TRADE OF BIRMINGHAM— PETITION OF THE MERCHANTS
8 February 1821
Mr. Dugdale presented a petition from the merchants and manufacturers of Birmingham for an inquiry into the causes of the national distress. Mr. Baring said that ‘a very considerable part of the distress ... arose from the nature of the currency’; and he suggested ‘the expediency of giving to the Bank the option of paying either in gold or silver, that the value of the two precious metals might be rendered more equal, and the present pound sterling, which was somewhat too high, relaxed. He wished to relax a cord which was at present stretched somewhat too tightly.’ He did not mean however to ‘trench upon the system of the member for Portarlington’.
Mr. Ricardo said, that if the House would indulge him for a few minutes, he should be desirous to make one or two allusions to what had fallen from his hon. friend below. The great point to which his hon. friend had addressed himself was the origin of the prevailing distress. By some persons this was ascribed to taxation, by others to restrictions on trade, and by his hon. friend to an alteration in the currency, which he seemed indeed to consider as almost the exclusive cause. With this view his hon. friend had entered into a comparison of the prices of corn at various periods, and he stated the fall to be from about 80 to 60s., inferring that other articles had undergone an equal depression. He seemed to think that with a quarter of corn he could now purchase the same quantity of other commodities which he could have obtained with it when corn was at 80s. and that the reduction of prices was therefore general and equal. Now, this representation he apprehended was erroneous. He could not agree that prices had fallen generally in the same proportion. He believed that the fall in corn had been severe beyond measure, whilst there had been no fall with regard to many other articles, or at any rate no fall in the least degree similar. If the prices of bullion were referred to at former periods, it would be seen that the price of corn had altered to the amount of 25 per cent. He was surprised to find his hon. friend making a statement from which, if correct, it must be inferred, that the distresses began at the moment when the last change in the currency took place. Now, if he looked back to the price of bullion in the flourishing year 1818, and compared it with the present price, it would be seen that the difference did not exceed 6 or 7 per cent. To this extent other prices might have since been affected, and he had no doubt that there had been a considerable reduction of prices in other countries. Wine had fallen here, and so had cotton goods; but he believed that fall was not more than equal to that which had occurred in most parts of Europe. In 1816 the price of gold was at 4l. an ounce. In the following year it was 4l. and 6d. In 1818 bullion still did not rise above 4l. 2s. and 4l. 3s., and in 1819, when the plan which he had the honour to recommend was adopted by the House, it was at 4l. 1s. The question, then, before the House was, whether it was advisable to return to the old standard, or to take the existing market rate, which was then about 4 per cent above that standard as the measure of value in future. But his hon. friend had argued on this subject as if bullion had been at that time, as it formerly was, at 5l. or 5l. 10s., an ounce. If, instead of being at 4l. 1s. bullion had been much higher, he should not have proposed a recurrence to the mint standard. What he was anxious about, was not to restore the old, but to establish a fixed standard; for, however desirable it might be to a body of merchants or bankers to possess the power of raising or lowering a fourth or fifth the value of the currency, and to make 3l. 17s. 10½d. at one time, equivalent to 5l. at another, it was a power destructive of every engagement, and finally ruinous to every interest. He was not anxious to restore the old standard; but the market price of bullion being then only 4l. 1s., he did not think it necessary to deviate from the ancient standard. What increased his surprise at the view which his hon. friend had taken in tracing all our distress to a variation in the currency was, that when a few years back we had so much greater variations, we had no such distress. With regard to the depression of agriculture, he believed it was a good deal owing to the laws which were enacted for the purpose of protecting it. It was certainly desirable that those engaged in the production of corn should have a vent when an excess of supply existed. When two or three good harvests followed in succession, we might, if prices were at all on a level with those on the continent, export it after a fall of three or four shillings a quarter; but at present there must be a destructive fall before it could be sent abroad. The hon. member for Cumberland, as well as the hon. member for Staffordshire, had talked of the extreme pressure of taxes on agriculture; as if they were found, in that respect, to be peculiarly burdensome. The stockholder was described as being comparatively free from these effects; but it would not be difficult to show, that all taxes fell upon the consumers of those commodities to which they were annexed; and if this were not the case, he did not see what right the landowner had to ask for protection. He could demonstrate, if it were necessary, that taxes always raised the price of that commodity on which they were laid, and therefore fell on the consumer. Was it not impossible that farmers could continue to grow corn for a series of years unless they obtained remunerating prices?