in times of intense party strife and widespread political corruption to retain his seat was difficult for a man who refused to give undivided allegiance to any party and whose supporters attempted to recommend him to a greedy populace by doggerel verses like these:
It has been said by one of the admirers of Henry Thornton that he wrote a good deal, “but nothing likely to descend to posterity.”* That the Paper Credit, the only book† which Thornton appears himself to have published, might be an exception probably never occurred to the author of this statement. He clearly had in mind the devotional and more popular writings of Henry Thornton, which, indeed, were voluminous. It has happened to a bibliophile economist that a stout volume of Collected Works of Henry Thornton, Esq., M.P., which he eagerly pulled from the shelves of a secondhand bookshop proved to contain Family Prayers and Family Commentaries on the Sermon on the Mount and on Portions of the Pentateuch. These strictly religious writings of Henry Thornton were published from his manuscripts after his death by R. H. Inglis. But in addition he wrote a considerable amount for the organ of the Clapham Sect, the Christian Observer, which he helped to found and which for many years was edited by Zachary Macaulay. It is said that from 1802, when this journal started, till his death, Thornton contributed no less than eighty-two articles on a wide range of subjects:
“sketches of public affairs, of the state of the parties in the stormy times of 1803, 1806, 1810, and 1813; the difficult questions of the Orders in Council; and the Middlesex election; biographies of Pitt and Fox, written with the thoughtfulness as well as the impartiality of history, critiques on the Edinburgh Review, on books, on the temper of religious parties, are interspersed with advice as wise as Addison’s, less playful, but more sound.”‡
During these later years of his life Thornton’s contacts and influence must have extended far beyond the narrower circle of the Sect. As early as 1800 we find Jeremy Bentham writing to him in connection with his Pannopticon project.§ And if a difference of religious views had probably prevented closer contacts, he was a well-known and respected figure in the camp of the Philosophical Radicals. Lord Brougham seems to have known him well* , and in 1812 we find Ricardo inviting Malthus to dine with him and Thornton, a dinner party which the busy Thornton asks to have transferred to his house.†
It is astounding that all this activity should have come from a man who throughout the greater part of his life seems to have been in exceedingly weak health. But apart from occasional visits to Buxton or Bath, Brighton or the Isle of Wight, enforced by the state of his health, he did not give himself any rest. Even these annual journeys, although often extended to include visits to the sisters More and other friends, were not entirely devoted to recreation. In a letter to Charles Grant written from Buxton in September 1806, Henry Thornton writes:
“Dr. Lovell, whom partly to satisfy the kind anxiety of friends, I consulted about my own health, advised Buxton Waters, and after seeing some beautiful scenes in Monmouthshire and one especially which I never shall forget we moved slowly hither. We bought a grey poney on which my little Girl‡ has cantered many a half stage and I have to thank the poney for having made me much better acquainted with my Daughter than I was before. We have also gone together to see a variety of Manufactures and have been learning to feel for those who dig in mines, who toil in Quarries, perspire in Salt works, wear out their Eyes in looking at Furnaces or pass their whole morning noon and Even in the limited Employment of putting on the head of a Pin, or drawing over and over the same pattern on a piece of China. I fear that the Less pleasant part of Education has been neglected. I trust however that seeing the world in this sense will be very usefull. It also has not a little entertained Mrs. T. and I trust that the View which we have taken of our fellow creatures has inspired some thankfulness for the temporal as well as spiritual Advantages of our own condition.”§
The anxiety of Henry Thornton’s friends was however only too well justified and the lingering complaint, apparently consumption, grew gradually worse. In the autumn of 1814 his constitution finally broke down, and after a prolonged illness he died on January 16, 1815, in his fifty-fifth year.*
“A more upright, independent, and truly virtuous man has never adorned the Senate,” says the writer of the obituary notice in the Gentleman’s Magazine.† The various attempts to describe his character depict him as a man of almost unearthly goodness. “He has indeed a mind so disciplined and trained,” writes one of Thornton’s friends to his wife, “so godly, so divested of self, and so active to glorify God and benefit men that a near view of him is a most humbling lesson.”‡ James Stephen§ and J. C. Colquhoun∥ describe the bent of his mind as pre-eminently judicial and “essentially philosophic.” But we shall perhaps have a more life-like picture of the man if from the almost unbroken stream of deserved praise we quote the one or two more critical passages. Henry Brougham describes him as “the most eminent in every respect” of Wilberforce’s small party,
“a man of strong understanding, great powers of reasoning and of investigation; an accurate and curious observer, but who neither had cultivated oratory at all nor had received a refined education, nor had extended his reading beyond the subjects connected with moral, political and theological learning. The trade of a banker, which he followed, engrossed much of his time; and his exertions both in Parliament and through the press, were chiefly confined to the celebrated controversy upon the currency, in which his well-known work led the way, and to a bill for restricting the Slave Trade to part of the African coast, which he introduced when the abolitionists were wearied out with their repeated failure; and had well-nigh abandoned all hopes of carrying the great measure itself.”*
And James Stephen at the end of the description of Thornton in his once celebrated Essay on the Clapham Sect pictures him as
“Affectionate, but passionless—with a fine and indeed a fastidious taste, but destitute of all creative imagination—gifted rather with fortitude to endure calamity, than with courage to exult in the struggle with danger—a lover of mankind but not an enthusiast in the cause of our common humanity—his serene and perspicacious spirit was never haunted by the visions, nor borne away by the resistless impulses, of which heroic natures, and they alone, are conscious. Well qualified to impart to the highest energies of others a wise direction, and inflexible perseverance, he had to borrow from them the glowing temperament which hopes against hope, and is wise in despite of prudence.”†
A note may perhaps be added to this on the fate of Henry Thornton’s firm. After his death it had become Pole, Thornton, Free, Down & Scott, with Sir Peter Pole as leading partner, and young Henry Sykes Thornton, Henry’s eldest son, who was only fifteen at the time of his death, became an active partner early in 1825. The house seems to have greatly prospered—it is said during the years 1818-24 to have yielded £40,000 a year,‡ and it was regarded as “one of the oldest and most extensive Banking Houses in London.”§ It is suggested, however, in some of the contemporary literature that the means of the partners were not fully adequate to the increased volume of business, and that they had invested “in securities not strictly convertible to a larger extent than was prudent”* However this may be, when in the late autumn of 1825 an acute stringency in the money market occurred and a number of the more important country banks failed, suspicion was aroused against the London house which by its extensive connections was bound to be particularly affected by the heavy drain of funds from London. For some time the firm was able to meet the steadily increasing demands; but on the evening of Saturday, December 3rd, the Deputy-Governor† of the Bank of England was informed that Pole & Co. were in need of assistance. An emergency meeting of the available directors on Sunday morning decided to put on Monday at the disposal of the firm, against ample security, the sum of £300,000.‡ And if we may believe a much later report, “it was not thought that the extent of the financial crisis should be known, and before the subordinates of the Bank were in their places, the Governor and the Deputy-Governor themselves counted out and handed over the gold, which was carried away in silence and secrecy”§ But this only prolonged the struggle for a week and on the following Monday the firm stopped payment* with the effect of bringing the panic to its height and causing the closure of several other banking houses on the next day, including one of about equal size, Williams, Burgess & Williams. Although Pole & Co. was ultimately not only found to be fully solvent but even to realize a handsome surplus over its liabilities, it did not re-open. It was in effect merged with Williams & Co., which at the beginning of 1826 re-opened as Williams, Deacon & Co.,† and it was in this firm that Henry Thornton the younger spent another fifty-five years of successful banking life till he died in 1881. His relations to another more famous son of a member of the Clapham Sect, his class-mate, Lord Macaulay, to whom he acted as banker, will be familiar to many readers of G. O. Trevelyan’s Life of Macaulay.
It is not too much to say that the appearance of the Paper Credit in 1802 marks the beginning of a new epoch in the development of monetary theory. Although Thornton’s merits have long been overshadowed by the greater fame of Ricardo, it has now come to be recognized‡ that in the field of money the main achievement of the classical period is due to Thornton, and that even the modifications of his theories by his better-known successors were not always improvements. The remarkable fact is that almost as soon as, after a long period of quiescence, circumstances once again made monetary problems the subject of general interest, he was ready to put forward a new body of doctrine which not only provided the framework during the next fifteen years for what may still be regarded as the greatest of all monetary debates, but which also represents the most important single contribution to these discussions.
