nTrn^iM'i»yMMhhh^^»ih»iJU!x«P^ w iif i m iiBB w ii mmmmmmmmmm A HAND-BOOK ON ©OLD AND Silver rMi&iiS&iSS.^. m m III m . m iiMniiii i w M i M 1 1111 1 1 1 iniinMiiiniir I'li'nn n»i[ih|iiinni-ii' • triiniiim-nniT-r [imiiyiiiiijjxiiiiiiQi^^ ■tf M MMt W — WfWil I tfCBgWaB flU B l— WWIM il M^»«agH«»tS:HWMM»i«iaM v'^45Wi>^ii5i;i**iiiii'i*lrt«'i5«^^ Hsitt (Eallege of 3^gticult«tc At QlotrnsU UniwcrattH 3tlfara, H. 1. ffitbrarg Cornell University Library HG 1234.H7 A handbook on gold and silver, 3 1924 013 775 626 A Cornell University 7 Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013775626 GOLD AND SILVEB LONDON : PBTBTKD BY SP0TTI9W00DE AND CO., NEW-STBEET SQUATVE Utn PARLIAMENT STBEET A HANDBOOK ON GOLD AND SILVER AN INDIAN OFFICIAL LONDON LONGMANS, GEEEN, AND CO. 1878 All rights veservtd J" INTRODUCTION The Silver difficulty and the universal depression of trade are but symptoms of the same economic disorder. In the British Empire the former may develop into paralysis of its Asiatic limb ; the latter into disease menacing its heart, viz., a waning prosperity of British manufactures, and a de- teriorating condition of the agricultural classes. The crisis requires wise and prompt treatment; but statesmen resign their duty to political economists who love abstract reasoning, and to theorise ; and to brilliant jour- nalists who excel in discussing the events of the everyday life of nations, but who have not time, opportunity, or the commonplace power of drudgery, for digging out the facts which must guide correct opinions of what the silver question means, and the universal depression of trade implies. There is yet another class, viz., bankers and merchants engaged in commerce between the East and West, who are peculiarly fitted to form a correct practical decision on the silver ques- tion; but they are content to salute it as a big subject which must be approached through a wide investigation of facts. In the papers which form an Appendix to the present work, an endeavour has been made to bring together the facts Requisite for understanding the silver difficulty, and the general depression of trade, in their bearing more par- ticularly on the prospects of the British Empire ; to bring, VI INTRODUCTION. in short, a big subject witbin the grasp of the thought and common sense of the educated part of the nation, who in this matter must lead the opinion, and shape the policy of its statesmen and legislators. The papers in the Appendix treat of the recent financial, monetary, and commercial history of the world for the term of but one generation ; yet it is a wondrous story which they unfold. The proper telling of it requires a skill in dealing with prosaic but significant facts of commerce, and a political insight, to which the present writer can lay no claim ; so as to trace the course of the commercial and political move- ments which — beginning about the time of the gold dis- coveries, and the last overthrow of the French monarchy — have changed the face of the world and the map of Europe. The repeal of the corn and navigation laws, and the gold discoveries, mark a new era of commerce, on a scale and proportions that have dwarfed all previous efforts of the world's industry and enterprise ; also, with tbem began a wonderful development of credit and finance which has dwarfed even the gold discoveries. If California and Australia have added some 450 millions sterling of gold and silver to the wealth of the world since 1848, credit and finance have increased the debts of the world by above 6,000 millions sterling. Commerce, and credit and finance — as we now behold them — though of twin birth, and rocked in the same cradle, went different ways. Commerce began the career of its triumphs with a shout of ' peace at any price ; ' credit and finance, leaving the highways of commerce, struck into the regions of politics, of the ambition and rivalry of rulers and States, INTEODUCTIOW. vil Ubiquitous finance made its influence felt in the cabinets of rulers, in the barrack, the Bank-parlour, and the homes of the poor. It stirred the ambition of kings by giving them the means of gratifying ambition — by showing how hosts of armed men would spring out of the earth at the stamping of its feet, and peaiceful industries be deluded into making bloated armaments and military lines of railway. With cruel malice, it showed how the mighty hosts might be moved, and the engines of destruction employed on their bloody work, and then it betrayed the secrets of the council chamber in the homes of the poor, through a heavy grinding taxa- tion. All this it did with consummate skill, iising as its prin- cipal yet unconscious instrument in the work of war the' country which courts isolation from Europe as the apostle of peace at any price — the country which, though familiar with the hackneyed truth that history repeats itself, yet does not see that, more than any other country, it has helped to render possible, in this nineteenth century, an irruption of the barbarians, by lending freely, abroad, the capital which should have cherished its agriculture and industry at home, but which abroad has made England powerless to obtain a general disarmament, which the spirit of the England of 1815 coidd have secured. At this point of universal arma- ment in Europe, outside the British isles, and of the universal depression of trade, the lou g-parted t-win brothers, commerce and finance, have again met. In the same period commerce completed a career of marvellous progress and prosperity. Distant lands attracted its ships, and yielded to it their materials of well-being; harbours were created, and cities sprung up on erst desolate shores ; the earth gave to the myriads who sought her virgin Vlll INTRODUCTION. soil in the New World and in the fifth Continent, the riches which had been denied to them in the Old. Production in every form was stimulated ; science was invoked to supple- ment, to direct, to multiply manifold, the power of human industry, and in union with the arts to help invention in devising means for augmenting the necessaries, the comforts, the embellishments of life. Distance was annihilated by the steamer, the railway, the telegraph, to bring producers into close communication and ready interchange of traf&c with the purchasers from whom they were separated by vast continents. In short, commerce, by finding a market for every kind of merchandise, energised the forces of production, and provided liberal inducements for invention, organisation, and enterprise, to thinkers and workers, to captains and the rank and file of industry. In so doing, however, and from the nature of its pursuits, it got imbued with a spirit of materialism ; and in England it receded farther and farther from the spirit which had animated the England of the beginning of the nineteenth century. It was conscious all along of this change ; but until of late years it pointed boastfully to the material triumphs which it had achieved with the help of science, and felt that in these days we are better than our fathers were. This self-complacency has been disturbed by the de- pression of trade, if it has not been utterly subdued by the waU of distress which arises on every side from suffering myriads, who cannot get work in a world in which labour is the inheritance of man. And when, in the retrospect of the past thirty years, it recalls to mind the shout of peace at any price with which it INTRODUCTION. ix went forth on a prosperous career, serious misgivings must disturb it when confronted, as now, with great nations ready for battle, and almost every country in Europe guarding itself against English commerce by a barrier of protective duties ; misgivings whether somehow finance has not out- witted commerce, and made the handmaid of peace and civilisation the unconscious instrument in bringing about the present tension in the relations of European States, which may be only the prelude of bloodier wars than any in this century. The prodigious borrowings by European States could not have been advanced by the lenders if commerce had not provided the means of remittance. The service has been requited by the existing general depression of trade, which arises, as to one cause, from diminished mea.ns of purchase of foreign manufactures, owing, 1st, to the pressure of heavy taxation for meeting the interest on national debts ; 2ndly, to the overwhelming pressure under which exports have to be sent abroad for meeting interest payments to foreign creditors, whereby but little of other exports is available for interchange with foreign imports. The depression of trade has been aggravated further by the depreciation of the currencies of ambitioiis, extravagant States, which for some time prevented a free introduction of capital into those countries, and latterly has been stimulating its withdrawal, which withdrawal involves a further export of merchandise from the indebted countries, without their being able to demand foreign imports in exchange. These principal causes of the depression of trade have been reinforced by a third cause, viz., the depreciation of silver, which, like the other two causes, occasions an increase X INTEODUCTION. of exports from the countries of depreciated silver currency, in excliange, not for foreign imports, but for silver. The solvent European States are thus flooded — England in particular — with exports from countries of depreciated currency which cannot demand other merchandise in ex- change. The remedies for England are : — 1. To demonetise silver in India. 2. To regain command over foreign markets for her manufactures : a. By increasing the efficiency of British labour through a resolute, unflinching suppression of drunkenness. b. By invigorating British agriculture, through the free application of capital to the land. c. By enlarging the home market for British manu- factures as a necessary consequence of the second measure, and thereby enabling the British manufacturer to sell abroad more cheaply than he can now do. The principal means by which the second and third objects are to be attained is a revision of the land laws in a spirit of true conservatism, and with the purpose of restoring to land its former supremacy in moulding the spirit and strengthening the will of the nation, among whom commerce has had free course to work its will, during the past thirty years, and has failed in those more essential objects of 'national welfare which are dearest to the patriot. CONTENTS. CHAPTER PAGR Intkodticiion V I. The Dbprbciation of Siltbk 1 II. The Battle op the Stawdaeds 15 III. SlLTBE IS FOK THE EAST, GoiD IS FOE THE WeST . . 27 IV. Will THE Peicb of Silver eise again ? . . . . 39 V. India shoulb have a common Money with the West . 55 VI. Plan foe a Gold Ctteeenct foe India 6.3 Vn. Peacticabiliit of STrBSTinTTiNe A Gold Standard foe India 79 VIII. Means to be employed foe establishing a Gold Cueeenoy IN India 88 IX. Tee delicate mechanism of England's Gueeescy and Oeedit 107 X. Oattses of the Depeession of Teadb 134 XI. India can no longbe enditeb a Silvee Oiteebncy . .145 XII. Peovision of Capital fob Ageicultitee and Inditstey in India, by means op a Gold Oiteeency . . . . 160 XIII. Sitmmaey 168 APPENDICES. APPENDIX PAGK I. Peodttciion op Gold and Silvee 181 II. Ctteeencibs of takioits Coitnteies 191 III. National indebxedkbss and Mercantile Credit . . . 283 xu CONTENTS. APPBNDTX PAGK IV. Prices ;U3 V. Wages 332 VI. Trade ov the United Kingdom and of Beitish India . 342 VII. OOTION AND THE OOTTON TkADE OF THE UNITED KXNGDOM . 358 VIII. "Wheat and the pkospects op Beiiibh AGRicrLiTJEE . . 371 A HANDBOOK ON GOLD AND SILYEE. CHAPTEE I. THE DEPBECIATION OF SILVEE. In the words of a late pampMet, the depreciation of silver has raised a question ' of world-wide importance, demanding the most careful solution, as the most important commercial problem of the day.' Among the prominent facts are the following : — I. The yearly production of gold and silver has been as follows, in millions sterling : — 1848. 1876. Gold 10 22 Silver 8 15 18 37 The total production from 1853 to 1876 amounted to 569 millions of gold and 231 millions of silver, giving a yearly average of 24| millions for gold, and 10 millions for silver. II, The price of silver has been as follows, viz. : — From 1848 to 1852 . . 591 to 60^d. an ounce, „ 1853 „ 1866 . ■ 61i „ 61i )j „ 1867 „ 1872 . . 60r\„ 60A J) „ 1873 „ 1875 . . 59i „ 56i jj „ 1876 ... 52J A HANDBOOK ON GOLD AND SILVER. And the monthly fluctuations in the price have been : — 1 Price of bar stiver Corresponding Bank bills in fin.lpnti-hn. irn Bate of ■j^Q ^j in London. Pence value of a rupee London, on exchange varia- per ounce in India, in pence demand of Council tions Drafts on India. 1875. Highest Lowest Higliest Lowest Higliest Lowest Pence January . 9 57-62 57-25 22-30 22-15 22-25 22- 22-16 April 9 57-37 67- 22-20 22-13 22-94 21-81 21-97 July . . 8 56- 56-62 21-67 21-52 21-87 21-37 21-34 October . 5 57-06 66-69 22-08 21-93 21-75 21-62 21-84 Total for year . 78 1876. January . 7 56- 54-87 21-67 21-23 21-37 20-81 21-29 April 8 54- 63-87 20-89 20-68 20-87 20-44 .20-93 July 15 51-5 47- 19-93 18-19 19-76 18-12 18-62 October . 14 53-62 52- 20-75 20-12 20-5 19-12 20-2 Total for year . 151 1877. January . 14 68-62 57- 22-68 22-06 22-37 21-62 22-16 April 13 55- 53-5 21-28 20-70 21-93 20-6 21-12 July . . 10 64-75 63-87 21-18 20-85 21- 20-69 20-83 October . 11 55-62 54-75 21-62 21-18 21-93 21- no allol^ Total to 31 Oct. 98 ment 23 Nov. 1 1877 J ■ • 64-62 54-60 20-94 20-87 made The variations in the price of -wheat can scarcely have exceeded the variations in the price of the standard of value in 1875 to 1877 ; and, notwithstanding the great expansion of the Indian export trade in these years, the price of silver fell, and -with it the rate of exchange declined. This shows that the depreciation of silver had stimulated the exports, and not that the exports from India, as during the cotton famine, had raised the price of silver — as they should have done if the expectation be at all reasonable, that silver will rise again through an increase of Indian exports. III. This depreciation of silver is not a new thing. As stated in a summary by the 'Times,' in January 1875, of notes by Dr. Soetbeer on variations in the proportionate values of gold and silver, that relative value in ancient INFLUENCE OF aOLD ON SILVER. 3 times was about 1 to 13^, 'and towards the end of the old Roman Empire of the west it rose to about 1 to 14| . In the middle ages, and down to the fifteenth century, the standard was about 16 of silver to 1 of gold ; but after the discovery of America the value of gold fell rapidly, until the proportion stood at 10 1^ to 11 of silver to 1 of gold, which relation was maintained with but little fluctuation during the sixteenth and beginning of the seventeenth centuries. After that date gold began to rise again in value, and by the end of the century the proportion had become 1 to 15. The standard of comparative worth fluctuated backwards and forwards at about that figure during the eighteenth century, and at the close silver was about 15^. Up to 1850 isilver had never fallen so low as 16, while from 1850 to 1852, owing chiefly to French coinage operations, and the absorption of silver for the double standard in that country, the price of that metal tended to advance slightly. It was never higher than 15, but still it was considerably less than 15^. After 1869 the course of the price of silver tended downwards, by almost imperceptible steps; but it was not until 1873 that the price began to be decidedly low; it then fell to 16-08 in relation to gold, and by the end of the last year had touched, in London, 16-80, or B7j^d. Since the beginning of the sixteenth century gold has " appreciated," as against silver, almost 50 per cent., and nearly 7 per cent, of that apprecia- tion has occurred since 1862 ; while, if we compare the favourable price of silver in 1859 with that ruling in the latter part of 1874, the value of the metal will be found to have fallen nearly 18 per cent.' With silver at 54:^d. an ounce, the relative value is about 17'3 to 1. IV. The course of the depreciation was the same after the discovery of America as after the gold discoveries in California and Australia. In both periods silver rose at the outset, in some gradation, only to fall eventually in a greater degree. E 2 4 A HANDBOOK ON GOLD AND SILVEE. Y. There is also a similarity ia tlie distribution, as affect- ing tlie relative value of the precious metals in the two periods. In the second period the proportion of new gold exceeded that of silver ; but in the first period ' it is stated, by other authorities,^ that the proportion of silver so greatly exceeded the proportion of gold, in the new supplies of the precious metals in the sixteenth century, that the quantity of silver brought forward was sixty times greater than the quantity of gold;' and yet it was silver and not gold that appreciated at the outset. This arose from two circum- stances: first, 'till about 1525 but little silver arrived in Europe; and though the great silver mine of Potosi was discovered in 1545, yet it was not until 1571, after the discovery in 1567 of the great quicksilver mine of Huanceva- lica in Peru, that an abundant yield was obtained from Potosi. The receipts of the precious metals in Europe, till about 1525, were confined merely to such quantities of gold as were obtained by force, or persuasion, or purchase from the Indian natives.' This, however, accounts for the depre- ciation of gold, only until the last quarter of the sixteenth century ; whilst secondly, gold continued to depreciate after the beginning of the seventh century, though the imports of silver from America had by that time long preponderated over the supplies of new gold. Adam Smith completes the explanation; the silver produce was drained to the East, through the low price there of commodities, and ' because in China and the greater part of the other markets of India the proportion between fine silver and fine gold is but as ten, or at most as twelve to one ; whereas in Europe it is as fourteen or fifteen to one. In China and the greater part of the other markets of India ten or at most twelve ounces of silver will purchase an ounce of gold ; in Europe it requires from fourteen to fifteen ounces. In the cargoes, therefore, of the .' History of Prices, vol. vi. p. 361. DISTRIBUTION OF GOLD AND SILVER. 5 greater part of European ships whicli sail to India silver lias generally been one of the most valuable articles.' This export had been in progress from the end of the seventeenth century at least. ' The export to Asia of piastres coined from American silver assumed colossal proportions, averaging, as Professor Soetbeer estimate?, from 1690 to 1800 about li- million sterling annually. Moreover, there was a con- siderable importation of gold from Asia in re burn to Spain and England.' ' Thus the silver from the mines of Potosi was drained off to the East, causing a smaller depreciation of the precious metals in Europe than if a passage to the East by the Cape of Good Hope had not been discovered ; for, though gold was brought back in exchange, yet the merchandise of the East also formed part of the exchange, with the result that, as in the period since 1849, 1st, the precious metals did not depreciate in the West to the extent which may have been predicated from the magnitude of the gross additional supplies of gold and silver; 2ndly, when, from the continued exports of silver to the East, the ratio of gold to silver declined in the East, and the export of gold thence to the West lessened, the price of silver declined in the West. yi. In accordance with the foregoing are the facts of the distribution of gold and silver in the second period, viz., a second exportation of silver to the East, though the new supply of the precious metals was furnished this time by the golden sands of California and Australia. The total produc- tion of the precious metals, from 1853 to 1876, exceeded the computed amount, at the former yearly rate, by sums which, in those twenty- three years, amounted to 336 millions ster- ling extra of gold, and 31 millions sterling extra of silver. But in the exports to the East the proportions were inverted, viz., to 198 millions sterling of silver and only 61 millions of ' Blme Booh on Depreciation of Silver — Appendix, p. 32. 6 A HANDBOOK ON GOLD AND SILVER. gold; that is to sa.y, the East absorbed 168 millions of the old rate of silver production, and the whole of the extra pro- duction of that metal, with only 68 millions of the extra production of gold. On the other hand, the West, by thus parting with all the new, and a great deal of old supplies of silver, was able to retain all but 61 millions of the extra pro- duction of gold, viz., 336 millions, without any injurious dis- turbance of prices. Or, confining the view to the thirteen years from 1853 to 1865, the extra production of gold amounted to 200 millions sterling, while the silver produc- tion showed no increase. Of this extra production, the West retained 168 millions, sending to the East only 32 millions of new gold; but it sent 151 millions of silver, which included 113 millions at the old rate of production, and 38 millions from the old stock. The bullion operations for getting together this stock of silver, old and new (by an exchange with gold), for exportation to the East, coincided with an exceptional dearness of cotton in the West, and with a consequent exceptional demand for the cotton of the East, and both these circumstances raised the gold price of silver in the West from 1853 to 1865. Relatively to commodities, both gold and silver depreciated during that period ; but silver appreciated, relatively to gold, from the temporary causes just mentioned; although its depreciation in the East, relatively to commodities, was greater than the similar depreciation of gold, relatively to commodities, in the West. The high price in the West, of Asiatic productions, raised the gold price of silver in the West, while the drain to tlie East, of all but 17 millions of the equivalent of the extra production of 200 millions of gold and silver, caused the de^ preciation of silver in the East. VII. Comparing 1873 to 1877 with 1853 to 1865, the only difference to be noted is that whereas, in the earlier period, the depreciation, relatively to commodities, was greater for silver, which, from temporary causes, had appro- CAUSES FOR THE DRAIN OF SILVER TO THE EAST. 7 ciated in the West relatively to gold — in the later period silver had recovered some of its depreciation and gold had increased its depreciation relatively to commodities, while silver had now permanently depreciated relatively to gold, far more than in any former period in the world's history. VIII. Alike in the period after the discovery of America, and in that after the gold discoveries in California and Aus- tralia, the principal cause which determined the drain of silver to the East was the low price of Asiatic produce ; but there was a second cause, viz., in the iirst period, an under- valuation of gold in the East, which caused its export to the West, in exchange for silver ; and, in the second period, an over-valuation, so to speak, in the West, of the Asiatic pro- duction of cotton, which caused its export from the East in similar exchange for silver. In both periods, the second cause operated temporarily to raise the price of silver in the West ; but, in the final result, the drain of silver to the East issued in its depreciation in the West. IX. If, therefore, it be wise to infer from the expe- rience of three centuries, that what has been will be and must be, and that the drain of silver to the East must con- tinue, we should not stop short of the further inference that this drain will only result in a further depreciation of silver in the West. X. We are shut up to this latter conclusion by the further fact of the great increase of paper currency since 1848. On whatever other points respecting a paper cur- rency writers may differ, all are agreed that the portion of it which permanently circulates displaces a nearly corre- sponding amount of metallic currency. This is the result even where the paper currency is readily convertible into coin ; and the effect is aggravated in countries with an inconvertible paper currency. In such countries, if the issues of inconvertible notes is excessive, a great portion of 8 A HANDBOOK ON GOLD AND SILVER. the metallic currency is exported ; there are extreme cases, as in Italy and Russia, where, virtually, the whole of the coin of full legal tender has been exported. And again, if any of these countries resume specie payments, they can do so with a smaller amount of metallic currency, from the nation having become habituated to paper currency. From the combined influence of these circumstances, a large amount of metallic currency has been displaced by the inordinate increase of paper currency. The displacement has been general throughout the western world, and as it happens that all but two coiintries in the West, which have a double standard, have an inconvertible paper currency, it has come about that the portion of the metallic currency which has been expelled by a process of natural selection, is the silver coinage. But expelled whither ? A portion of it has been sent to the East, but, failing the Ea.st for the portion not thus exported (which remains to be expelled from the western system of currency), the West, in the absence of means of export to Kingsley's world on the other side of nowhere, is being forced to demonetise silver. XI. Practically, only one of the precious metals can circulate as full legal tender, in any one country, even if it has the double standard. Hence, the depreciation of silver would be of little consequence, it would indeed be unmeaning, if the country had no foreign trade. It is as international money that the depreciation acquires importance; the country which uses depreciated silver not being able to correct an adverse exchange by sending it to countries where the export would only cause a further depreciation of silver. On this point the following extract from Professor Senior's lecture, on the 'Transmission of the precious metals from one country to another,' deserves to be remembered. ' I will suppose that all the protecting duties, with which we have clogged our commerce with France, are suddenly removed, and that the removal is immediately followed by an increased importation of EFFECTS OF TEANSMISSION OF METALS. 9 Frenct commodities to tte amount of five millions sterling. And I will suppose the commercial restrictions on the part of France to remain unaltered. I will suppose, too, that the five millions in question are actually remitted in money. It must he admitted that the efilux of so large a sum from England, and its influx into France» must sink all English prices, and occasion a general rise of prices in France. Indeed, if it did not, the transaction would be one of pure benefit to England, and of pure loss to France. As money is not a source of gratification, but a mere instrument of commerce, if our prices were not afiected by parting with a portion of our money, we should be insensible of our loss ; or rather, we should have sustained no loss whatever, and have gained the five millions worth of French commodities without any real sacrifice; while France would have parted with those commodities, and received no sensible equiA'alent. ' But those who fear that a nation may be injured by parting with its money, are certainly right in supposing that the transmission of five millions in specie to France would occasion a general fall of prices in England, and a general rise iu France. The steps by which these effects would be produced in each country cannot properly be stated in this part of my Lectures, but I suppose there is no one present who doubts that such would be the case. • ' The consequence would be an immediate and universal increase of imports and diminution of exports in France, and an immediate and universal increase of exports and diminution of imports in England. The commerce which any country carries on with its neighbours must depend on the prices of their respective exportable commodities. When commodities of the same quality, or which may be substituted for one another, can be imported from different quarters, a slight variation of price will decide which shall be preferred. If linen of the same quality can be imported into South America indifferently from Germany and from France, and the cost of transport from each country is the same, while the price per yard is also the same. South America will probably import indiffei-ently from each country ; but if the influx of money should raise the price of linen of a given quality from two shillings to two shillings and a farthing per yard in France, while it remained at two shillings in Germany, South America would instantly desert the French market, and confine her linen trade to Germany. ' With every commercial rival with whom France was formerly on a par, she would now be at a disadvantage ; and many would now meet her in markets from which she had formerly excluded them. 10 A HANDBOOK ON GOLD AND SILVEE. The same consequences, though to a less extent, would follow, even in the cases in which France had exclusive powers of production. Every commodity has among its purchasers some whose desire for it, or at least for that variable quantity of it which they consume, induces them to spend on it a given portion of their income, and no more. On the slightest rise of price, they either discontinue or diminish their consumption. A very slight rise in the price of claret would occasion some to drink less, and others to drink more. Precisely the same causes which would diminish the exports of France, would incjfease her imports. However earnestly a nation may endeavour to secure to its own productive classes the monopoly in what they respectively produce, it cannot really protect them against foi-eign competition by 'any measvire short of the prohibition of all foreign commerce. The consumer cannot be forced to buy the dearer or inferior home-made article. If he is prohibited from importing precisely what he wants, he may still make his purchase abi-oad. The increased price in France of all home commodities would, of course, stimulate the consumption of foreign ones. The bills of France, on other countries, would increase ; those of other countries on France would diminish ; and the exchange woiild be against France throughout the commercial world. It is impossible that, under such circumstances, she could retain for a month the five millions which I have supposed to have been paid to her. They would flow from her in every direction. 'In fact, until she parted with the money, France would have derived, not benefit, but rather evil, from her export to England. That money is a means, not an end ; that no gratification is afforded by an increase in the quantity necessary to efiect a given purpose ; that it is quite as pleasant to purchase a given commodity for five shillings as for fifty, — are truisms, but truisms so often impliedly denied, that they cannot be too often repeated. The rise of prices in France, while they lasted, must have been an evil. It must have deranged, so far as it went, the existing relations of society ; have impoverished creditors, and those whose incomes were fixed ; and, to a certain extent, unfitted money to perform its functions of a per- manent expression or standard of value. If no other results were to to have followed from the sacrifice of so much French industry, France had better have given away, than have sold, her five millions' worth of silks. The sale of the silks would have become advantageous to her only when, by re-exporting their price, she had obtained from other countries commodities capable of affording her more gratification EFFECTS OF TRANSMISSION OF METALS. 11 than she coiikl have received from the industry of the silk trade, manufacturing silks or other commodities for her own home market. ' It is obvious, that all this time precisely an opposite process would be going on in England. The general fall in English prices would give a preference to our goods in every market of which they had merely an equal portion before ; it would admit them to many others from which they were previously excluded. It would exclude from the English market many foreign commodities, which could now be obtained more cheaply at home. While the bills in England on foreign countries were increasing, the foreign bills on England would diminish ; the exchange would be in our favour with the whole world, and the five millions would come back as rapidly as they went went out. To suppose that the level of the precious metals in the commercial world can be permanently disturbed, by taking money from one country to another, is as absurd as to suppose that the level of a pond can be altered by taking a bucket-full from one place and pouring it into another. The water instantly rushes to the place from which the bucket-full has been drawn, just as it rushes from the place into which it has been poured. Every country to which France exported any of the money she received from England would, to that extent, have more money than her habitual state of prices would allow. It would flow from her either directly to England, or to those countries which were in want of money in consequence of having previously exported it to England. ' It appears, therefore, that even in the extravagant case which I have supposed, of an export of five millions in money, the loss, if it can be called one, would be immediately repaired. The only incon- venience that we should suffer from the refusal of France to take our cottons and our hardware in return for her silks, would be that instead of the direct exchange of English for French commodities, we should give to France money ; Fr'ance would export that money to Germany, Holland, and Russia; and Germany, Holland, and Russia would return that money in exchange for our manufactures ; that our- trade would, in short, be circuitous instead of direct. ' For the sake of illustration, I have supposed a sudden and great transmission of money ; efiects the same in kind, though less in degree, would of course follow a more gradual one. If a balance of only one hundred thousand sovereigns a year were sent to France, similar consequences, though less palpable, would follow ; either immediately, or as soon as the annual efflux of money from the one country to the 12 A HANDBOOK ON GOLD AND SILVEE. other amounted to a sum sufficient to affect the prices of either country or of both.' This is a long quotation, but the truth which it enforces is overlooked by writers on the present depreciation of silver, who would solve the controversy respecting gold and silver by retaining gold for the currency of the West, and allotting silver for the currency of the East. The argument in the extract rests entirely on the assumption of a common money between the countries engaged in foreign trade. If France had a silver currency, and England and all the other coun- tries with which France trades had a gold currency, the illustrations and the argument in the extract would entirely fail : 1st. The five millions of silver sent by England to France could not be exported by the latter to otber countries, and the passing evils which, in the illustration, France ex- perienced until she could re-export the silver, would have been permanent. 2ndly. Prices would not liave sunk in England to the extent supposed in the extract, from the ex- port of five millions of silver, if it was not international money, and therefore was not readily convertible into English, money. In other words, for the free play of the precious metals in interna.tional settlements, there must be an uni- versal international money, whether that be gold, or, until 1867 and somewhat later, both gold and silver. Every country which receives one of the precious metals in settle- ment of international obligations should be free to re-export that metal in correction of an adverse exchange. But any such re-export of silver from the East to the West must be impracticable if silver be demonetised in the West. In 1876-7 there was a gross export from India to Europe of £1,229,000 in gold, but of only £146,000 in silver. The facts and conclusions presented in this chapter are that — I. The price of silver had fallen in 1876 to 52|«^. an EESULTS OF THE INQUIRY. 13 ounce, from 69^d. to 60^d. in 1848 to 1852 ; and from 1875 to 1877 the price has been as variable as that of wheat. II. This depreciation of silver is not a nev? thing. The course of silver depreciation, relatively to gold, has been uniform, alike in the period after the discovery of America, when the new supplies of gold and silver diifused themselves over the world, as in the period after the gold discoveries in California and Australia ; though, in this second period, the production of gold greatly preponderated over that of silver. In both periods alike, the drain of silver to the East issued, through the perverse fate of this standard of value, in its depreciation in the West. III. In both periods alike, the price of silver was temporarily enhanced in the West, relatively to gold, from the exceptionally high price in the West, compared with the East, of a special export from the East, viz., of gold in the first period and of cotton in the second period. On the cessation of this influence, the gold price of silver declined in the West; this tendency to decline being the normal relation of silver to gold. IV. If it be wise to infer from the experience of three centuries, that what has been will be, and must be, and that the drain of silver to the East must continue, then, as in the past, this drain can only result in a further deprecia- tion of silver in the West. V. Hence, it cannot be seriously maintained that the deprecia.tion which silver has reached is not permanent, except in the sense that a lower depth remains to be sounded by the East, in its progress to financial ruin, unless, like the West, it stops the further coinage of silver. YI. The depreciation of silver in the West would of course be immaterial to the East, if there were no trade between the two hemispheres; but an international common money is a vital necessity of foreign trade, because every 14 A HANDBOOK ON GOLD AND SILVEE. country wliicli receives one of tliese precious metals in international settlements should be free to re-export it, in correction of an adverse exchange. VII. Hence, no further reason is required to show that, the West having closed its mints against the coinage of silver, the East must do so too. Argument on this point can be raised only by a denial of patent facts. 15 CHAPTER II. THE BATTLE OF THE STANDARDS. Is there a remedy for the depreciation of silver, or must the silver-using countries submit to loss, and bear it as best they may ? The din of the battle of the standards prevents the immediate hearing of an answrer to the question. 2. If some modification of the standard of value in silver- using countries be indispensable, we get scant encourage- ment from the disputants. The mono-metallists proclaim that silver is for the East, and gold for the West ; by which fiat, should it prevail, they would condemn the East to the darkness of Erebus, and deepen the gloom that overhangs the finances of India and her prospects of material progress. On the other hand, the bi-metallists administer the cold pitiless comfort that silver must continue to fall until the nations join in an universal bi-metallism, in that remote, improbable future when England and Germany may give up their gold standard. 3. On one point some bi-metallists and mono-metallists of Europe, that is, the advocates of a gold standard for the West and a silver standard for the East, are agreed, namely, the inexpediency or the injustice of altering the standard of value — that is, the inexpediency or the injustice of any change of the systems which they severally maintain for their respective countries. It does not occur to these con- troversialists, that if both their systems be perfect, and the third system of a silver standard be bad, the deliverance of 16 A HANDBOOK ON GOLD AND SILVER. the silver-using countries from this third system by a change of standard may be wise, just, and humane. 