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• The Works and Life of Walter Bagehot, Volume V
• A Universal Money. (1869.)
• Preface.
• The Alleged and the Real Advantages of an International Coinage.
• The Real Advantage of an International Measure of Account.
• The Conditions Which an International Coinage Should Satisfy, and the Reasons Why No Existing Coinage Fulfils Them.
• The Practical Proposals For an International Coinage.
• The Result of the Discussion.
• The Real Feasibility of Assimilating the English and the American Currencies.
• Note On Seignorage.
• Henry Crabb Robinson. 1 (1869.)
• Bad Lawyers Or Good? (1870.)
• The Earl of Clarendon. (1870.)
• Mr. Grote. 1
• On the Emotion of Conviction. (1871.)
• Mr. Lowe As Chancellor of the Exchequer. (1871.)
• The English Constitution. 1
• No. I.: Introduction to the Second Edition.
• No. II.: The Cabinet.
• No. III.: The Monarchy.
• No. IV.: The House of Lords.
• No. V.: The House of Commons. 1
• No. VI.: On Changes of Ministry.
• No. VII.: Its Supposed Checks and Balances.
• No. VIII.: The Prerequisites of Cabinet Government, and the Peculiar Form Which They Have Assumed In England.
• No. IX.: Its History, and the Effects of That History.—conclusion.

THE REAL ADVANTAGE OF AN INTERNATIONAL MEASURE OF ACCOUNT.

We have explained that some of the alleged reasons for changing our coinage, and for using one which foreigners would use, too, were not sound. The advantages were indisputable, but they were not worth the cost at which they would be purchased. We have now to state the great advantages which make it well worth while to think whether we should not make a great effort to establish an international money. Those who have paid most attention to it for the most part think that it is. The essential point in which an international money would help commerce is very plain. Suppose that trade circulars were all expressed in a single currency instead of being, as now, expressed in many currencies, would they not be far easier to understand? “I have before me,” says Mr. Hendriks, the eminent actuary, “Morgan’s British Trade Circular, which is a good example among the many trade circulars which are published. The amounts are there represented in pounds, shillings, and pence; for instance, we find sums like 44s. 6d. per cwt.—2s. 1½d. per stone.” And illiterate merchants in foreign countries, not knowing our mode of reckoning, are in a perfect puzzle as to what they would get for their goods. Clever and knowing men can make their calculations, but ordinary men cannot. Our imports are liable to diminution because the mass of foreign traders do not comprehend our price language. We have to pay the cost of their learning it. Some few know it,—few, that is, in comparison with the mass of men,—and they make a kind of monopoly—a source of privileged irreducible profit—out of it.

Our exports suffer probably more. Mr. Behrens, of Bradford, one of the most eminent authorities on the subject, observes: “One of the great advantages which we expect from the change of course would be the immensely greater facilities which would be afforded for international transactions, particularly in England. I might instance the case of a merchant in Rio wishing to send a cargo of coffee to Europe. Supposing that in Rio they had also joined the convention, and we had not, the Rio merchant would find perhaps by a London pricelist so much per ton quoted for coffee; of course he would have to go through a very elaborate calculation, and take all the risks of the exchanges into account. On the other hand, if he found that at Antwerp or Hamburg (supposing those places had joined the convention) the price of coffee was stated in the same currency, or in some multiple of it, as his own, and with the same weights and measures, he would make the calculation easily; he would say, the freight is so many centimes per pound, or so many francs per kilogramme, the commission is so much, and all the charges to be added to it amount to so much per cent. He would at once see the total amount, and then he would say, ‘I will allow one or two per cent. for the risk of the exchanges, and I can at a glance see where I must send my coffee to’. And most likely he would prefer sending it to the Continent rather than to England. As I said before, the competition between the different nations is so great that already our exports of manufactured goods are more and more reduced to half-manufactured goods. The yarns which must be woven into pieces before they can be worn increase every year. Although I do not say that the goods themselves decrease, yet the yarns increase, which shows that the manufacturers on the Continent are very much on the alert, and produce more every year. There is therefore a great danger that if the slightest impediment be thrown in the way of English commerce, our Continental customers will soon cease to take even the yarns; and if they have greater facilities given to them as against ourselves by the use of the same money, they will import cotton direct, and not even take our cotton yarns in future.” And again, Mr. Behrens tells us, “I had an instance of the difficulty caused by the multiplicity of foreign coins, and that a painful one. I had to draw upon a place at which I did not know whether the ordinary currency was the Prussian thaler or the French franc; the place was Luxemburg, the amount was £97. I endorsed the bill at the exchange in francs; the party upon whom it was drawn said, ‘Prussian money is our legal tender, and I will not pay the bill, except in Prussian money’. The conversion from francs into Prussian money, and then back into English money, cost me upon this £97, 45 francs.” That is to say, an exporter of foreign goods cannot tell at a glance what money he will be entitled to, nor in what form of currency he will be paid; a sort of uncertainty hovers over all the subject.