Since the contributions of Cantillon, Galiani, and Hume in the middle of the eighteenth century little progress had been made in monetary science. Joseph Harris’s Essay on Money and Coins, published in 1757-8, which was one of the first systematic treatises on money in the English language, might still be regarded, at the end of the century, as representative of the existing state of knowledge. The suggestive and interesting, but essentially wrong-headed chapters on money in James Steuart’s Political Economy had no very wide influence. And the treatment of money in the Wealth of Nations, which dominated opinion on these matters in the last quarter of the century, contains comparatively little of theoretical interest.* But even the descriptive parts of the Wealthof Nations were no longer adequate by the end of the century. The twenty years following its appearance had brought gradual but fundamental changes in the structure of the English credit system. The rapid increase in the number of country banks, the abandonment of the issue of notes on the part of the London bankers, the rapid growth of the use of the cheque, and the establishment of the London Clearing House all fall into this period. And it was during the same period that the Bank of England became the Bankers’ Bank, the dernier resort as Sir Francis Baring described it in 1797,* where in an emergency everybody expected to obtain ready money.
Another phenomenon to which Adam Smith had given comparatively little attention were the economic crises which occurred with surprising regularity in 1763, 1772, 1783, and 1793. And in consequence of the changed position of the Bank of England new problems arose on the occasion of these crises. It is said that in the crisis of 1783 the Bank for the first time deliberately and successfully met an outflow of gold by a contraction of credit. Whether or not this was a new discovery, there can be little doubt that ten years later, in somewhat different circumstances, the Bank applied this method rather harshly.
The years preceding the crisis of 1792-3 had been years of great prosperity, which, in the last twelve months before the crisis, assumed the character of an inflationary boom. The tide had, however, already turned in the last few months of 1792, and the outbreak of the war with France led in February 1793 to a financial panic, caused by the failure first of a well-known house in London, then of a big banker in Newcastle and finally of numerous country banks all over England. The general state of alarm, and the discredit into which the notes of the country banks fell, led to an extensive and prolonged demand for guineas and Bank of England notes. The directors of the Bank, who for the past six months had seen their demand liabilities mount and their cash reserves dwindle, finally lost their heads and suddenly refused to grant further accommodation, leaving “the unfortunate public to shift for itself.”* The result was an unheard of intensification of the financial panic and the danger of universal failure. After pressure by the Government on the Bank to relax its attitude had failed to produce any result, a rapidly appointed committee of the House of Commons† recommended that Exchequer bills to the amount of £5,000,000 should be issued (under the direction of a board of commissioners appointed for the purpose) to provide the mercantile community with the means to raise cash. The mere announcement that this step would be taken went far to stay the panic, and, in fact, only a fraction of the authorized amount of Exchequer bills had to be issued before normal conditions were restored.
This drain on the resources of the Bank of England had occurred at a time when the exchanges were favourable and when in fact gold was being imported in small quantities. It was a classical case of what was later to become known as an “internal” as distinguished from an “external” drain. But it took some years more for the Bank of England to learn that the way to meet such an internal drain was to grant credits liberally, and then, in learning this lesson, it forgot that in the case of an external drain exactly the opposite measures were called for.
The first two years of the war with France, although free from major financial disturbances, gradually created a situation of considerable difficulty for the Bank. On the one hand expenditure for the English army on the Continent, subsidies to the allies, bad harvests in England, and France’s return to a gold currency led to a continual and increasing drain of gold from England. On the other hand insistent and repeated demands from the Government for loans not only made it impossible for the Bank to contract the note circulation, but actually led to a considerable expansion. When finally, towards the end of 1795, the foreign exchanges began to fall rapidly and the export of gold assumed alarming proportions, and repeated protests to the Government had failed to lessen the demands from that quarter, the Bank (which was still prevented by the usury law from charging a rate of interest in excess of five per cent) made the sensational announcement, on the last day of that year, that in future
“whenever bills sent in for discount shall in any day amount to a larger sum than it shall be resolved to discount on that day, a pro rata proportion of such bills in each parcel as are not otherwise objectionable, will be returned to the person sending in the same, without regard to the respectability of the party sending in the bills, or the solidity of the bills themselves.”*
This recourse to a rationing of credit caused renewed stringency in the money market in the spring of 1796 and evoked loud protests from the City. A committee of merchants and bankers even proposed a plan for a new Board of Credit, a kind of rival institution to the Bank of England, which was to relieve the dearth of cash.
It is not easy to reconcile these complaints about the continued scarcity of money during this period with the no less insistent complaints about the high prices, and with the continued unfavourable course of the exchanges. While, however, a really satisfactory account of the exact course of events could only be given after a good deal of research, there can be no doubt that the immediate cause of the final suspension of cash payments by the Bank in 1797 was a renewed internal drain. The latter part of 1796 had brought a new wave of failures of mercantile and banking houses all over the country. The apprehension of a French invasion heightened the alarm, and when in February 1797 a single French frigate actually landed 1,200 men in Fishguard in Wales, a run on the Bank of England started, which in the course of a few days reduced its already much impaired reserves by one half.
It is idle to speculate to-day as to whether the Bank, if it had continued to pay in cash so long as it could, would have been able to allay the panic before its reserves of coin had been exhausted.* The fact is that Pitt, being informed of the state of affairs by a deputation from the Bank on Sunday, February 26, 1797, forbade the directors, by an Order in Council of that date, to continue
“issuing any cash payments until the sense of Parliament can be taken on that subject, and the proper measures thereon, for maintaining the means of circulation, and supporting the public and commercial credit of the kingdom at this important conjuncture.”†
On the following day the contents of this Order in Council were conveyed to the House of Commons in a special Message from the King, and the House thereupon immediately resolved to appoint a committee “to examine and state the total amount of the outstanding demands of the Bank of England, and likewise of the funds for discharging the same” A Committee of Secrecy of fifteen members was accordingly chosen by ballot on March 1st, and proceeded at once with its task. A special committee was also appointed by the House of Lords on the following day, and on March 7th was supplanted by a Committee of Secrecy of fifteen “to enquire into the causes which produced the Order in Council of 26th of February last.”
In the course of March and April both committees took extensive evidence, the Commons committee calling nineteen witnesses and the Lords sixteen. Both committees called largely the same persons, primarily representatives of the Bank of England, merchants, the secretary of the Country Banks Association, and Henry Thornton, who seems to have been the sole representative of the London Bankers. The reason why he was selected is probably that, in addition to his being a member of the House of Commons, his firm was particularly widely connected with country banks. The list, which he gave in the course of his evidence, of places in which his bank had country correspondents in 1797 is largely the same as that for 1800, the first year for which we can reconstruct a complete list. In that year, Down, Thornton & Free had altogether twenty-three country correspondents. They were mainly in the Midlands, the North, and Scotland, with a few in the South-west.*
But Thornton had something more to offer than just the knowledge and experience of a banker with wide connections all over the country. It is clear from his evidence that he had already thought deeply about the problems of credit. Indeed, there is some reason for believing, despite a statement in the preface to the Paper Credit which gives a contrary impression, that he was perhaps at that time already engaged on a work on the subject. This at least seems to follow from a statement, which we no longer have any means of checking.
“that while, during one of his elections, he had been engaged all day in a hot canvass, toiling through the streets of Southwark, he writes to his wife that he secured a couple of hours in the evening to carry on his work on Paper Credit.”†
As the elections of 1802 took place some months after the book had appeared, this statement must evidently refer to the elections of 1796, so that Thornton would appear to have worked on the book for six years.‡
Whether this is true or not, Thornton’s evidence, which is reprinted in full in Appendix I of this volume, gives, in the course of the discussion of the causes of the panic of 1797, a careful analysis of the interrelations between the different parts of the monetary circulation and of the factors determining the demand for the different kinds of media of circulation. Incidentally he also throws a certain amount of light on such problems as the factors which affect “the disposition of persons to detain bank notes,” the rôle of the rate of interest, and in particular the difference between the position of a private banker and the position of the Bank of England. He does not yet, however, deal with the question of the depreciation of the currency and the factors influencing the foreign exchanges, which were to be the main topics of discussion in the years to come, and on which he was to make the major contribution in his book of 1802.