4. Professor Emile de Laveleye is the latest exponent of the main argument which his school of bi-metallists and the mono-metallists of Europe employ against any alteration of the standard of value. His argument is as follows : — I. The demonetisation of the cheaper metal (as of silver in a bi-metallie system, or, as in a change from a silver to a gold standard), 'is a great injustice, since it modifies all contracts to the detriment of those whose interests are most worthy to be considered — namely, the debtors. They have at present the right of paying their debts either in gold or silver at their option ; and to deprive them of that right, and oblige them to pay in gold only, at the very moment when, by the act of demonetising silver, the value of gold has been considerably increased, would be a grave hardship. It would be sacrificing the tax-payers for the benefit of the bond-holders.' II. It would also be inexpedient. ' All countries burdened with a heavy debt which they mean to pay, like France, Italy, Austria, Russia, England, and the United States ; — all mortgage debtors, all railway companies with their mil- liards of bonds, are interested in having bi-metallic money, because the simultaneous employment of the two metals secures an abundance of money, and acts in the long run, in the direction of a rise of prices; while the single standard system causes a scarcity of money, and acts in the direction of a fall of prices. It would be a great aggravation of the burden of debtors, if they were required to pay exclusively in gold, inasmuch as that metal would, of necessity, be made scarcer and dearer by the exclusion of silver.' (The last sentence equally applies to an alteration from a silver to a gold standard, in a country like India, which owes gold debts abroad.) ' Certain countries, such as Austria, Italy, Eussia (and India), ' have a large part of their public debt placed QUESTION OF CHANGE OF STANDAED. 17 abroad, and it is for their advantage to be able to pay it with as small an amount of products as possible,' whereas, if silver be demonetised, the value of gold will be raised and the prices of commodities will fall. Before stating the general considerations which are opposed to this argument, the replies of certain bi-metal- lists to a portion of it may be quoted. a. Mr. Henei Ceenuschi. ' Breach of faith ! The English creditors have stipulated for payment in gold ; if they are paid in silver they are aggrieved. This is a pitiful scruple : they would be aggrieved if a given sum in silver was worth less than the same sum. in gold, but they are not if the two sums are exactly equivalent, and universal bi-metalUsm makes them equivalent. Eng- land has been in turn bi-metallic, silver mono-metallic, again bi- metallic, and lastly gold mono-metallic, without drawing on herself the reproach of having at every change committed a breach of faith. Holland, Belgium, the United States have changed their monetary metal without incurring any blame. The French rentier has never troubled himself whether he would be paid in gold or sUver ; he has always been indifferent to the colour of the metal. The EngUsh fund-holder will be so too. English interests the interests of the whole world, demand this reform, which consists ia declaring the coinage of silver free, even in England ; and this reform will injure nobody. To reject it there must be good reasons, not mere pretexts or pitiful scruples.' h. Mr. Samuel Smith, President of the Chamber of Commerce, Imerpool. ' All nations benefit by stability in monetary matters. None, except thieves and rogues, wish to borrow in one standard, and pay in another.' c. Mr. Eknest Seyd. ' In a bi-metallic system, the mass of debts is paid not in metal, either gold or silver, but in paper; that is, through accounts, cheques, clearing systems, — without any use of currency, — at the relative value between gold and silver which is fixed in the bi-metalhc system, irrespectively of the price of the metals outside the system.' 6. Categorically stated, M. de Laveleye's argument is as follows : — I. That in any alteration of standard, creditors suffer by a change from the dearer to the cheaper, and debtors by a 18 A HANDBOOK ON GOLD AND SILVER, cliange from tlie cheaper to the dearer metal; and that, as the interests of debtors are most worthy to he considered, the change should never be from the cheaper metal. II. It is not to the interest of countries which owe, abroad, debts pajjable in gold, that the cheaper metal should be demonetised; because thereby gold would be enhanced in value, the prices of commodities would fall, and a larger amount of products would have to be exported for payment of the old amount of debt, or of the interest on it. III. And it would also be to the advantage of all who owe debts within the country, that prices should be kept high, by not demonetising the cheaper metal, for thereby the incomes out of which debts are paid will be kept high; whereas, if prices fall, incomes will fall, but the old amount of debt will remain unaltered. 7. The first of these arguments is met, under the bi- metallic system, by the passages quoted from M. Cernusehi and Mr. Seyd; but we have to consider the wider applica- tion of the three objections, to a change from a silver to a gold standard, as well as to the demonetisation of silver in the bi- metallic system. 8. Conceding for the moment, that a judicious alteration of the standard must injure either the creditor or the debtor class, is it the latter or the former who should be protected from injury? Apparently, the interests of creditors should be regarded — I. Because the creditor class is the representative of capital, which is wealth accumulated by past labour, and the motive power of the marvellous industrial progress in the . world since the gold discoveries in California and Australia. Injury to creditors means destruction of part of the wealth which provides profitable employment for the debtor class. II. If capital suffer, the rate of interest must rise ; and as the largest part of the debt existing at any time in the work of production, distribution, and supply is renewed NEED OF CHANGE OF STANDARD. 19 at short intervals, the enhanced rate of interest would soon reach the mass of debtors, whose last state, by reason of the destruction of capital, would be worse than the first. Nor would the richer debtors, in whose behalf, rather than in that of the poorer, the argument is employed, be in better plight : for a rise in the rate of interest lowers the price of stocks and securities ; and it is not to the advantage of a government, a railway company, or other industrial enter- prise, that its stocks or securities shotild be depreciated. 9. It is assumed in the second and third arguments, that an alteration of standard from silver to gold, or by demone- tising silver in a bi-metallic system, must reduce prices. In the second of the arguments this reduction of prices is supposed to be general in all countries ; in the third, the reduction spoken of refers to that in the country whose standard is altered. On the first-mentioned supposition of a general fall of prices, the fall would in a poor or indebted country be greater, among other articles, for the imports into it, than in the rich or creditor country for the imports into it ; so that the old amount of indebtedness, that is, the old amount of extra or special production for payment of its yearly debt by the indebted to the creditor country, would probably not be materially aifected. 10. And in this regard it should be remembered that while no government of any country would wantonly alter its standard of value, no circumstance a.ffecting merely the country's home trade would ever influence the change. Some serious inconvenience in the country's foreign trade, or in its payment of foreign debt or tribute in a metallic standard diiferent from its own, would be the grave and imperious necessity for change. In other words, if the standard be not altered, after it has ceased, abroad, to be money, the special difficulty in making the foreign payments (when once that difficulty has become inherent in the standard of value of the indebted country), must continue to increase with a c 2 20 A HANDBOOK ON GOLD AND SILVER. growing depreciation of that standard; consequently, the amount of exports from the debtor to the creditor country would continue to increase (with an accompanying fall of their price in the creditor country), without the coun- tervailing advantage to the debtor country of a corre- sponding fall in the prices of the imports from the creditor country, such as, on the hypothesis considered in the preceding paragraph, would accompany an alteration of the standard in the indebted country. If two years ago the standard in India had been altered from silver to gold, at a relative value of 15^ to 1, would the amount of exports for settling India's indebtedness to England, with exchange at Is. lid. per rupee, be greater now than the amount which will be required two years hence, if, with a continuing silver standard, exchange were to fall to Is. Gd. per rupee ? To suppose that it would, one must disregard all experience — and the evidence at the present time — of the action of a low exchange in stimulating exports and reducing their gold price abroad. 11. Silver is money in the East, but it is no longer inter- national money in the West, from the closure against it, to the public, of the mints in Europe and the United States. This virtual demonetisation of silver in the West, as international money, is overlooked in M. de Laveleye's objection, that for silver-using countries, or the East, to change to a gold standard would be folly, because thereby they would raise the value of gold, and in consequence would have to export to the West a larger quantity of goods to pay the old amount of indebtedness. Whatever mischief, in the direc- tion of enhancing the value of gold in the West, was possible, has been already done by the discontinuance there of silver as international money. The prices in England of Asiatic merchandise can be reduced only in two ways, viz., 1st, by an offer by the East, of increased quantities of it, otherwise than in response to an increased demand at the EFFECTS OF CHANGE OF STANDARD. 21 old price ; 2ndly, by a scarcity of gold, which, would cause a general fall of prices in the West. Now', the first of these causes must continue to act so long as the low exchange of the rupee with sterling (that is, the depreciation of silver, concurrently with its retention in India as money), operates as a bounty on exports from India. The additional exports which, under the influence of this bounty (and not in response to an increased demand from Europe, at the old price), are sent to the West, must lower the gold price of Asiatic produce in the West, and thereby compel India to send larger quantities of goods for the old amount of indebtedness. Thus, the disadvantage which is apprehended from an alteration to a gold standard besets an adherence to the silver standard ; and the evil is progressive, because every fresh fall in the gold price abroad, of Indian produc- tions, must lower the gold price of silver — that is, provide a fresh bounty on Indian exports, with the result of a further fall of their gold price abroad, by reason of the additional exports under the stimulus of the new bounty. 12. It cannot be admitted that if a country were to change from a silver to a gold standard, or were to de- monetise silver in a bi-metaUic system, prices in that country would fall by reason of the change. The very reverse has happened in Germany. A currency can affect prices only by its inflation or its depletion ; and there is no reason why either the one or the other should accompany a change of the standard of value. Or, if anything, the tendency would be towards inflation and an increase of prices. The reason why prices would not fall is plain. Paper currency (if readily convertible into coin) and a silver token currency (if readily convertible into full legal tender) are just as ef&cient items as the coins of full legal tender in the mass of a country's currency, which by its exchange against commodities acts upon prices. Tor, in a properly regulated alteration from a silver to a gold standard, silver would not be altogether 22 A HANDBOOK ON GOLD AND SILVEE. divested of its functions as currency ; and there would not be a diminution of the mass of metallic currency (legal tender and subsidiary) wbicli collectively, in the interchange for commodities, acts upon prices. So much of the silver coinage as could be readily exchanged for full legal tender would be retained as subsidiary currency, and the remainder would be withdrawn with the new gold currency. The old amount of metallic currency would not be reduced ; nay, by reason of the replacement of a certain number and amount of silver coins by fewer gold coins of equal value, an extra amount of silver coinage would be required to maintain the old numerical proportion of coin to the population. 13. Furthermore, though the alteration of values from a silver to a gold standard would probably be effected in the ratio of 15^ to 1, yet (that object obtained) the new sub- sidiary silver currency, though of restricted legal tender, might consist of coins containing so much more silver than the superseded currency, as would bring their intrinsic value to a par with that of the new gold coins, according to the market price of silver at the time of changing the standard. With this precaution, and if the new silver coins be freely received in the public treasuries, in payment of the revenue, the limit of legal tender of the subsidiary coins might be enlarged beyond the customary limits, so as to continue a fairly extensive use of silver in the internal transactions of the country. 14. It is through the foreign trade that the currency acts upon prices ; and if each country had sufficient of gold cur- rency to bear the impact of that foreign trade, and correct the foreign exchanges, the remainder of its currency might be subsidiary silver currency, constituted in the manner just described. The nations would then have gold as interna- tional money, and silver and paper currency for internal trade or domestic transactions; thus supplying a material addition to other most effectual means of economising gold, ADVANTAGES OF THE GOLD STANDARD. 23 whicli are now diminishing its use in tlie settlement of inter- national transactions. 15. Hence it appears that with the universal adoption of a gold currency, though gold would come into more extended but moderated use for international transactions, yet it would be less required for domestic trade, while the use of silver would be enlarged. This would be equally the result in bi- metallic countries, from which the relative value of 16f to 1 had expelled silver coins of fall legal tender before the great depreciation of silver. 16. Accordingly, the assumption of M. de Laveleye, that the general adoption of a gold standard would so enhance the value of gold as to cause a serious fall of prices in the countries concerned, and generally, cannot be admitted. It is overlooked that the demonetising of silver does not mean its disuse as currency, but its over- valuation ; that is, the raising of its value relatively to gold, thereby enabling it to relieve gold of some of its functions of currency in the inter- nal trade of each country. The total value of the metallic currency in each country would not be reduced, only the numerical proportion of the silver currency to the population would be diminished, and that only in silver-using countries like India, which may not have expelled silver by means of an inconvertible paper currency. There is nothing in these circumstances to warrant the expectation of a considerable enhancement of the value of gold such as could cause a general and serious fall of prices. 17. If these observations be just, it is not necessary to follow M. de Laveleye in his remarks on the gain to the State, in the discharge of its obligations, if it abide, in the bi-metallic system, by the metal which has depreciated ; and on the injustice to poor debtors, if their obligations be in- creased by a change of standard from the metal which has depreciated to that which has appreciated. But from the importance which has been attached to these objections, 24 A HANDBOOK ON GOLD AND SILVEB. they m.a.j repay a farther examination — though they have been answered in paragraph 8. In India the second objec- tion would be urged more especially on behalf of the numerous peasant proprietors and others who pay the land tax, which has been assessed in silver rupees. If a gold standard be adopted, at a relative valuation of silver to gold of 15J to 1, the tax-payers will be required to pay a larger amount in gold than the present money's worth, in gold, of their rupee or silver assessment. And this it is alleged, would be unjust, until the next revision of the settlements of the land revenue. But for the bulk of the ryots, or peasant proprietors, the assessment for each field, though expressed in gold money, would, from the smallness of the amount, continue to be demanded and collected in the over-valued subsidiary silver currency ; so that if, on the one hand, the assessment be over-valued in gold money, on the other hand the payment would be made in silver money of corresponding Over-valuation. The same remark applies to the assessment payable by larger proprietors ; these would receive their rents in over-valued silver money, from their ryots, and they would have no difficulty in converting the subsidiary silver money into gold money; or, failing such conversion, the over-valued silver coins would be freely received by the Government in payment of the revenue. The alleged injus- tice (like that which, on M. de Laveleye's theory, must have been sustained by peasant proprietors in Belgium, Holland, and Germany, in the instances cited by M. Cornuschi, para. 6a) would be imaginary. 18. With regard to State obligations, it is difficult to understand how any benefit to the State can accrue from its obligations, and from the revenue out of which they are discharged, continuing to be expressed in silver money which has depreciated. Private individuals, other than those on fixed incomes, or employed on fixed salaries, may be able to increase their income proportionately to the depreciation of QUESTION OF POPULAR INTEEESTS. 25 silver — thongti this is by no means certain — but tlie land re-venue of a Government is fixed for a term of years, and the revenue from indirect taxes can increase only commen- surately with any augmentation of the prosperity of the country, which, with local capital diminished in effective- ness, — and with the importation of fresh capital checked, — by the depreciation of silver, will certainly not advance in pro- portion to that depreciation. At the same time, the amount payable by the State for its foreign indebtedness, and in salaries to its servants, would increase in the degree of the depreciation of silver money. 19. We may therefore conclude that if a sufficient amount of over-valued silver currency, freely receivable in Govern- ment treasuries in payment of revenue, be provided, there would be no breach of faith, nor any disadvantage to the State, in altering its standard from silver to gold at a rela- tive value, whether 15^ to 1, or other, which shall fully correct the effects of the late depreciation of silver. This conclusion becomes overwhelming, when it is considered that heavy additional taxation, pressing upon all the springs of industry and commerce, in a poor country, would be the alternative of not so rectifying the standard of value. 20. Not merely the greatest good of the greatest number, but the welfare of the entire population, calls for such an alteration of the standard in a silver-using country the metal of whose currency is mere merchandise, like iron or copper, in the rest of the world, excepting China. Ethical considerations, therefore, do not bar but support the change. But if, on any view of such considerations, English rulers of India abstain from adopting, in the interests of India, a change of standard which Englishmen, not less honest, adopted in the interests of England in a past generation, the expense or loss from the decision should hardly fall upon India. 21. But, says the organ of either the most advanced or 26 A HANDBOOK ON GOLD AND SILVER. the weakest school of the mono-metallists of Europe, silver is for the East and gold for the West, and so it must con- tinue. This doctrine, seemingly an after-thought, was broached by the ' Economist ' after the great depreciation of silver. Its examination, and that of one or two other objec- tions to the adoption of a gold standard for India, will be reserved for the next chapter. 27 CHAPTER Til. SILVER IS FOR THE BAST, GOLD IS FOE THE WEST. An impression prevails that there is not enough of gold in the world for all. The idea might accord well with a spirit of money-getting ; hut such, of course, is not the temper of the nineteenth century. If there he not enough of gold, there must be something wrong with the world's currency ; and the currency doctors should see to it, whether their patient is not in a state of feverish excitement, induced by speculation and disordered fancies about much gain, in which bleeding and drastic treatment would do him more good than indulging him with more gold. 2. Be that as it may, on the assumption that there is not enough of gold in the world for all, some of the possessors of a gold standard proclaim that silver is good enough for the East, and that gold must be reserved for the West. The utterances of this doctrine by the 'Economist' are as follows : — a. ' The East and the West need different currencies, and the reason of the difference is obvious. Exactly the same circumstances which make it desirable for the "West to have a principal gold cur- rency, make it desirable that the East should have a silver one. The West is pre-eminently the seat of large commerce with great trans- actions; the East, of minor commerce with small transactions. Accordingly, the Wast needs a large miit of reckoning and exchange, the East a small unit.' — Economist, September 11, 1875. Yet Germany and France have smaller units of reckoning, with gold currencies, than India with a silver currency. b. ' Probably, if there were gold enough for all the world, it would 28 A HAJISTDBOOK ON GOLD AND SILVER. be best that tbere sbould be only a single standard of value throughout the world, and that one — gold. But this is impossible. Some have doubted whether there is gold enough even for the nations which now intend to use it ; and there certainly is not enough for all the world. Happily, the East has always been a country which had much silver, and for whose purposes silver was quite sufficient.' — Mr. Bagehot on the Depreciation of Silver, p. 2. c. We must remember that silver is practically the main currency of a very large part of the world. The whole of the East uses it, not indeed to the entire exclusion of gold, but still much more than gold. It suits the minuteness of the payments which in Oriental countries, and in all countries in which there is no credit, of necessity make up almost the whole of the daily transactions which carry on common life, and for which the smallest gold coin that can be safely and eco- nomically used is very many times too great.' — Ibid. p. 28. Mr. Bagehot was not aware that in the small transactions ' for which the smallest gold coin is very many times too great,' there is a system of credit in India more extensive than anything of the same kind in Europe, and that for large transactions the mechanism of credit in India is so fine, that no other part of the world approaches it. Large sums are lent by native shroffs to one another, on verbal application, through subordinate gomashtahs, or accoun- tants, and without any receipt for the money, or any record of the transaction other than the entries in the books of the lender and the borrower. A banker in one part of India will draw on a banker in another part, without having any money at credit with the latter, on the simple assurance that their names and credit are mutually known to each other, and in the feeling that the courtesy will be reciprocated whenever required. d. ' The Latia Union was a group of double-standard countries largely using gold, and the question for them is whether they will give up their gold, and become silver countries exclusively — which would happen if they were to abandon the limitation of coinage while silver is as cheap as now — or whether they will demonetise silver and use gold as a standard only. This would be troublesome and costly, but THEORIES ON ASIATIC CUREENCY. 29 still it could be done. But India has no problem to consider ; she is irrevocably committed to a silver currency, and therefore a similar attitude would, in her case, besides being misclaiovous, have no mean- ing. The true remedy, as we have often shown, is not to impede silver's going to India, but to permit the laws of trade to diflrase silver through India and through the world.'' — Ihid. p. 64. That is, through the world on the other side of nowhere : silver not diffusing itself from India to China, and in but limited amount through the countries around the Red Sea and the Persian Gulf. e. The closure of the Indian mints against the importers of silver 'would (ibid. p. 106) deprive India of the great advantage she will gain, if the present state of things continue, as the entrepdt through which silver is introduced into the East. This is always the effect of a lowered value of the currency metals. The first persons who get them from the mines gain much ; those who buy them from the mining people gain much too ; and so on, till the depreciation is effected. In the case of India the importation of silver wiU gradually raise silver prices ; this will bring imports into India from other countries where they have not risen.' Which countries ? China receives silver from the West, and latterly, in increased quantities, direct from America; she exports silver to India. Should silver prices rise less in China than in India, the net Indian revenue from opium will be reduced, or the competition of indigenous opium in China with Indian opium will be increased, through the increased cost of production in India. Mr. Bagehot borrowed his account of the flow of the precious metals over the world from Professor Cairnes ; he should have concluded with the words of the same authority. ' As the final result of the whole movement, we find that while the metallic systems of England and the United States are receiving but small permanent accessions, those of India and Chiaa are absorbing enormous supplies. The former countries, though the first recipients of the treasure, yet not requiring it for domestic purposes, are enabled to shift the burden to others whose real wealth they command in 30 A HANDBOOK ON GOLD AND SILVER. exchange; while the latter, requiring what they receive, are com- pelled to retain it. Having parted with their commodities for the new money, they are unable afterwards to replace them. As their stock of coin increases, their means of well-being decline, and they become the permanent victims of the monetary disturbance.' Professor Cairnes had a thoughtful concern for the last receivers of the yearly millions sterling of silver ; but Mr. Bagehot, in his fear that there was not enough of gold in the world for all, considered ' the de'il might take the hindmost.' 3. The law that the East should confine itself to silver has heen set at naught by Japan and the Philippine Isles, which, with a smaller trade thau that of India, have adopted the gold standard ; and the dictum that silver is suited to countries with a small trade, while gold is the prerogative of countries with a large trade, has been further contravened by the Scandinavian kingdoms which, with severally a smaller trade than that of India, have acquired a gold cur- rency. There is more than enough of large transactions in India, for employing a gold currency sufficient for correcting the foreign exchanges. The doctrine that silver is good enough for the Bast, while it is demonetised in the West, con- tradicts the theory of the transmission of the precious metals, a,n exposition of which, by Professor Senior, has been quoted in a previous chapter. Only under an oppressive fear that there is not enough of gold in the world for all the countries that need a common money in their foreign trade, could Mr. Bagehot have forgotten that theory. He quickly remem- bered it when the balance of his mind was regained. In combating a proposition for stopping the coinage of silver, which might have proved the precursor of a gold currency in India, he observed : ' The currency of monopoly coins, so in- troduced, would be a very bad one. There would be one currency fit for foreign payments — the gold — and another not so fit. The monopoly coins would be unexportable, and SUPPOSED FITNESS OF SILVER FOE INDIA. 31 SO, when any one wanted to make a foreign payment, he would have to get gold, which, as a rule, would make gold at a premium.' Mr. Bagehot was quite right in his remark that a currency of which the coins cannot be exported, in correction of an adverse exchange, is 'a very bad one.' What then can be worse than an Indian silver currency which is constantly receiving accessions, in yearly sums of several millions sterling, in the face of an adverse exchange, and which cannot re-export silver coins in correction of that exchange ? This, certainly, is not an automatic currency which in an adverse exchange rejects redundant coin, with the same facility with which in a favourable exchange it opens the mint to supply a deficiency. 4. Assuming that silver is quite good enough for India, which has a respectable position in the trade of the world, it is interesting to know how she will fare with a silver stan- dard which is continually depreciating abroad, and above all in the country to which she is indebted. Mr. Bagehot tells us — a. ' The effect, therefore, of the fall in the value of silver on the trade of India will be temporary only, but its effect on the financial position of the Indian Government will continue as long as the fall lasts. The Indian revenue is received in silver, and therefore the less far silver goes in buying, the poorer will the Indian Government be. And this is of more importance to the Indian Government than almost any other, because its foreign payments exceed those of most Governments, and those payments are made in gold. . . The less valuable silver is in comparison with gold, the less effectual for these necessary purposes will the Indian revenues be.' — Depreciation of Silver, p. 5. b. ' For our Government and that of British India, we believe that there is no other policy possible, except to leave the ordinary economical causes to operate, to suffer the present evil (March 4th, 1876) and to await the ultimate cure.' — Ibid. p. 13. c. 'The low rate of exchange encourages exports from and dis- courages imports into India. By this combination, therefore, exports from India increasing on one hand, and imports into India dimia. 32 A HANDBOOK ON GOLD AND SILVER. ishing on the other hand, before long a large void will be created, which this silver, set free from Germany, will have to fill. The process will take time, but the effect is inevitable. The tendency of this great import of silver into India will of course be to raise prices. . . When this rise of prices has taken place, the encouragement of exports from and discouragement of imports into India will manifestly cease.' d. But India and Manchester will not then have rest. ' If new silver should still continue to come into the market, the same process must go on. The first step must be incessantly repeated. The value of the rupee must fall as against sterling money ; instead of being Is. ^d. it may fall to Is. %d. And then, what we have just desciibed as happening will happen again.' — Ihid. p. 5. With, an exchange of Is. 8c?. on fifteen millions sterling of the Secretary of State's bills on Lidia, the loss by exchange ■will amount to three millions ; at an exchange of Is. Qd. it would amount to five millions. Tn 1873-4 the loss amounted to £987,000. e. ' Addition to the supply of silver in India will raise prices : that is, will necessitate a larger amount of silver currency, and so will increase the demand in the East for silver.' — Ihid. pp. 28-9. f. ' Silver being cheaper here, more of it will be bought and sent to the countries where silver is money. But its value there against commodities will not fall as suddenly as it has here. We see that it would not, if silver had been the only metal used as money in the world. And the coiratries where it is used are, within their own boundaries, in the same position. The more silver falls in purchasing power, the more of it will be wanted to purchase commodities ; and the demand for it, therefore, will increase incessantly where the supply is augmented. The silver prices of commodities wiU be slowly raised ever3rwhere where silver is money, and a great deal of it will be required in the process, and the course of trade will be changed. The silver countries must find exports to pay for this new article, silver, which is coming in upon them. . . One of the ultimate effects will be to raise the value of silver in London — in the entrepdt — where the market is so sensitive, by distributing it over vast regions where much more will be wanted, if the value falls comparatively but little. ' Thirdly, we must observe that this process is not at all bad for the trade of England. No doubt, the fall in the rate of exchange is a EFFECTS OF THE FALL OF SILVEE IN INDIA. 33 disadvantage to shippers to the countries where money is silver. But then another class of exporters will be benefited, for we import that silver and have to pay for it. The loss on the one hand wUl be com- pensated by a gain on the other.' — Ibid. p. 74. These lengthy extracts darken counsel with words. Let us try to gather the comfort which they afford in the disor- ganisation of the Indian finances by the depreciation of silver. I. The price of silver may fall so as to bring the exchange down to Is. 6d. a rupee, when the loss by exchange on the fifteen millions sterling of Council drafts will amount to five millions, against a corresponding charge of not quite one million sterling in 1873-4. II. With exchange at Is. 2d,, the remitting of fifteen mil- lions sterling for the home expenditure of the Indian Govern- ment would have cost about 170 millions of rupees ; — with exchange at Is. Qd. it would cost 200 millions of rupees. In other words, Indian exports amounting to about 170 millions of rupees, which would provide the remittance at an exchange of Is. 2d., must be increased to 200 millions of rupees if the exchange fall to Is. &d., as it did in July 1876. III. The Indian finances would no doubt suffer; but commerce, if left to itself, would work out a new equilibrium or par of exchange, for the regulation of imports and exports, until some fresh fall in the price of silver in London might give a fresh check to imports and a new impetus to exports, until a second, and lower equilibrium or par is attained. rV. British trade would not suffer, only the exports to India of merchandise might decline; exports to India of silver, previously paid for by British exports of merchandise to some other quarter, would increase under the stimulus of a low exchange, which operates as a bounty. V. The incessant stream of silver to India would raise prices in the country ; but it would also raise the price of silver in London. 34 A HANDBOOK ON GOLD AND SILVEE. There are here weighty matters. The probability of at least four millions sterling of additional taxation in a poor country ; an increase of its exports, necessarily to the lower- ing of their gold price abroad; some disorganisation of industry, through the transfer of labour from the pursuits which are least affected by the new export trade, to the pro- duction of the articles which provide the new or additional exports ; an inflation of prices from the importation of vast supplies of silver, in consequence, not of the increased value abroad of Indian exports, but of the depreciation of ihe Indian standard of value ; and a repetition of these convulsions of trade and industry with each fresh consi- derable fall of the price of silver. In other words, a depre- ciated metallic currency, which will be constantly increasing the cost of remitting India's foreign expenditure, raising local prices and the local rate of interest, and steadily reducing the amount of capital for industrial employments, by checking its importation into India and by stimulating its export with that of merchandise or materials of well-being — the latter, in exchange for barren silver ; diminished incomes of the people, from the diminution of capital and from the weight of additional taxation. But all this need not disconcert us ; for have we not a clear, lucid, apparently complete exposition of how, through the increase of exports and the reduction of imports, India will be able to pay her enlarged tribute to England, and relieve London at, it is hoped, an improved price, of all the silver which England may buy from Americai with her exports? And so, with the further comforting assurance (let us hope it is well founded) that British trade will not sufi'er, and that, with each fresh fall in the price of silver, commerce will work out a fresh equilibrium or par of exchange for regulating imports and exports, we can shut up the volume on the Depreciation of Silver, and dismiss the subject from our minds as a philosophically settled question. THEOEIES OF MR. BAGEHOT. 35 We may indeed awate some day to find that incessant floods of silver poured into India have resulted in a financial cata- clysm : because, after a protracted experience of an universal depression of commerce, vrhich is partly owing to an une- qual distribution of gold between the East and the West, some think that there is not enough of gold for all the world. But what then ? Our duty, clearly, is not to probe difficult questions with the resulb of having to search out possibly heroic remedies, but to be content with knowing how it will all come about, and to maintain, meanwhile, a calm philosophical spirit and an expectant attitude. But let us linger awhile over Mr. Bagehot's exposition. I. British trade will not suffer from the incessant stream of silver from California to India, though the silver will flow to the East, not alone from an increase of Indian exports, but to fill an additional void from the diminution of British imports. It will not suffer, though the usual effect of new discoveries, or of a greatly increased production, of either of the precious metals is to modify the course of trade, and though the stream of Californian silver is controlled by the shrewdest nation in the world, which has already sent an increased volume of the stream direct to China. It will not suffer, though the United States are awakening to the fact that their own fiscal laws crippled and weighted them in the competition with England for the carrying trade of the world. It will not suffer, despite the warnings of a nation conscious of its strength. In an article on ' Commercial Supremacy, its Growth and Decay,' in the New York 'Bankers' Magazine' for August 1877, the following passage occurs : 'Our geographical position favours our control of Eastern commerce ; our fertile valleys, broad prairies, inexhaustible mineral deposits, network of railways and rivers, with a free and educated people, ought to make us rich in all the ele- ments of a substantial wealth. The lesson of commercial history, however, warns us that the seeds of decay are ever D 2 36 A HANDBOOK ON GOLD AND SILVER. present, and unless we bestir ourselves, the golden apple will elude our grasp. This is the age of enterprise, and which- ever of the two great Anglo-Saxon nations exhibits the most of this characteristic will win in the industrial race.' It will not suffer, though Manchester's important customers in India will be impoverished by the diminution of incomes from the increased taxation, increased rate of interest, and shrunken capital incidental to a great and progressive depreciation of the silver currency. It will not deserve to suffer, though India, denied the privilege, which is conceded to other coun- tries with a smaller commerce, of a common money in the trade with foreign nations, be commercially delivered over to America, ' a permanent victim (to borrow Professor Cairnes' expression) of the monetary disturbance' caused by Cali- fornian silver. II. India will not suffer from the incessant Bow of silver from California, though prices will be inflated from a currency unnaturally swollen through the depreciation of the standard of value ; though interest will rise, capital wiU shrink, taxation will increase, net income will diminish, from the same cause ; and though the ruin of Germany's trade and industry from the inflation of her currency by the pay- ments of the Trench indemnity, and by her currency operations, enable India to read her future, should she abide by the silver standard. III. The price of silver will rise in London, though India with an impoverished income will be less able to pay a better price, and though, as shown in an Appendix, the price of silver in London sympathises with the price there of Indian productions, which price, from the great increase of exports, will fall. IV. The progressive decline in the exchange will act as a bounty on exports, and India will prosper, though with each fresh fall in the exchange the amount of rupee payment FALLACIES OF EECENT THEOEIES. 