In every newspaper throughout the mercantile world prices ought to be quoted in the same manner. Commerce has very many and very natural difficulties. Distance of place, difference of speech, are irremovable impediments. We may conquer them, but we cannot remove them; nature made them, not man, and man cannot hope to foresee the time when they shall exist no longer. But the painful existence of real obstacles is the very reason why mankind should not invent artificial ones. We are encumbered in our commerce already,—do not let us be more encumbered than we can help. Yet we voluntarily invent impediments if one set of us count in one fashion and the others count in different fashions.

Persons who look at the facts at a distance may fancy that this diversity of monetary expression is a minor difficulty. But, in fact, it is not conquered. English bankers are supposed to be—perhaps are—the most educated part of the English business world. Yet how few ever look with care at the accounts of the Bank of France. An enormous increase of late years in the note circulation has happened without their heeding it. Except from some translation in a City article, they have not an idea how much bullion the Bank of France now holds. Yet all English bankers know that, after the amount of bullion in the Bank of England, one of the most imperative influences upon our money market is the bullion in the Bank of France. Of course all bankers can turn francs into pounds, and some think they will; but few ever do. If the accounts of the two great Banks were rendered in identical language they would be criticised with equal accuracy. But now, in England, the accounts of the Bank of France, in certain cases the most instructive and important, are altogether neglected.

In other trades we see the same. The diversity of monetary expression is an effectual bar to common commercial understanding. Unquestionably, great firms employ skilled clerks, who translate these difficulties—whether of Norway, or Austria, or India—very rapidly, but ordinary traders cannot keep such clerks. Their profits are not great enough; their business is not large enough. They cannot export to these countries of confusing currency, because they do not know really what their goods will fetch—how many pounds, shillings, and sixpences their price will bring home.

No doubt certain skilled exporters know all this, and make a large profit on their knowledge. One of the most intelligent said before the Commission that an international money would be disadvantageous to him, because it would render unnecessary a kind of knowledge which he possessed, but which merchants at large did not share. The democracy of Trade, if we may so say, is excluded by the present monetary complexity; little men, used to small transactions, cannot grapple with it, and yet it is the lesson of all our recent legislation upon commerce that we must facilitate the transactions of the many, and leave to take care of themselves the transactions of the few. The more traders are able to trade, the larger and the better will our commerce be.

But will the nation gain? If we ask the nation to make a great change, we must show that as a whole it will gain a great benefit,—not only that certain persons belonging to it will gain one. The answer is that an increase of commerce does benefit every one. An augmentation of imports of course benefits the people, because they have greater facilities in buying what they want and consuming what they wish. An increase of exports, too, is a benefit not merely to the exporter, but to the nation, for it cannot be permanent without an increase of imports, which the nation can use, and it employs in the most profitable manner labour and capital which would otherwise be spent in a way comparatively unprofitable.

At present, too, in many cases, international transactions are managed by a rough calculation, which means a calculation favourable to the calculator, and upon which he charges a percentage. In the French book trade, for instance, a buyer in England has commonly to give 12 shillings for a book costing in Paris 12 francs. No one contends that such is the just exchange, but it is an easy exchange, by which no individual purchaser loses very much, and by which considerable traders probably derive considerable gains.

To sum up, an international money would enable smaller people to trade, and new unskilled people to trade; it would abolish a toll which the consumer pays, and remove an encumbrance which the merchant feels. There would be a gain to every one worth every one’s making a certain sacrifice to reach. But this advantage cannot be reached without a large change. It involves what is not always seen, not only an identity of certain coins, but an identity of the common money of account. You must make the monetary language of trade circulars identical, or you will not have effected your object. You will not have made quotations identical, and without that you will not augment trade much, help small traders or untrained traders much, or benefit the consumer much. Unless you make a great change, you will not achieve anything worth much cost, or that justifies inflicting a difficulty on the many.

How this change is to be effected so that it may gain most and cost least we shall immediately consider.