There had been, indeed, even before this time, much concern about the unfavourable state of the exchanges and even suggestions that this might have been due to an over-issue of bank notes.* We must not forget that the recent spectacle of the depreciation of the French assignats had made the phenomenon of inflation as familiar to the English public as it is at the present time, and that it certainly did not require any very profound knowledge to realize that an increase of paper money would lead to a fall in its value. But at the time of the crisis of 1797, the exchanges had recovered and remained fairly favourable for more than two years; and the Bank was even able to replenish its much depleted gold reserves. The restriction of cash payments, however, which may have been justified as a temporary expedient, was renewed again and again, and remained in force for altogether twenty-four years.
Up till the end of 1799 it can hardly be said that there existed any appreciable degree of inflation. The demands for accommodation of the Government were kept within fairly narrow limits and, since the general depression of trade also kept private demands for credit low, there was little temptation for the bank to expand its circulation. Towards the beginning of the year 1800, however, the situation altered. Increased war expenditures and the unsatisfactory receipts from the new taxes led to renewed Government borrowing from the Bank on a large scale, and as early as the middle of 1799 the exchanges began to fall and prices to rise. Most attention was attracted by the rise in the price of gold bullion which in the autumn of 1800 reached a premium of 10 per cent. This led to attacks on the Bank in a host of pamphlets. The one which drew most attention was a pamphlet by Walter Boyd, who had already taken a prominent part in the discussion of the measures of 1797, and had become known as one of the sponsors of the proposed rival note-issuing institution.* Boyd claimed, with somewhat questionable justification, that it had been reserved to him.
“to assign, as the cause of the general rise, which almost all things have experienced within the last two or three years (and which grain, as the article that comes most frequently in contact with money, feels the soonest and the most) the existence of a great Bank, invested with the power of issuing paper, professing to be payable on demand, but which, in fact, the Bank which issues it, is not obliged to pay.”†
Boyd had the satisfaction that, even before his Letter to Pitt appeared in print, his argument was apparently confirmed by a statement which the Bank of England submitted at the request of the House of Commons, and which showed that the note circulation had increased from the date of the restriction to December 6, 1800, from £8·6 to £15·5 millions. In the debate in the House which followed, Henry Thornton agreed that.
“as to the assertion that the increased issue of Bank paper was the cause of the dearness of provisions, he would not deny that it might have some foundation; but he would contend that its effect was far from being as great as was being alleged; and as to the depreciation of Bank paper arising from the exchange being against this country, it was at present only 12 per cent and was produced, not by the mismanagement of the Bank, but by the difference between imports and exports, the latter of which had risen above the former from the extraordinary importations of provisions.”*
There is reason to doubt whether this condensed report of Henry Thornton’s speech does justice to his argument. It is clearly unfair to regard Thornton as an apologist of the Bank of England, and the too often repeated accusation of bias is particularly baseless when it is founded on the wrong assumption that he was a director or even Governor of the Bank. It is, nevertheless, evident that he regarded the argument of Boyd and others, who attributed all the difficulties merely to an excessive issue, as unduly simplified and misleading. He was still too much impressed by the acute scarcity of money which had only recently been felt; and events, indeed, proved that before inflation was to set in on a scale such that there could be no doubt about its existence, the pound was to make at least a partial recovery.
It is very likely that, at least in the shape in which it was ultimately published, the Paper Credit was intended partly as a reply to Boyd. Others, who had attempted to reply, had not been particularly successful,† and for some twelve months Boyd’s argument seemed to hold the field. But when, in February or March 1802, Thornton’s work appeared, it immediately took first place and provided the basis from which all further discussion proceeded.
This Introduction cannot attempt to summarize the argument of the work or even to point out all its merits. It would take a great deal of space merely to mention all the points in respect to which Thornton’s treatment constituted an important advance on earlier discussions, and it must suffice to indicate a few passages which deserve special attention. It may be true, as has often been asserted, that his exposition lacks system and in places is even obscure, but too much can be made of this defect. And there will be few readers who will not be impressed by the acumen and the balance of mind displayed throughout the exposition. Thornton’s achievement lies much more in his contribution to general theory than in his diagnosis of the situation of the particular moment. And if, as may well be the case, it can be argued that his judgment of the situation of the moment and his forecasts were less correct than those of some of his contemporaries who used cruder reasoning, this does not detract from the lasting value of his work. We have to judge it not as a controversial pamphlet on the questions of the day, but as one of the works in which problems of the moment have led the author to go down to fundamentals and to treat them for their general significance.
It seems that on the whole the arrangement of the book follows the order in which the author’s thoughts developed. The first part, after two short introductory chapters, is mainly devoted to pointing out the dangers of an excessive contraction of the issue of paper, and the causes of what became known as an “internal drain.”* It is in this context that Thornton develops his important views about the “motives for holding” money, the factors which determine the relative demand for the different kinds of media of circulation, and a fairly elaborate theory of the effects of changes in the “rapidity of circulation.”† He discusses the effects of the “state of confidence” on the willingness to “provide for contingencies” by holding money or assets which can be more or less easily converted into money, and in certain later passages he takes account of the “loss sustained by keeping money” and the effects of an increase of money on the rate of interest.* And it is in these discussions that he makes his main contributions to the theory of credit properly so-called: that is, to that branch of monetary theory which has only just recently again begun to attract attention under the title of “liquidity preference.” It is largely in this connection also that he incidentally provides a great deal of descriptive information on the organization of the English monetary and banking system. One does not realize how full this description is until one finds it summarized in systematic form in the review article by Francis Horner which has yet to be mentioned. Of special interest in this connection is the explanation of how “by the transfer of debts in the books of the banker a large part of what are termed cash payments are effected,” and the implied recognition of the essential similarity of bank notes and bank-deposits.†
There are several other little points in these early chapters, such as the remark about the relative rigidity of wages,‡ and the reference to the movement of commodity stocks,§ which show surprising insight into the problems of industrial fluctuations. But Thornton’s best-known achievement does not come until later when he deals with the problems relating to the foreign exchanges. He first takes up this topic in Chapter V, where he treats the effects of an external drain, i.e. an outflow of gold which is primarily caused by an unfavourable change in the balance of trade.∥ This is the situation which he rightly thought to exist in the years immediately before and after the abandonment of the gold standard in 1797. He is fully aware that a relative excess of bank notes “may arise from other causes besides that of a too great emission of paper,”¶ and that in such a situation “the bank should not only not increase, but that it should, perhaps, very greatly diminish it, if it would endeavour to prevent gold from going out.”* His very modern doubts about such a policy of deflation (doubts by reference to which he attempts partly to justify the Bank of England’s policy), are “whether the bank, in the attempt to produce this very low price, may not, in a country circumstanced as Great Britain is, so exceedingly distress trade and discourage manufactures as to impair . . . those sources of our returning wealth to which we must chiefly trust for the restoration of our balance”† as to frustrate the main purpose.
The problem of the effects of an absolute increase of the circulation, as it was the last to arise in his experience, is also the last to be taken up in his book. What is most impressive here is the methodical development of the argument. He commences by giving a brilliant exposition of the mechanism of the change in relative prices in the two countries concerned, which already contains practically all of the doctrine which, one hundred and twenty years later, was “rediscovered” as the purchasing power parity theory.‡ Then after showing how a local change of prices in a particular part of any country will soon be corrected by a reduction of sales to, and an increase of purchases from, other parts of the country,§ he proceeds to apply the same argument to the relations between two different countries.
All of this is, of course, the theory of the mechanism of international gold movements, and of the foreign exchanges, which later became associated with the names of Ricardo and John Stuart Mill. It has now become clear that in so far as Mill (and later Professor Taussig) differed from and improved upon Ricardo they just resumed Thornton’s argument. Ricardo’s unwillingness to recognize that the excess of the circulation might be an effect as well as a cause of the unfavourable balance of trade, which led him to criticize Thornton at some length,∥ caused this whole theory to remain for a long time in a much more rigid and unsatisfactory form than that which it had originally received at the hands of Thornton.