37 * for lier foreign indebtedness must increase, and though bounties on export fall, not on the country which receives, but on the country which sends the exports. V. With these cheerful prospects we may calmly await the play of the exchanges in the free course of a commerce which cannot correct an adverse exchange by the exportation of silver, and complacently regard the happy, contented state of a people, taxed additionally to the amount of some four or five millions sterling, by rulers who have found it the hardest problem in finance to devise a new tax for India. VI. Let us 'leave the ordinary economical causes to operate; suffer the present evil; and await the ultimate cure ; ' — or the financial deluge. VII. With the financial deluge there may be an end of this chapter on the lucid exposition of how, with silver con- tinually depreciating, commerce will ever work out a new equilibrium, but not of how the Indian Grovernment can work out a new equilibrium between an expenditure ever rising, and an income which cannot rise as fast. The following rough jottings of what has been stated in this chapter seem to represent with a too sad fidelity the fallacies and cold comfort which are to content India in her retention, as money, of a metal which the West refuses to coin any longer into money : — I. Silver is for the Bast, gold is for the West, because of — a. The smallness of transactions in the East. h. The East has always absorbed silver. c. Evil will befall the last absorbent. d. Of course the Government of India must suffer heavily. II. With each fresh fall of the price of silver, imports of it into India will increase, and imports of Manchester goods and other merchandise will decrease. 38 A HANDBOOK ON GOLD AND SILVEE. III. Incessant streams of silver to the East will raise prices there. IV. British trade must suffer in various ways. V. India will be ruined. VI. But the United States will benefit; and that fine cosmopohtan spirit, which is the true British spirit of the nineteenth century, can only heed this last comforting thought. 39 CHAPTEE IV. "WILL THE PRICE OF SILVER RISE AGAIN ? In July 1876, when the price of silver had fallen to 4:8d. an ounce, Mr. Bagehot observed : — ' No competent person can propose a demonetisation of silver in India and a substitution of gold for it, just at a moment when the price of silver has been thrust down by so strong an apprehension caused by such peculiar circumstances.' That fools may not rush in where angels fear to tread, it will be useful to ascertain what circumstances would be held to justify a proposal for demonetising depreciated silver. Stability of value has been considered by all writers on the subject an essential requisite or characteristic of money. It will suffice to quote the utterance of an eminent member of the Committee on the Depreciation of Silver — Mr. Fawcett : — ^ ' It is of course quite as important that a standard of value should be as invariable as the nature of the case admits. It is obvious that it is impossible to obtain an absolutely invariable standard of value, because the value of every substance which is known to us is liable to varia- tions. Some substances, however, are liable to much greater fluctuations in their value than others ; and it is evident that these are quite unfit to fulfil the functions of money : the substance selected to be used as money should be liable to as few and as slight variations in its value as possible. This qualification is possessed in a high degree by the precious metals. If gold and silver were as liable to as great 40 A HANDBOOK ON GOLD AND SILVER. fluctuations in value as wheat and cotton, it is manifest that money would be no uniform standard of value, although a pound sterling might always contain the same quantity of gold.' We have seen in the first chapter, that for above two years silver has fluctuated in price as frequently as wheat. But Mr. Bagehot, in reviewing the report of the American Commission on the Currency, pointed out that the unstable character of silver is of no consequence. ' The gold price of silver is now like the gold price of tin — left practically for the first time in history without artificial regulation, and free from the manipulation of governments. ... In former times, M. Leon Say justly said, the fiuctuations in the rela- tive value of the two metals were few and small, but now they are many and large. Particular causes— especially the demonetisation of silver by Germany, and the supposed like- lihood of great supplies from Nevada — are no doubt aggra- vating the unstability at this moment. But as they did not create the unstability, it will not cease with them. There is no inherent reason why the gold price of silver should be uniform, any more than why the gold price of platinum should be the same. The old notion of extreme steadiness is one generated by the practice of governments, and which has ceased when the practice ceased, and will not revive till it revives.' "With this lucid exposition of how it has come about, we must perforce dismiss prejudices against unstable silver, begotten of old notions of political economists ; though the unstability of silver is of serious moment to the Indian Government, insomuch that its finance minister may go to bed in the pleasing consciousness of a surplus of half a million, and wake in the morning to a deficit of like amount. Happy the people whose immunity from avoidable taxation is secured by such favourable conditions of prosperous finance ! But if we must accept silver as the only possible and sufficient currency for the East, we may be indulged iu a FALL IN PItlCE OF SILVER IN THE WEST. 41 pardonable curiosity to know whether silver, like Lucifer, has fallen never to rise again. All hope of a rise of the price of silver is centred in its exportation to the East ; but we find that its drain to the East after the discovery of America finally resulted in its depreciation in the West. On that occasion the increased production of silver indeed preponderated through the dis- covery of the silver mines of Potosi ; but the subsequent drain to the East after the gold discoveries in California and Australia had also precisely the same issue, namely, a depre- ciation of silver. In the first period, as pointed out by Adam Smith, the market of Europe became enlarged, the greater part of Europe having much improved since the discovery of America ; while new markets for silver opened out in America itself, in all the English colonies (they having been formed after the increase of production), in the greater part of the Spanish and Portuguese colonies, in the East Indies, which continually took off greater and greater quantities, and in China. Still the final result was a depre- ciation of silver. In the later period it was the production of gold that increased, and the same extent of new markets, as in the earlier period, was not available for absorbing the new gold; but yet in the final result it was silver that depreciated relatively to gold. In his pamphlet on ' The Fall in the Price of Silver,' 1876, Mr. Seyd writes :— ' Never in the history of the world has silver been so low.' Those who controvert M. Chevalier's opinion that silver should be demonetised reproach him with inconsistency, because in 1 850 he advised that gold should be demonetised, whereas gold has appreciated relatively to silver. But the ground of their reproach vindicates M. Chevalier, for it shows silver to be a hopeless reprobate, going from bad to worse, under circumstances the most favourable for reform. Mr. Bagehot too confirmed this bad character of silver in recommending its continuance as the standard of value in India. He pointed 42 A HANDBOOK ON GOLD AND SILVER. out that from 1848 to 1856, during wliicli a higli gold price of silver was promoted by a high price, and latterly by an exceptionally high price, of Indian commodities in Europe, also by the export of money or capital to the East for the mutiny and for railways, the price of silver rose from 69^d. to only 61^d. an ounce, ' which is certainly wonderfully little in comparison with what we now see, though the dis- coveries of gold then were in every way as remarkable — indeed more remarkable — than those of silver now ; ' whereas between 1867 and 1875 the price of silver fell from 61c?. to 66^d. an ounce. We may conclude then, that if there be any fresh drain of silver to the East, it will issue in a further depreciation of the metal, not in any rise of its price in Europe ; unless in sympathy with a rise of gold prices of Asiatic produce, of which rise the increasing exports from the East, in payment of an enlarged tribute, and under the stimulus of the bounty afforded by the low exchange with sterling, forbid the least hope. Mr. Bagehot devoted a goodly portion of his book to proving or expounding the self-evident proposition, that with silver depreciated in the West, it must flow to the East, where it has a higher conventional value as money. Like every- thing else in trade, whether commodities or securities, ' gold or silver seeks that country where it is dearest.' His argu- ment that silver would in consequence rise in the West, where it is not wanted, was of the weakest kind, and it is contra- dicted by facts. The exports from India in 1876-7 reached 61 millions sterling, or an amount greater by five millions, or more, than in any year from 1866-7 to 1874-5 (excepting 1871-2); and yet the price of silver was much lower at the end of 1876-7 than at the end of 1874-5, as the result of a progressive depreciation. Instead of the exports from India raising the price of silver in London, through the exchange on bills in India upon London, that exchange UNLIKELIHOOD OF THE EISE OF SILVER. 43 followed and was depressed by the London price of silver. And in London the price of silver was affected by the Secre- tary of State's bills on India. These bills, while India has a silver currency, act on the London money market like an import of silver from India ; that is, the exchange banks in London find conveniently to their hand two competitors, of whom one offers them coined silver rupees in India, and the other silver bullion ; and, since the owners of the bullion are not free to take their bullion to other European markets (for all are closed against the coinage of silver), they are com- mitted to a competition with the Council drafts, which, as in a Dutch auction, must send down the price of silver in a pro- gressive depreciation, that will not cease until India alters her standard of value, or until the cost of the production of silver is approached. With India annually flooded in this manner with silver in excess of what is wanted for exports not settled by the Council drafts (and even Mr. Bagehot con- tended that the flow will be incessant) Indian exports will not influence the price of silver in London any more than the Bank of England can now control the rate of interest under the overpowering competition of the bill brokers and joint stock banks. Those, then, who look for a rise of the price of silver in London from its export to India will find the warning ' JSTo hope ' inscribed for them, over the portals of that trade. And if they turn to Europe they will find every mint closed against the coinage of silver for the public, except in some insolvent countries which wiU give inconvertible paper in exchange ; and even these purchase but timidly, since they have found that their peoples virtually reject the silver by exporting it. Thus far there is an utter absence of demand, except for flooding the East with silver, which, in the competition to be encountered from the Council drafts, must progressively lower the price. But there has been further progress in absolute 44 A HANDBOOK ON GOLD AND SILVEE. demonetisation of silver, consequent, partly, on its superses- sion by paper currency, in the manner described in a previous chapter. In 1868, omitting the countries which then had a gold currency, there were, in the West, the following with a silver currency, viz. : Germany and the Northern States (these have now a gold standard), and Holland (which has stopped the coinage of silver and adopted a coinage of gold, at the relative value of 1 to 16-525, but without as yet de- monetising silver). And there were the following with a double standard, besides countries in Central and South America, viz. : Belgium, France, Switzerland, Italy, Greece (now forming the Latin Union), Spain (which has modelled her currency on that of the Union), the United States, and Russia. Of these, the United States, Spain, and the coun- tries of the Latin Union, except Italy, will, it is probable (as shown in Appendix II.), adopt a single standard of gold ; Italy and Austria (which has a silver standard), are hesitat- ing ; the former probably on political considerations, in defer- ence to Germany, which Power might be embarrassed by a too early accession of the Latin Union to the gold standard. In Austria, the opinion of commercial men and of financial authorities outside the Government service inclines to a gold standard ; while the necessities of Austria make her look both ways, like her double-headed eagle, borrowing, in gold bonds, the money which she can get only on interest, and hankering after the resumption of specie payments in depre- ciated silver. But how that insolvent Empire will work its uncertain way out of its difBculties, is not material to the present inquiry. With regard to gold and silver, which as money have a conventional value quite irrespective of the cost of their production, — it is futile to contend, as Mr. Bagehot did, that the relative value of gold and silver will be determined, in the end, by their respective costs of production. The coin- age demand which enhances their conventional greatly INFLUENCE OF PANICS. 45 beyond tlieir intrinsic value is what determines the relation of value between the two metals. Therefore, when all other causes which have temporarily depreciated silver shall have ceased, the cessation of demand in Europe, from the general demonetisation of silver just mentioned, will continue to de- press it as an enduring cause of the lasting depreciation of silver. Among the temporary causes of depreciation, there has been mentioned. Panic. The ' Economist ' has repeated this ever since the great depreciation of silver began. So long after the depreciation as March 1876, that is, only four months before silver fell to 47 pence an ounce, Mr. Bagehot, in speculating on the causes of depreciation, observed : ' And lastly, the perturbed state of men's minds which is conse- quent on these events. So large an increase of the supply makes dealers fear a still larger further increase, and there- fore they do not wish to buy, and do not care to hold. When markets are in this temper, there are speculations for the fall, and not for the rise, and therefore there is just now a disposition to " bear " silver, and to force its price down. Over and above the proper effect of the causes in operation, there is an additional effect consequent on apprehensive opinion.' This seems to be a mere euphemism for the simple but disagreeable statement of fact, that the demand for silver greatly decreased simultaneously with a sudden and considerable increase of supply in the market. Bullion dealers are keen, hard-headed men of business, and are the very last persons of whom it can be supposed that they could remain under the influence of panic for two or three years. Bullion, while retained, entails a loss of interest ; and hence it is quickly got rid of ; so that it is not conceivable how it could be sold any sooner under the influence of panic. If there is no prospect of selling it at a profit over the price asked by the vendors, it will not be bought. In this case the sellers were Germany and the United States, who were 46 A HANDBOOK ON GOLD AND SILVEE. in no hurry to sell ; the European mints were closed against silver ; and the only consumers to whom the bullion dealers could sell it were in the East. The absence of demand from the East, and the cessation of demand in Europe, furnish a rational explanation why bullion dealers bought sparingly, and at low prices, without its being necessary to attribute to them an irrational panic. Accordingly, the Silver Committee ascribed the fall in the price of silver to four causes, viz. : the sale of demonetised silver by Germany and the Scandinavian kingdoms ; an in- creased production of silver ; the closure of European mints against it, and the increase of the Council drafts on India. Now, of these four causes, so to speak, the first two should be transferred rather to a statement of the question, namely, why it is, that the silver demonetised by Germany, and the increased production of Nevada, have sold at a price lower than had obtained in the previous history of the world ? The other two causes supply the answer, namely, a cessation of demand in Europe and the East. The first of these causes is permanent ; the second is so too, up to 15 millions sterling a year and more, irrespectively of the amount of private in- debtedness, in the form of profits, freight, and returns for European capital invested in India, which India has to remit to Europe. Up to the aggregate of these there is a per- manent cessation of demand from the East. Now, with this extensive permanent cessation of de- mand for silver in Europe and the East, it is quite imma- terial whether the stock of Germany's silver which remains to be sold, and the yearly production of Nevada, are large or small. A thing which is not wanted is dear at any price ; and with this extensive permanent decrease or cessation of commercial demand for silver for remittance, and of currency demand for coinage, even the offer of smaller supplies in the market would not raise the price of silver. The experience of the past two years confirms this view; the quantities of EEMITTANCES FROM INDIA TO ENGLAND. 47 silver which have been sold would not, in the period down to 1870, have lowered its price at all; whereas, from the per- manent cessation of demand there has been a great deprecia- tion in 1876 and 1877. That silver has been sold at all, is owing to its use in the 'East as currency. On that account it possesses there a conventional value which, according to the state of the ex- port trade, yields a profit on silver if it be sold in London at a price which gives a relatively lower exchange in rupees than that conventional value as expressed in the Indian or local price of the exports. Hence, if that means of sale of silver were to cease by the closure of the Indian mints against silver coinage, it would not follow that silver would drop to thirty pence an ounce, or to twenty pence ; it would simply not be offered for sale, because there would be no buyers, beyond the limited demand for ornaments. The silver mines of Nevada would have to cease their production for awhile ; and Germany would have to absorb her surplus silver as best she may. Probably she would then rectify one of the very few mistakes she has made in her currency opera- tions, by putting more silver into her subsidiary coinage, enlarging the limits of legal tender for silver, and increasing the proportion of marks per head of the population — a pro- portion which, under such conditions, could be greatly aug- mented. For disposing of its surplus silver, the German currency would in fact be stewed in its own juice, to use a well-known phrase of Prince Bismarck ; and a very sensible stew it would make. The yearly demand on account of the remittance for the home expenses of the Government of India has been stated at 15 millions sterling ; but this does not convey an accurate idea of the fact. The amount of rupees for provid- ing that sum in sterling will vary with the rate of exchange ; it would be 160 millions of rupees with exchange at two shillings, 180 millions with exchange at Is. 8d,, and 200 48 A HANDBOOK ON GOLD AND SILVER. millions witli exchange at Is. 6d. We have seen that even if the sum to be provided for the Home Government of India were a fixed amount of 150 millions of rupees, the exports, acted upon by a continually depreciating currency, and their influence counteracted by the competition at home between bullion dealers and the Council drafts, could have no effect in arresting the fall, much less promoting a rise of the price of silver in London, But with an increasing amount of rupees to be provided, at each fresh fall of the London price of silver, for the expenses of the Home Government, the rise of that price through a growth of Indian exports is hopeless. As therefore our question is, not (as Mr. Bagehot ex- pounded it) how much silver India can absorb at a continu- ally decreasing price, but what demand will raise the gold price of silver so as to correct the Indian exchange, the only answer which can be given is, that there is no currency or coinage demand for silver in Europe, and no commercial demand for it, for remittance to the East, such as can arrest that progressive fall in its price which for above three cen- turies has attended the drain of silver to the East. The de- preciation must proceed at accelerated pace with every addi- tion to the supply of silver, and to the amount of rupees required to meet the requirements in sterling of the Home Government. Mr. Bagehot, in a preface dated April 1877, to his work on the Depreciation of Silver, stated that ' as yet no one can prove that the permanent value of silver — whether in relation to gold or in relation to commodities at large — wiU change so much as to render any alterations necessary.' In April 1877 the highest and lowest prices of silver were 55d. and BS^d. an ounce — the latter giving a relative value of 17"96 to 1. We are not concerned to show that the per- manent depreciation has reached 69 pence an ounce, though that price has never been touched since February 1874, and PEOBABLE FUTURE FALL IN SILVER. 49 the great depreciation is of somewhat later date. But it is evident, from the preceding observations, that each great drain of silver to the East, after the discovery of America and after the gold discoveries in California and Australia, resulted, by the time that the drain had run its course, in an undoubted depreciation of sUver relatively to gold. We are warranted in concluding that at the end c f the second drain, or by 1873, the depreciation then reached was permanent. At that time the relative value was below 15^ to 1, which previously had been considered, universally, the real propor- tion of value between the two metals, when not disturbed by casual influences. We are further warranted, by the cessation of coinage of silver in Europe, and by the cessation of com- mercial demand for it for the East, for remittances, at any price exceeding 59 pence an ounce (which gives a relative value of 15'98 to 1), in concluding that the depreciation of silver has taken a fresh departure, and that, though it may not be practicable to say how low it will fall, yet this much is certain, that it is now permanently lower than the relative value of 15^ to 1. At the same time, the reasons for appre- hending a progressive depreciation are so overwhelming, that it is incumbent on those who resist a change of sta.ndard to show that it can and will recover, that it will not fluctuate as frequently as the price of wheat, and that the nations of the West will receive it freely from the East, as inter- national money, should it be sent in correction of an adverse exchange. This is not a dispute about abstract points — weighty issues depend upon a settlement ; and yet it is strange that a practical common-sense decision has been formed and the requisite action taken by all other countries concerned, while the leading financial journal of a nation which prides itself, above other qualities, on its sound practical common- sense, amuses itself with theorising on the subject, indulges in reasoning which darkens counsel, sets at naught sound E 50 A BANDBOOK ON GOLD AND SILVER. notions of a standard of value, forgets principles which underlie the transmission of the precious metals from one country to another, and assumes an expectant attitude while a million and a half sterling is annually slipping away from a revenue which can ill afford the loss. Mr. Fawcett writes : — ' It has thus been shown that a great fall in the price of silver, or a great change in its value when compared with gold, need not neces- sarily be accompanied by a depreciation in its value estimated by a decliae in its purchasing power ; and it therefore becomes of great importance to inquire whether the recent rapid fall in the price of silver to 48 pence an" ounce has produced a decline in the purchasing power of silver in India, where silver is used as the general standard of value. On this pomt there seems to be conclusive evidence that up to the present time no such decline in the purchasing power of silver has taken place in India. If such a decline had occurred general prices in that country must have advanced, whereas there seems to be no doubt that during the last three or four years, when silver has been falUng in price, general prices have not advanced in India, but, on the contrary, have somewhat fallen.' Mr. Fawcett himself supplies the explanation, hut yet abides by his conclusion that the fall in the gold price of silver is immaterial, because at the time that he wrote its purchasing power had not diminished in India. He ex- plained : — ' It was conclusively establLshed, by the evidence which was given before the^ Select Committee on Indian Finance which sat in 1871-2-3, that the importation of this great quantity of silver into India had produced a very marked depreciation in its value, which was shown by a general rise in prices. This rise was estimated by many competent authorities to be as much as 30 or 40 per cent. It was also established that this rise in prices was checked so soon as the import of silver began to diminish ; and it is only natural to find that as the import of silver has now declined to little more than £3,000,000 a year, the rise in prices which occurred when £15,000,000 of silver were annually imported has not been maintained, but has been succeeded by a shght fall in prices.' INADEQUACY OF RECENT AKGUMENTS. 51 The facts here set forth by Mr. Fawcett are, as regards India, that, owing to the drain of silver to the East, silver became depreciated in India, and reached its maximum depreciation as currency about 1870. Since then the inflated prices of the years down to 1870 have fallen, but, as shown in the Appendix on prices, the depreciation of silver in India as currency is still fully as great as the depreciation of gold in Europe as money. With regard to Europe, Mr. Tawcett states that the gold price of silver has fallen in Europe since 1876, while its value in India has increased in the same time. But he overloots the fact that down to 1867 or 1870 silver was international money in Europe, and its price was kept up accordingly so long as the prices of Asiatic produce were high in Europe. Of late silver has been degraded in Europe from inter- national money into mere merchandise ; and as the inflated gold prices of articles, including Asiatic products, have been falling in Europe, the price of silver, now mere merchandise in the West, has fallen with them, and in sympathy with the prices of Asiatic products which silver now represents in European markets. If the price of silver has not fallen in Europe to the same extent as that of Asiatic products, it is because these latter do not admit of re-export to India, but must be sold in Europe for what they will fetch, while silver, failing a suitable price in Europe, can be exported to the East. There is no parity in any comparison of the con- ventional value of silver in India as currency, and its price in Europe in its now degraded position as merchandise, except so far as a relation between the two is established by the circumstance that the gold price of silver falls in Europe together with the gold price of Asiatic products. It appears fi om this chapter that — I. The retention of silver by the East as money is recom- mended by arguments of a peculiar double-faced character ; such, that if they were pressed upon the West for its adoption 52 A HANDBOOK ON GOLD AND SILVER. of a like policy, the West would reject them, as it has un- mistakably done by closing its mints against the further coinage of silver, e.g. — a. The price of silver has become unstable as that of wheat ; but this is of no consequence, for a standard of value, for the East. bo The price of silver has greatly fallen, and it must fall, for silver is a hopeless reprobate, going from bad to worse, under circumstances most favourable for reform; and Mr. Bagehot plainly said so, in urging the retention of silver by the East as its standard of value. c. With each fresh fall of the pi-ice of silver, there will be very pretty play, by commerce, with the foreign exchanges, in working out a new equilibrium ; the more that silver goes to the East, the greater will be the exports to the West, and the larger will be the amount of the Secretary of State's drafts on India, which are the same as an import of silver rupees into England. Facts show that this increasing import of silver rupees into England, and the increased export of Asiatic products to the West, send down the price of silver in the West ; but India must discard this antiquated, in- ductive method of political economy, and have firm faith that as the West exchanges less and less of its merchandise, for more and more of the merchandise of the East, the price of silver will rise in the West, and the East will drive a most remunerative trade. II. Every State in Europe has closed its mint against the coinage of silver for the public, so that India cannot correct an adverse exchange by exporting silver to the West. But, no matter ; this is mere panic, which has seized the acutest financial abilities in Europe, that is in the world, and which, for three long years, has urged bullion dealers — the shrewdest, keenest, hardest headed calculators in Europe — to sell incontinently the silver which at no time have they ever kept on their hands. MISCHIEFS OF THE PRESENT SYSTEM. 53 III. The amount of silyer which the German Government has sold, added to the amount of silver production in the past four or five years, is not more than the East absorbed in the past, with a high range of price for silver ; the only- two points of difference, in this respect, between the last four years and the period from 1858 to 1867, are the closure of the mints in the West against the coinage of silver, and the increase of the Indian Secretary of State's Council drafts. These two circumstances have destroyed the demand for silver, which can now be sold only by send- ing it, at continually diminishing prices, to India, to be coined in the Indian mints. rV. In other words, silver, which used formerly to be sent to India as money, in settlement of international accounts, is now sent to India as merchandise, in competition with imports of other foreign goods into that country. India's purchasing power being limited, the more this new merchandise, silver, is forced upon her, on payment with her exports, the less of exports she has to exchange against imports of other merchandise, and the less, therefore, does she buy of the latter. V. Not only are Manchester and British manufacturers injured; India's finances, industry, and trade are dis- organised. If India desires to retain the old amount of her imports of manufactures, and so to attain that object of a healthful commerce, viz., the acquisition of the country^'s material necessaries at the cheapest price, she must provide (against each fresh accession of the silver she does not ask for) a fresh augmentation of the old amount of exports. This she can only do by diverting to the production of the exports which are in foreign demand, some of the industry and capital that are now employed on other productions for which the principal demand is local. It is both possible and probable that the demand for extra exports, through a fall in the exchange and in the price of silver, and through the 54 A HANDBOOK ON GOLD AND SILVEB. unchecked floods of silver into India, may increase in two years by 40 millions of rupees. Neither in her home in- dustry, nor in her home markets, nor in her finances, is India equal to the strain by which her exports may advance with those leaps and bounds such as awakened, not many years since, the self-gratulations of England in respect of her own exports, only to leave her commerce exhaiisted and her industry paralysed at the present time. VI. Evidently, Mr. Bagehot quite misapprehended the question, when he regarded it simply as an inquiry by what process India and China would be brought to export goods sufficient for paying for all the silver production of the world, which would be sent to them because it cannot be sold elsewhere. Vil. Far weightier issues than this are involved in the inquiry; the facts considered in IV. and V. are of the gravest import, and they are in progress now, and have been in progress for some time ; they have but one meaning, and that meaning cannot be explained away by Mr. Eawcett's doubt, whether silver has fallen in value in India. The sooner that facts of grave importance to the prosperity of India and of British manufactures are faced with the courage and common-sense of Englishmen, the better for the British Empire. 55 CHAPTER V. INDIA SHOULD HAVE A COMMON MONEY WITH THE WEST. We have advanced sufficiently far to make it necessary to gather up results. The depreciation of silver has been destroying landmarks and uprooting convictions on questions of political economy which had been regarded as settled long ago ; silver has done this mischief at least among its friends, namely, those who oppose its demonetisation. With them we are expected to perceive, by the strong light of the depreciation of silver, that : — I. Stability of value is not by any means an essential quality in a standard of value. The standard may depreciate abroad relatively with gold, and may depreciate at home rela- tively to commodities, in the country which it floods, until it has effected a new distribution of what wealth may remain to that country, after the economic disturbances caused by a rise of wages (which, for the working masses, wUl be dispro- portioned to the rise of prices) ; by a rise in the rate of interest (consequent on the diminution of capital, partly through its withdrawal to other countries where antiquated notions about stability of value still prevail) ; by a diminished production, that is, a diminution of gross earnings, through the restriction of production's motive-power, capital (while popu- lation increases and supplies new famine problems of great in- terest); andby a heavy weight of additional taxation. All this must happen from the instability of the standard of value ; but it is of no consequence, for we have a lucid exposition of how commerce, if let alone, will, on each fresh fall in the 56 A HANDBOOK ON GOLD AND SILVER. price of silver, fiud out a new par of exchange with gold in the direction of vanishing point ; vye have an excellent new theory that ' the gold price of silver is now like the gold price of tin, left practically, for the first time in history, without artificial regulation, and free from the manipulation of governments ;' and we have the priceless consolation that silver is for the East and gold for the West. II. Tbe silver mines are in the West, but the West won't buy the silver ; there it is as tin. But it must be sold ; otherwise what are the poor owners of the silver mines to do? And how will it fare with the exports to the United States with which England buys the silver, and in which she hopes she finds a compensation for exports to the East, which, as shown in a clear exposition, must decrease at intervals with each fresh depreciation of silver? Whether Manchester shares this hope and consolation is not clear; of piece goods, the exports to India, Egypt, and China were 2,000 millions of yards in 1876, and to the United States only 65 millions of yards. Be that as it may, the East is the only market for the silver which the West produces but which the West will not buy ; and it is clearly shown that the East, so long as silver continues there as money, will absorb any amount of silver which the West may send. True there might, as above stated, be incessant economic disturbance in the East from the floods of silver to be received into the Eastern currencies, without power of re-exportation to the West (where it is as tin) in correction of an adverse exchange, and in the course of the natural process by which (in conformity with the laws for the transmission of the precious metals from one country to another), other countries get rid of any redundance in their metallic currency. But that does not matter ; the question, from the standpoint that silver is for the East and gold is for the West, is in advance of those antiquated laws ; nor does it concern itself with what may befall the East ; its sole concern is whether the East can and EEFECTS OF SILVEE CUEEENCY ON EXPOETS. 