— He would now offer a very few remarks on what had been thrown out as to the restoration of two metals as a standard. It gave him pain, however, to hear any allusions made to the subject of not paying the public creditor, and to find that they met with the reception which they did in some quarters. If, indeed, the dividend was to be reduced, he trusted that it would be done openly, and that no stratagem or delusion would be practised. With regard to the plan of his hon. friend, he was sorry that he could not approve of it, recommending, as it did, a different standard from that fixed in 1819; at least, he could not help thinking that the plan amounted to this when he heard his hon. friend say, that the string was too tight, and that it was desirable to empower the Bank to pay either in gold or silver. This appeared to him to be a complete departure from the true and sound principles of currency. No currency could be of the same value perpetually, any more than other articles could always retain the same price. Gold bullion, however, was the commodity which varied the least; and if a contract was made to pay 100l. at a future period, the contract would be most faithfully performed by the payment of that sum in gold. But it might suit the purpose of the debtor to pay it in silver, whilst, by so doing, the creditor would sustain a loss. The two metals seldom maintained the same proportion to each other long. The price of the one might rise, while that of the other fell. So the Bank being now under an obligation to pay 60 ounces of gold, would enable a person who received it, to propose more, or a greater nominal amount of commodities than he would if he paid in silver. The relative value of the two metals had varied since the act of parliament; but what was the cause of that variation? It was this: the Bank being a timid body, seldom clinging to the true principles of circulation, had taken alarm, and had made great and unnecessary purchases of gold, although they found, by experience, that no person applied to them for any. He almost doubted whether a single bar had been demanded from them since the commencement of the new plan. If the Bank were enabled, according to his hon. friend’s proposition, to pay in silver instead of gold, they would now realize a profit equal to the difference between 4s. 11½d. and 5s. 2d. As soon as this profit should cease, the two metals would have recovered their relative value, and then it would be difficult to discover the value of his hon. friend’s proposition. He had proved last session that the two metals might vary to the extent of three per cent; but his hon. friend then remarked, that this might be true in theory, but in France, where the experiment had been tried, the difference did not exceed one per mill. Still it was something to find that the possibility of the variation was admitted. He entirely agreed in all that had been said with regard to the retrenchment in our expenditure being the principal, if not the only source of relief. The committee would, he doubted not, without preconceived or particular views, inquire whether the present system of restrictions on trade was advantageous to the country. He should only add, with respect to the rents of land, that no interests could be more distinct than those of the owners and occupiers; yet it did happen that the latter were persuaded to petition that House for regulations which might be beneficial to one class, but most injurious to themselves.
Mr. Baring expressed once more his conviction that ‘from the operation of the plan lately adopted by the legislature with regard to the resumption of cash-payments,... the value of the pound sterling, with reference to the price of commodities, had advanced one-third, or at least one-fourth, above that which it bore during the latter years of the war.’ He again urged the policy of allowing a double tender, of silver as well as of gold. As a practical man he could see no purpose in having a single standard: ‘although the establishment of such a standard might be more agreeable to the views of the Royal Society, or other abstract philosophers, who would regulate weights and measures by the vibrations of the pendulum.’
Mr. Ricardo remarked, that the difference between his hon. friend’s opinion and his own was this, that he maintained the advance of the pound sterling with reference to the price of commodities to be only about 4 or 5 per cent, which was equal to the difference between the price of gold at 4l. 1s. and 3l. 17s. 10½d. an ounce, while his hon. friend maintained that advance to be equal to 25 per cent. But how came it, he would ask, that although Russia, Austria, and France had adopted the same system as this country in the issue of paper, there should be such a difference in this country alone as his hon. friend had stated? He, however, differed from the views of his hon. friend, the principle of whose animadversions would in a great measure operate against any metallic currency whatever. With respect to his hon. friend’s recommendation of a double tender, it was obvious, that if that recommendation were adopted, the Bank, although it seldom saw its own interest, would be likely to realise a considerable sum by the purchase of silver at its present reduced price of 4s. 11d. an ounce. But as this purchase would serve to raise silver to the Mint price of 5s. 2d. and comparatively to advance the price of gold, the consequence of which would be to drive gold out of the country, this was, among other reasons, an argument with him for resisting his hon. friend’s doctrine.
The petition was ordered to be printed.
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