Great as this achievement is, to many readers Thornton will appear to reach the height of his intellectual power in the penultimate chapter in which he proceeds to meet various objections, and in particular to refute the erroneous argument “that a proper limitation of bank notes may be sufficiently secured by attending merely to the nature of the security for which they are given.”* It is here that, in summarizing earlier points, he sometimes finds the happiest formulations; he also breaks entirely new ground in an attempt to elucidate the effects of a credit expansion in greater detail. He sees that the expansion of credit will in the first instance lead to the employment of “antecedently idle persons,” but adds that as these are limited in number, the increased issue “will set to work labourers, of whom a part will be drawn from other, and perhaps, not less useful occupations.”† This leads him (after some animadversions on Hume’s suggestion that it is only in “the intermediate situation between the acquisition of money and the rise of prices that the increasing quantity of gold and silver is favourable to industry”) to one of the earliest expositions of what has become known as the doctrine of “forced saving.” The “augmentation of stock,” which may be brought about by an excessive issue of paper, is due to the fact that the labourer “may be forced by his necessity to consume fewer articles, though he may exercise the same industry” and “this saving” may be supplemented by “a similar defalcation of the revenues of the unproductive members of society.”‡ And Thornton is careful to add that the increase in output will never be proportional to the increase in the quantity of money and that therefore a general rise in prices is inevitable.§
The discussion of the proper limitation of issues leads on to the second point of primary importance in this chapter, the discussion of the rôle of the rate of interest. The statutory limitation of the rate of interest which the Bank may charge has the effect, he says, that at times this rate will be much lower than the mercantile rate of profits, and will in consequence lead to an undesirable expansion of credit unless the Bank takes other measures to keep down the volume of credit.* This is a remarkable anticipation of the distinction between the market rate and the “natural” or “equilibrium” rate of interest which since the work of Knut Wicksell has played such an important rôle in the discussions of these problems. With this idea, along with the idea of forced saving, Thornton was for the first time in possession of the two main elements which it was left for Wicksell, nearly a hundred years later, successfully to combine into one of the most promising contributions to the theory of credit and industrial fluctuations.†
The points we have mentioned, though they are the most important, do not by any means exhaust Thornton’s contributions to knowledge. They may, however, serve as an indication of the character of the work which put the discussion of monetary problems on a new plane. Its outstanding merit was soon recognized. On June 28, 1802, we find Jeremy Bentham writing to Dumont:
“This is a book of real merit—a controversy with him would be really instructive. I have tumbled it over but very imperfectly, that not being the order of the day, and for fear of calling off my attention, and absorbing my capacity of exertion. But one of these days I may not improbably grapple with him. Admitting all his facts, with thanks,—agreeing with him in almost all his conclusions,—but disputing with him what seems (as far as I have yet seen) to be his most material conclusions, viz., that paper money does more harm than good. Here is a book of real instruction, if the French were wise enough to translate it; the style is clear, plain, without ornament or pretension, the reasoning is close.”‡
A fact which was of great importance in leading to the rapid diffusion of Thornton’s ideas was that Francis Horner devoted to it, in the first number of the new Edinburgh Review, a brilliant article of thirty pages in which, even if he perhaps passed over some of the finer points in Thornton’s analysis, he gave an exposition of the main argument of the book in a form which was considerably more systematic and coherent than the original version.* Although to some extent critical, he gave the work the deserved praise as “the most valuable unquestionably of all the publications which the momentous event of the Bank Restriction had produced.” In particular his reproduction verbatim of one of the most important passages on the effect of price movements on the balance of trade and the foreign exchanges probably exerted as much influence as the book itself.
The developments of the years immediately following the publication of the Paper Credit had the result of causing further discussion to centre almost entirely upon the effects of an over-issue on the foreign exchanges and the price of bullion. The immediate cause of the renewed discussion was not so much the situation in England as developments in Ireland. The restriction of cash payments had been extended (merely for the sake of uniformity and despite the fact that the exchanges had been favourable to Dublin) to the Bank of Ireland. This institution seems very rapidly to have taken advantage of the new situation, and in the first six years it quadrupled its note circulation. The result was that by 1803 the rate of exchange on London had fallen by about 20 per cent. The fact that this was due to the mismanagement of the note issue was particularly clear in this case because the exchanges on Belfast, which had its own circulation consisting largely of coin and notes of local banks, had remained at par, and the Dublin exchange showed the same depreciation in Belfast as in London.
Sometime before this, however, and shortly after the appearance of the Paper Credit, Henry Thornton had already expressed, in one of the parliamentary debates, his concern about developments in Ireland. In the second reading of the Bank of Ireland Restriction Bill on April 26, 1802,
“Mr. Henry Thornton observed that this bill had been introduced to accompany the restriction on the Bank of England. With respect to the restriction on the Bank of England no danger could result from it; that Bank was a body extremely respectable, who were sufficiently disposed to restrain the circulation of their own paper, and to limit within due bounds the circulation of the country, which they were better enabled to do, as they possessed a monopoly of the issue of paper in the metropolis. With respect to the Bank of Ireland, the case was different; other banks issued paper in the same place where that existed, and a restriction on that bank would therefore be ineffectual. It was important, however, for the House to bear in mind, that too great an emission of paper produced the ground on which the continuance of the restriction on the Bank was founded, as, by raising the price of commodities, it impeded their exportation, and consequently turned exchanges against us. Ireland appeared extremely liable to dangers of this kind; when, however, the discontinuance of the restriction on the Bank of England should be under discussion, the circumstances of the course of exchanges against Ireland ought not to operate as a reason against that discontinuance, and they must provide in that country, as in this, cash for their paper. . . .”*
As time went on, however, it became increasingly clear that the Bank of England, too, was not keeping its circulation within safe limits. And in April 1804 Thornton (in the marginal annotations of a copy of Lord King’s Thoughts on the Effects of the Bank Restriction which he evidently made for a friend)† already expresses his apprehension of the Directors of “the Bank perhaps not sufficiently perceiving that a limitation of Paper will improve the exchanges,” although he still thinks that, compared with the Bank of Ireland, “the Directors of the Bank of England, if they have erred at all, have erred but a little.” But at the same time he admits that
“if the Committee of the House of Commons on Irish Currency now sitting were to state in their Report to the House in distinct language that they are persuaded that a Reduction of Bank Paper must have a tendency to improve the Exchange even this hint coming from such a quarter and applying itself as is necessary to the Bank of England as well as that of Ireland would have all the desired effect.”
Of this Committee on the Irish Currency to which Thornton here refers and which had been appointed early in the year Thornton himself was a members. It seems even that he was one of the most influential and active member,* and in view of this confessed intention to give a hint to the Bank of England, the Report of this Committee, which has justly been celebrated as anticipating the more famous Bullion Report in almost every important respect gains still further significance. It is, however, not known what part, if any, Henry Thornton took in the drafting of the Report, and in view of the fact that the Committee counted among its members other competent writers on Currency, in particular, Henry Parnell, who in the same year also published a pamphlet on the Irish Currency,* we cannot even venture a surmise.
Of the development of Thornton’s ideas in the next six years we know nothing. Nor is this the place for writing a history of the monetary developments of these years or of the further discussions to which they gave rise. This has been done well by others. Suffice it to say that in 1810 the continued rise of prices and fall of the exchanges caused increasing and widespread apprehension, and that eventually, on a motion of Francis Horner, on February 19th of that year, a Select Committee was “appointed to enquire into the Cause of the High Price of Gold Bullion, and to take into consideration the State of the Circulating Medium and of the Exchanges between Great Britain and Foreign Parts.”
Of the deliberations of this famous Bullion Committee, and the exact responsibility of its individual members for the writing of the Report, we also know very little. Francis Horner was elected chairman, and on the twenty-two days (from February 22nd to March 26th) on which the Committee took evidence, he usually took the chair, although his place was occasionally taken by Huskisson and three times by Thornton.
On the drafting of the report there is an oft-quoted passage from one of the published letters of Francis Horner which deserves to be included here:
“The Report is in truth very clumsily and prolixly drawn; stating nothing but very old doctrines on the subject it treats of, and stating them in a more imperfect form than they have frequently appeared before. It is a motley composition by Huskisson, Thornton, and myself; each having written parts which are tacked together without any care to give them an uniform style or a very exact connection. One great merit the Report, however, possesses; that it declares in very plain and pointed terms, both the true doctrine and the existence of a great evil growing out of the neglect of that doctrine. By keeping up the discussion, which I mean to do, and by forcing it on the attention of Parliament, we shall in time (I trust) effect the restoration of the old and only safe system.”*
There is also a somewhat obscure and probably incorrect statement of Colquhoun, who speaks of the “long deliberations in the bullion committee in which Horner and Henry Thornton carried their motions against the Government 11 to 4.”† As the total membership of the Committee numbered twenty-two, this statement, allowing for a number of absentees, is not absurd on the face of it, although nothing else is known of any motions on which the Committee voted.