57 must buy the silver, if silver continues there as currency. The reassuring answer is that the East will not be able to help itself, but must buy, and that is enough ; though the doctrine of silver for the East and gold for the West is nothing more than an inconvertible international currency forced on the East by the West, which must be worse than inconvertible paper money, in that each country is able to limit for itself the amount of its inconvertible paper, and so keep up its value, while the East will have no power to limit the amount of its international silver money which is incon- vertible in the West ; that must be regulated by the West, which has silver to sell to the East. III. The depreciation of silver acts at each fresh stage of the depreciation as a bounty upon exports from the silver- usiug countries ; this is the keynote of those lucid exposi- tions of how commerce will adapt itself to each new fall of silver, which are designed to show that the great deprecia- tion of silver is of no consequence. An antiquated political economist, Adam Smith, did indeed tell the world that bounties upon exports are no good ; they are paid by the country which exports ; they divert labour from profitable to unprofitable channels; they make that country part, at insufficient prices, with materials of well-being, and with the result of increasing at home the price of the articles exported. This is precisely what is alleged of the bounty upon export, which the depreciation of silver provides, according to those lucid (and in this particular correct) expositions of how everything will come about which have reconciled to doing nothing, a nation especially gifted with sound practical common-sense. But as Adam Smith wrote in 1776, and we are in the year 1877, his notions belong to an old world. What could he, poor ignoramus, know of the great strides since of commerce, the great need of gold for the money-market in London, the great need for the West to sell some eight millions sterling a year of new silver to 58 A HANDBOOK ON GOLD AND SILVER. the East, and to throw the cast-off silver currencies of European countries into India and China? True, that France and the countries of the Latin Union closed their mints against the coinage of silver when they saw Germany- preparing to throw her snails into her neighbours' gardens ; but that is a different matter, and a special concern of the West, with which the East has nothing to do. Has not Professor Jevons told us that ' Asia is the great reservoir and sink of the precious metals. It has saved us from a commercial revolution, and taken off our hands many millions of bullion which would be worse than useless here. ... In the middle ages it relieved Europe of the excess of Spanish American treasure, just as it now relieves us of the excess of Australian treasure. . . . Eaynal affirms that the Spaniards must have abandoned their most productive mines of silver in America, as they had already abandoned many of the less productive ones, if the progress of the depreciation of silver had not been somewhat retarded by the exportation of it to India'? And did not the views of Professor Jevons and of the Spaniards colour the disquisitions of Mr. Bagehot, making him feel (in contradiction to the thoughtful concern of Professor Cairnes for the last absorbents of Professor Jevons' millions of barren silver, which they can export no whither), ' that it does not matter what evil befalls the hind- most ' ? This is the final form and expression of the latest advanced views in the science of political economy, which in days of now antiquated notions had to do with the material well-being of nations. Next, as to the facts respecting silver, which has played the mischief with our modern political economists. We find that :— 1. Since the discovery of America silver has gone from bad to worse, notwithstanding the very favourable oppor- tunities it has had of recovering its value relatively to gold. 2. The most competent judges, the countries in America RELATIVE VALUE OF GOLD AND SILVER. 59 whicli have watched its progress from infancy, the countries in Europe best capable of forming an intelligent opinion of its conduct in mature years, from the extensive use of silver in their currencies for centuries, have rejected it, from the inherent tendency of its character to deteriorate, which nothing can correct or reclaim. Even the East, where it was welcomed for centuries, has ceased to demand it; though, from the subjugation of its fairest parts to the West, it is forced to receive it. 3. As a consequence, the value of silver relatively to gold, which for long had remained at a normal proportion of 15^ to 1, has greatly declined, and the price of silver has become variable as that of wheat, with a marked downward tendency, which the new competition between the Council drafts and the bullion dealers in the London silver market will not correct, but aggravate. 4. Silver, in fact, has become mere merchandise in the West, and thus has ceased to be international money be- tween the East and the West. It has thereby become imper- fect money, even in the East, where it is degraded to the same level as paper currency, from the impracticability of exporting it in the course of foreign trade. Nay, it has sunk lower than a sound paper currency, of which the test is its ready convertibility at par into the alternative metallic currency or standard of value. The moment this test is applied to silver, by exchanging it with gold, it is found to be below par, with a growing depreciation. 5. In short, silver has ceased to be perfect money — that is, to be in India other than a debased and deteriorating metallic currency. This last conclusion should have spared us all that dis- cussion in Chapter II. about whether it is just or expedient to alter the standard of value, and especially to change from a metal which is depreciating to one which has appreciated. That becomes an idle question, since silver has ceased to be 60 A HANDBOOK ON GOLD AND SILVER. money, if India is to remain commercially in the comity of nations. She cannot do so -without an international money, and with a local money which is depreciated and dete- riorating merchandise in the West. But though, in a common-sense view, and at the stage which we have reached, the discussion in Chapter II. is superfluous, yet, for any good to be got from the present inquiry, the discussion could not have been avoided. However abundant the proofs that silver has ceased to be international money, no one who pressed the logical consequences of that fact would be listened to, if he did not first salute the controversialists in the battle of the standards. His incivility would mark his ignorance of what are essential points in the policy of doing nothing. But having entered on the discussion in the second chapter, and silver, as we have ascertained, having ceased to be money in some of the most important functions of me- tallic money, we are warranted in now assuming that a change from the single standard of silver in the East is necessary, so as to bring the East into accord with the West. This accord with the West being the sole necessity and object of the change, so as to prevent India suffering from incessant floods of silver and its progressive depreciation, we are not concerned with the controversy between bi-metallists and gold mono-metallists. We see as a fact, that in Europe, even in countries which are bi-metallic according to law, gold is the efficient currency, and that silver is virtually subsidiary currency ; and it is with the facts, not the theories, of metallic currency in the West that the currency of India must be assi- milated. At the same time, if it be possible to work out the details of alteration from the silver to the gold standard in India, so that they may fit into the bi-metallic system should it regain ascendency in the West, this might be attempted. In changing from the silver to a gold standard, a relative value between the two metals must be adopted for translating DUTIES OF THE INDIAN GOVERNMENT. 61 into expressions in gold value, obligations wliicli are now expressed in silver value. The relative value of 15^ to 1 exists in the currencies of the Latin Union and of Spain ; it was adopted for G-ermany for the transition to a gold stan- dard, because, as stated in the German Coinage Act of 1871, that was 'what is considered the usual ratio between the two metals, viz., 15 J of silver to 1 of gold.' The recent great and sudden depreciation of silver, too, took its depar- ture from substantially this relative value ; and in measures for correcting the injurious effects of the depreciation of silver, necessarily this valuation should be restored. To whatever extent a relative value worse than 15^ to 1 may be adopted for effecting the transition, to that extent the measure would be abortive, from its perpetuating the injuri- ous consequences of the depreciation. If, for instance, the transition were to be effected in India at a price, for silver, of 53d. per ounce (which gives a relative value of 17"79 to 1), because that may happen to be the price at the time of conversion from a silver to a gold standard, it would for all time continue a very serious and unnecessary additional charge upon the Indian revenues, which would involve a corresponding amount of additional taxation. This extra taxation would only pile up agony for those whom the de- preciation of silver had already injured. The Government of India is entitled, fully as miich as Germany or Holland, or as England, in the past, to correct a depreciation of the metallic currency which it had no hand in bringing about, and which is yet of recent origin. By converting at a worse rate than 15^ to 1, the Government would fling away an advantage which Parliament, in its responsibility for the administration of India, should have secured for the country when silver began to depreciate. Silver is unfit to continue the full legal-tender currency in India, and the transition to a gold standard should be effected at the relative value of 15^ to 1. Having arrived 62 A HANDBOOK ON GOLD AND SILVER. thus far, the next step would be to stop the coinage of silver, and to allow the coinage of gold, at the Indian mints, at a relative value with the existing silver currency, of 16J of silver to 1 of gold. The gold coins, if the Government be so minded, need not, at the outset, be declared legal tender, but they might be freely received by G-overnment, at this valuation, in payment of revenue, in the courts, and on rail- ways. In this there would not be anything heroic ; for Holland has done this much without the least injury to herself, or to any one except owners of silver mines. Even were this cautious trespassing on the gold preserves of the West to awaken fear, the Government could go ' back again,' by stopping the coinage of gold and resuming the coinage of silver ; for the issued gold coin could be withdrawn without loss, since any and every country in Europe would willingly receive it. This cautious venture, however, though not heroic, would be profitable ; it would at least prevent the heavy loss by exchange, which yearly oppresses the Indian finances more and more with its crushing weight. 63 CHAPTER VI. PLAN FOK A GOLD CUEEENCT FOR IKDIA. Bt closing the Indian mints against the coinage of silver, and allowing the coinage of gold in those mints, in standard coins exchangeable with the silver rupees in the ratio of 1 of gold to 15^ of silver, India would arrive at this stage, namely, that silver rupees would continue as legal tender, but more of them could not be coined, while the gold coins of which the coinage was permitted would not be legal tender, though exchangeable with silver at the valuation of 1 to 16^. At this valuation, if the exchange were not to be affected by the cessation of silver coinage, gold would not be coined. But, from the closure of the mints against the coinage of silver for the public, the exchange would rise, and when it had risen sufiiciently to allow of the importation of gold, gold would be imported and coined, the Government receiving it freely in its treasuries. The importation of gold would be determined not by the price of silver in London, but by the rate of exchange between sterling and rupees, for Council drafts and other bills on India ; which rate would rise on the cessation of silver coinage in India. Under such a law, with the smaller demand for remittances between Holland and foreign countries, compared with the similar demand in transactions between India and the West, there was coined in Holland in 1876, for private individuals, above one million sterling of standard gold coins ; which evidences that the exchange had been fully corrected in favour of Holland, notwithstand- ing the depreciation of its silver currency, until the closure 64 A HANDBOOK ON GOLD AND SILVER. of the Netherlands mint against the coinage of silver. A like result would follow in India. The loss by exchange in 1875-6 amounted to £1,429,722; in 1876-7 it was entered in the regular estimate framed in the twelfth month of that year at £2,135,106; and on cessation of borrowing in England, and with a progressive fall of the price of silver which might lower the exchange to Is. Id., it would amount to 3"95 millions sterling, or with exchange at Is. 6c?. to 5 millions sterling. Instead of these terrible amounts, the loss would on the cessation of silver coinage, with a consequent rise in the exchange, drop below, and greatly below, a million sterling. Though, therefore, with silver coins as legal tender, and gold coins as still not legal tender, India will have advanced but a short way towards a gold standard, yet the great drop in the loss by exchange, which must bring happy relief from not unreasonable fears of additional or new taxes, should perhaps encourage a further advance ; but there is a lion in the path, and bis roaring is thus transmitted by the tele- phones of M. de Laveleye and Mr. Fawcett : — a. M. de Laveleye. ' There is not gold enough in the world ; and Mr. Goschen (' Bankers' Magazine,' New York, November 1876) stiikes in plaintively : " Silver and gold have been in partnership for the purpose of doing the work of the circulation for thousands of years, and I think it is not in the interest of the world that the whole weight of the burden should be borne by gold alone." ' h. Mr. Fawcett. ' But even if a gold currency were not so entirely unsuited to India as it is, the difficulties of changing a cmrency in such a country would be most formidable. The people themselves, who dislike Ltmovations upon their habits and traditions with an intensity which Europeans can scarcely understand, would strongly resent such a change ; and however well-intentioned it might be, they would be sure to conclude that the Government was prompted by some sinister motive to introduce it. Nothing would be more calculated to spread a feeling of insecurity and discontent.' What a comment on British, compared with Native rule ! SUPPOSED LACK OP GOLD. (i5 Gold is coined freely, and gold coins circulate freely in Native States, and somehow the people like the coinage, with perhaps a regard for faint traditions of the time when, as Adam Smith wrote, gold was so plentiful in India that it circulated with a relative value to silver of 1 to 10 or at most 12, while the ratio in England was 1 to 14 or 15 ; and on what' a lofty moral elevation Mr. Fawcett places the people of India, who would resent the introduction among them of that gold of which some think, on behalf of the "Western nations, that they have not enough ! Mr. Fawcett continues : — ' Biit even if there were not these obstacles in the way, it is more than doubtful whether the adoption of a gold currency would avert the inconvenience and loss produced by a fall in the price of silver. It has been already stated that the German Government have pur- chased 70 millions sterling of gold, in order to eifect the change in their currency ; but if it has been necessary for Gei'many to purchase this large quantity of gold, a far greater amount would have to be purchased by India, if silver were demonetised in that country. The purchase of a great amount of gold, and the sale of the large quantity of silver which would be displaced by this gold, would exercise a more powerful influence than is probably exerted by any circumstance now in operation, to depreciate the value of silver compared with gold. A change in the currency of a great and populous country such as India could not be suddenly carried out : many years would be re- quired for its completion, and during the whole of this time, as silver was gradually withdrawn from cu'culation, India would find herself in this unfortunate position, that the silver which she had to sell was constantly falling in price, and that she had conseqxiently to give more and more silver for the gold she requu'ed.' The objection that there is not enough of gold in the world for all, may be reserved for another chapter ; but Mr. Goschen's lament, that it is hard that all the burden should fall on gold, suggests a passing remark of how differently the same thing looks when regarded in different aspects. The bi-metallists protest that silver should not be dethroned or degraded by being demonetised; Mr. Goschen grudges to silver its happy release from toil, and laments that gold p 66 A HANDBOOK ON GOLD AND SILVKR. should have to bear all the burden. There is a tertium quid in which silver may be enthroned as the most general metallic currency in internal trade throughout the world ; while gold will, whether silver adherents will it or no, be supreme as the international money of foreign trade. Putting aside the political objection to a gold currency, which must have been urged when Homer was nodding, Mr. Fawcett's objections may be thus summarised. A very large amount of gold will be required ; its purchase and coinage must be spread over many years ; each year too the purchase must be effected at a dearer . price, through the progressive fall in the price of silver ; on the large amount of purchase money interest will be payable until the sale of the silver which will have been withdrawn with the gold ; a further loss must be sustained in the sale of that silver, of which the price will have sunk, no one can tell how low, by the time that the coinage operation is completed. The expense wUl be tremendous. Or, as Mr. Bagehot put it : — ' No one could now propose to the Indian Government the Ger- man plan of introducing a gold currency, as a means of relieving itself from financial difficulty, for the cost which it would entail would be enormous. Even with all their resources, they would have great difficulty in getting the immense sum required in gold, and they would hardly be able to sell the silver at any price. The present position of the Indian Exchequer is not good, but it is beyond comparison better than it would be if this expedient were tried.' And again : ' No competent person can propose a demonetisation of silver in India, and a substit^ition of gold for it, just at a moment when the price of silver has been thrust down by so strong an apprehension caused by siich pecviliar circumstances. It would be to require the Indian Go- vernment to buy the largest amount of gold ever bought in the dearest market for gold, and to dispose of the largest amount of silver in the cheapest market for silver which ever existed. The present financial position of the Indian Government is no doubt impahed by this sudden depreciation of the metal in which it receives its revenue ; but the remedy for a minor deficit would bring in, in lieu of it, a de- ficit of the first magnitude; it would be nothing else but financial ruin.' If this be so, then, whichever way India turns, she will NEED OF A GOLD STAND AED FOR INDIA. 67 encounter financial ruin. Should silver fall in price till the exchange reaches Is. 6d, a rupee (and the exchange did touch that nearly in July 1876), the loss by exchange would amount to five millions sterling, which means financial ruin ; a drop of one penny more,or to Is. 6d., and the loss would reach six millions sterling, which, to vary the phrase, would mean a financial cataclysm. What madness, for English statesmen to be guided in their Eastern policy by the protection of British interests, forsooth ! It seems high time, if Mr. Bagehot was right, to hand India over to Russia, whose experience in financial ruin may qualify her to help India out of her difficulty. But this world is governed by a divine Providence, whose beneficent Hand may be traced in the blessings of British rule in India. These will not wither, nor will England's mission to raise India in the scale of, well-being, and her people to a purer faith, result (through helplessness or in- ability to resist a pitiless fate) in a grinding taxation which will leave life without hope or wish for anything but the grave. We learn better things from our Christian faith ; and the economists, and those who would do nothing, must be wrong, Mr. Eawcett, for instance, is certainly wrong in supposing that, because the declaration of a resolve to adopt a gold currency for India would send down the price of silver, India would have to pay dearly for the gold which she would require to buy. Precisely the reverse would happen. As pointed out in the opening paragraph of this chapter, the exchange of the rupee with sterling would rise on the cessa- tion of silver coinage and the declaration of a gold standard ; and the importation of gold into India would be determined by the rate of that exchange, not by the diminished price of silver. On grounds which are set forth in an appendix, on the currencies of various countries, the amount of British Indian r 2 68 A HANDBOOK ON GOLD AND SILVER. silver coin circulating in India may be estimated (over- estimated) at 160 millions sterling. The population of India is estimated at 190 millions under Britisli administration, and 50 millions in Native States. Of the latter, 20 millions may be reckoned as using the coins of the Indian Govern- ment ; so that the provision of subsidiary silver coinage may be reckoned for 210 millions. In the United Kingdom the proportion of silver coin is nearly ten shillings per head of the population. At that rate a subsidiary silver currency in India would absorb 105 out of the estimated 160 millions sterling of existing silver currency. This would leave 55 millions for withdrawal by substitution of a gold currency. Now the loss in selling these 65 millions would be but a small fraction of the capitalised value of the loss by exchange which the finances of India must meet, to the yearly amount of five or six millions sterling and more, if silver be not demonetised. By stewing the Indian currency in its own juice, this loss could be very much reduced; that is, by adding a portion of the withdrawn silver to the weight of the present rupee, in a new subsidiary coinage, and by withdrawing a portion of the surplus 55 millions of silver with paper currency instead of with gold. In altering to a gold standard it is necessary to fix the relative value between the new gold ciu-rency and the full legal-tender coins of the old silver currency which have to be withdrawn with the gold coins. This, as already sug- gested, should for India be 15^ to 1. But it is not necessary to observe either that or a more favourable ratio of silver to gold for the subsidiary silver coinage of the new currency. One of Germany's mistakes was in regulating the intrinsic contents of the silver mark and the gold crown, in the ratio of only 13-95 of silver to 1 of gold. Had the proportion been on the other side of 16^ to 1, namely, at (say) 17 to 1 , the difficulty of disposing of the withdrawn silver and ADVANTAGES OF THE CHANGE. 69 of retaining the new gold coins would have been much less than it has proved. Here the bi-metallists would strike in, with noisy per- sistency, that the existing silver currency, if it must be superseded by gold, should be simply degraded into a subsidiary currency, without adding to or taking from the weight of the rupee, so that its intrinsic contents may re- main adjusted to the intrinsic contents of the new gold coin in the ratio of 15^ to 1 : thereby facilitating transition to bi-metallism when the nations shall declare for univer- sal bi-metallism. Inasmuch, however, as we have no certainty that the millennium is at hand, it will be well that India should boldly adopt the inconsistency of adding to the weight of her full legal-tender silver rupee in the act of demonetising it. The doing so would not hinder any transition afterwards to universal bi-metallism. When that happy time arrives, mint machinery will have been carried to high perfection ; and it will be easy to restore the ratio of 16J to 1, by re- coining the comparatively small stock of gold rupees, for putting more gold into them, without recoining the subsi- diary coins of the new currency. Tor an analogous difiSculty, the Magna Charta of bi-metallism, the French law of 1803, provides that ' if imperious circumstances compel a change of this proportion (15| to 1) it is the gold coins alone which shall be re-minted :' implying, not, as some have misread the passage, that silver was intended from the outset as the basis of the French legal-tender currency, but that, as com- mon sense suggests, the expense of re-coinage should be incurred for the numerically smaller or gold currency. If, with a ratio of 15^ to 1 for the transition from silver to gold rupees, 10 per cent, were to be added to the weight of the silver rupees, the ratio of the subsidiary silver coin to the gold coin of the new currency would be 17 to 1, repre- senting a price, for silver, of slightly more than 65d. an ounce. 70 A HANDBOOK ON GOLD AND SILVEK. With the silver coin thus valued in the currency, there would be no temptation for foreigners to import spurious silver coin of full weight and standard purity, under the additional difficulty of a restricted legal tender for silver coins, seeing that the very high seignorage, or difference, which the depreciation of silver has created between the low market price of silver in 1875 to 1877, and the. ratio of 15^ to 1, in the enormous 5 franc, full-tender silver currency has produced no such danger in France and the other coun- tries of the Latin Union. If India had carried on a state of barter, and were now being for the first time provided with a metallic cur- rency, the under-valuation of silver rupees in the manner suggested would prevent their importation ; but India being possessed of the coin, the valuation would be an advan- tage — 1st, from its disgusting the manufacturers of full- weight spurious coin ; 2ndly, by its permitting an extensive circulation of the subsidiary silver coins concurrently with the gold coins, though with a restricted legal tender. In short, the two main reasons for keeping the amount of a subsidiary silver currency within very narrow limits would not apply; and the Government of India could both safely pass the ordinary limits in their issue of the new subsidiary silver rupees, and in the amount of their limitation as legal tender, and provide, as the best practical and sufficient limi- tation, that the silver coins should be received without limit in the Government treasuries, in payment of Government demands. Considering, on the one hand, the smallness of the mass of transactions in India, together with the smallness of the items respectively due from the individual payers of land revenue which make up the aggregate demand from each village, also the innumerable little rills which flow into the other streams of revenue and taxation — and on the other hand the small sums disbursed monthly by Government to EFFECTS OF LESSENED LOSS IN EXCHANGE. 71 numerous troops, police, peons, and petty officials, and by every class for domestic or business expenses, also the more frequent disbursements to labourers, — the circulation of silver coin in India, even as restricted tender, with a gold currency, must far exceed European experience of the circulation of a subsidiary currency. It is not unreasonable to expect that, with a subsidiary silver ciirrency having 10 per cent, more silver than the existing rupees, the limit of legal tender may be fixed for it at 100 rupees, and the amount of its probable circulation may be estimated at more than the 105 millions sterling which have been assumed in a previous paragraph. Under the magical influence of 10 per cent, of extra silver in the rupee, lowering looks of sullen discontent on the intro- duction of a gold currency into India, the apprehension of which disturbed Mr. Pawcett's judgment, would be trans- formed into faces beaming with loyalty ; and a people prover- bial for hoarding, and for turning rupees into ornaments, would be loud in their applause of a Government which was giving them 182 instead of 165 grains of silver in the rupee, and perhaps taking off some taxes besides, through the reduction of loss by exchange. Applying the lesson taught us by the bi-metallists and Mr. Goschen, we see (respecting the worth of Mr. Tawcett's political argument), that much depends on the way in which you look at it : the argument is handy for any purpose in considering measures for India; and even a cautious judgment like Mr. Faweett's may be misled by it. Let us take stock of the advantages of adding 10 per cent, to the silver rupee on demonetising it : 1. The political argument. 2. By promoting an enlargement of the limit of legal tender of the subsidiary silver coin, and its extensive circu- lation, less gold would be required for effecting the currency reform. 3. A market would be found in India, and within the 72 A HANDBOOK ON GOLD AND SILVER. Indian currency itself, for the surplus silver wliich may be withdrawn with the gold currency. For instance, if the amount of the new subsidiary silver currency would be 105 millions, and that of the gold currency 65 millions, one-tenth, or 10 J millions, would be added to the weight of the former, out of the 55 millions that would be withdrawn with gold, leaving only 44 millions sterling for sale. Now, the new rupees of the subsidiary silver coinage might be issued as soon as they are coined; they would circulate at par with the old rupees, though containing 10 per cent, more of silver. Accordingly, they would find their way to the melting pot, to the extent of yearly demand for ornaments, and they would also be exported beyond the British Burnian and North-Western frontiers and to Arabia aaid the Persian Gulf in preference to the old rupees. Thus a portion of the new rupees would be withdrawn by the old, and a corresponding portion of the 44 millions remaining on hand, out of the with- drawn 55 millions of silver, could be used up in the re-coinage of another instalment of the old rupees with the heavier new rupees, while the sale of the remainder could be hastened by a heavy duty on the importation of silver, with a provision in the law for dividing between informers and captors, the silver that may be confiscated. India, as Professor Jevons has told us, has been made by other countries the sink of the precious metals, particularly of silver ; she would there- fore be warranted in demanding, through such a law, that countries which export silver to India should now cease their imports, and not interfere with her while she is correcting the effects upon herself of their depreciation of silver. 4. Comparatively little silver would remain for sale. Mr. Fawcett fears that it could not be sold outside India, because of a considerable fall in the price of silver, through its demonetisation in India. In that case, it must be retained until it can be gradually worked off by the yearly consump- PROBABLE GEADUAL DISAPPEARANCE OF SILVER. , 73 tion for ornaments, and for renewal of what would still be an extensive silver currency. 5. Doubtless, on tbe silver, wbile it remains on hand, there would be a loss of interest : but 1st, this loss would be insignificant on the comparatively small residue remaining on hand, compared with the present loss by exchange, which it should be remembered is a loss of yearly progressive amount ; for, if silver be not demonetised in India, the ex- change against India and the price of silver must continue to fall, without any limit to the fall this side of the financial ruin of India ; 2ndly, a part of the residual silver will have been withdrawn with paper currency, as will be explained in the sequel; and on the portion thus to be withdrawn interest could be reckoned only on the cost of the paper used for the currency notes, not on the nominal value of the silver. This portion of the withdrawn silver would, in fact, be a gain which would set off part of the loss on the remainder of the account. 6. Furthermore, Mr. Fawcett's apprehensions of an ex- cessive fall in the price of silver outside India may not be realised. The solution of the silver difficulty which is here suggested may occur also to other countries from the neces- sities of their position, with the result of enlarging the limit of restricted legal tender and the circulation of silver coins. In this regard it should be remembered that in bi-metallic countries with a ratio of 15^ to 1, silver has had but a re- stricted circulation since the rise in its price after 1854. Even England will be forced, by the depreciation of silver, to reconstruct her silver coinage, by putting more silver into the shilling, and, by arrangement, some of the Indian surplus of silver could be absorbed in the re-coinage. On the whole, this demand for silver as the principal metallic currency in the domestic trade of each country will be greater than it has been, with silver expelled, for many years 74 A HANDBOOK ON GOLD AND SILVER. past, under the Gresham law, or by inconvertible paper, from bi-metallie countries. This increased demand will of course not compensate for the cessation of silver as full legal tender ; but, on the other hand, the owners of the silver mines are shrewd enough to be aware of the evils of overproduc- tion. Hence, it appears on an examination of the alleged diffi- culties, that — 1st, gold for changing from a silver to a gold currency will be obtained by India at a far cheaper rate than she can now get it ; 2ndly, the loss from disposing of with- drawn silver will be very much less tran is supposed. It would be 10 per cent, on the amount of new subsidiary currency, and perhaps 15 per cent, on the further amount which could be gradually absorbed as ornaments, plus the loss, greater or less than 20 per cent., on the sale of the remainder. On the other hand, there would be a set-o£F to the extent of, 1st, the portion which may be withdrawn with a permanently outstanding paper currency ; 2ndly, the net amount that would be saved in diminished loss by exchange during the progress of the currency reform; 3rdly, the capitalised value of that yearly saving from the time of com- pletion of the reform. Inasmuch, however, as the yearly progression of the amount of loss by exchange, if silver be not demonetised, would know no limit this side of the finan- cial ruia of India, calculations of the amount of net gain can only serve to amuse ; and the amusement might be deferred till action is taken for putting an end to the loss of about 1-^ million sterling a year which is being incurred meanwhile. This loss by exchange, from the depreciation of silver, is a running sore which must eat into the vitals of Indian finance ; but instead of pressing for the application of the obvious remedy, the public journals are urging an imperial guarantee of the Indian debt as the best way of affording relief to India. It would not be difficult to show, apart from the subjects of loss by exchange and of famine expenditure, COST OF SUBSTITUTING GOLD FOR SILVER. 75 that England, as a measure of just restitution, ought to lighten the burden of the Indian debt ; but, for the reason just stated, it would be folly for the Imperial Exchequer to afford any help till the ever-growing loss by exchange is both checked and almost entirely removed. Unless that be done, the day for restitution to India is past ; no one would dream of offering to a drowning man pecuniary amends for a pecuniary wrong. And in this connection will it be irrelevant to interpolate here a suggestion that the expense of effecting the change from a silver to a gold standard should be kept separate from the consequent saving in loss by exchange, in the sense that the latter would properly accrue to the Indian revenue, while the former is not wholly chargeable to India ? The right of coinage is a prerogative of the sovereign ; especially is it so in the traditions and feelings of the people of India. This subject of Indian currency reform is therefore one for which the Parliament of England, which gives expression to the will, and shapes the acts of the sovereign, is peculiarly responsible. If the authorities that are more immediately charged with the government of India have not yet seen their way to a reform of the Indian currency, the responsi- bility of Parliament in the matter is not thereby diminished. Nay, its responsibility has been increased by the deliberate purpose with which the Committee on the Depreciation of Silver was instructed to report simply on the causes of that depreciation, and was not required to report on any remedies. There was in this an abnegation of responsibility which only increases the ultimate responsibility. And if, passing beyond the walls of Parliament, we went into the City, we would find that, brushing away sophistries and theorisings which contradict received doctrines of political economy, the main, if not the sole reason why India has not, long ere this, had a gold ciirrency, is the fear that there is not gold enough for both England and India. This subject is reserved for 76 A HANDBOOK ON GOLD AND SILVER. another chapter ; here it suffices to press the conclusion that if England has aggravated the difficulties of changing in India from a silver to a gold standard, by delaying this necessary currency reform, for the execution of which she is peculiarly responsible, the expense ought either to be borne by England or to be shared with India. Of course, there are not wanting those who declare with loud voice, and unreason, that India is a drag upon England, a drain on her resources. These have not the imagination to realise what would result from England's relinquishment of India. We may be assured that, in that case, India would pass under other "rule, whether of France, Germany, or Russia. Whichever of these States might hold India, it would find, as an incident of the acquisition, an increase of its commerce, mercantile marine, and naval power. In other words, India, if held by Germany, Prance, or Eussia, would cause that Power to endanger the naval supremacy, or to approach very near to the naval strength, of England. The heavy loss by exchange, from the depreciation of silver, acts like a customs duty of 10 or 12 per cent, on the import of British goods into India ; and this has contributed much to the commercial depression which is now paralysing British manufacturing industry. It should not require any great clearness of perception to realise how much worse would be the effect upon British trade with the East, if Eussia held India, and, with it, the means of imposing prohibitory duties in India on English commerce, and of concluding commercial treaties with China adverse to English interests. It appears that — I. By closing the Indian mints against silver, the sterling exchange with the rupee would rise, an amount of loss by ex- change exceeding one million sterling yearly would be saved, and a further possible loss of two millions more would be prevented. But, as in fairy tales, voices in the air warn the Indian Government not to press towards the golden prize. FINANCIAL DILEMMAS. 77 a. Bah ! you will take away Europe's gold, cries out M. de Laveleye. b. Poor silver ! is the plaintire sigh of the chairman of the Committee on the Depreciation of Silver. c. A grave political danger ! is the deep hoarse warning of the financial Mr. Pawcett. d. Bash men, beware ! shouted Mr. Bagehot ; * the remedy for a minor deficit would bring in, in lieu of it, a deficit of the first magnitude ; it would be nothing else but financial ruin.' II. Financial ruin, if India advances ; a financial deluge, if she does nothing; a strange madness among English statesmen, who talk bravely about British interests in this India, which, if voices in the air speak truly, is past helping out of her diflSculty except by Russia, who has experience in financial ruin. And the Eussian mode of relief might be the wisest, after all! General Gourko gained renown for successful daring, because he advanced, when fco do nothing, or to go back, would have been ruin. III. The perplexity of the wise has sometimes been re- solved by the simplicity of a child. In a system of gold currency for India, if 10 per cent, more silver than there is in the existing rupee were to be put into the new subsidiary silver currency, and if the latter were, in consequence, de- clared to be legal tender up to 100 rupees, would give the following results : — a. M. de Laveleye would be reassured, because not very much gold would be required by India. h. Mr. Goschen would be comforted, because silver would be supreme in internal transactions. c. Mr. Fawcett would be overcome by the political argu- ment, that the millions in British India would bless the British rule when it gives them 10 per cent, more silver in their rupee, with a gold currency to boot, and takes off taxes. 