The report was not submitted to the House until the evening of the day (June 8th) preceding the prorogation of Parliament. But, it is alleged,
“the substance of the report was immediately circulated in the newspapers and the alarm which it occasioned among the bankers and the merchants, who were accustomed to look to the Bank for discounting their bills, was followed by many failures of mercantile houses in London, as well as of some country banks.”‡
The publication of the report led to an intense discussion of the problems it raised in a host of pamphlets, but as it had been too late to discuss it in the session in which it had been presented, it was some time before it was taken up in the House. In fact, it was not until May 6, 1811, that Francis Horner moved the House into Committee to consider the report. There occurred a four-day debate in which Thornton, Horner, Huskisson, Canning, and a number of the other members of the Bullion Committee took part. A carefully prepared speech which Thornton delivered on the second day, together with another made a week later, was published by him in pamphlet form. This first part of the debate revolved around sixteen resolutions moved by Horner, of which the last and most important proposed.
“That in order to revert gradually to this Security, and to enforce meanwhile a due Limitation of the Paper of the Bank of England, as well as of all the other Bank Paper of the Country, it is expedient to amend the Act which suspends the Cash Payments of the Bank, by altering the time, till which the suspension shall continue, from Six Months after the Ratification of a Definitive Treaty of Peace, to that of Two Years from the present Time.”
By this time, although he had not altered his theoretical position in any essential respect, Thornton had become thoroughly convinced of the mismanagement of the note issue and the overwhelming danger of an excessive circulation in general, and was no longer afraid to apply the remedy of a severe contraction. His speech, which is really a lecture on the dangers of a paper currency, is particularly interesting for the increased importance which he had now come to attach to the rate of interest. He not only emphasized the power of a high rate of interest to attract gold,* but described the whole “subject of the rate of interest” as “a very great and turning point.”† He supplemented his theory, as given in the Paper Credit, of how a rate of interest lower than the mercantile rate of profits, led to an indefinite expansion of credit, by a discussion of the effect of an expectation of rising prices on the rate of interest, which in all important points anticipated Professor Irving Fisher’s well-known distinction between the real and nominal rate of interest.‡
In the vote which followed Horner’s resolutions were all defeated, the first fifteen (which embodied the theoretical basis of his recommendations) by 151 to 75, the last and decisive one by 180 to 45. And to make quite certain of the victory, Vansittart, for the Government, moved on May 13th seventeen counter-resolutions, which in effect asserted that there was no divergence of value between notes and coin and that the high price of bullion was not due to any over-issue of notes. These resolutions led to a further debate, in the course of which Thornton took the opportunity to reply to a number of objections. The most interesting feature of this second speech is that in it Thornton explicitly retracts “an error to which he himself had once inclined,” namely, the idea that an increase of the circulation, by stimulating production, might help to correct the exchanges.*
With these two speeches Thornton’s known contributions to monetary theory come to an end. If, in the remaining three years of his life, he took any active part in the discussion which continued, nothing has been preserved in print. But although in Parliament his views had been defeated, largely for reasons of high policy, he lived long enough to see them widely accepted. And among those of his contemporaries who took an interest in these matters there existed little doubt that the new body of thought was mainly his creation. Even a comparative outsider, like Dr. Miller in his Philosophy of History, did justice to his contribution by describing his book, in 1816, as “forming an epoch in the history of the Science to which it belongs.”† If some of his fellow-economists, and particularly Ricardo, do not appear to have given him full credit and to have mentioned him only to criticize him, we can be sure that this was only due to the fact that among the public for which they wrote they could take a thorough acquaintance with Thornton’s work for granted. But the effect was that in the course of time his fame faded before that of men whose contributions covered a much greater part of political economy, and then even the distinct contribution, which was undoubtedly his, began to be credited to his successors. For a long time John Stuart Mill, who in 1848, in his Principles of Political Economy, described the Paper Credit as even at his time “the clearest exposition that I am acquainted with, in the English language, of the modes in which credit is given and taken in a mercantile community,”* was the last author to do anything like justice to Henry Thornton. And even Mill does not appear to have been quite aware that in his exposition of the mechanism of international gold movements he followed Thornton more than Ricardo. It was not until just before, and particularly since, the Great War, that, with the great interest which a number of American economists (particularly Professors Hollander and Viner) have shown in the history of English monetary policy and monetary doctrines, his importance came again to be fully recognized.†
[* ]The influence of the Clapham Sect in this respect is well brought out in E. Halévy’s History of the English People in 1815.
[† ]See Bibliographical Note at the end of this Introduction.
[‡ ]W. Wilberforce at one time intended to write a biography of his friend Thornton, but never completed it. See on this Life of Wilberforce by his sons, vol. ii, p. 329; the Correspondence of William Wilberforce, edited by the same, London 1840, vol. ii, p. 422; and the Preface to Henry Thornton’s Family Prayers, by R. H. Inglis.
[* ]MS. Recollections of Marianne Thornton (1857).
[† ]The Genealogical and Heraldic History of the Landed Gentry, by the late Sir J. Bernard Burke; and P. M. Thornton, Some Things We Remember.
[‡ ]MS. Diary of Henry Thornton (see Bibliography at the end of this Introduction). The author wishes here to express his gratitude to three descendants of Henry Thornton, Mrs. P. M. Thornton, Mrs. D. Demarest, and Mr. E. M. Forster for the loan of this and other documents and for permission to quote from them.
[* ]The connection with Cowper came about through John Newton, one of the many clergymen whom John Thornton supported. Newton had, after a youth spent in the slave trade, become parson of Olney and when he took Cowper into his house Thornton gave him an extra allowance to support the poet. See the Correspondence of W. Cowper, edited by T. Wright, and T. Wright, The Life of William Cowper, also Memorials of the Rev. William Bull of Newport Pagnell, compiled chiefly from his own letters and those of his friend Newton, Cowper, and Thornton, 1783-1814, by his grandson the Rev. Josiah Bull, M.A., London, 1864.
[† ]The term “Clapham Sect” was apparently first used by Sydney Smith in an article in the Edinburgh Review.
[‡ ]According to John Newton and Henry Venn respectively. See Telford, Sect that Moved the World, p. 71, also R. de M. Rudolf’s article on the Clapham Sect in Clapham and the Clapham Sect, and [Henry Venn] The Love of Christ the Source of Genuine Philanthropy, A Discourse on II Cor. chap. 5, ver. 14, 15, occasioned by the death of John Thornton, Esq., containing observations on his Character and Principles. London, 1791, and Thos. Scott, Discourses Occasioned by the Death of John Thornton, Esq., London, 1791. John Thornton also adapted in 1775 for English use an earlier translation of C. H. von Bogatzky’s Güldenes Schatzkästlein der Kinder Gottes as the Golden Treasury Interleaved, and it is reported that “He employed the extensive commerce in which he was engaged as a powerful instrument for conveying immense quantities of Bibles, Prayer Books, and the most useful publications, to every place visited by our trade. He printed, at his own sole expense, large editions of the latter for that purpose and it may safely be affirmed that there is scarcely a part of the known world, where such books could be introduced, which did not feel the salutary influence of this single individual” (Life of John Newton, written by himself, with a continuation by R. Cecil, Edinburgh, N.D.).
[* ]According to an evidently exaggerated statement in the obituary notice in the Gentleman’s Magazine (November 1790) “he began the world with £100,000 and left it with £600,000. His gains as a merchant were immense. He was the greatest merchant in Europe, except Mr. Hope, of Amsterdam; and generally one-half of his profits was dedicated to the poor.”
[† ]Of the two daughters, Jane, married Lord Balgonie, later Earl of Leven, and the other died as a child.
[‡ ]See the Book of Yearly Recollections of Samuel Thornton, Esq.
[* ]J. R. MacCulloch, The Literature of Political Economy, London, 1845, p. 169, who already suggests that Henry Thornton was in consequence unduly partial to the Bank of England. The error has entered even Leslie Stephen’s article on Henry Thornton in the D.N.B. and has since again and again been made the basis of unfounded accusations of bias on the part of Thornton, especially by J. W. Angell, The Theory of International Prices, Cambridge, 126, p. 46. That Henry Thornton was never a director of the Bank of England is apparent from the complete list of directors given by W. M. Acres, The Bank of England from Within, 1694-1900, London, 1931, vol. ii, pp. 613-30, and has been confirmed on enquiry by the Secretary of the Bank of England. The falsity of the statement should, however, have been obvious from the fact that according to a firmly established tradition a banker (in the strict English sense of the word, as distinguished from a “merchant-banker”) could not become a director of the Bank.
[† ]Cf. R. de M. Rudolf in Clapham and the Clapham Sect, p. 107; Colquhoun, Wilberforce, p. 270; W. G. Black in Notes and Queries, 5th Series, vol. vii, January 6, 1877, p. 6; and MS. Recollections of Marianne Thornton.
[‡ ]Book of Yearly Recollections of Samuel Thornton, p. 1. The University of Halle was then the centre of German Pietism, in a sense a precursor of the Evanglical Revival in England.
[* ]MS. Diary of Henry Thornton.
[* ]MS. Diary of Henry Thornton, January 1802.
[† ]Established in 1773 as Marlor, Lascelles, Pell and Down.
[‡ ]William Wilberforce I, the grandfather of the more famous William Wilberforce III here discussed, had married Sarah Thornton, a sister of Robert, the grandfather of Henry Thornton. In the next generation a daughter of Robert Thornton and half-sister of Henry’s father, Hannah Thornton, married her cousin William Wilberforce II, an uncle of William Wilberforce III, who spent part of his boyhood in the house of his aunt and there came for the first time under the influence of the Evangelicals. Most of the years of his boyhood were spent in the house of Mr. Joseph Sykes, at West Ella, near Hull, where he grew up with the numerous children of the family, one of whom was to be the future Mrs. Henry Thornton.
[* ]Cf. the following note by Fanny Burney: December 2, 1782, “Mrs. Thrale had a large party. . . . The rest were: . . . Mr. Thornton, the new member for the borough, a man of Presbyterian extraction upon which he has grafted of late much ton and nonchalance, and who was pleased to follow me about with a sort of hard and unmeaning curiosity, very disagreeable to me, and to himself very much like nothing . . .” Diary and Letters of Madame D’Arblay, edited by C. Barret, Preface and Notes by Austin Dobson, 1904, vol. ii, p. 130.
[† ]Henry Thrale had been M.P. for Southwark from 1768 to 1780.
[‡ ]MS. Diary of Henry Thornton. The passage quoted in the text continues: “There is no doubt that the law which forbids treating was violated by me on this occasion, a subject into which my Father and Mother did not enquire. Mr. Adair, in the speech which he made on retiring from the Hustings intimated that he might if he pleased set aside my Election by petitioning against me and I believe he took the question of an appeal to the House of Commons into consideration, but that he relinquished his purpose partly on the ground of his party having also treated though in a less degree, and partly on that of my majority proving so considerable that I could not be said to owe my success to this illegal practice. A short time after my Election, but antecedently to my taking my Seat I was invited by a friend to dine at his House in private with Mr. Pitt, and I was much gratified by the idea of being introduced to so great a person.”
[* ]MS. Diary of Henry Thornton.
[† ]Thomas Babington (1758-1838), landowner in Rothley Temple, Leicestershire, since 1800 M.P. for Leicester, member of Wilberforce’s “Philanthropic Cabinet,” prominent abolitionist and writer on education. On Babington and the others mentioned below see the full accounts in Colquhoun, Wilberforce and his Friends.
[‡ ]Thomas Gisborne (1758-1846), curate of Barton-under-Needwood, Staffordshire, lives at Yoxall Lodge which, like his friend Babington’s house Rothley Temple, provides frequently a country retreat for Wilberforce and other members of the group; author of Principles of Moral Philosophy, 1789, and An Enquiry into the Duties of Men in the Higher Ranks and Middle Classes, 1794.
[* ]Sir John Shore, later created Lord Teignmouth (1751-1834), after early experience in India under Warren Hastings Viceroy from 1793-1798, retired to Clapham in 1802, first President of the Bible Society.
[† ]Hannah More (1745-1833), authoress and dramatist, who after a youth in the midst of the London literary circles, as a friend of Garrick, Dr. Johnson, and Horace Walpole, became one of the most influential religious writers and most active advocates of popular education.
[‡ ]James Stephen (1758-1832), Master in Chancery and M.P. for Tralee since 1808, and for East Grinstead since 1812, became interested in the abolitionist cause by experiences as a barrister in the West Indies, later for many years one of the closest allies of Wilberforce.
[§ ]Charles Grant (1746-1823) lived in Clapham after a long life in India and as one of the most influential directors and at one time Governor of East India Company; father of Lord Glenelg, Secretary for the Colonies, and Sir Robert Grant, Governor of Bombay.
[∥ ]Thomas Clarkson (1760-1846), with Granville Sharp and Wilberforce the leading figure in the abolitionist movement.
[¶ ]Granville Sharp (1735-1813), originator of the anti-slavery agitation.
[** ]Zachary Macaulay (1768-1838), joins anti-slavery movement because of experience as employee on an estate in Jamaica, appointed Governor of Sierra Leone Company by Henry Thornton, and after his return for many years editor of the Christian Observer; Father of T. B. Macaulay.
[†† ]John Venn (1759-1813), son of Henry Venn, the author of the Complete Duty of Man, “the trusted exposition of the Characteristic theology of the Clapham Sect,” Rector of Clapham since 1792.
[‡‡ ]William Smith (1756-1835), merchant and stockbroker, from 1784 M.P. in succession for Sudbury, Camelford, and Norwich, noted lover of nature and patron of the arts, lived at Clapham.
[§§ ]John Bowdler (1783-1815), lawyer and poet, cousin of Thomas Bowdler of “Family Shakespeare” fame. In John Bowdler’s writings Henry Thornton appears under the name of “Sophron.”
[∥∥ ]T. Gisborne married Babington’s sister, and Babington Macaulay’s, who in turn married, if not a real member of the group, at least a favourite pupil of Hannah More’s; James Stephen married as his second wife a sister of Wilberforce who, it will be remembered, was a second cousin of Henry Thornton. James Stephen’s son of the same name, the author of the Essay on the Clapham Sect, married a granddaughter of John Venn, whose son Henry was married to Martha Sykes, a niece of Mrs. Henry Thornton.
[* ]The most famous of these is of course T. B. Macaulay, who in a school originally provided for negro children but then continued for the Clapham boys had James Stephen the younger, Samuel Wilberforce, the bishop (“Soapy Sam”), and the younger Lord Teignmouth for his contemporaries. In the third generation there is Florence Nightingale, the grand-daughter of William Smith, and in addition James Fitzjames and Leslie Stephen, G. O. Trevelyan, A. V. Dicey, and John Venn the logician may be mentioned as figures of great intellectual eminence. Of living authors the names of Mrs. Virginia Woolf as a descendant of the Stephens’s and of Mr. E. M. Forster as a direct descendant of Henry Thornton may be added.
[† ]A charming description of Battersea Rise (which disappeared only in 1907) is given from her own recollection by Miss Dorothy Pym, another descendant of Henry Thornton, in a book of that title (London, 1934) Photographs of the famous library will be found in Clapham and the Clapham Sect, p. 109, and in J. Telford, A Sect that Moved the World, p. 116.
[‡ ]Cf. F. J. Klingberg, The Anti-Slavery Movement in England, New Haven and London, 1926, and R. Coupland, The British Anti-Slavery Movement, London (Home University Library), 1933.
[* ]The following anecdote, connected with the final passage of the long fought for bill, which is rather characteristic of Henry Thornton and his relation to Wilberforce, may have a place here. After the division “a good many came over to Palace Yard after the House got up and congratulated [Wilberforce]. John Thornton and Heber, Sharp, Macaulay, Grant and Robert Grant, Robert Bird and William Smith who were in the gallery. ‘Well, Henry,’ Mr. Wilberforce asked playfully of Mr. Thornton, ‘what shall we abolish next?’ ‘The lottery, I think,’ gravely replied his sterner friend.” (Life of Wilberforce, vol. iii, p. 298.)
[† ]On the History of the Sierra Leone Company see F. W. Butt Thompson, Sierra Leone in History and Tradition, 1926.
[‡ ]That Henry Thornton was the originator of the bill is commonly affirmed in the literature, but not evident from the Parliamentary Debates. But according to the Annual Register (vol. 40, 1798, p. 237) Henry Thornton moved, on May 4, 1798, “that the House resolve itself into a committee in which he should move to bring in a bill to prohibit the carrying on the slave trade on the Northern Coast of Africa.” See also the Journals of the House of Commons, vol. liii, 1797-8, p. 540.