78 A HANDBOOK ON GOLD AND SILVER. d. The expense of the ehang-e would not be alarming ; the comparatively little gold that would be required would be bought cheap, that is, at a high sterling exchange with the rupee ; and the comparatively little silver to be sold would entail a loss that would be covered, manifold, by the ad- vantages from the change. e. Furthermore, Parliament, which is responsible for not having some years since corrected the evils, to India, from the depreciation of silver, would share with India the expense of the coinage reform. 7y CHAPTEE VII. PEACTICABILITT OF STTBSTITtrTING A GOLD STANDAEB FOE INDIA. Theee is not enough of gold in the world. It will simplify an answer to this objection, if we define the only practical meaning which, in the present inquiry, can be attached to the word ' world.' We may include in it the United States, solvent States (if any) in Central and South America, the countries in Europe which are without an inconvertible paper currency, France, Egypt, India, and Australia. The rest are of no account ; there is no reason why India should be left out in the cold, and vacant places at the feast of gold be reserved for countries with an inconvertible paper cur- rency, which are not likely to resume specie payments even long after India shall have completed her change from a silver to a gold standard. 2. Accordingly we may pass by, as irrelevant, the follow- ing passage, which M. Emile de Laveleye quotes approvingly, in proof of the impossibility of an universal gold standard : — 'As was remarked by M. J. Errara (in the Nord of April 21, 1876), all the available gold augmented by the entire produc- tion of gold for many yearg to come would not suffice to furnish America, Russia, Austria, and Italy with the metal which those countries would require in order to resume specie payments.' Such being the hopeless indebtedness of these countries (the United States excepted), they may stay out in the cold, while India goes in to the feast of gold : what could these countries do at the feast, but look at the 80 A HANDBOOK ON GOLD AND SILVER. gold witli glistening eyes, without power or right to touch any of it ? They had better remain outside. 3. On running over the list of other countries, we find that Australia has enough and an abundance to spare ; that the United States will shortly resume specie payments with ease, not interrupting the yearly flow of gold which comes from California to Europe in a not diminishing volume ; that England has waxed rich, very rich, but is oppressed with a nightmare, from much surfeiting, in which she feels that she has not enough of gold, and shrieks when any of it goes to the Continent; that the Scandinavian kingdoms have been satisfied ; that Germany's need is not so much the getting of gold as the getting rid of silver, the gold which goes to her from England flowing out to Paris, so that the general stock is not reduced ; that France — whose peasantry have learnt to invest in the funds instead of hoarding gold, and whose retail dealers and merchants, for years habituated to paper currency, are now becoming habituated to cheques and remitances through branch banks — has aji immense hoard of gold, which she will liberate on resuming specie payments : the echo resounding from these facts seems to be gold, too much gold. 4. Too much gold in one part of Europe, an inconvertible paper money in the remaining parts, the silver currency of the East depreciating as mere merchandise in the West, and a common international metallic money a necessity of foreign trade — what wonder if it should appear on inquiry that this disorganisation of the world's currency has much to do with the general depression of trade ! . 5. M. Chevalier showed that not much gold is consumed in arts and manufactures, aud that as civilisation ad- vances, the tawdry display of gold diminishes ; and M. Victor Bonnet states that it is well established now that the annual rate of wear and tear of gold coin is -^ 0000 P®^' annum. When the coins lose from wear and tear more than the OPPORTUNITIES FOR CHANGE. 81 prescribed weight they are re-coined. The yearly demand then under these two heads is not much, while the yearly production is 22 millions sterling at the present time, against a not much greater yearly average from 1863 to 1876 of nearly 25 millions. Of late, too, the supply of gold from Africa has markedly increased. 6. Perhaps in the interests of the world's commerce (which has always found springs of its prosperity in the trade between the East and the West) no time, since the gold discoveries of California and Australia, was so favourable as is the present time for the introduction of a gold currency into India. Had it been introduced in 1854, preventing the outflow of silver from the bi-metallic countries of Europe, but not preventing the importation of gold into Europe, the derangement and inflation of prices in the West might have produced aU the evils which were apprehended by M. Chevalier. At the present time the depression of commerce is ascribed to too high a range of prices and wages in the West, where the yearly production of gold is aecumalating ; while the discontinuance of a common money between the East and the West, through the demonetisation of silver in the West, cannot but have an injurious effect on trade with the East. 7. Some write frantically as if gold were the heart's blood of Europe, but a little bleeding, some outflow of the gold which is accumulating in the West, will do Europe good. It need not be feared that the blood-letting would exhaust the patient. Those who cherish such fears complain incon- sistently that the production of gold is falling off; the supply from Australia is diminishing. What else ca.n be expected, when prices have risen in Europe, and more attractive industries than mining are prosperous in Australia ? When the gold was extracted from auriferous sands, in which nature had done all the work, leaving man simply to wash and carry away the gold, the produce was necessarily large G 82 A HANDBOOK ON GOLD AND SILVER. and its cost small. With quartz-mining the cost of produc- tion has increased, and simultaneously prices of commodities have risen in other countries. It is but natural that under these circumstances the exports of gold from Australia should diminish, without warranting any presumption that the mines are becoming exhausted. Should a diminution of gold supply in other countries raise the value of gold by lowering prices, the exports of gold from Australia would again increase. That they are maintained at their present amount, notwithstanding the adverse influences just men- tioned, evidences anything but the exhaustion of the mines. In the United States the production is large, and latterly it has been increasing ; and the supply from Africa, too, shows a marked and progressive increase. 8. We have seen that the only candidates for a supply out of the world's stock of gold are the United States and India. On the other hand, the countries in Europe are suffering from repletion, and France will liberate a large amount of gold on resuming specie payments ; so will Ger- many when delivered from the throes of her currency reform ; for in a country where small money was suited to the im- mense mass of its small transactions, the displacement of a smaller amount of silver currency by a larger amount of gold currency implies a mistake somewhere. Ten silver marks may serve the need of five persons, where a gold halfcrown, worth ten marks, can be used only by one. The inadequate limit of ten marks per head of the population must be enlarged ; in other words, the amount of Germany's gold currency must be reduced, 9. Thus, the supply for the only two new candidates for gold exceeds the demand ; and were gold to become slightly insuf&cient, a decline of prices would create an increased supply ; but the general depression of trade points to a redundance, not a deficiency of gold. 10. One great cause of disturbance in the money markets FACILITIES FOE CHANGE. 83 of Europe was the yearly remittance of immense sums to the East. This occasioned an annual export of gold to the Continent, for the purchase of silver for the East. The currency operations of Germany, and the silent preparations by Prance for the declaration of a single standard of gold, caused similar disturbance. These necessitated the retention of large working balances in the several banks in Europe ; but these causes of disturbance have now nearly ceased. The fifteen millions sterling a year of India Council drafts, the completion wellnigh of G-ermany's coinage reform, the near approach of Prance to the consummation of a financial policy which has ably masked from Europe the operations for the reform of her currency, all promise, at no distant pe- riod, rest to the money markets of Europe, which the intro- duction of a gold currency in India would not interrupt. 11. Indeed, the Indian reform could be carried out in a way which would immensely simplify remittances between the East and the West ; for Bank of England notes, against which gold is deposited in London, could be declared legal tender in India. 12. It is a favourite argument with the bi-metallists, that because the amount of gold coin existing in 1877 is not greater, or is possibly one-third less than the amount of gold and silver coin which existed in 1848, therefore, consi- dering the great expansion of commerce in the interval, the present stock of gold coin cannot suffice by itself for the world's metallic currency. But in this argument several considerations are overlooked : — I. As already explained, the demonetisation of silver does not imply its disuse as currency. It would still be employed as subsidiary currency, perhaps on an enlarged scale, and with an enlarged limit, for subsidiary silver coin as legal tender. Coupled with the condition of its receipt to any amount in payment of Government dues, the silver currency, within its own special range, viz., the mass of a 2 84 A HANDBOOK ON GOLD AND SILVER. inland or domestic transactions, -would be just as efficient currency as gold. II. Supposing tliat there were no paper currency, tlie amount of a metallic currency with, a single gold standard (and witli a subsidiary silver currency of the kind described in the preceding section, and in a previous chapter), would, together, form an effective or efficient currency as extensive as, or greater than, the metallic currency which existed in 1848. III. At the same time, the use of paper money has since 1848 greatly diminished the amount of requirements of a metallic currency. It is fallacious to compare the amount of trade in 1848 with that in 1877, as implying the necessity of a proportionate increase of the metallic currency, be- cause : — a. The mass of transactions in foreign trade, and the wholesale transactions of internal trade, are settled by means of foreign and inland bills of exchange, cheques, and the clearing-house. In the foreign trade, this form of settle- ment derived an advantage from the stability of the relative value of the precious metals ; but since the depreciation of silver, there has been some derangement. In some branches of England's export trade, notably in the cotton trade, the depreciation of silver makes, sometimes, all the difference between profit and loss. 6. The trade of the two periods which are compared includes in larger measure in 1877, than in 1848, the trade of countries with an inconvertible paper currency. c. Since 1848 there has grown up a vast amount of international paper money, in the form of stocks of the indebted nations. The export of these securities serves the same purpose as an export of gold ; and as they are not im- ported except when gold, or other equivalent, is available in the purchasing country to pay for them, their efficiency as circulating medium is on the same side as an addition to the metallic currency. INFLUENCES AFFECTING METALLIC CUERENCY. 85 d. There has also grown up, particularly on the Conti- nent and in the United States, a larger amount of paper currency, much of it under circumstances of iuconrerti- bility of notes, which, by expelling gold and silver from circulation, have habituated the people to paper money ; so that, when specie payments are resumed, a large amount of metallic money will be found to have been permanently displaced, from the now rooted preference of the people for paper money. In France, which has a stupendous amount of metallic money, this education of the people in the use of paper money has been systematically carried farther than in other countries, by the multiplication of branch banks, the enlarged use of cheques, and extensive facilities which have been afforded for inland remittances. e. Steamers, railways, and the telegraph too, have econo- mised the use of specie. /. And the circumstances mentioned in paragraphs 10 and 11 tend in a remarkable degree to diminish the use of metallic money. g. Hence, a comparison of the trade of 1848 with that of 1877, as indicative of the proportion or of the amount of metallic currency required in the two periods, is un- meaning. 13. The salient facts are : — I. That if commerce has greatly increased since 1848, so has the use of paper money ; and the increase of the latter has been such as to reduce the use of metallic currency in a greater degree than the former could increase it. a. Because an increase of commerce means an increase of both imports and exports; and therefore, as regards foreign trade, the bills of exchange created by the augmen- ted imports and exports settle the bulk of the transactions, leaving only the balance to be settled by the import or export of gold or silver. i. And even for settling that balance, a new form of 86 A HANDBOOK ON GOLD AND SILVER. international paper currency other than bills of exchange has been created on a prodigious scale since 1848, to the displacement of gold and silver in such settlements: — 1st, the Council drafts upon India have increased from 3 to 15 millions sterling a year; 2ndly, there has been an enormous growth of national indebtedness, the registered stocks or securities of which are largely employed as remittances, in which form they serve the same purpose as an export or import of gold and silver. c. Turthermore, in the years from 1852 to 1868, the movement of the precious metals was not alone for the set- tlement of balances of international indebtedness ; there was a special extra movement for the replacement of the silver currencies, first, of the countries of the Latin Union, then of Germany and the Scandinavian kingdoms, by gold ; and this movement absorbed, in the West, the bulk of the yearly production of gold, and in the East the bulk of the silver production. But the demand of these coun- tries on the yearly supply of gold is now nearly ended. France, indeed, must soon liberate large amounts of gold, and Germany will be forced to do likewise, on a lesser scale. d. With regard, again, to the internal trade of each country, the demand for metallic currency has lessened: in England by the growth of deposits and inland bills of exchange, to stupendous amounts ; in France from the same causes on a smaller scale, and from a very great extension of the use of notes, cheques, and other forms of paper money; in other countries in Europe, which have mostly inconvertible paper money, and in the United States, from the people having become habituated to paper money by the use of inconvertible notes : and a further diminution of the use of gold, by the substitution for it of silver for internal transactions, is possible in all these countries, especially by recourse to the expedient of a subsidiary paper currency, PEOBABLE FUTUEE DEMAND POE GOLD. 87 payable in silver, tlie notes of wliicli would supersede tlie use of gold for all retail transactions of internal trade. II. Tlie special demand for gold by solvent States in Europe, for tbe change from a silver currency, has hitherto absorbed each year's fresh supply of gold ; but that demand has for the most part ceased, and will soon be ended ; thence- forward, the demands of those States for replacing the or- dinary wear and tear in their gold coinages will be small, and unless India adopts a gold currency, the yearly supply of fresh gold must soon begin to derange prices, in the manner apprehended, in 1848, by M. Chevalier. III. This shows that universal bi-metallism, though harmless as a chimera, which amuses writers on the currency, would be a grave disaster, were the nations to adopt it. For purposes of international trade, the existing supply of gold is abundant, if not excessive. Were silver to be addi- tionally employed in that trade, thus causing the united mass of yearly supply of gold and silver to act on prices which are now influenced, in the West, by gold alone, the disorganisa- tion of commerce would be complete. IV. The disuse of silver as international money does not imply its demonetisation in the internal trade of each country. Hence, the adoption of gold as the universal money would not throw an undue burden upon gold ; silver would remain enthroned as the money for internal trans- actions. Moreover, in like manner, as the India Council drafts, with a silver currency in India, have the same effect as the import of 15 millions sterling a year of silver, into London, so, with a gold currency in India, they would operate like an import into the West of 15 millions sterling of gold. It appears then, on a detailed examination of the facts, that there is enough of gold for all ; there is an unequal dis- tribution of it, but the introduction of a gold currency into India would modify that, in the I'ight direction. 88 A HANDBOOK ON GOLD AND SILVER. CHAPTEE VIII. MEANS TO BE EMPLOYED FOE ESTABLISHING A GOLD CUEEENCT IN INDIA. We may now conclude that there is enough, of gold in the world for enabling India to change to a gold standard, with- out harming any one. More proofs will be adduced in the next chapter ; but meanwhile it may be assumed that the City would give leave for the introduction of a gold currency into India. 2. The full operation of a gold standard in India would involve some important changes, viz. : — I. It would enable the Secretary of State for India gradually to issue, and permanently to keep afloat, some 50 of 60 millions sterling of India Office Treasury biUs, cor- responding to the exchequer bills of the English Treasury, which, for the purposes of this exposition, may be styled quasi-excheqaer bills. II. The issue of these g'wasi-exchequer bills would enable the Secretary of State for India to reduce the interest on all the sterling loans of the Indian Government to 4 per cent. or less, and (with a gold currency in India) to transfer them to the Indian registers for payment of interest in India; to holders of the stock in that country. In this manner, stock of these sterling loans, or else securities of rupee loans, now held in Europe, could be transferred from the English to the Indian loan registers, up to the amount of the quasi- exchequer bills, so that the amount of the various forms of Indian loans held in Bng]g,nd would not be increased. MEANS FOE EFFECTING THE CHANGE. 89 III. It would be liighly conducive to important financial and commercial interests of England and India that, with a gold currency in India, the Bank of England should establish branches or agencies in Calcutta and Bombay, perhaps also in Madras and Eangoon, for facilitating remittances between the two countries, and for cashing its own notes, which, with English sovereigns, might be made legal tender in India. IV. The Secretary of State for India now issues his Council drafts on India through the Bank of England, generally in monthly instalments, up to the aggregate, in the twelve months, of his requirements for the year, which are usually reckoned, for the future, at 15 millions sterling. For doubtless good reasons, which would be inapplicable under the new arrangement, the amounts of the monthly drawings are not varied to suit the periods when the demand for bills on India is active or slack ; but were the Bank of England to establish branches in Calcutta and Bombay, the Secretary of State could receive credit in the lump, from the Bank, for the amount of his monthly requirement, the Indian Government affording credit to the branch banks at Calcutta and Bombay, in the lump, for the corresponding amount, at an approximate rate of exchange. The Bank of England would then issue its own bills on India, in the place of the Council drafts. As the issues would only respond to the actual demand for bills, the Bank would obtain for them better rates, on the average for the year, than are obtained on the Council drafts. In consideration of the large balance which the Secretary of State for India keeps at the Bank of England, the approximate rates of exchange charged monthly by the Bank for its monthly credits to the India Office could be adjusted, at the end of the year, to the average rate. V. From Bank of England notes being made legal tender in India, they would accumulate in the Indian treasuries ; on the Government of India presenting these notes at the local branches of the Bank of England for cancellation, cor- 90 A HANDBOOK ON GOLD AND SILVER. responding amounts would be placed to the credit of tlie Secretary of State in London. YI. Merchants would perhaps be allowed a similar ad- vantage, on their presenting Bank of England notes to the local branches, which might find this mode of settlement better than the discharge of the notes in cash. In that case Bank of England notes would command a small premium in India, such as would gain them a preference over sovereigns in remittances from England to India. Independently, too, of this circumstance. Bank of England notes would be sent to India in the place of sovereigns, that is to say, some millions sterling of notes would be sent to India, and to a great extent would remain outstanding, against gold de- posited in the Bank of England, which would never be required out of the country for cashing those notes. In times of crisis, the Bank of England might safely be allowed to issue notes uncovered by bullion, up to the amount of the notes held in treasuries and banks in India. 3. The command which the Bank of England would acquire over remittances between the West and the East would be helpful both to the Government and to commerce, in extraordinary emergencies; to Government, which on such occasions could be emergently assisted by the Bank with fands; to commerce, which, through the Bank of England, and in no other way, could obtain help from the reserve balances of the Secretary of State and of the Govern- ment in India. Exceptional drains of gold from England to India would on such occasions bs averted, or be very much restrained. The currency system of England would be strengthened. 4. The expectation that the Secretary of State for India would be able to issue gradually, and to keep outstanding, qnasi-excheqnev bills to the amount of some sixty millions sterling is not visionaiy. In years long past, as shown in a paper in the appendix, on the currencies of various countries. SUGGESTED ACTION OF THE BANK OF ENGLAND. 91 large amounts of exchequer bills were outstanding, the real magnitude of which should be estimated by the proportion which they bore to the comparatively small deposits and floating capital of those days. Down to 1844 the Bank of England kept in these exchequer bills a part of its reserve against the outstanding circulation of notes. This practice ceased under the Bank Act of 1844. About the same time railway debentures came to be preferred to exche- quer bills for temporary investments. From these two cir- cumstances, exchequer bills sold less readily than before, and, in consequence, got into disfavour also with the English Treasury, which for a long period steadily observed the policy of reducing their amount. But in the thirty years and more which have elapsed since the banks ceased to invest in exchequer bills, deposits have enormously increased, to amounts which the mind can express arithmetically, but cannot adequately realise. The banks have been forced, in consequence, failing any safer temporary investments, to de- posit with bill brokers, and to hold, in discounts to stock brokers, very large balances, with the result of weakening and often paralysing the control of the Bank of England over the rate of interest. There is room, therefore — unfor- tunately, too much room — for the issue of exchequer bills to the amount of even twice 60 millions; the doing so by the English Chancellor of the Exchequer and the Indian Secre- cretary of State would be an unmixed good to the country. The perception of this fact, of the control over the money market which these bills would help in restoring to the Bank of England, and of the considerable advantages which the Bank would derive from a closer connection with India, and from the command of remittance operations with that coun- try, would enlist the active co-operation of the Bank in placing the exchequer bills favourably on the market. Nor, in consideration of the great good from thus bracing up the system of currency and credit in England, which will be 92 A HANDBOOK ON GOLD AND SILVER. noticed at length in a later chapter, would the English Treasury hesitate to receive the gitasi-exchequer bills of the Secretary of State for India in payment of revenue. 5. Hence, by an arrangement with the Imperial Govern- ment, the quasi-exchequer bills of the Secretary of State for India might be received in the United Kingdom in payment of revenue ; and in order that his hand may not be forced, he might be empowered to raise, at any time, on the issue of stock, a sum equal to his yearly requirements. The accumulation of notes of the Bank of England in Indian treasuries would also strengthen his position ; for, as already stated, the cancellation of the notes held there would instan- taneously place him in funds for discharging his exchequer bills should cash be demanded. So great, however, is the need for this form of investment for the large balances of bankers in London, including the Bank of England, that the bulk of these short-dated bills would be renewed. The short periods for which the bills run are their special recom- mendation or merit ; because the renewal at brief intervals affords the opportunity of adjusting the rate of interest to the current rate of the market, which makes the bills saleable readily at par. This being all that the investors want, the bulk of the bills would be renewed. 6. If, on the declaration of gold as the standard and as legal tender in India, the Secretary of State for India were to cease his drafts upon India, for four years, and were to raise the 15 millions sterling a year for the disbursements of the Home Treasury by means of quasi-excheqnev bills — the further coinage of silver in India being at the same time stopped, and interest on sterling loans being made payable in India — we should have the following results : — I. The trade remittances to India would be made — a. By the transfer of securities of the Indian Government from England to India, both the sterling and rupee loans. BAJSK OF ENGLAND NOTES AND BILLS. 93 h. By the remittance to India of gold bullion, sovereigns, and notes of tlie Bank of England. To the trade generally, and to other than the Bank of England, there would, indeed, be available a third form of remittance, viz., the bills which the Bank of England would sell upon its branches in Calcutta and Bombay ; but as the branches would have to be placed in funds by one or other of the modes a and b, practically those two would be the only real modes of remittance. So long as the first form of re- mittance would be available, the bank would avoid the second mode. In other words, the issue of the quasi- exchequer bills of the Indian Secretary of State, up to 15 mil- lions a year, would cause the transfer of a corresponding amount of Indian securities from the English to the Indian registers. II. During the five years of cessation of the Secretary of State's drafts on India, to the amount of 15 millions sterling, equal to at least 165 millions of rupees a year, the latter amount would accumulate in Indian treasuries, where it would be available — 1st, for the comparatively small amount of yearly borrowing for Public Works Extraordinary ; 2ndly, for discharge of rupee loans. III. This discharge of 15 millions sterling a year of rupee loans would be necessary or expedient for various reasons : a. To help the Bank of England in making the remit- tances of securities from England to India, for Indian trade (I. a), because the securities would be sent to India only to the extent that they could realise a fair price in India ; and therefore, unless a void in the Indian market for these secu- rities be created by discharging 15 millions sterling a year of rupee loans, transfers to that yearly amount, from the English to the Indian registers, would be impracticable. b. The 5 J per cent, rupee loan, amounting to 10^^ millions 94 A HANDBOOK ON aOLD AND SILVER. sterling, must be discharged on 1st May 1879 ; it is of especial importa.nce that this loan should be converted into four per cents, at par. Were it to be converted at 4J or 6 per cent., a proportionately higher price vfould have to be paid for the purchase of the East Indian railway. By dis- charging 15 millions sterling of 4 per cent, rupee paper in 1878, the conversion of the 6^ per cents, into fours in 1879 ■would be assured, if indeed a lesser rate than 4 per cent, would not be obtainable. Nearly 43 millions sterling of 4 per cent, rupee loans can be paid off by Government, at its option, on three months' notice. c, India 5 per cent, stock, to the amount of 17^ millions sterling, is redeemable after 6th July 1880, upon one year's notice. The transfer, by that time, of nearly 40 millions sterling of Indian securities, from the English to the Indian registers, would create, in the London market for such secu- rities, a great void, such as would enable the Secretary of State for India to convert the 5 per cent, stock at a better rate than 4 per cent.; for it should be remembered that the quasi-excheqaer bills of the Secretary of State would be held by a different class of investors from those who invest in colonial and foreign stocks. 7. Thus far, the declaration of gold as legal tender in India, and the closure of the Indian mints against the coinage of silver for the public, would secure the following advan- tages : — I. An actual saving of above one million sterling a year in loss by exchange, and the further prevention of loss from a great but indefinite growth of the charge. II. The conversion of large amounts of 5^ and 5 per cent, loans into 4 per cents, at par, or at a more favourable rate. III. The discharge of some 40 millions sterling of 4 per cent, rupee loans in India, by raising that amount in London on quasi-excheqaer bills at much less than 4 per cent, and PEOBABLE RESULTS OF THE CHANGE. 95 by raising it in such, a way as not to increase the amount of Indian securities held in England. IV. Facilities for buying the East Indian Railway by the issue of 4 per cent, stock at a more favourable rate than could be otherwise possible. V. The transfer of the stock of the India sterling loans from the English to the Indian registers, as a first and important step towards the gradual purchase back, by India, of her securities which are held abroad. VI. The introduction of a system by which India would borrow yearly, for its requirements for public works extra- ordinary, in the cheapest, that is, the London market; at the same time that, by absolute cessation of borrowing in India, her people would be forced to buy back from London the securities upon which her Government wiU have borrowed at cheap rates abroad. VII. A general reduction of the rate of interest in India ; which means increased facility for cheaper production. VIII. An iavigoration, or bracing up of the system of credit and currency in England, through the command over remittances between England and India, and the greater command over the London money market, which the Bank of England would gain from the measures which have been discussed. 8. The measures for introducing a gold currency into India might be somewhat as follows : — I. Gold coins of an intrinsic value in the proportion of one to 15^ silver rupees of the present currency, to be struck, for the present, for Government only ; to be declared legal tender, at that valuation ; and to be issued in perma- nent withdrawal of rupees of the old currency. II. The coinage of silver for the public and for the paper currency of&ce to cease, and a duty of 20 per cent, to be levied on the importation of silver, under penalty of con- fiscation in any attempt to evade the duty, the confiscated 96 A HANDBOOK ON GOLD AND SILVER. treasure being divided between the informers and the captors. III. A new subsidiary silver currency to be coined, the rupees of which shall contain ten per cent, more silver than the existing rupees. The new silver rupees shall circulate at par with the existing rupees as legal tender, for any amount, until the withdrawal of the old rupees, after which they shall be legal tender for not more than one hundred rupees. IV. The Paper Currency Office shall receive from the public gold bullion, English sovereigns, and Bank of England notes, at the relative value, between silver and gold, of 15^ to 1, in exchange for silver rupees or for currency notes of the existing system, which are payable in sUver. V. The Paper (Currency Office shall (in exchange for silver rupees, or for its notes payable in silver) issue notes payable in gold coins of the new Indian currency, or in English sovereigns or Bank of England notes ; and gold notes thus redeemed shall not be reissued. VI. All silver rupees, and currency notes of the existing system, which may be received at the currency office in exchange for gold notes shall be permanently withdrawn. The silver rupees (including silver, from the coin reserve, equal to the currency notes withdrawn) being re-coined into rupees of the new subsidiary currency. VII. Sovereigns and notes of the Bank of England shall be received at all Government treasuries, in payment of Government demands or as railway traffic receipts, and in exchange for silver rupees, or for notes payable in silver. But as a rule they shall not be reissued by the Government except in permanent withdrawal of silver rupees, or of currency notes with their equivalent reserve in silver coin of the old currency. VIII. Sovereigns and notes of the Bank of England shall also be received in courts of law, and on all the guaranteed PEECAUTIONS TO BE TAKEN. 97 and State railways, and shall be paid into Government treasuries. IX. On completion of the change to a gold standard, sovereigns and notes of the Bank of England shall be legal tender in all transactions. 9. This sketch provides that the notes of the Bank of England, imported into India, must go into Government treasuries, the Mint, or the Paper Currency Office, to be issued thence, not to the importers (who will receive other full value), but at the discretion of Government, in per- manent withdrawal of the old sUver currency. Profiting by the warning in the example of the German Govern- ment, the object of this is to ensure that the new gold coins, including sovereigns, shaU be issued only in withdrawal of the old silver currency. 10. This precaution would be very necessary, because, simultaneously with the declaration of gold as legal tender, the Council drafts on India would be discontinued, exchange on India would rise to more than Is. lO^f^. per rupee, and even to 2s. In consequence, gold would be imported into India, to the amount of the discontinued Council drafts : that is, to the extent of 15 millions sterling a year, less any extra amount of private bills on India which may be offered in the market. 11. Assuming that the currency operation or coinage reform extends over four years, the importation of 60 millions sterling in that period, as an addition to the present metallic currency of India, might inflate prices and dis- organise trade. These evils, and the embarrassment ex- perienced by the German Government, would be avoided by the precaution of withdrawing an equivalent of silver coin for every gold coin that may be issued. The high exchange in favour of India, which would rule during the operation, would prevent the exportation of the issued gold coins. 98 A HANDBOOK ON GOLD AND SILVER. 12. No doubt, the measures for promoting the remittance of Indian securities from England to India would prevent the importation of anything like 15 millions sterling a year of gold coin and bullion; but the precaution suggested would not the less be sound and necessary ; for the need of yearly remittance to India exceeds 15 millions, and the excess, amounting perhaps to four or five millions, would be remitted in gold, or in notes of the Bank of England. 13. But, at this rate, the completion of the change to a gold standard, by the demonetisation and withdrawal of the existing silver currency, would be a very long process. Hence it would be expedient to borrow in gold a certain amount yearly for the purpose of withdrawing the old silver coinage. The yearly borrowing would include about three millions sterling for public works extraordinary. On the surface it would seem that the amount of gold obtained for the public works extraordinary expenditure in India could not be issued in withdrawal of the existing silver currency; it could, nevertheless, be issued, in the first instance, in exchange for silver rupees, and the withdrawn rupees, after adding 10 per cent, to them in a re-coinage, could be reissued as part of the new subsidiary currency, which, until withdrawal of the old silver currency, would circulate at par with the latter, as full legal tender. In this way, the coinage reform could be completed in about five or six years. 14. Until the conversion of the 5^ and 5 per cents, into fours, the extra borrowing, for obtaining a special supply of gold, for withdrawal of the silver currency, could either be deferred, or be effected through ^Mast-exchequer bills, so as not to interfere with the conversion into 4 per cents. 15. It has been shown how greatly the demand for gold for remittances to the East would be reduced by giving the Bank of England a control over them, and by the other measures which have been suggested. Large amounts of ADVANTAGES OF THE PROPOSED CHANGE. 99 gold must also be liberated, at no distant period, by France and Germany : indeed, tbe demand for India would unlock tbe hoards of the Bank of France ; accordingly, there is no reason to apprehend that European markets would be dis- turbed or distressed by the measures for introducing a gold currency into India. 16. Perhaps all fear of disturbing the money market would be removed if the Secretary of State for India were to entrust the details of the measure for changing to a gold standard in India to the Banks of England and France, the Messrs. Rothschild, and Baring Brothers ; paying them a commission which might increase inversely with the amount of gold employed in completing the operation, besides a commission, say a yearly rate, for five years after the de- monetisation of the old currency, on the amount of silver that may be permanently withdrawn with paper, in a manner to be presently explained. This form of payment might not admit of very nice adjustment ; but the high character of all the parties, and a high sense among those benefited, of the importance of the service, would certainly not hinder a liberal settlement, perfectly satisfactory to the financial ability of those whose wise arrangements may give to the East the inestimable advantage of a common money in the trade with the West. 17. It may be reiterated that, in this regard, the effect of the several measures which have been discussed in reduc- ing the bulk of the remittances between England and India, to simple adjustments in the books of the Bank of England and of its Indian Branches, should not be overlooked. 18. Thus, on the one hand, India would make a large temporary demand on the gold supply of the world, with the view of remaining commercially in the comity of nations ; but she would on the other hand abundantly requite the ser- vice by converting a large part, perhaps eventually the bulk of the international settlements through England, into a H 2 100 A HANDBOOK ON GOLD AND SILVER. mere book adjustment, whicli means that a large amount of notes of tlie Bank of England would be permanently out- standing in, or in transit to India, without the gold against which they were issued ever leaving the issue department. England has taught India to pay handsomely for every ser- vice rendered to her, and even in this her extremity India would not forget the lesson. The West would find the part- ing, out of its money bags, with some sixty millions sterling of gold, for a gold currency in India, not the least profitable of its investments in its trade with the East. 19, The throes of the City, on account of the exportation to India of fifteen millions sterling a year of gold money, would be assuaged when notes of the Bank of England are included in the export ; — and there would be a happy relief — that exquisite pleasure of intense pain steadily and rapidly subsiding and ceasing — as the City awoke to the fact that the surplus gold of France, an increased supply from specie- paying United States, a slackened or discontinued demand from Germany and France on Australia's gold supply (and not diminishing hoards of the Bank of England) were fur- nishing the gold that was streaming to the East. happy City ! who would not envy your impassioned soul the joy of such grief as disturbs the possessor of untold wealth — idle for lack of use — which after all remains undiminished by an imaginary loss ! 20. The Indian mints would be unequal to the re-coinage of 100 millions sterling of silver rupees in five years; but their power can be increased, and it would not be absolutely necessary to demonetise the existing currency at the end of the fifth year. That period would be required for drawing a suf&cient amount of gold to India by cessation of the Council drafts on India. After five years the drafts could be re- sumed, and the gold portion of the currency would adjust itself, by infiux or efflux, to the requirements of the country, while the silver of the old currency could continue to circu- THE PROCESS OF TRANSITION. 101 late as full legal tender, at par with the heavier new coinage, .the restriction of whose legal tender would have to be de- ferred. The lighter rupees, by consigning the heavier to the melting pot, would thus steadily hasten their own destruc- tion. As, however, it is not desirable that the Indian metal- lic currency should remain in a state of transition a day longer than the Government can avoid, special measures, beyond the utmost increase of the powers of the Calcutta and Bombay mints, would be required. Perhaps a part of the re-coinage shotdd be executed in England, the overland troop transports being utilised for the carriage of the silver, and another part might be obtained by leasing the mints of native states, and improving them, should that appear a preferable alternative to the temporary constitution of a third, and even a fourth mint. The extra expense of the special arrangements would be eventually recovered in the saving of permanent mint expenditure ; for with a gold cur- rency, including the circulation of sovereigns as legal tender, India could spare one of the two existing mints. 21. As stated in a former chapter, the silver currency in India may be reckoned at 160 millions sterling, of which 105 millions would be required as subsidiary silver currency, even in the small proportion of ten shillings per head of the population, which obtains in England. This, probably, is an under-estimate of the amount of subsidiary silver currency that would be needed ; but it may stand as a set-off to any possible under-estimate of the amount which is outstanding of the existing silver currency. Accordingly, there would remain for withdrawal 55 millions sterling of silver. But some abatements must be made from this, to arrive at the net amount which would have to be sold, viz. : — I. The 105 millions of new subsidiary coinage would contain 10 per cent, more silver than the existing rupees, and so would absorb 10^ millions of the surplus silver. II. An issue of 55 millions sterling of gold coins would 102 A HANDBOOK ON GOLD AND SILVEE. withdraw, in tale of silver coins, ten times the number of the gold coins, and it is not an unreasonable conjecture that at least 20 millions sterling extra, of new silver coinage, would be required. In other words, at the end of the five years which are assumed as the period for com- pleting the coinage reform, the new gold and sUver coinage together might exceed the withdrawn coinage of the old currency by 20 milKons sterliug of new subsidiary silver currency. III. Hence, out of a total of 160 millions sterling of existing sUver currency, there would be reissued, as subsi- diary silver currency, 105 + 20=125 millions, containing extra silver to the amount of 10 per cent, or 12*5 millions, thus raising the aggregate to 137*5 millions, and leaving for sale 43 millions worth. 22. If a loss of even 20 per cent, were to be sustained on the sale of 43 millions worth of silver, the amount would be covered by the five years' accumulation of the savings and advantages stated in para. 7 ; not to mention the greater loss by exchange from a growth of the deprecia- tion of silver, which the alteration to a gold standard would prevent, 23. Furthermore, it would be a part of the measures for the introduction of a gold currency into India, that a duty of 20 per cent,, or other higher prohibitory duty, should be imposed on the importation of silver ; and, with this precau- tion, a yearly sale of 3 to 6 millions sterling of silver rupees, with an allowance of 15 per cent, in favour of the buyers, would be practicable. 24. A part of the 43 millions, sufficient to cover a con- siderable portion of the loss on the final account, could also be withdrawn with paper money. The sale of the surplus silver, in India, would be gradual ; while it remains on the hands of Government there would be a loss of interest ; to MEASURES AFFECTING THE EYOTS. 103 prevent this, and on important administrative considerations, the idle money might be utilised. 25. In the Deccan, in the Bombay Presidency, the in- debtedness of the Government ryots has become so serious that it m.ay be necessary to reduce the assessment of the land revenue. The peasant proprietors in the Punjab, and in many places the cultivators in the North- Western Pro- vinces, are in similar indebtedness. In fact, the dependence of the cultivating classes generally on the village banker is proverbial ; it caused the Santhal rebellion ; and its removal by any means which would turn the Indian peasantry from being borrowers into depositors in Government savings banks would unite the governed to their rulers in bonds close, pro- fitable, and agreeable, which would obliterate the feeling of subjection to a foreign rule. 26. England's own experience, the important part which the country banks of a past generation played in the deve- lopment, and which their successors have continued in the improvement, of British agriculture, show the unavoidable dependence of the cultivating classes upon capital, for the yearly expenses of cultivation. In India, through the astuteness of the village banker, and partly through the im- providence of the cultivator, this limited dependence has grown in many parts of the country, as above stated, into deep indebtedness. In England, the high character of the bankers, and a wealthy landed proprietary, have averted a similar result. In India, if a like happy condition, as in England, is to be attained, the Government, which is the real landlord, by combining the duties of landlord and the functions of banker, must lift the ryot in the scale of well- being, help him to pay his debts, thereby enable him to save, and confirm his attachment to British rule by making him a creditor of the British Government, as a depositor in its savings banks. Should that Government ever advance beyond 104 A HANDBOOK ON GOLD AND SILVEE. its frontier to encounter a foreign power, perhaps its rear could not be better secured tban by an army of creditors. All-pervading finance improves even strategy. 27. Hence, simultaneously witb the declaration of a gold standard for India, a new class of district currency notes, payable in silver, might be issued, to be legal tender in the district and at the office of issue at the chief seat of the local Government in whose province the district is situate. The notes would be issued, not against silver, but to ryots or peasant proprietors, on the security of their estates, (1) for a temporary object, viz., the discharge of their debts ; (2) as a permanent arrangement, viz., for their yearly expenses of cultivation. The convertibility of the extra issue of notes for the discharge of debts would be secured by the reissue, to the extent demanded, of the withdrawn silver which may be available for sale. The interest, perhaps 6 per cent, per annum, on the amount advanced to the ryotsj would set off a considerable part of the expense of the coinage operation. 28. These measures of relief would of course be put in hand, not simultaneously throughout all districts, but only in so many districts at a time as could be served with the available amount of silver reserve. The other districts would be taken up in their turn. Though the metallic currency might be inflated for a time, and in some measure, by this procedure, the usual effects of such inflation would be neu- tralised or mitigated by countervailing influences ; for the measure suggested would also reduce the rate of interest, and liberate village bankers' capital for other uses, thus cheap- ening production. 29. The convertibility of the ordinary issue of notes for expenses of cultivation would be secured by a comparatively small reserve of coin, the very purpose of their issue (namely, the expenses of cultivation) — their being received yearly in payment of revenue, — and their being made legal tender in the district — would keep the bulk of the notes outstanding INDIAN BAIJKING. 105 till the end of the season, when they would return in payment of the revenue. 30. During the five years of progress of the coinage reform the ryots would become educated in the use of paper money, and familiarised with notes which had rescued them from the village bankers, and unfailingly helped to cultivate their fields. At the end of the period a large amount of the notes would be permanently outstanding ; and a proportion of the silver currency could be withdrawn from circulation. The silver thus withdrawn with paper would set off loss from the sale of other silver. 31. Anj great progress of savings banks in the country is checked by the indebtedness of ryots who have nothing to put by, and by the ability of lenders to obtain from the ryots more than the savings-bank rate of interest. With the extinction of the ryot's indebtedness, by means of paper which he had found more serviceable than gold, he would trust the issuers of the paper, and would leave his savings with them on interest, instead of hoarding gold which yields no interest; that is to sa.y, a further amount of silver, to the extent of the deposits, would be virtually withdrawn with paper. 32. The village banker's occupation would be gone, but not his capital — that would flow into other channels, adding to production or distribution, and cheapening its cost. The ryots' deposits in savings banks, should they reach a large amount and become progressive, would reduce India's bor- rowings in the London money market. 33. The extension of the paper currency through ad- vances to peasant proprietors and to the cultivating classes is not necessary for the introduction of a gold currency ; but it fits into the plan of coinage reform, from the promise it affords of the permanent withdrawal of a considerable part of the old silver currency with paper, and from the means it would provide for employing, for urgent administrative and 106 A HANDBOOK ON GOLD AND SILVER. fiscal needs, a large part of the yearly 15 millions sterling wMch. would be set free by the cessation of Council drafts. Throughout India, except in the Lower Provinces of Bengal, the district organisation is adapted to the systematic issue and recovery of advances from agriculturists ; and even in Bengal the measure is not impracticable. 34. The liberation of the capital of the village bankers for other uses is one of the principal means of deyeloping the resources of India. At the risk of some repetition, this subject will be considered in a subsequent chapter. 35. It is not necessary to discuss measures by which the paper currency of India could be increased even without altering or extending the present organisation of the depart- ment of paper currency. No doubt, those who may be entrusted with the execution of the details for the intro- duction of a gold currency into India would be fully em- powered to work their wUl in promoting the more general convertibility of currency notes, without sparing the present amount of invested reserve of the Paper Currency Depart- ment. 107 CHAPTEE IX. THE DELICATE MECHANISM OP ENGLAJSTd's CUREENCT AND CREDIT. Theee is enough of gold in the world, and England lias the first choice of the world's yearly supply. The Californian and Australian mines never omit this homage to their king Croesus, who, following Oriental' custom, lightly touches the offering, which is then passed to other countries. ' Gold, gold, nothing but gold ! ' but from choice, not necessity, sur- feited England uses little of it. Addressing the Committee of Inquiry into the Commercial Distress in 1867, Mr. Slater (of the firm of Morrison, Dillon, and Co., whose transactions are among the largest of the metropolis) observed : — ' To prove how little of real money, that is, of Bank of England notes and gold mohurs, enter into the operations of trade, it may be iaterestiag as well as conclusive, on that point, to refer to the ana- lysis of a continuous course of commercial transactions, extending over several millions yearly, and which may be considered as a fair example of the general trade of the country. The proportions of re- ceipts and payments are reduced to the scale of jgl,000,000 only dur- ing the year 1856, and they are as under, viz. : — Beceipts: £900,938 of bankers' drafts, mercantile biUs of exchange, country bankers' notes, cheques ; Bank of England notes, £68,554 ; gold, £28,089 ; silver and copper and post-office money orders, £2,409. Payments : £966,346 of bankers' drafts, &c. ; £22,743 Bank of England notes ; £9,427 gold; and of silver and copper £1,484.' Later, in a similar analysis by Sir John Lubbock in 1865, we find the proportion still smaller, namely, out of 23 millions sterling of transactions 'in the last few days of 1864,' bank notes, £1,137,000; coin, £139,000. 108 A HANDBOOK ON GOLD AND SILVER. Tet we read (Mr. Bagehot's 'Lombard Street/ pages 311-12) : — ^'This is the first and tlie plainest way in which the Grerman Government could take, and did take, money from this country, and in which it might have broken the Bank of England if it liked.' And so in the vanity with which we regard our commerce (that advances * with leaps and bounds ') and Lombard Street as ' by far the greatest combination of economical power and economical delicacy that the world has ever seen,' we were content in 1873 to be indebted to the forbearance of Germany for the solvency of the Bank of England. Somehow, our absurdly poor plodding stupid fathers, who slowly crept along in a way which must put their sons to shame, managed at least to preserve their country's financial independence. Francis, in his history of the Bank of England, tells us how a plan to break the Bank failed, though it had been carefully organised by French instigation, in days before the theory of a sound paper currency on a metallic basis, which is our pride. May we, to that pride, add a feeling of calm satisfaction (deepening into a profound self-complacency, as the prospect of war for British interests becomes clearer), that the deposits in the Bank of England on foreign account, and by foreign banks which have offices in London, have greatly increased of late years. We have become the creditors of powerful indebted nations, on a scale which goads them with heavy taxation to pay us mere interest on their debt ; and at the same time we have framed, in Lombard Street, a mechanism of credit of ' wondrous potency,' through which some of those nations can break the Bank of England. The situation is a very pretty one. Across the Channel we have a neighbour perhaps superior to ourselves in financial ability and skUl, the same who, in a generation not long ^past away, tried to break the Bank of England. Of that country we know that it has more gold EECENT FRENCH FINANCE. 109 and silver than England and Germany together, and that its peasantry have subscribed to their national loans, sums many thousand times more than the corresponding classes in the rest of Europe could muster for investment. Of that country we read that it has experienced less of general com- mercial depression than the rest of the world ; while, respect- ing it, we know that the manifestation of its wondrous recu- perative power was coincident with the recall of its capital from foreign investments ; and of that country we were told by Mr. Bagehot in 1873, that 'nothing but their immense misfortunes, nothing but a vast loan on their own securities, could have extracted the hoards of France from the custody of the French people. The offer of no other securities would have tem/pted them, for they had confidence in no other securi- ties' France has been simply national, not cosmopolitan ; and has kept her capital at home to invigorate domestic in- dustry, instead of sending it on a beneficent mission to countries which (raising up a barrier of protective duties) set about seeing whether they cannot dispense with foreign manufactures, particularly with those of the ' perfidious ' creditor who advanced to them loans which the creditor paid in goods (at the same time raising the price of the goods), and now receives interest which is furnished by heavy taxation. But let us examine a little closer this fine mechanism of England's currency and credit, which is so liable to snap under the unfriendly touch of a foreign hand. The repeated investigations of the causes of the more recent commercial crises have established as the safest policy, on such occasions, that the Bank of England should begin sufficiently early to raise the rate of interest, but (this precaution taken) should, during the crises, lend its reserve freely, on good securities. ' We lent it [said Mr. Haiman on behalf of the Bank of England, in 1825] by every possible means, and in modes we bad never adopted before; we took in stock on security, we purchased exchequer bills; we 110 A HANDBOOK ON GOLD AND SILVER. made advances on exchequer bills ; we not only discounted outright, hut ■we made advances on the deposit of bills of exchange to an immense amount ; — in short,-we helped by every possible means consistent with the safety of the Bank, and we were not on some occasions over-nice.' The reserve of the Bank of England whicli has to be so freely lent in a panic is the reserve against its deposits, which include the balances kept in the Bank by bankers, bill brokers, stockbrokers, and merchants. The balances held for bankers are simply the uninvested portion of the assets which those banks possess against their liabilities. The deposits with the various banks in the United Kingdom, all whose reserves are concentrated in London, and of which the uninvested portion is concentrated in the Bank of England, amounted to 616 millions sterling in 1872, with 152 millions more for foreign and colonial banks, having ofiSces in London — total, 768 millions (Mr. Palgrave, ' Statisti- cal Journal' for December 1873), In a time of panic these banks are not able to call in all the invested part of their reserve ; to do so summarily would only increase the panic, and aggravate the crisis : and so, having strengthened their reserves at the Bank of England, during the premonitory symptoms of a crisis, they are at such a time peculiarly dependent on those reserves. In a still greater degree is the Bank of England dependent on its reserve at such a time; for the other assets against its deposits are Govern- ment securities (which, in a panic, are unsaleable on any scale that could afford relief) and discounted bills — which latter, under the necessity for lending freely in a panic, cannot be reduced. Thus the pressure for meeting the liabilities both of the banks throughout the country, and of the Bank of England itself (to the extent that those liabili- ties are demanded, and are not met by realising any part of invested reserves), falls on the reserve of notes and of coin and bullion in the Banking Department of the Bank of England. BANK OF ENGLAND RESERVES. Ill The tension under these circumstances, in a crisis, of the currency and credit system of England, is thus described by Mr. Bagehot : — 'On the surface there seems a great inconsistency in all this. First, you establish ia some bank or banks a certain reserve ; you make of it or them a kind of ultimate treasury, where the last shilling of the country is deposited and kept. And then you go on to say that this final treasury is also to be the last lending house ; that out of it, unbounded, or at any rate immense advances are to be made when no one else lends. This seems like saying, first, that the reserve should be kept, and then that it should not be kept.' The sovereign remedy is to increase the minimum coin and bullion reserve, and to begin raising the rate of interest, long before the country is hurt, when gold is being exported. Between this uneasiness when gold is exported (with the frantic efforts to prevent the export from a country which has a permanent general balance against all other countries) and the mercantile theory of wealth (which found no practi- cal expression save in a desire and effort to prevent an export of gold), there does not appear to be any material difference — as to the ultimate object — of the two systems. The mer- cantile system has long been recognised as vicious ; is it too soon to inquire whether the existing system of credit and currency of the United Kingdom also is not unsound ? Of the ef&cacy of the expedient of raising the rate of interest, to prevent an export of gold, we shall presently speak. Respecting an increase of the coin and bullion re- serve in the Banting Department of the Bank of England, Mr. Bagehot observed : — ' I should say that at the present time the mind of the monetary world would become feverish and fearful if the reserve in the Banking department of the Bank of England went below £10,000,000. Esti- mated by the idea of old times, by the idea of ten years ago, that sum, I know, sounds extremely large. My own nerves were educated to smaller figures, because I was trained in times when the demands on us were less, when neither was so much reserve wanted, nor did 112 A HANDBOOK ON GOLD AND SILVER. the public expect so much. But I judge from such observations as I can make of the present state of men's minds, that in fact, and whether justifiably or not, the important and intelligent part of the public ■which -watches the Bank reserve becomes anxious and dissatisfied, if that reserve falls below £10,000,000. That sum, therefore, I call the apprehension "minimum" for the present times. . . Then, I should say, putting the foregoing reasoning into figures, that the Bank ought never to keep less than £11,000,000 or £11,500,000; since experience shows that a million, or a million and a half, may be taken froiQ us at any time, I should regard this as the practical minimum at which, roughly of course, the Bank should aim, and which it should try never to be below. And in order not to be below £11,500,000, the Bank must begin to take precautions when the reserve is between £14,000,000 and £15,000,000 ; for experience shows that between two and three millions may probably enough be withdrawn from the Bank store before the right rate of interest is found which will attract money from abroad, and before that rate has had time to attract it. When the reserve is between 14 and 15 millions, and when it begins to be diminished by foreign demand, the Bank of England should, I think, begin to act, and to raise the rate of interest.' Thus, with a facility which is not unusual in dealing with millions of money not your own, the minimum is raised in a few seconds from an ' apprehension ' minimum of £10,000,000 (which, even ten years ago, would have sounded ' extremely large ') to a practical minimum of fifteen millions. In 1840, Lord Overstone, then Mr. Loyd, in his evidence before the Committee on Banks of Issue, observed: — ' The main advantage of the paper currency is the economy arising from accomplishing the purposes of money with a less waste of capital than is contained in the precious metals; the larger the reserve of bullion, the less of that economical advantage you obtain ; and I con- fess I cannot look upon the suggestion of working upon a larger amount of reserve of bullion than we have hitherto acted upon, in- stead of enforcing the true principles of currency, as anjrthing less than a partial surrender of economy, the main advantage of paper circulation, without any reaUy more eiFectual protection from that which is its main evil, namely, the danger of non-convertibility.' It may be said that things have immensely changed, and credit and deposits are on a much larger scale now than in CREDIT AND METALLIC CUEEENCY. 1 1 3 1840. But Lord Overstone, the Gamaliel at whose feet had sat the author of the Bank Act of 1844, added : ' Banking in all its forms is dependent on credit ; and the due regulation of the money of the country is the proper means of placing credit, and all transactions that spring out of credit, under due control, and confining them within their legitimate limits.' Instead of increasing the banking reserve, Lord Overstone would have placed ' credit, and all transactions that spring out of credit, under due control, and confined them within their legitimate limits.' This is what should now be done. It is absurd to be content with maintaining the metallic basis, and the convertibility of the note in the Issue Department, if, through an imperfect regulation and control of credit, the Bank of England can be broken in its Banking Department, with assets more than sufficient to cover its liabilities. In 1840, Lord Overstone thought that credit would be completely restrained by regulating the currency on a metallic basis. Events have falsified the expectation — credit has become an influence of wondrous potency ; and the infant whom Lord Overstone saw in the cradle has become a giant, whose little finger can overturn the Bank of England. For that Bank has only one means of preventing an undue drain of gold, viz., by increasing the rate of interest. On the advice of Mr. Goschen, the Bank since 1860 has raised the rate by steps of one per cent, at a time, whenever it was desired to affect the foreign exchanges. But it has come about that " You may call spirits from the vasty deep ; but will they come ? ' If the Bank cannot get bills to discount at its ordinary rate, will any bills be brought under the influence of the advanced rate ? The ' Economist ' wrote on 14th July 1877 : ' It is also understood that, while the advertised minimum of the Bank of England's rate of interest, over a considerable period, represented with sub- I 114 A HANDBOOK ON GOLD AND SILVER. stantial accuracy the general rate of interest in London, on the best commercial securities, there have been — more particularly during the last three or four years — weeks, and months, when the market rate was considerably below the Bank of England minimum; and when therefore, for all practical purposes, as regards the discount business of the Bank, its rate might as well have stood at 3 or 4, as at 2 per cent.' On the occurrence of an export of gold, the Bank has more than once raised its rate of interest, but with no effect, owing to the lower market rate established by the joint-stock and private banks and the bill brokers. The deposits held by the banks and brokers being manifold greater than the deposits in the Bank of England, it has lost that control over the rate of interest through which alone a suflScient banking reserve can be maintained. Hence the credit and currency system of England is in a state of tension, in which it may snap under a pressure ridiculously small for the vast wealth, and the large excess of her assets, or moveable or fluctuating capital, over her liabilities of the same kind ; and this state of things exists by the side of the solid posi- tion of the Bank of France. This risk, for England, of disturbance of an even course of prosperity such as France enjoys, is not caused by a scarcity of gold, or by England's inability to get the gold ; nor is it explained by the state of her commerce and produc- tive industry, though that should awaken the anxious concern of her statesmen. Thus : — I. The general depression of commerce is ascribed to an absence of demand arising from present high prices ; as if they were the principal or real, as well as the proximate causes. Hence there is an endeavour to reduce the cost of produc- tion, by a decrease of wages. No doubt aU wages which became inflated during commercial excitement, in the period of enormous and continued international borrowings, must be reduced ; but high prices cannot be the cause of an universal CAUSES OF COMMERCIAL DEPEESSION. 115 depression, because the exchange of commodities would still proceed on the old level, though at a higher universal elevation of prices. But the assumption that high prices are the real cause of the depression may carry the conflict between labour and capital to an extreme, in the direction of reversing — that is, of reducing the workman's share of, that re-distribution of wealth in favour of the working classes which, as Professor Cairnes has shown us, was one of the earliest and most promising results of the gold discoveries. In the United Kingdom, this extreme reduction of wages would mean a putting back in the scale of living some millions of workmen, and four or five-fold more millions of human beings — diminished motives, means, and oppor- tunities for education which prevents that larger half of ills that poverty brings on itself, and which is even more indispensable than long hours to the efiiciency of labour; a fall in prices that would, in the home market for produc- tion, countervail much of the decrease in wages ; a lasting breach between labour and capital, as the outcome of the policy of peace at any price, which heralded and promoted the vast international borrowings that (instead of opening) are closing the world's markets through a consequent heavy taxation which has diminished the world's income or purchasing power, and has raised a barrier of protective duties against England in almost every country. II. Rightly interpreted, the universal commercial depres- sion perhaps means diminished purchasing power in the world, from the outrageous lending of English capital (more particularly) to foreign countries ; a consequent liability of the foreign countries to pay interest, and to buy back their securities, when their currencies became depreciated : a further consequent current into the creditor countries, of imports already paid for, which prevents an outflow thence to the indebted nations, of the yearly production of gold which comes in the first instance to their creditors : — a necessary I 2 116 A HANDBOOK ON GOLD AND SILVER. accumulation, accordingly, of the new gold in tlie creditor countries — the more so, as inconvertible paper prevails iu most of the indebted countries; a consequent depression of prices in the borrowing, and of their elevation in the lending countries, which accounts for the universal stagna- tion of trade. III. If this be a correct exposition of the facts, the evident preparation in Prance for a change to a gold standard, and the execution of the similar currency reform in Germany, have mitigated the general depression of trade, by absorbing the new gold for which there was no other outlet. IV. The prospects of England's manufacturing industry are chequered. Things look very bad in the coal and iron industries ; but yet, with the considerable fall in the price of coal and iron on the Continent and in America, the markets for those products will probably improve. But in other industries generally, there is slackened demand ; and if labour must contribute to the cheapening of the cost of production, the contribution should be primarily in the form of more efiS.cient labour, and only secondarily in that of reduced wages. In this regard, as an indispensable means of making labour efficient, there should be a resolute suppression of drunkenness, through an exertion of patriotism which (uniting all political parties in the effort) shall beat down the opposition of the licensed victuallers. V. Over the prospects of British agriculture, which is now hard-pressed by foreign competition, there is gloom that can be dispelled only by measures of reform, conceived in a spirit of true conservatism, with a strict and wise regard for the rights of property ; but also with the courage of our convictions. The competition of foreign agriculture threatens to upset the received doctrine that ' rent is not an element of the price of agricultural produce (or, in other words, that corn and food would not be necessarily cheaper if every EXPENDITUBE OF THE AGEICULTUEAL CLASSES. 117 farmer's rent in England were remitted for a term of years).' The immense importations of corn into England from Oregon are from lands which do not pay rent, and are made at an expense' for transport which is less than the rate of rent in England. Heretofore, British wheat had withstood this competition, through its superior yield in England, namely, 30 bushels an acre, against 12 bushels or less in the United States, Hungary, and Russia; but of late years the exports from these countries have been sent forward under the double pressure of their increased indebtedness (which lowers prices in the exporting country), and of a depreciated currency (which lowers the selling price of the exports in the creditor or importing country). In this unequal competition, British agriculture must succumb, unless rents be reduced, or, through the free application of capital to the land, its produce be greatly increased. Since 1869, wheat cultivation has seriously declined ; and now the fast developing meat trade with North and South America threatens British agriculture in its last stronghold, namely, pasture land. Moreover, it is not enough that British agriculture should barely hold its ovm ; it is essential to the well-being of England, with the increased dependence of her manufactures on an enlarged home market, that her agriculture should be lifted from the negative position of not receding, to one of redoubled prosperity such as may materially increase the purchasing power of the agricultural classes. A great improvement in their scale of living would quicken all the industries in the kingdom ; but this result can be brought about only by augmenting the production of the land, through the free application to it of capital and labour — that is, by the same means which would avert an else inevitable fall of rents. VI. Let us see whether the agricultural interest and industry are fitted, in their present condition, for this self- 118 A HANDBOOK ON GOLD AND SILVER. renovation, without external and legislative measures of reform, a. ' From sucli consideration [writes Mr. Fawcett] it inevitably follows that land will not, as a general rale, be property cultivated if, as is the case in onr own country, those who rent it seldom possess any security that they will be able to claim compensation for im- exhausted improvements. The correctness of this conclusion is repeatedly confirmed by those who are intimately acquainted with agi'iculture. Lord Leicester, a large landed proprietor and a well- known agricultxirist, has lately said, that after having travelled through a considerable portion of England and Scotland, and having carefully observed the farmiag, he has arrived at a very positive conclusion that the produce of the land might be nearly doubled, if oui- present system of agriculture were improved by the application of a greater amount of capital to the cultivation of the land. A similar opinion has been expressed by Lord Derby. The correctness of these conclusions receives an important confii-mation from the excellent farming which prevails in parts of Liacolnshire, where a system of tenant right is maintained by custom. 6. As to the rural laboui-er, Mr. Fawcett writes : — ' Even those who are most decided in their opinions as to the productiveness of England's industry must feel that the condition of those who are em- ployed in agriculture is most unsatisfactory ; for there are few classes of workmen who, in many respects, are so wretched as the English agricultural labourers. They are in many districts so miserably poor, that if they were converted into slaves to-morrow, it would for the interest of their owners to feed them far better than they are fed at the present time. * * A moment's consideration will show that such wages are barely sufficient to supply the first necessaries of life. Meat cannot be tasted more than once a week; and those who have to exist on this scanty fare are more exposed than any others to the inclemency of our trying climate. Such wages will not permit the slightest provision to be made, either for sickness or the feebleness of old age. Throughout large agi-icultui-al districts, not a single agricultural labourer wUl be found who has saved as much as a week's wages. A life of toiling and incessant industry offers no other prospect than a miserable old age ; for when these labourers are too old to work, they will either be paupers in a workhouse, or they must come as suppliant mendicants for parish relief If England applied this description to the condition of DUTIES OF PEOPERTY. 