[* ]M. G. Jones, The Charity School Movement, Cambridge, 1938, p. 152.
[† ]Roberts, Memoirs of H. More, vol. iii, p. 451.
[‡ ]“He and H. More are like brother and sister, or mother and son” is the description of the friendship by Lady Hesketh (Letters of Lady Hesketh to the Rev. John Johnson, edited by C. B. Johnson, 1901, p. 89).
[§ ]According to his Diary, in addition to revising for Hannah More some of her own tracts, particularly the Shepherd of Salisbury Plain and the Lancashire Collier Girl, he seems to have written himself at least three tracts in 1795, one of them containing dialogues and another on the Religious Advantages of the Inhabitants of Great Britain.
[∥ ]Hannah More in a letter to Z. Macaulay, dated January 6, 1706 (Life and Correspondence, edited by Roberts, vol. ii, p. 460).
[¶ ]See A. de Morgan in Notes and Queries, 3rd Series, vol. vi, pp. 241-6.
[** ]E. Stock, The History of the Church Missionary Society, London, 1899, vol. i, p. 69.
[†† ]W. Canton, History of the British and Foreign Bible Society, 1904, vol. i.
[‡‡ ]Lady Knutsford, Z. Macaulay, p. 310.
[* ]MS. Diary of Henry Thornton, March 21, 1803.
[* ]This is a statement frequently made in the literature on Henry Thornton. In a letter to The Guardian of June 19, 1907, p. 1023, “A Granddaughter of Henry Thornton” gives the following extracts from Henry Thornton’s accounts for the four years from 1790:
and about the following year, 1794, he says in his MS. Diary: “I have spent £1,300 this year more than I have got and I find I have been indiscreet in my loans of money, especially formerly—
which is about £1,300 more than I have got, but I have been rather imprudent and I ought to trace this to a fault in my character.”
[* ]MS. Diary, January 23, 1795. Shortly later the following entry occurs, February 15, 1795. “Went to Sierra Leone House and attended an hour and a half on Committee of Trade—I think my attendance was useful—It was certainly a self-denial, and yet how pleasant would some people think even my acts of self-denial to be—so favoured am I by Providence.”
[* ]Colquhoun, Wilberforce, p. 248.
[* ]J. Stephen, Essays, p. 191. From the last sentence of the passage it appears that the event must have taken place between 1809 and 1815. The first sentence very likely refers to the bankruptcy of his brother Robert.
[† ]In the House of Lords Debate on the Bank on May 15, 1797, already, Lord Auckland refers to “Mr. Henry Thornton of whom and of whose evidence it was difficult to speak in terms of adequate respect.”—Parliamentary History, vol. xxiii, 1897-8, p. 534.
[‡ ]Leslie Stephen in the article on Henry Thornton in the D.N.B. and Manuscript Recollections of Marianne Thornton.
[* ]There is only a short reference in the report in Hansard of his speech on December 22, 1798, to the distinction between fluctuating and fixed incomes, but some additional information can be gathered from J. Stephen’s Essays, p. 190, L. Stephen’s article in the D.N.B., and an article by Miss J. Wedgwood in the Contemporary Review, vol. lxviii, October 1895.
[† ]See Journals of the House of Commons, vol. lix, 1803-4, pp. 129-30.
[* ]MS. Diary, 1809.
[† ]MS. Recollections of Marianne Thornton; also Colquhoun, Wilberforce, p. 283.
[* ]M. Seeley, Later Evangelical Fathers, London, 1879, p. 36.
[† ]See Bibliographical Note at the end of this Introduction.
[‡ ]Colquhoun, Wilberforce, p. 303.
[§ ]Catalogue of the Manuscripts of Jeremy Bentham in the Library of University College, London, compiled by A. Taylor Milne, University College, London, 1937, pp. 41, 141.
[* ]See Brougham and His Early Friends. Letters to James Loch, 1798-1809. Collected and arranged by R. H. M. Buddle and G. A. Jackson, Privately Printed, 1908, vol. ii, letters of December 14 and 22, 1904.
[† ]Letters of David Ricardo to Thomas Robert Malthus, 1810-23, edited by James Bonar, Oxford, 1887, pp. 25, 26, December 17, 1812.
[‡ ]This is Henry Thornton’s first child, Marianne, then nine years of age.
[§ ]MS. letter of Henry Thornton to Charles Grant, dated Buxton September 17, 1806, in the possession of Mr. E. M. Forster.
[* ]On the day of Thornton’s death we find young T. B. Macaulay writing to Mrs. Hannah More: “Clapham, January 16, 1815. My dear Madam, My mamma was on the point of writing to inform you that a supposed favourable alteration has taken place in Mr. Henry Thornton’s case. His physicians are still sanguine in their expectations; but his friends, who examine his disorders by the rules of commonsense, and not by those of medicine, are very weak in their hopes. The warm bath has been prescribed; and it is the wish and prayer of all who know him that so excellent and valuable a character may be preserved to the world.”—Letters of Hannah More to Zachary Macaulay, edited by A. Roberts, London, 1860, p. 68. Mrs Henry Thornton followed her husband after a few months and the orphaned children were taken care of by Mr. and Mrs. R. H. Inglis (later Sir Robert Inglis, and M.P. for Oxford), who moved into Battersea Rise and succeeded in preserving it as a centre of humanitarian and intellectual activity. It may be of interest to note that the a pothecary Pennington who attended Henry Thornton in his last illness was probably the brother of the economist, James Pennington.
[† ]Gentleman’s Magazine, February 1815, vol. lxxxv, Part 1, p. 182.
[‡ ]Morris, The Life of Charles Grant, London, 1904, p. 177. Letter of Charles Grant to Mrs. Grant of September 1794.
[§ ]Essays, p. 189.
[∥ ]Wilberforce, p. 271.
[* ]Henry Brougham, Historical Sketches of Statesmen who Flourished in the Time of George III, London, 1855, vol. i, article on Wilberforce, p. 346.
[† ]Essays, p. 193.
[‡ ]J. Francis, History of the Bank of England (1845), vol. ii, p. 9.
[§ ]T. Joplin, Analysis and History of the Currency Question, 1832, p. 206.
[* ]See J. H. Palmer’s statement in Report from the Committee of Secrecy on the Bank of England Charter, ordered (by the House of Commons) to be printed June 17, 1833, Q.607. In a pamphlet by an anonymous writer Henry Thornton is blamed as being responsible for the failure of the firm ten years after his death: “The failure of Pole, Thornton, and Co. is in no degree whatever to be ascribed to their country correspondents, but mainly to the circumstances of that kind-hearted, amiable and good man Henry Thornton, having left the concern of Down, Thornton, and Co. in a state of great perplexity, to say no more; and Sir Peter Pole having joined the concern, on the death of Mr. Thornton, in a state that imperatively required the most rigid adherence to pure banking principles, to insure safety and prosperity to the establishment, being weak enough to depart from those principles for the purpose of speculation.” A Letter to the Earl of Liverpool, on the Erroneous Information that His Majesty’s Ministers have adopted regarding the Country Banks and the Currency in the Manufacturing Districts. By a Manufacturer in the North of England. London, 1826, p. 11.
[† ]The Governor, Cornelius Buller, is reported to have been connected with the House of Pole & Co. by marriage and “other circumstances of relationship.”
[‡ ]Report on the Bank Charter, 1833, Q.5006.
[§ ]J. Wedgwood, Contemporary Review, vol. lxviii, October 1895, p. 525.
[* ]T. Joplin, in discussing this crisis (Analysis and History, p. 235), rightly points out that it was similar to that of 1793 in that it was brought about by a contraction of the issues of the Bank of England, and he adds that “Mr. Thornton, being a banker—a partner, it is curious to remark, of the house that failed on this occasion—had his attention particularly called to the subject; and a very considerable portion of his work, on public credit, is devoted to show, that, in a period of panic, the Bank ought rather to lean to the side of enlarging, than contracting its issues.”
[† ]This is according to a circular dated December 31, 1825, and signed by Robt. Williams and C. M. Williams, a copy of which was kindly supplied to the present author by the Manager of Williams, Deacon’s Bank Ltd. Mr. John Deacon who joined the firm at the same time is described as a later partner of Messrs. Baring Brothers & Co., and the Hon. John Thornton Melville, who also became a partner at the same time, was the son-in-law and former partner of Samuel Thornton, and apparently related to the Thorntons in other ways also.