119 the peasants in Bulgaria, Turkey would complain of tlie application as a foul libel on lier humanity — nay, on our common humanity. c. Thus we see that the land produces barely half of what it should; and the condition of the agricultural classes, generally, is wretched. ' But even the physical suffering -w-Mch is associated with their poverty, is not the -worst feature of their condition ; their ignorance is as complete as it is distressing. Improved schools, enormous educational grants, and a general zeal for instructing the poor, have failed to educate the agricultural labourers * * Parents may be accused of neglecting their children's welfare ; hut how can we expect those who are so miserably poor, and who are ignorant themselves, to sacrifice the two shillings a week that a child of eight or nine years of age may readily earn ? ' Property has its duties as well as its rights. Of landed property, its most sacred duty to the country, as well as to God, is to increase the production of the land, and to promote the well-being of those who live on it, and work out the farmers' profits and the landlords' rents. If these duties are neglected, it matters little what other duties are done. d. But neglect of their duties cannot be imputed to the majority of the landed proprietors of England and Scotland ; and if the descriptions in a. to c were read respecting another country, and with a knowledge that the landed proprietors were intelligent and conscientious, the ready exclamation would be that only capital was wanting to raise England's peasantry to the happy condition, now interrupted for awhile, of the Bulgarian peasantry. It will be England's shame, and the precursor of her downfall, if the capital for changing the face of agricultural districts, so freely bestowed on foreign countries, be withheld from her own children. e. ' In the seventeenth century, a lawyer, a physician, a retired merchant, who had saved some thousands, and who wished to place them safely and profitably, was greatly embarrassed. Three generations 120 A HANDBOOK ON GOLD AND SILVEE. earlier, a man who had accumulated wealth in a profession generally purchased real property, or lent his savings on mortgage. But the number of acres in the kingdom had remained the same ; and the value of those acres, though it had greatly increased, had by no means increased so fast as the quantity of capital which was seeking for employment.' ' It cannot excite wonder, if the exportation abroad of the capital which should have fertilised the fields of once happy England has left British agriculture without a suf&cient wages fund for raising the wages of the labourer, and im- proving both his scale of living and the home market for British manufactures. Look at the future (see Appendix) of the misery caused by national indebtedness and foreign borrowings, also at the humiliating inferiority of England's to the Bulgarian peasantry, and then compare both with the future which fancy can readily portray of what might be, were capital to be freely applied in British agriculture ; and a burning desire must stimulate the intelligence, the con- scientious regard for duty, and the aroused patriotism (never dull, though at times unheeding) of the landed gentry of Great Britain, to sweep away the finance companies and the ill-controlled credit, which, through a lavish waste of capital on foreign nations, are sowing seeds of national decay. Thus, whether we consider the condition of British com- merce, manufactures, or agriculture, the one cause of deca- dence in these interests which confronts us, is the too free employment abroad of British capital, because the richest field for its employment at home, viz. British agriculture, is closed to the English investor. Even the savings of the farmers are sent abroad, instead of fertilising their own fields. This brings us back to the radical evil in the credit and currency system of England ; an evil which can be destroyed only by dealing a death-blow to financing. ' Zembard Street, page 132. ENGLISH CKJiDIT ANU CUKEENCY. 121 The extent of the evil is thus stated by Mr. Bagehot : — ' English money is borrowable money. Our people are bolder in dealing with their money than any Continental nation, and even if they were not bolder, the mere fact that their money is deposited in a bank makes it far more obtainable. A million in the hands of a single banker is a great power ; he can at once lend it where he wUl, and borrowei"s can come to him because they know or believe that he has it. But the same sum scattered in tens and fifties, through a whole nation, is no power at all ; no one knows where to find it, or whom to ask for it. Concentration of money in banks, though not the sole cause, is the principal cause, which has made the money market of England so exceedingly rich, so much beyond that of other countries. The eflect is seen constantly. We are asked to lend, and do lend, vast sums, which it would be impossible to obtain elsewhere. It is sometimes said that any civilised foreign country can borrow in Lombard Street, at a price * * There are very few civilised foreign governments that could not borrow considerable sums of us if they choose * * It is true that English bankers are not themselves very gi'eat lenders to foreign states ; but they are great lenders to those who lend — they advance on foreign stocks, as the phrase is, with ' a margin ' ; that is, they find eighjiy per cent, of the money, and the nominal lender finds the rest. And it is in this way that vast works are achieved with English aid, which, but for that aid, would never have been planned.' The country banks which receive deposits in the rural districts send to London for investment the portion which they cannot locally employ. Mr. Bagehot thus describes the flow of deposits to London : — ' There are whole districts in England which cannot and do not employ their own money. No purely agricultaral county does so. The savings of a county with good land, but no maniifaotures and no trade, much exceed what can be safely lent in the county. These savings are first lodged in the local banks, are by them sent to London, and are deposited with London bankers or with the bill brokers. The money thus sent up from the accumulatiug districts is employed in discounting the bills of the industrial district. Deposits are made with the bankers and bill brokers in Lombard Street by the bankers of such counties as Somersetshire and Hampshire, and those bill brokers and bankers employ them in the discount of bills from Yorkshire and Lancashire.' 122 A HANDBOOK ON GOLD AND SILVER. In this manner tlie savings of the country are gathered into banks in London, where they are quite handy for bor- rowers on foreign as well as on domestic account. The joint- stock banks transfer the portion of their shares of these deposits which they cannot employ, to the bill brokers on interest. Thus the deposits of the farmer or the country gentleman, which he had entrusted to a private bank of local repute, and which the banker transferred to a joint- stock bank in London with a paid-up capital, is made over to a bill broker. In this manner deposits exceeding in amount the note circulation of the United Kingdom pass into the keeping of bill brokers; and the Legislature, which regards with jealousy the issue of notes by country banks, is unconcerned about the danger to the system of currency and credit of the United Kingdom, from the combination of the uncontrolled functions of bill broker and banker. Formerly, the bill broker was a mere commission agent between the drawer of the bill and the bank which discounted it; the bank was constrained, in such a transaction, to satisfy itself of the good character of the bill, while the broker was interested in not presenting bad bills for dis- count. Since the bill brokers have received deposits on interest, they have attracted large deposits, and have ac- quired, in consequence, credit, on which, rather than on the goodness of the bills, banks now rely on lending money on the security of the bills, instead of discounting them. Thus, of the two checks by which the character of a bill was tried, one, by the bill broker before the discounting of it, has been discontinued, thereby adding a new element of insecurity. Again, the facility with which the bill broker obtains, on interest, deposits from the public, often without his giving any security, and gets advances from a bank on deposit of unguaranteed bills, encourages him to be not very particular about the character of the bills which he discounts with DEPOSITS AND BILL BEOKERS. 123 deposits on wliich he would lose interest if lie did not dis- count the bills. The sums advanced by banks to bill brokers are the invested part of the banks' reserves, which thus are lodged with those who are not under the same influences as a bank, for the cautious discounting of bills. And lastly, the bill brokers are constrained to undersell the Bank of England in their rate of discount. Bill brokers are perforce indispensable ; but it may be doubted whether the old class of brokers, which was not concerned in discounting bills by means of deposits, was not fully as serviceable for all the legitimate requirements of trade. Anyhow, it is certain that the brokers' employment of deposits in discounting bills has a prejudicial effect on the system of currency and credit in the kingdom, by providing a less secure investment for bankers' balances than is de- sirable, and by paralysing the control of the Bank of England over the rate of interest. As Mr. Bagehot pointed out, ' under a more natural system, no part of the banking reserve would ever be lodged at the bill brokers.' Stock brokers happily do not receive deposits ; but ' they lend large sums on foreign bonds, or railway shares, or other such securities, and borrow these sums from bankers, de- positing the securities with the bankers, and generally, though not always, giving their guarantee.' This is financing, and not brokerage business ; stock brokers as such have no occasion to borrow on the securities which, within their legitimate functions, they have simply to transfer from the vendor to the purchaser, on his paying the purchase-money. The gains, with the usual penalty of occasional losses inci- dental to these borrowings, give an unhealthy stimulus to a class of business which more particularly attracts and encourages traffic in foreign securities. The noxious result of this departure by stock brokers from their proper functions is to provide a less secure invest- 124 A HANDBOOK ON GOLD AND SILVER. ment for bankers' balances than is desirable, and to draw some of the banks into the business of financing, as distin- guished from legitimate banking. The baneful influence of bill brokers and stock brokers upon the system of currency and credit in the country might be prevented, in a measure, by restricting loans to both, and the flow of deposits to the former. The gradual floating of some 120 millions of exchequer bills of the English Treasury and quasi-excheqaer bills to be issued by the Secretary of State for India, would withdraw bankers' balances from the brokers ; and with the increasing need for a safe investment of this kind, that amount might be enlarged. The Indian Secretary of State's exchequer bills would not increase the amount of Indian debt held in England, for a corresponding amount of sterling loans bearing higher interest could be discharged. Next : the bi)l brokers and the joint-stock banks obtain on interest enormous deposits. The rates formerly allowed were so high as three, four, and five per cent. ; but since the accumulation of unemployed funds in London, they have been reduced. To a great extent the practice must have ceased. The rates of interest, observed the ' Economist ' of August 4, 1877, were 'especially attractive to the classes at the two extremes of the general and mercantile public, namely, the humbler people whose savings are in fifties and hundreds, and the great commercial houses whose occasional surpluses are scores of thousands. For the public safety, the allowance of interest by banks and brokers, on deposits with- drawable under one month's notice, might cease ; and if the land laws be revised, so as to make verification of titles easy, and the transfer of title cheap and expeditious, a new class of banks would spring up, which, by profitable advances on land, could outbid the joint-stock banks and bill brokers, in the allowance of interest to depositors. The overshadowing influence of the present holders of the mass of deposits in EEMEDIAL MEASURES. 125 the country would be destroyed ; and the Bank of England would resume its former control over the rate of interest. The action of credit, through the deposits with bill brokers and with joint-stock banks, on the banking reserve of the Bank of England, would cease ; for the new class of banks that would lend on mortgages of land would not be affected by the commercial crises which gather force from the weakening or distribution of what to a great extent is personal credit. With such a revision of the land laws as might freely attract capital to land, the yield of land would be nearly doubled ; that is to say, the country would pay for some ten million quarters of wheat less to foreign countries. At 4Ss. a quarter, this would reduce by above twenty millions the casual indebtedness which now causes a drain of gold. Similarly, with a prosperous agriculture, the home market for manufactures would be enlarged ; that is to say, the charges for interest and for depreciation of stock and plant, which now heavily weight the costs of production, would be paid, perhaps entirely, from the extra profit on the home trade ; and England would then be enabled to export to foreign countries at a redaction upon present prices, even though wages and raw materials were not cheapened. These two influences in lessening the foreign drain would be supplemented by the settlement of a great mass of the transactions between India and the West, through mere transfers in the accounts of the Bank of England, as explained in a previous chapter. The continuous drain of gold from London to the country- might also be corrected by a re-coinage of the English silver currency, and an enlargement of the limits of legal tender for silver. If 20 per cent, more silver be put into the shilling, the limit could be safely enlarged. A subsidiary paper currency, of which the notes (£1 to £S) might be payable in silver, should also be issued. The silver shilling might be 126. A HANDBOOK ON GOLD AND SILVER. legal tender up to one hundred shillings; the subsidiary paper currency payable in silver could be legal tender up to one hundred pounds. It was stated in evidence before the Select Committee on Banks of Issue in 1875, that sovereigns and half-sovereigns (more especially the latter) are largely employed in periodical settlements of wages, but that they quickly return from circulation, being soon replaced by silver. It cannot be doubted that a silver currency of legal tender up to one hundred shillings, sustaining a subsidiary paper currency of legal tender up to one hundred pounds, would effectually stop the autumnal drain of gold. The considera- tions which restrict the amount of legal tender of a subsidiary metallic currency have not the same force in limiting the legal tender of a subsidiary paper currency payable in silver ; hence the larger limit of one hundred pounds which is suggested for the latter. It will be said that gold coins displaced by the enlarged silver currency here suggested would be exported, and that thereby the stock of gold in the country would be diminished. But no harm would arise. For any purposes which gold serves in a crisis, the gold coins in circulation, in strata of society where silver would displace gold, might just as well not be there. The gold thus circulating among the people would certainly not be returned to the Bank in a time of crisis; while the action of a panic (through the deposits) upon the gold reserve is too intense to be affected by any amounts of gold which, under present circumstances, could by special efforts be collected out of the amount in retail circulation. Thus, we see that if the City, instead of shrieking when gold temporarily leaves a country to which all other countries are indebted, would resolutely set about a reform of the English system of credit and currency, it would shake off an oppressive nightmare. At the same time, the reform would secure other vital LABOUE AND CAPITAL. 127 interests. Unless the produce of the land be nearly doubled by a free application of capital, the wages fund for improving the condition of agricultural labourers cannot be increased, and the growing foreign competition would necessitate a fall of rents. During the transition the relations between land- lords and tenants would be strained, and Mr. Arch might find an accession of followers among the farmers. At the same time a diminished market for home manufactures, coinciding with a lessened demand from abroad, would widen the breach between Labour and Capital. When the agitation for free trade began, masters and workmen in the manufacturing districts were arrayed against landowners and farmers. The consummation of free trade finds England isolated by a barrier of protective duties against her on every side ; and at this critical time, when from every feeling of patriotism and humanity, and from a sense of responsibility for the duties of wealth and property, England should present an united front to the world, she is tending to the worst form of disunion — a widening gulf of separation between rich and poor, between capital and labour, masters and workmen, landlords and those who live on their estates. Inordinate luxury, an infallible sign of a country's approaching decay, appears to be stealing over the nation, though happily its incipient growth can be easily stopped : amongst the rich, a luxury of land, which weakens a sense of the duties of property, by extreme indulgence of the craving for social distinction ; among the poor, the luxury of drunkenness, which enervates, excites a craving for short time, deteriorates the quality of labour, and creates a sullen disposition towards capital. Among both, a luxury which by lessening production threatens a growth of pauperism, ignorance, and vice ; attests the failure of property in the main duty which is the only charter of its rights that a revolution would respect (because an increase or decline 128 A HANDBOOK ON GOLD AND SILVER. of production means tlie well-being or wretchedness of those who live on the land) ; and proclaims that among a people whose energy and enterprise spread British commerce over the world, a proportion of the labouring poor, sufficiently large to procure a reduction of hours of labour, are too enervated and listless to care to raise their scale of well- being by work. In the country, a luxury which, stealing over both rich and poor, will enervate the vigour and destroy the life of the na.tion. Sumptuary laws are accepted as a necessity when luxury bas begun to eat into the vitals of a nation ; and as a drunken Englishman is at the base, while the perfect English gentle- man is at the summit of humanity, it is hardly too strong an expression to say that our statesmen and our Parliament will be undutiful to their country if they any longer neglect to grapple effectively with the vice of drunkenness. In a climate like that of England, the moderate use of liquor must perhaps be accepted as a necessity ; but, as with sumptuary laws, so in dealing with what, among the poor, generally passes from a necessary to a luxurious indulgence, the object of an excise reform should be, not to prohibit the use of liquor, but to keep it at some distance from, or in some way to make an excessive supply of it difficult of, attainment by, those who are prone to turn indulgence into a vice. This has been accomplished among the European soldiers in India with the happiest results. As to the luxury of land : we borrow the phrase from the advocates of letting things remain as they are, who contend that so long as land is a luxury for which persons are willing to pay a fancy price, it is vain to talk about measures for facilitating the application of capital to land ; the buyers at a fancy price must keep out those who could invest only at a remunerative price. Mr. Goschen, however, has taught us that there are two ways of looking at the same thing. In a country with overflowing riches, where the land produces ENGLISH WASTE OF LAND. 129 only half of what it could yield under a sufficient application of capital to it, one half of the land is a luxury in which the country indulges, on a scale of extravagance for which it would be difficult to find a parallel. As England cannot claim exemption from the usual fate of spendthrifts, she must be content to abdicate her commercial and political supremacy if she continues this profligate waste of God's gifts : a waste which, to gratify a petty craving for social distinction, keeps myriads who live on the land in a wretched state of existence, and causes the strength, the bone and sinews of the nation to deteriorate, from poor food on scanty wages. For this waste there must be moral retribution ; and for a nation, the only moral retribution is in this world, namely, in its decline and fall. This division of the land into large estates, — ^with pro- prietors who have failed in their principal duty, inasmiich as the land produces only half of what it should, — with agricultural labourers who are wretchedly poor, and with farmers who are nowhere, for any interest they have in laying out capital on improvements — is a condition of things which is morally deteriorating to the landowners and to the country. If the landowners who have received their estates from ancestors that have handed down ennobling traditions of many generations, only knew their true interest and that of their country, they would systematically pursue the object of raising, from among their tenantry, farmers into proprietors of land, through the help which banks would afford under a revision of the land laws, and their rural labourers generally so much higher in the scale of education and living, that frugality and intelligence would create gradations even among them. The agricultural interest thus organised, with compact and serried ranks, would lead the public opinion which now it only follows. The respect of the rich for the poor, which these relations would foster, would send upwards a current of healthful manly feeling. 130 A HANDBOOK ON GOLD AND SILVER. instinctive in the mass of the Anglo-Saxon race, which would countervail the enfeebling influence of commerce. Commerce may bring wealth, but a nation's manly reso- lute will is derived from its agriculture, from the children of the soil. When the influence of the owners of land predo- minates, whatever may be its other defects, the spirit of the nation will at least be manly, and daring in deeds of high emprise. Commerce is the handmaid of civilisation ; land should remain her master. The associations that arouse patriotism or awaken the martial ardour which has built up the English empire, are connected with land. England's proud boast is of her virgin soil ; her resolve is that no nation shall invade her land. Her armies go forth to fight not for merchandise ; the thin red line which has carried British armies to distinction and renown followed colours on which were inscribed various counties of rural England, Ireland, or Scotland. The militia is still a rural institution. The traditions of the sacrifices, and of the endurance in long- continued struggles and unequal contests, by which England gained her supremacy among the nations, have been trans- mitted to us from a time when the resolute will that governed her foreign policy was derived from the land. "We flatter ourselves that we have changed all this for the better. We profess to desire peace for all nations; and, with England's supremacy among them, — that is, with a place accorded to her in the first rank of the special con- stables who are sworn to prevent breaches of the peace and of international law, by the timely use (not merely by an exhibition) of their batons as special constables, — England's duty it is to preserve order ; but, in spite of all this pro- fession of peace, and of the influence which we are supposed to exercise in Europe, somehow nations with prodigious armaments, prodigious debts, prodigious taxes, have multi- plied under our policy of peace at any price. We profess more morality and humanitarianism in our LANDLORDS AND COMMERCE. 131 foreign policy ; but somehow, tlie nations, instead of ad- miring the spirit of our policy, think that our acts are shifty, not manly and straightforward ; that we are not reliable friends ; and though not cowardly foes (the courage and might of England have been too clearly established for that, by past governments of landlords), but still, foes of not any account, for we wont fight. And when, to disabuse a mistaken scepticism, we tell the nations that we will fight, we are careful to impress upon them that we will fight not from any generous recognition of our duty to allies, or of our duty, as among the first of the nations, to take an active, effectual part in supporting the side of order, but for "^ British interests : ' a phrase which smacks of commerce. The first Napoleon had a political insight at least as keen as Prince Bismarck's, with a military genius at least as great as Von Moltke's, in handling great armies, and more brilliant in the struggles of an unequal contest. Tet England quailed not, felt no sense of inferiority, when that man closed Europe against her. In the present day she is content to acknowledge, once France, next Germany, as the leading power in Europe. In that earlier period the reso- lute will of the landlords governed the foreign policy of England, which in the present day is shaped by the less healthful instincts of commerce. The resolute will of England's former statesmen must now be sought in Germany, in Erauce, in the United States, where the influence of land is supreme. The patriotism, the generosity, the self-sacrifice, the noble instincts which the landed gentry have inherited from ancestors whose deeds are cherished traditions of Englishmen, are not dead. The sense of duty which has ever animated them is still a power that can revolutionise the agricultural districts of England in the spirit of a true conservatism, unlike the revolution that, at no distant time, may otherwise K 2 132 A HANDBOOK ON GOLD AND SltVEE. sweep over them. The evil is known, the remedy is appa- rent ; the application is in their hands. A great and rapid improvement of the agricultural districts is required to pre- serve the strength of the nation, energise its forces, sustain its manufactures, help the reform of its system of currency and commerce, close the widening breach between rich and poor, and unite in the bonds of mutual dependence, all classes in the seagirt isle which may soon need all the strength of her sons. For soon may she have to withstand, as of yore, towering ambitions, and, at the end of the struggle, to compel a general disarmament, and so deliver the nations from a burden that is cruelly bowing down their backs, and op- pressing them with a misery worse than the Bulgarian massacres, because it is a misery worse than death. Our subject was gold : the getting more of it ; the loss which the country would sustain, the fearful injury to the commercial and industrial system that would result, from losing any of it ; and the solution we arrive at is, — lift up the agricultural poor from their slough of despond, rescue the masses of the English population from the one vice which neutralises their many virtues ; and through the beneficial results which will follow, heal the breach that is widening between rich and poor. The disorders in the world of commerce have been caused by the indebtedness of nations, mainly from bloated armaments kept up for the ambition of mighty empires, from much borrowing for rash or dishonest speculations in the haste to get rich, and to rise thereby in the social scale. The spirit of progress — of nations to power, of men towards wealth — broke away from the spirit of religion; but the schemes of the mighty are confounded. The nations most ambitious, and with the largest armies, are seething with discontent; in the country most engaged in getting wealth, productive forces are being para- lysed by a growth of drunkenness, which creates a sullen temper J;owards capital, and by the wretched condition of SOCIAL DUTIES. 133 agricultural districts that would have revived the realities of a once happy England, if there had been directed into them one hundredth part of the fertilising streams of wealth that flowed to foreign countries, under the disastrous effect of the land laws. The result, everywhere, is a growing sepa- ration of rich from poor — of capital from labour. The remedy is, to catch the spirit of the teachings of the car- penter's Son; and it is an encouraging circumstance that at the present time, the Church of England, the organisation best fitted for the work, is awakening to the necessity of making the rich and poor bear one another's burdens : the poor, by having charity for the rich; the rich, by having respect for the poor, and lifting them from the mire of igno- rance, drunkenness, and vice. 134 A HANDBOOK ON GOLD AND SILVEE. CHAPTER X. CAUSES OP THE DEPEESSION OP TRADE. Our ramble in the last chapter was with a purpose: it brought under survey subjects seemingly apart, but which are intimately connected, namely, the prospects of British manufactures and agriculture, amid a growing separation of rich from poor ; and a mechanism of currency and credit in England, so delicate that it may any day snap under the rude touch of a foreign hand. We saw, in a general way, that the causes of the universal depression of trade, which has continued now for above four years, must permanently bear down British industry^ unless certain measures be adopted which, additionally, would brace up and strengthen the system of credit and currency in England. It will repay us to investigate the first part of this subject in a little more detail. 2. For a prosperous foreign trade, a country must de- pend on — I. Natural Advantages. (a) Soil.— The yield of wheat in the United Kingdom is two and a half times that in the United States, Russia, and Hungary ; but this arises mainly from expensive farming. (b) Minerals (coal and iron) indispensable to manufactwres. The great extension of railways on the Continent and in the United States (mainly with British capital) developed abroad mining industries, and at home improved old mines and opened out new ones. The aggregate result was, first, a vast increase of yearly production ; secondly, a great rise of THE LABOUR QUESTION. 135 prices, soon accompanied, througli th.e custom in these indus- tries, by a considerable rise of wages. With the completion of the railways, the extra demand has ceased ; but the extra production has not, from the difficulty of closing works on which capital has been sunk, and from a reluctance to dis- perse skilled labourers. In consequence, the relations be- tween masters and workmen, as determined by wages, are strained, particularly in England ; and matters will not right themselves until the fall in the prices of coal and iron shall have destroyed the production on the Continent and in the United States. The present difficulty is nothing more than the competition of British capital, exported abroad through finance companies and stock-brokers, with the British capital invested at home in mining enterprise. (c) Labour. — Skilled labour is an acquired advantage, but we may consider both it and unskilled labour under the pre- sent division. When England entered on her career of free-trade, she had a great pull over the numerous Roman Catholic countries on the Continent in her much fewer holi- days ; but she has surrendered this advantage in her now short hours of labour. Again, she had, and to this day she retains, a superiority in the greater strength, activity, earnestness in work, and endurance of her labourers ; but much of these advantages she has surrendered by her acquiescence in a frightful increase of drunkenness. There is a consequent sullenness in the disposition of workmen towards employers, which the latter have begun to withstand in a way that js not for the country's good, viz., by importing foreign labour and exporting British capital, thus burning the candle at both ends. Of like noxious character are the combinations among workmen, for wages irrespective of results or of the quality of labour. Again, though the per- centage of rise of wages since 1848, among agricultural labourers, has been great, yet the actual amount of wages compares unfavourably with that in other industries, mainly 136 A HANDBOOK ON GOLD AND SILVEE. from the insufiScient production obtained from the land, owing to the restricted capital which is laid out on it, the result being a migration from agriculture to other employ- ments, and an increase of permanent pasturage, as when Eome began to decline. Lastly, whUe short hours, intemperance, and combina- tions among workmen for wages irrespective of skill, have been diminishing the efficiency of British labour — on the Continent and in the United States skilled labour is being multiplied through the influence of those railways and canals which British capital has helped to create; for wherever these are in operation, there springs up a local demand for various handicrafts, which creates a local supply. n. Acquired Advantages. (a) A large, home market. — When the home market is large, proportionately to the foreign trade, the profits on the home trade, probably, cover wear and tear and interest on the capital sunk in buildings, machinery, and plant. When this is the case, the manufacturers are able to push their wares in foreign markets. In 1845, the proportion of Eng- land's home trade to her foreign was very great ; and con- versely, on the Continent and in the United States, the proportion of home manufactures to British goods, in their own markets for those goods, was comparatively small. In 1877, the proportions at home and abroad are reversed. England's home market now bears but a small proportion to her foreign, thus throwing on her exports to foreign coun- tries a greater burden in respect of wear and tear, buildings, and plant. Had the production of the land greatly advanced in the interval, in England, even though some way behind the foreign trade, things would have been more favourable to British industry. (&) Cheaper raw materials than a/re available to other countries. — Until the opening of the Suez Canal, England FREE TEADE. 137 obtained her raw materials from tlie Bast, at a cheaper price than the countries on the Continent. This advantage has been lost. (c) Communications, viz., railways and canals. — In both these respects England had great advantages over other nations when she began that course of free-trade and of international lending, which has resulted in raising up against her a barrier of protective duties in every country on the Continent, except Turkey and Portugal. Since then, to the countries which try to do without her manufactures, England has, in the past eighteen years, lavishly given her capital for the construction of railways and canals ; and on Turkey, which has readily received her merchandise, England has bestowed her staunch generous friendship. The result is a greater internal trade in the countries benefited by English capital, which, with an increase of taxation — including increase of customs duties — for paying interest on the sums freely lent for bloated armaments on the Continent, by England, the apostle of peace at any price, has restricted the continental markets for British manufactures. (6) Machinery and implements. — With the extension of railways abroad, through British capital, and the growth of protective duties and of local manufactures, on account of huge borrowings by foreign Governments, the advantage under these heads is not so great to England now as in 1848. (c) Capital. — In this respect, too, England began her career of free-trade under great advantages. Before 1848, and down to 1860 or 1862, British capital was but little employed in industries on the Continent, which compete with British manufactures ; and if the foreign countries had been left to improve their means of competition, by acquisi- tions of capital out of their savings, the competition to this day might have been comparatively unimportant. But British capital was exported to the Continent, mainly through the 138 A HANDBOOK ON GOLD AND SILVEB. instrumentality of finance companies ; — and the result in the present day is a stagnation of foreign demand for British manufactures. 3. The foregoing statement of facts is, apparently, directed in part against free-trade ; but the facts would be misread, were any lesson adverse to free-trade to be drawn from them. The main lesson which they convey is, that England began her career of free-trade with certain advantages, which gave her superior facilities for a profitable foreign trade ; and that she surrendered these advantages, one by one, chiefly, nay entirely, by the exportation of British capital through finance companies, and in loans to foreign Grovernments. Even the combinations among workmen, which led to short hours and a deterioration of the quality of British labour, are attributable to this exportation of British capital, which caused the inflation of prices, and the consequent advance of wages that afterwards augmented the power of trades- unions, when the subsidence of inflated prices brought on the struggle, by workmen, against a consequent reduction of wages. 4. The practical deduction from this lesson is, that British capital should be more freely spent at home, in stimulating British industry, and that the pernicious working of the finance companies should be stopped. 5. But, in order that British capital may be more freely employed at home, it is necessary that the home market for British manufactures should be enlarged, and that facilities should be provided for that investment of capital in the land which, according to the testimony of Lord Leicester and the Earl of Derby, would nearly double its produce. The object is worthy of the patriotism of England's landed gentry, and it cannot be attained, except through their initiation of reforms conceived in a spirit of true conservatism. 6. The objection, that in some parts of England the soil EFFECTS OF OVER-MUCH EXPORTATION. 139 does not admit of an outlay of capital in large farming, is not of mucli account ; — because those districts are the best for applying the lessons that France, her peasant proprietors, and the solid position of the Bank of France, teach England in respect of the efSciency, and the conservative tendency, of the system of peasant proprietorship for that kind of agriculture in which the land requires minute husbandry, and the steady gradual improvements that are accumulated upon it from the yearly savings of peasant proprietors, such as those who bought back from foreign countries a great part of the War Indemnity Loan. 7. The only effects which we have considered, as yet, of the too free exportation of British capital to foreign countries since 1860, are, first, the inflation of production and prices, with their subsequent collapse, and the disorganisation of the relations between masters and workmen ; secondly, the imposition abroad of protective duties for meeting the charge for interest on foreign loans, and the consequent growth of local manufactures. Outside France, the borrowing by foreign States was accompanied by increased issues of incon- vertible paper money, which depreciated the currency. When, to this depreciation of the paper currency, was added the further depreciation of silver, the difficulty of remitting interest to the foreign holders of securities increased, and, with it, increased the disadvantage of holding those securities abroad, and of sending goods to the countries on the Continent whose silver currency was depreciated. Securities were con- sequently returned to the borrowing countries ; that is to say, these countries had to buy back their securities by an increase of exports, which, abroad, sent down the price of those expoi'ts, and presented the appearance of a rise in the value of gold. 8. Similar results, though from a different cause, hap- pened in silver-using countries like India, which are solvent ; the depreciation of silver, and the consequent fall in the 140 A HANDBOOK ON GOLD AND SILVEE. sterling exchange with the rupee, acted like a bounty on exports, so that increased quantities of Asiatic products were sent to Europe, to the lowering of their gold price abroad. Excepting tea, these products have not a monopoly of the Western markets ; they compete there with other Western products, which are used for the same purposes as the Asiatic. It has necessarily resulted that the depreciation of silver has brought down the price of both Western and Eastern productions in respect of those articles in which the two hemispheres compete. 9. But the effect has not stopped there : the Western countries, whose products have depreciated in the London and Paris markets from the competition of Asiatic produce, have thereby lost some of their purchasing power, with the result, necessarily, of reducing their imports of foreign commodities. 