[‡ ]The more correct appreciation of Thornton’s merits in modern times is mainly due to Professor Jacob Viner’s Canada’s Balance of International Indebtedness, 1924.
[* ]On the literature of this period see J. H. Hollander, “The Development of the Theory of Money from Adam Smith to David Ricardo,” Quarterly Journal of Economics, vol. xxv, May 1911. I am here disregarding some of the more interesting French writers of the period, who seem to have had practically no influence on discussion in England (with the exception probably of Turgot). For the same reason I am also neglecting Henry Lloyd’s interesting Essay on the Theory of Money, 1771, which appears to have remained almost completely unnoticed.
[* ]Francis Baring, Observations on the Establishment of the Bank of England, 1797, second edition, pp. 22 and 47.
[* ]A Letter to the R. H. William Pitt on the Conduct of the Bank Directors, 1796 p. 11.
[† ]See Report of the Committee on the State of Commercial Credit, 1793.
[* ]See T. Tooke, History of Prices, vol. i, 1838, p. 200.
[* ]As Ricardo later thought it might have done. See Proposals for a Secure and Economical Currency, in Works, edited McCulloch, p. 406.
[† ]The texts of the various documents connected with the Bank Restriction have been conveniently collected together by A. Allardyce, An Address to the Proprietors of the Bank of England, 3rd edition with additions, 1798.
[* ]I am indebted to Mr. H. A. Shannon for a complete list of the country correspondents of Down, Thornton and Free, and later of Pole and Co., from 1800 to 1825. In 1800, in addition to the places mentioned in the evidence, they had correspondents in Aberdeen, Brecon (Wales), Sheffield and Stafford. And as regards the towns mentioned in the evidence they now had two correspondents in both Bristol and Edinburgh, but apparently no longer had any in Ashburton and Sleaford (assuming that the bankers in these places mentioned in 1793 were “correspondents” and not merely “acquaintances”). The number grew from twenty-three in 1800 to a maximum of forty-nine in 1813, and was still forty-one in 1825 when the firm went out of business. In that year fourteen of their country correspondents seem to have failed or otherwise come to an end, eight to have transferred to Williams, Deacon and Co., and the rest to other London banks.
[† ]J. C. Colquhoun, Wilberforce and His Friends, p. 283.
[‡ ]Certainly the statement cannot refer to an earlier date, for Thornton did not marry until March 1796; nor is there any indication in his diary for 1795 that he was then occupied with questions of this kind.
[* ]Cf. [W. Anderson?] The iniquity of banking; or banknotes proved to be an injury to the public, and the real cause of the present exorbitant prices of provisions, London, 1797.
[* ]Walter Boyd, A Letter to the Right Honourable William Pitt on the Influence of the Stoppage of Specie at the Bank of England on the Prices of Provisions and Other Commodities, London, 1801. See also two earlier pamphlets, The Cause of the Present Threatened Famine Traced to its Real Source, viz. an Actual Depreciation of our Circulation, Occasioned by the Paper Currency, etc., etc., by Common Sense, London, 1800, and Thoughts on the Present Prices of Provisions, their Causes and Remedies, by an Independent Gentleman [J. Symons?], London 1800; and of a slightly later date: Profusion of Paper Money, not Deficiency in Harvests; Taxation, not Speculation, the Principal Causes of the Sufferings of the People, containing . . . and an important inference from Mr. H. Thornton’s speech in Parliament on March 26th, by a Banker, London, 1802. (The reference is actually to Thornton’s speech on March 23, 1801, quoted below.)
[† ]Loc. cit., p. 60.
[* ]Cf. The Parliamentary Register; or, History of the Proceedings and Debates of the Houses of Lords and Commons, printed for J. Debrett; First Session, First Parliament of the United Kingdom and Ireland, vol. xiv, vol. 76 of series, 1801, p. 556. The report there is fuller than in Hansard. An even fuller report, judging by contemporary references, appears to be contained in yet another publication, referred to as Woodfall’s Parliamentary Debates, which I have not been able to trace.
[† ]See particularly Sir Francis Baring, Observations on the Publication of Walter Boyd, London, 1801.
[* ]Chapter IV.
[† ]Pages 96, 232.
[* ]Pages 83, 91, 96, 232, 234, 235.
[† ]Pages 101 and 134 footnote.
[‡ ]Pages 119 and 189-90.
[§ ]Footnote on p. 120.
[∥ ]Page 150 note.
[¶ ]Page 225.
[* ]Pages 151.
[† ]Page 152.
[‡ ]Pages 198-9.
[§ ]Pages 208-11.
[∥ ]The High Price of Bullion (1810), Works, edited by McCulloch, pp. 268-9. For further criticisms of Thornton’s views by Ricardo, see the latter’s notes on Thornton’s book as reproduced in Minor Papers on the Currency Question, 1809-1823, by David Ricardo, edited by Jacob H. Hollander, Baltimore, 1932.
[* ]Page 244.
[† ]Pages 236.
[‡ ]Page 239.
[§ ]Pages 239 et seq.
[* ]Pages 253-6.
[† ]On the significance of Thornton’s views on this point, and the further development of these theories, see the first chapter of my Prices and Production, 2nd edition, 1935, and “A Note on the Development of the Doctrine of ‘Forced Saving,’ ” Quarterly Journal of Economics, November 1932.
[‡ ]J. Bentham, Works, edited by J. Bowring, vol. x, p. 389.
[* ]The Edinburgh Review, vol. i, No. 1, October 1802, pp. 172-201. It was at one time intended to reprint Horner’s article in this volume, but this plan had to be abandoned in favour of the inclusion of Thornton’s speeches on the Bullion Report. It is, however, to be hoped that not only this, but also some of the other very interesting articles on economic questions which Francis Horner contributed to the Edinburgh Review, will some day be reprinted.
[* ]Parliamentary Register (Second Session of First Parliament of United Kingdom and Ireland, vol. xviii), vol. 80 of series, p. 95.
[† ]See Appendix II below, p. 312, where these manuscript notes are reproduced and a full description of the volume from which they are taken is given. It appears from this that Henry Thornton gave the annotated copy of Lord King’s book to a friend, Mr. Scott Moncrieff, whose name also appears in Thornton’s diary, who in turn sent it to J. A. Maconochie, evidently the same James Allan Maconochie, advocate and Sheriff of Orkney, who owned the manuscript notes of Adam Smith’s Glasgow Lectures (see Edwin Cannan’s Introduction to his edition of Adam Smith’s Lectures on Justice, Police, Revenue and Arms, Oxford 1896, p. xvi). The passages quoted above occur on pp. 29 and 126 of the pamphlet, see pp. 316 and 321 below. Acknowledgment is due to the Goldsmiths’ Librarian of the University of London for permission to reproduce the notes from the copy in his library.
[* ]Among the letters of Francis Horner in the possession of Lady Eleanor Langman there is an unpublished letter to his brother Leonard, undated but probably written in April 1804, in which he writes about the Irish Committee: “The inquiries of this Committee will give us a good many curious facts. Thornton attends these constantly; and he understands these matters better than anybody else in London.” For this quotation I am indebted to Professor F. W. Fetter, who has had an opportunity to inspect the unpublished letters of Francis Horner.
[* ]H. Parnell, Observations upon the State of Currency in Ireland and upon the Course of Exchange between Dublin and London, Dublin, 1804.
[* ]Francis Horner to J. A. Murray in a letter dated June 26, 1810, reprinted in Memoirs and Correspondence of Francis Horner, edited by L. Horner, London, 1843, vol. ii, p. 47.
[† ]Colquhoun, Wilberforce, p. 301.
[‡ ]T. H. B. Oldfield, Representative History of Great Britain and Ireland, London, 1816, vol. ii, p. 345. The crisis mentioned occurred only in September and is the same as that in which, as we have seen, Henry Thornton’s firm experienced difficulties, and in which, as may be added here, the firm of his eldest brother Samuel came to grief. See also, W. Smart, Economic Annals of the Nineteenth Century, 1801-1820, London, 1910, p. 255.
[* ]Page 331.
[† ]Page 335.
[‡ ]Page 335-6. See also page 339, where Thornton speaks of “a rate of interest lower than that which was the natural one at the moment,” and page 342-3.
[* ]Below, page 353.
[† ]George Miller, Lectures on the Philosophy of Modern History, Dublin, 1816.
[* ]Ashley’s edition, p. 515 note.
[† ]See Bibliographical Note D at the end of this Introduction.