10. Apparently, then, the purchase back of their secu- rities by many States in Europe, and the depreciation of silver, have greatly contributed to the stagnation of trade. And the indefinite prolongation of the second cause, while silver may steadily fall every yeai", would be terrible. It may suit the East foolishly to give a bounty on exports to the West, by retaining as money silver which continues to de- preciate ; but will it consist with the wisdom of the West to receive the Asiatic products in exchange, not for Western merchandise, but for Californian silver, which will displace the exports of that merchandise ? Especially, will the West remain passive under the decadence not merely of its export trade to the East, but partly of the trade among occidental countries themselves ? Asiatic exports (continually increasing under the stimulus of the silver bounty) — would gradually expel from European markets, first one, then some other competing Western product, and (with it) the manufactvire (British or other) for which that product may have exchanged in those markets. In fact, the depreciation of silver, rela- PROSPECTS OF BRITISH COMMERCE, 141 tively to gold, means the depreciation in the West of all Asiatic produce, — that is, its competition there, on terms ruinous to all rival Western agricultural produce, and de- pressing to all Western manufactures for which, practically, that produce used to be exchanged. The demonetisation of silver would stop this ruinous competition, without raising the value of gold ; for the silver rupee Council drafts, which now reduce the price of silver in London, would, with the force of 15 millions sterling, a year, of gold rupee drafts, prevent an enhancement of the value of gold. The relief to the cotton industry would be instan- taneous ; and the new competition from Indian wheat, with which the British farmer is threatened, would be averted. A period of respite would be obtained for British trade, during which measures for invigorating the agricul- tural and manufacturing industries of the kingdom could be considered. Two papers in the Appendix show the unpromising character of the cotton and agricultural industries. Re- specting the latter we give, on p. 143, a table of statistics taken from the ' Chamber of Agriculture Journal.' The acreage is for the calendar year ; the other figures are for the harvest years, from 1st September to 31st August. Thus 1866 represents the harvest year 1866-67. There is some error in the acreage for 1877; the increase in that year over 1876, in Great Britain, having been inconsiderable. It has been said that, even with its utmost efforts, British agriculture could not provide sufficient wheat for an ever- increasing population, and that, accordingly, what British agriculture cannot supply must be obtained from abroaid. But, firstly, it cannot be maintained that, even years back, when British agriculture provided more than 12 million quarters a year of corn, it was unequal, if only there were a free application of capital to the land, to the provision of 142 A HANDBOOK ON GOLD AND SILVER. nearly double the quai;itity, that is, of the whole yearly requirement. We have the testimony of Earl Derby and Lord Leicester, that the produce of the land can be nearly doubled in the way indicated. Moreover, the figures show that foreign corn does not merely supply what British agri- culture cannot provide. The provision by the latter has fallen off by 3 or 3^ million quarters, and the supply from abroad has increased by rather more than that. The British cultivation of wheat has been retrograding ; that of oats too, on which Mr. Caird relied for making good the decline in wheat cultivation, has been falling off; and the very greatly increased imports of maize are assailing, with a close com- petition, all the grains which are used for distillation, or as food for cattle. Lastly, the fast developing trade with TJ^Torth and South America, in meat and cattle, will attack British agriculture in that its last stronghold, which is also the first marked symptom of a decay of the British Empire that, happily, can yet be averted. The influences adverse to British agriculture arise from the competition, first, of the American farmers, who do not pay rent; second, of indebted nations, like Hungary and Russia, that are forced to export agricultural produce to pay interest on debt : as the debts increase, the force of this influence increases, and how greatly it has augmented of late years, all the world knows ; third, the depreciation of silver, which affects principally agricultural countries, and which, in the solvent silver-using countries in the East, acts like a bounty on the export of wheat and of other agricultural produce to the world's market, viz., England. A passive acquiescence in the effect of these tremendous influences will certainly not help to sustain and strengthen British agriculture, which ought to be the best customer of British manufactures. Special measures are necessary. One of the influences can be extirpated by the demonetisation of silver ; the other two can be counteracted by investing capital freely COEN PRODUCE OF ENGLAND. 143 in land, for this will liave the double effect of withdrawing part of the British capital now floating abroad, and so reducing the indebtedness to England of the competing agricultural countries, and of invigorating British agri- culture, even to the doubling, wellnigh, of the production of the land, whereby the English farmer wiU not succumb on his own soil to foreign agriculture. Wheat Crops op the United Kingdom. {Three GOO'S omitted.) Imports of Ayailable "Wheat and Total Average Price Yield per Consumption Flour during available of British Acres Acre after deducting the Harvest for Con- Wheat for 12 Seed Year, less Exports sumption Months, July 1 to June 30 Bushels Quarters Quarters Quarters I. d. 1866 3,661 27 11,440 7,600 19,040 58 1867 3,640 25 10,390 9,010 19,400 69 3 1868 3,951 34 15,790 7,880 23,670 51 8 1869 3,982 27 12,490 9,580 22,070 45 11 1870 3,773 32 14,100 7,950 22,050 63 5 1871 Average 1872 3,831 27 11,970 9,320 21,290 55 3 3,806 — 12,696 8,557 21,253 — 3,840 23 10,110 11,720 21,830 67 1 1873 3,670 25 10,550 11,230 21,780 61 3 1874 3,833 31 13,700 11,640 25,340 46 4 1875 3,514 23 9,124 13,940 23,064 46 3 1876 3,125 27 9,668 12,150 21,818 55 3 1877 Average 3,821 24 9,035 (13,465) (22,600) — 3,550 — 10,364 12,357 22,722 — The increasing dependence of England on foreign corn must be painful and alarming to every feeling of patriotism ; and perhaps, unhappily, one would indulge in truth and sober sadness, more than in fancy, were he to trace the coincidence between the decadence of British agriculture and the decadence, in England's foreign policy, of the undaunted spirit and the resolute will which marked that policy in the days of forefathers whom we are proud of, without emulating ; that is, in days when the influence of 144 A HANDBOOK ON GOLD AND SILVEE. land on the spirit and in the councils of the country was supreme. Thus the highest interests of the nation, even its national existence, call for the revision of the land laws, in a spirit of hearty co-operation by landlords, such as shall promote the free application of capital to the land, and enable the landlords to initiate, and steadily pursue, a policy of lifting all classes that are now engaged in agriculture in the scale of well-being. The instincts of a generous patriotism would iind in this policy the double reward of not only reviving the manly spirit, the contentment, and the kindly social relations of once happy rural England, but also of restoring the prosperity of British manufactures, and so effectually healing those differences between masters and workmen which, else, may widen into an impassable gulf of separa- tion of rich from poor at a time when England may, any day, have to withstand an irruption of the barbarians. With the elevation and prosperity of the agricultural classes, and with an enlarged home market for British manu- factures, the Bank of England would soon attain to the solid position of the Bank of France. 145 CHAPTEE XI. INDIA CAN NO LONGER ENDUKE A SILVEB CUEEBNOT. Non possumus — we cannot give tlie gold, is the thouglit, if not tlie reply, of many in England, wlien a gold currency for India is proposed. Non possumus — we cannot afford to remain as we are, is India's reply to those who tell her that she must be content with her silver currency. The simple fact is, that the revenue of India does not expand so fast or freely as to be able to overtake, or even approach, in its yearly increase, the rate at which the yearly charge for loss by exchange must advance with a progressive depreciation of silver; vjjbile again, the yearly borrowing for public works expenditure extraordinary, causes a progressive augmentation of the charge for interest at the rate of above £200,000 a year. If, for instance, we take the gross revenue, the amount shows but feeble progression since 1869-70, thus — {Millions sterling.') 1863-4 44-42 1867-8 48-63 1871-2 50-11 1876-6 51-31 1864-5 45.17 1868-9 49-26 1872-3 60-22 1876-7 60-28 1865-6 46-42 1869-70 60-90 1873-4 49-60 1877-8 51-26 1866-7 48-53 1870-1 61-41 1874-5 60-67 Erom 1863-4 to 1867-8 the increase of revenue was four millions, or, excluding income tax (which was £830,000 less in 1867-8 than in 1863-4) the increase was nearly five millions; 1877-8 shows an excess of 2| millions compared with 1867-8, and of only one-third of a million compared 146 A HANDBOOK ON GOLD AND SILVER. ■with 1869-70. Since 1870-1 the revenue has been stationary, with a tendency to decline. Comparing similarly the growth of the charges for in- terest on debt, loss by exchange, and net military expen- diture, we find — {Millions sterling.) 1863-4 1867-8 1869-70 1870-1 1871-2 1873-4 1876-6 1876-7 1877-8 Interest . Loss by exchange . Gain by railway ex- change Net military expen- diture . 4-69 •24 4-91 •21 4-98 •39 5-31 •74 5^47 •45 5-25 •99 5-18 1-43 5-41 2-14 5-65 1-60 4-93 13-66 5-12 15'34 5-37 •25 15-25 6-05 •30 15'12 6^92 •26 14-73 6-24 •33 14-22 •36 14^26 7-55 •42 15^30 7-25 •35 15-35 We have seen that the revenue for 1877-8 shows an excess of only one-third million over that of 1869-70, while the items of interest and loss by exchange show an excess of nearly two millions, after deducting gain by railway exchange; the excess of charge has been met hf a decrease of ordinary Public Works' expenditure since 1869-70 to the extent of J2,200,000. Henceforth that saving will not be available to meet the progressive charge under these two unsightly heads of interest and loss by exchange. India may indeed gain something by reduction of military expenditure, which has increased through the charges raised against her by the War Office on account of home expenditure for British troops serving in India, for of these charges much seems wrong and apparently illegaL But the two other progressive items would soon exhaust and outstrip any such saving. The figures respecting interest do not show the really progressive character of that charge. In 1872-3, 16 J mil- lions sterling of 5 per cents, of rupee loans in India were converted, viz., 2| millions into 4 per cents, and the re- mainder into 4^ per cents., from which they will drop after INDIAN REVENUE. 147 seven years, or in 1879-80, to 4 percent. The actual saving of interest amounted to £93,698 a year, and tlie prospective saving will be £67,500. Again, in 1873-4, tlie capital stock of the East India Company was redeemed under arrange- ments which caused a saving of £450,000 a year, of which £341,516 accrued in 1874—5, and the remainder in 1875—6. Altogether the saving from these conversions of stock has amounted to £543,698 a year, so that the real increase of fresh charge for interest, since 1869-70, has been '67 plus '54, or 1'21 million sterling in eight years, or £150,000 a year. Latterly, however, the charge has increased at the rate of £280,000 a year ; for the reason that in the earlier years large surpluses on the ordinary account kept down the borrowing for Public Works extraordinary. We may take a closer view of the growth of revenue. To this end, it will be expedient to exclude receipts which arise out of expenditure. Such are those under Post-office, Telegraph, and Forests, Interest on Service Funds, and receipts in aid of Superannuation and Eetiruig allowances ; also other miscellaneous items which it is not necessary to recount. The survey, thus, will be confined to the heads of revenue proper, viz., the Land revenue, the Opium re- venue, the Income tax, and the indirect taxes under Excise, Customs, Salt, and Stamps. Respecting all of these, except Land revenue, a clearer idea of their growth may be obtained from the net revenue, after deducting charges of collection; but it would mislead to regard the Land revenue otherwise than in its gross amount, because the so-called charges for the collection of Land revenue are really charges for administration ; being mostly for the pay and expenses of officers and establishments that are employed, in some parts of India, on magisterial duties, and in the general adminis- tration of their districts, while in other parts they are additionally employed in adjudicating civil suits, the bulk of the expense for these services would have to be incurred L 2 148 A HANDBOOK ON GOLD AND SILVER. even were there no Land revenue or Excise or Stamp revenue to collect. The receipts are as follows : — {Minions sterling.') Net Revenue Grobb Lamd Eevebue 1 -rffi 1 Eyotwar Territories 1 1 Is 3 i 3 a ■ H 1 II •3ffi sS 1 Iff ^ i3 Mm if Im 1 1862-3 .^ _ . _ _ •16 •50 7-56 8^22 11-27 19-49 1863-4 19-9 4-5 10-1 1-1 •2 36-8 •24 •52 7^76 8^52 11-41 19-93 1864-5 19-7 5'0,10-9 1-0 •2 36'8 •19 •56 7^75 8^50 11^20 19^70 1865-6 20-1 6-610-7 •6 ■3 38-3 •22 •53 7^86 8^ei 11^45 20-06 1867-8 20'0 7-011-8 •5 •4 39-7 •23 •58 7-86 8^67 11^31 19-98 1868-9 19-9 6-7 11-9 •5 •3 39-3 •31 •57 7^62 8^50 11^37 19-87 1869-70 21-1 6-1 12-0 1-1 •5 40-8, •70 •64 8^05 9^89 11'67 21-06 1870-1 20-6 6-0 126 2-0 ■6 41 -71 •32 •60 ^•99 8^91 11^71 20-62 1871-2 20-5 7-6 12-5 ■8 •6 41 -91 38 65 ^•84 8^87 11^65 20-52 1872-3 21-3 6-9 12-9 •6 •4 42-li 39 66 S-44 9^49 11^86 21-35 1873-4 21-0 6-3 12-9 ■0 •5 40-7 39 75 3^14 9^28 11^76 21-04 1874^5 21-3 6'2 13-1 •0 •5 41-1 39 73 S^33 9^45 11^85 21-30 1876-6 21 '5 6-3 13-4 •0 •6 41 '8 41 82 3-23 9^46 12^04 21-50 1876-7 |i3^,te} 20-0 6-4 13'3 •0 •6 40-3 41 78 3^82 8^01 11^99 20-00 1877-8 Estimate 20-9 6-2 13-4 •0 ■7 41-2i-40 79 r-74 893 12-01 20-94 The following remarks are suggested by this table. I. Of the total increase of six millions since 1863-4, the Land revenue furnished only 1^ million, and we shall see presently that there is not much prospect of a material increase for some years. Omitting assessed taxes, the remaining heads increased from 15 millions in 1863-4 to 18-6 millions in 1869-70, 20-2 millions in 1872-3, and 20-3 millions in 1875-6 : showing a feeble progression since 1869-70. II. The net Opium revenue amounted, ia the six years from 1863-4 to 1869-70 (omitting 1866-7, a year of eleven months) to 35-9 millions, and in the six years from 1870-1 to 1875-6 to 39 "3 millions : giving a yearly average of INDIAN EXCISE- AND CUSTOMS. 149 6"98 millions in the first period, and of 6*55 millions in the second period. In the four years from 1873-4 to 1876-7, the yearly average was somewhat less, viz., 6'3 millions. Perhaps i8500,000 more can be gained by increasing the duty on Malwa opium, and selling more chests of Bengal opium. III. Under Excise, Customs, Salt and Stamps, the re- venue amounted to 10 millions in 1863-4, 12 millions in 1869-70, and 13'4 millions in 1875-6, showing an increase in twelve years of 3*3 milKons, or at the rate of £275,000 a year; but the bulk of the increase, namely, 1*9 million, was obtained by 1869-70, at the rate of £316,000 a year, and the subsequent increase up to 1875-6, viz. 1*4 million, was at the rate of only £233,000 a year. The Excise revenue increased from £1,670,000 in 1863-4, by £270,000, or to £1,940,000 in the next four years up to 1867-8 ; and by £294,000 or to £2,234,000 in the ensuing four years to 1871-2; but this steady progression was not afterwards maintained, the yearly average of the revenue from 1872-3 to 1874-5, in which latter year it amounted to £2,259,000, having been only £2,215,000. The revenue is being made over to the local Governments to improve, on the under-' standing that one half of any increase may be retained by them. ly. The Customs revenue gave a yearly average, from 1868-4 to 1867-8, of £2,192,000 ; it amounted in 1868-9 to £2,517,000; and its yearly average from 1869-70 to 1874-5 was £2,413,000. On the whole it has increased, mainly from the export duty on rice, the trade in which, from British Burmah, steadily increases. If the silver standard be retained for India, the revenue of £800,000 from the import duty on cotton goods will fall off; if a gold currency be introduced, the imports wUl improve, and with them the revenue ; for Manchester would no longer press for the abolition of a duty which really acts as a protective duty in 150 A HANDBOOK ON GOLD AND SILVER. its favour (see Appendix), when once relief, manifold greater tlian the repeal of tlie duty on cotton goods, may be afforded by raising the exchange to near two shillings the rupee, by means of a gold ciurency. V. The Salt revenue shows a steady progression, mainly from an increase of the salt duties, but latterly from an increase of consumption. The future progress of this revenue is uncertain; if the duties be equalised in the three Presidencies, by raising those in the minor Presidencies and lowering the duty in the Bengal Presidency, consumption may be checked in the former, while it would increase in the latter. If the consumption be checked, the result may be a decrease of revenue. In the Bengal Presidency, the reduc- tion of duty would lower the revenue on the present amount of consumption: it cannot be predicated whether the revenue on the extra consumption would neutralise the loss from the reduction of duty, and give a surplus besides ; the result must be awaited. Meanwhile, it can only be said that the prospect of any considerable increase of the salt revenue is not so sure as the certainty of a further and con- siderable depreciation of silver, with a consequent consi- derable increase of loss by exchange. VI. The Stamp revenue has increased partly from a revision of stamp duties, principally from an increase of litigation. It increased by £340,000 in 1864-5 over the amount in 1863-4 ; and 1870-1 exhibited a further excess over 1864-5, of £557,000, while 1874-5 showed another advance of J243,000. Doubtless, there will be further pro- gress; but half of any increase of the revenue will be retained by the local Governments ; and, furthermore, strong opinions respecting this tax on litigation may forbid its employment for counteracting loss from the deprecia- tion of silver, and the growth of charge for interest on account of borrowings for public works' extraordinary expen- diture. CANAL AND LAND EKVENUE OF INDIA. 151 VII. The Canal revenue (gross) amounted to £358,000 in 1867-8, and tlie Land revenue to 20 millions. In 1875-6, the former amounted to £518,000, and the Land revenue to 21^ millions. The total increase was £1,660,000, including £160,000 of Canal revenue. The net revenue from State Railways was £74,800 ; but it is increasing, and the estimate for 1877-8 amounted to £174,000. Of the increase under Land revenue, much the smaller part can be credited to canals, the greater portion having accrued from lands which are not under the canal systems; and of the increase obtained on such lands, the portion due to rise of prices, to better markets afforded by the State railways, and to increase of population, must be deducted. The augmenta- tion of fresh charge for interest since 1867-8 has amounted to 1:^ million sterling, of which the greater part was for irrigation works and State railways. The real charge for interest on the outlay for these works since 1867-8 exceeds, however, 1^ million sterling, for a considerable portion of the outlay was provided out of the surplus on the ordinary account, which, but for this application of it, would have been employed in reducing debt. It has been held by some that the way to provide India with more water is to pour out money like water ; but the great depreciation of silver will induce caution in making such experiments. VIII. The increase of Land revenue has occurred prin- cipally in the territories under ryotwar settlements, where the revenue improves not alone from a revision of the rates of assessment once in every thirty years (or at shorter in- tervals of ten or twenty years in districts which are in a backward state), but also from a yearly increase of cultiva- tion. In the provinces in the Bengal Presidency, under village settlements, the bulk of the iacrease of Land revenue occurs at the distant periodical revisions of settlement for twenty or thirty years, as above explained ; in the interval between two settlements there are minor increases, from 152 A HANDBOOK ON GOLD AND SILVER. lapses of tenures of rent-free lands, changes in the course of rivers, and the like ; but on the whole these are not of much account. IX. In the provinces in the Bengal Presidency under village settlements, the revision of settlements was concluded in Oudh about 1874-5, in the Central Provinces a little earlier ; in the North-western Provinces it has been nearly- finished; in the Punjab the greater portion has been finished, and only poor and generally outlying districts re- main for re-settlement. In the territories, collectively, under village settlements, the Land revenue increased from 11-27 millions in 1862-3 to 11-71 millions in 1870-1, or by £440,000; and by 1875-6 it rose to 12-04 millions by a further increase of -33 million. The total increase from 1862-8 up to 1875-6 was £770,000 upon a revenue in 1862-3 of ll-27millions; or, excluding the Lower Provinces of Bengal, which are under a permanent settlement, the increase was £735,000 on a revenue in 1862-3 of £7,527,000, or not quite 10 per cent, despite the great increase of prices since 1862-3. Taking the North-western Provinces and the Punjab, which contain the canal systems on which the largest expenditure for public works extraordinary has been incurred, the increase in Land revenue in 1875-6, compared with 1862-3, was £279,000, or, owing to transfers of Canal revenue from the head of Land revenue after 1862-3, we may reckon it at £479,000 or £500,000 upon a Land revenue in 1862-3 of £5,760,000 ; thus arriving again at an increase of rather less than 10 per cent. As even the whole of this, if credited to a rise of prices and to increase of cultivation since the pre- previous ten to thirty years' settlements, would appear to represent a not over liberal increase, but little margin, out of this augmentation of the Land revenue in the Punjab and the North-western Provinces, appears to be available for a credit to irrigation works. X. In the territories under ryotwar settlement, the Land MADRAS AND BOMBAY EEVENUE. 153 revenue rose from 8'22 millions in 1862-3 to 9*46 millions in 1875-6. Of the increase of 1*24 milHon, ;g670,000 oc- curred in the considerable territories in the Madras and Bombay Presidencies, and all but £69,000 of the remainder in the two provinces of British Burmah and Assam. In Assam the increase amounted to £177,000, of which the greater part, viz. £134,000, occurred from a revision of assessment, and the discovery of concealed cultivation, in 1868-9 and 1869-70. By 1873-4 there was a further in- crease of £28,000, with another £10,000 in 1874-5, and but little improvement since. In British Burmah, there was steady progression from £495,000 in 1862-3 to £639,000 in 1869-70, and £824,000 in 1875-6, but in 1876-7 the revenue declined to £780,000. The increase has occurred partly from increase of population (for receipts from a capitation tax are included under Land revenue), partly from a revision of assessment, and the remainder from an increase of cul- tivation and discovery of concealed cultivation in the course of settlements. Perhaps the smallest part of the increase has been from revision of rates of assessment. On the whole, it is unlikely that the future increase of Land revenue in British Burmah and Assam will, for some years, be at the same rate as hitherto, or that it can make any sensible ad- dition to the assets for meeting the growing loss by ex- change. XI. The increase of Land revenue in the Madras and Bombay Presidencies has been as follows : {Millions sterling.) 1863-4 Yearly Average from 1863-4 to 1868-8 1869-70 Yearly Average from 1870-1 to 1875-6 1875-6 Yearly Average from 1873-4 to 1875-6 Madras Presidency . Bombay Presidency . 4-2 3-3 4-2 3-5 4-5 3-6 4-5 3-6 4-5 3-7 4-5 3-7 Since 1863-4, the total increase up to 1875-6 amounted 154 A HANDBOOK ON GOLD AND SILVEE. to £700,000 upon a Land revenue of 7^ millions sterling, thus again presenting what would seem to be a recognised conventional rate of 10 per cent., notwithstanding a great increase of prices. From 1863-4 to 1868^9 the Land revenue in the Madras Presidency was stationary; in the following year it increased by £300,000 to an amount at which it has since remained. In the Bombay Presidency, the increase up to 1869-70 was £300,000; in 1872-8 there was a spurt the revenue having amounted to 3* 75 millions; but as in the previous year it exhibited the unusually low amount of 3 '40 millions, we may reckon its permanent increase to 3*7 millions from 1873-4. There is not much scope for further improvement, for some time. XII. Thus, we find that in the provinces of the Bengal Presidency which are under village settlements, and in the ryotwar presidencies of Madras and Bombay, the increase of Land revenue since 1863-4 has been small — barely 10 per cent, upon the amount in that year, notwithstanding a rise of prices. The reason of this inadequate increase is that an additional amount has been raised in the form of local cesses upon Land revenue, which are locally appropriated. The theory is that these cesses are a voluntary contribution by the people (over and above what coidd be taken from them as Land revenue), on the understanding that the money will be spent within their respective districts. The prac- tical effect, however, is that the imperial Land revenue demand is really abated by the sum set apart as local cesses. Should the late inquiry into the condition of the Deccan ryots lead to a reduction of assessment, that reduction would imply that the local cesses, which were imposed for the first time during the period since 1863-4, were the additional feather that broke the camel's back ; but the cesses would stUl remain, and the reduction would fall upon the imperial land revenue. The cesses are subtracted from the resources for meeting obligatory imperial expenditure, in order that INCREASE OF INDIAN EEVENUE. 155 they may be devoted to optional local expenditure under public works, and to education of the rural population. From this survey of the ordinary sources of revenue it appears that — 1. The total gross revenue has shown but feeble progres- sion since 1869-70, when it was 60"90 millions, whUe in 1875-6 it was only 51-31 millions sterling. 2. Under Land revenue the total increase has been two millions since 1862-3, or 1^ million since 1863-4. The greater part of this occurred in the territories under ryot- war settlement, viz., £1,200,000 since 1862-3, or £940,000 since 1863-4. Nearly the whole of this increase occurred by 1874-5, after which the revenue dropped by £100,000 in the Madras Presidency in 1875-6, while it remained sta- tionary in the Bombay Presidency and in Assam, and gained in British Burmah an increase of £100,000, of which about a third was lost in following years. Beyond a comparatively small rate of yearly increase in British Burmah, there is little expectation of further improvement of the land revenue, for some years, in the territories under ryotwar settlement. And in those under village settle- ments in the Bengal Presidency, what increase was to be got by a revision of settlements has been nearly aU gathered in; the settlements in Oudh and the Central Provinces have been finished, those in the North-western Provinces have been nearly completed, and what remains in the Punjab is the resettlement of some poor or outlying dis- tricts, from which no material gain can be expected. 3. Any further increase of the Opium revenue is purely speculative, the sale of a larger number of chests of Bengal opium, and a further increase of the duty on Malwa opium, would probably yield half a million sterling a year; but those who are answerable for managing the Indian finances might reject any irresponsible opinion of this kind. 156 A HANDBOOK ON GOLD AND SILVEE. 4. Under the remaining heads, the future progress of the Salt revenue is uncertain ; the Customs revenue must decline, without the adoption of a gold currency ; the half of any increase of the Stamp revenue will be appropriated by local governments ; the portion thereof which consists of taxes on transfers of capital, in various forms, will diminish with the withdrawal of foreign capital from the country under a pro- gressive fall of the exchange ; and the tax on litigation can- not be counted upon as a resource for averting financial disorder from the depreciation of silver. Thus, the old sources of revenue would fail the Govern- ment in its extremity. The only other source is an income tax. In the United Kingdom an income tax of fourpence in the pound, or If per cent., was reduced to threepence, and then to twopence, or five-sixths per cent., because the higher percentage was too burdensome a rate, as an ordinary rate for a permanent tax. In India, an income tax of 3|- per cent, yielded in 1870-1 only two millions sterling. With foreign capital expelled from India by a depreciated and deteriorating silver currency — with an enhanced rate of interest, and with heavier taxation — incomes would diminish, and a rate of 5 per cent, would not yield two and a half millions sterling after three or four years. In England, an income tax of 5 per cent, would be expressed by a rate of twelve pence in the pound— a rate which, if imposed as an ordinary tax, would drive the strongest ministry from of&ce. It has always been the care of Indian statesmen to regulate taxation so as to consolidate British rule in India. If an income tax could be made to yield suf&cient to meet the increased expenditure from an augmentation of salaries, consequent on the depreciation of silver (and there is but scant hope of its doing so), it is as much as could be expected from it. The Government of India, then, has to reckon, in its ordinary expenditure, first, a charge for interest on the LOSSES ON INDIAN REVENUE. 157 loans for public works extraordinary, &c., which has been growing latterly at the rate of £200,000 a year, but which we may reckon at the yearly rate of £1 75,000. Every six years would increase the annual charge by one million sterling. In eight years, from 1867-8 to 1875-6, the Canal revenue, apart from any Land revenue due to irrigation, in- creased by only i6160,000. The net revenue from State railways has been increasing at a faster rate, but as yet by much less than the amount of yearly increase of the charge for interest. To the yearly increase of charge for interest must be added loss by exchange, and a great expenditure for in- creasing salaries on account of the high prices which a con- tinued depreciation of silver would involve. The last- mentioned cannot be estimated ; but, as already remarked, it would not be less — probably it would be more — than the proceeds of any conceivable rate of income tax. With ex- change at Is. 8^d., that is, with silver at about 53^c?., the loss by exchange to the Indian Government would amount to about 1| million sterling; in 1873-4 and 1874-5, it was somewhat below one million. With exchange at Is. 6d. (that is, with silver at 47t?., which price was touched in 1876) the loss would amount to five millions sterling ; and it would increase by one rjiUlion for every additional fall of one penny in the price of silver. On the one hand, there would, in four or five years, be an alarming growth of expenditure, which, if it assailed the elastic finances of the British empire, would awaken dread and anxiety. On the other hand, there is an Indian revenue of which the old sources, including the Land revenue, afford but little promise of increase ; whUe the only new tax which the best English financial ability, aided by Indian experience, has been able to devise for India, is an income tax which, if it produced sufficient to pay for the increase of salaries on account of the depreciation of silver, would give as much as 158 A HAKDBOOK ON GOLD AND SILVER. could be expected from it, and it could not produce even that except through, the imposition of a rate which, if it were imposed in England as an ordinary tax, would overthrow the strongest ministry. Thus, with a progressive depreciation of silver and a pro- gressive augmentation of the loss by exchange, India's only outlook would be into financial ruin. All this would be averted by the adoption of a gold standard for India, vnth a transition to it, from the silver standard, at a valuation of 16^ to 1 of gold. This view of the Indian finances, and the utter imprac- ticability of counteracting, from the Indian revenues (albeit supplemented by new taxes), the alarming growth of expen- diture in loss by exchange through the progressive deprecia- tion of silver, which is inevitable, disposes of an objection to change that has been urged by some. It has been said that everything in India is going on smoothly. Commerce — at least the export trade — is brisk or flourishing; the banks declare good dividends; people on fixed incomes have not suffered, except in any remittances which they make to England ; only the Government is at a disadvantage from the exceeding largeness of its home remittances. But surely this cloud, already bigger than a man's hand, is suf- ficient cause for alarm. A country whose finances are, or will soon be, in disorder, failing the demonetisation of silver, cannot prosper. Production, distribution, exchange, com- merce, cannot flourish imder the increased taxation in a poor country to which the Government of India will be forced. Famine expenditure may be the apparent cause, but the loss by exchange would be the real cause of additional taxation. Expunge the latter from the Indian finance minister's account of revenue and expenditure, and the surplus would be large enough to provide a considerable yearly instalment towards the redemption of the famine loan after meeting the entire charge for interest. The possible INDIAN EXCHANGE. 159 heavy famine taxation next year would be tlie first move- ment of tlie gathering and rising cloud, now but little above the horizon, which must soon darken the sky. Nor would it be the only sign of coming disaster. The rate of interest has risen; this surely is not encouraging to production. For a time, the rise of the rate gave an upward tendency to silver, which has been lost since. And though the bounty on exports is stimulating them, yet it cannot be taken for granted that the stimulus is a healthy one. In 1876, when there were great perturbations in the price of silver, the export trade was much affected by a spirit of gambling or not over safe speculation. There were contracts with banks for the forward delivery of bills, in which one party speculated for a greater and the other for a slighter fall, or for an im- provement, in the price of silver ; so that the exporters had chequered fortunes, some gaining largely, others losing. For importers there was loss, or but little profit. A repeti- tion of this with each fresh fall, and with fresh perturbations in the price of silver, would not be a healthy, satisfactory state of things, and anyhow the gains would end with the financial deluge. The great loss by exchange is an unmistakeable fact; impending heavy taxation for famine expenditure may soon be realised ; the rate of interest has advanced ; in short, the evils predicated from the depreciation of silver are palpable realities, in their first stage. The time for action has surely come; and it would scarcely be a suf&cient answer for a Government to say that, though disorder is threatening our finances, yet commerce is getting along tolerably well. Commerce, it is said, will take care of itself, if the Govern- ment does not meddle with it. The complement of this theory is, that the Government should look to itself in a time of financial danger ; for then only will commerce be able to take care of its own. 160 A HANDBOOK ON GOLD AND SILVER. CHAPTER XII. PEOVISION OP CAPITAL FOE AGEICULTUEE AND INDUSTET IN INDIA, BY MEANS OP A GOLD OUEEENOT. Ip, from the demonetisation of silver in the West, its price is hopelessly gone — if, under this malign influence, combined with the operation of the 15 millions sterling of yearly tribute, imports must be restricted, and exports must be sent forward at a diminishing price abroad, for which the only compensation will- be the bounty upon exports, involved in the depreciation of silver, it is plain that foreign capital will not flow into India, any more than to a country with an inconvertible and depreciated paper currency. Like cautious generals, capitalists, in advancing, secure their line of retreat ; and capital will not flow readily into a country, if it cannot as readily flow out again. With silver falling in price, it must be difficult, if not impossible, for any one not engaged in trade to carry his capital out of India, except at a heavy loss which might absorb the profits of two, three, or more years. Recognising this difficulty, even in the smaller matter of remitting interest, instead of withdrawing capital, from India, the Government of India favours the policy of not borrowing in England, that is, not importing foreign capital into India. The decision is quite right, if the injurious effects of the depreciation of silver must be accepted as inevitable; but not many years have passed since it was commonly remarked that nothing was wanting to raise India to an unexampled prosperity, but the capital which DEBT or INDIA. 161 was tlien being freely embarked and wasted in unprofitable enterprises on the Continent and in America. A gold cur- rency for India, sucb as has been suggested in preceding chapters, would assist the flow of capital to India, in a form, — namely, that of Bank of England notes of legal tender in India — which would not endanger the system of credit and currency in England, like the loans to foreign countries. It is no doubt expedient that, in one sense, India's foreign indebtedness should be diminished ; but the reduc- tion should fall, not upon the private capital which is invested in mercantile and industrial enterprise, but upon the India sterling loans in England. For some years those loans must increase ; but it is not an unreasonable expecta- tion that by means of a gold currency, and through one of the incidental measures for its introduction, a great part of those sterling loans would be transferred to India. The first step to this end would be the payment in India of the interest on these loans. This is not practicable with a silver currency ; but it would be a natural result of the adoption of a gold currency. The transfer of a large amount of these loans to India would then depend on the cessation of Government borrowing in India, on an im- provement of the income of the people, by avoiding heavy taxation, and on the supersession of the functions of the village banker, with the liberation of his capital for other investments. It has been suggested in a former chapter, that Govern- ment should extricate the ryots or cultivators in the greater part of British India from the indebtedness which now crushes them, through the heavy charge of interest, by lending them money in the form of district currency notes, in liquidation of their debts to the bankers and for their yearly expenses of cultivation. The advances would be without risk, for they would be made to the classes who now pay their land revenue with unfailing punctuality, and the M 162 A HANDBOOK ON GOLD AND SILVER. advances could, by law, be made recoverable in tbe same way as land revenue. Even at present, money is advanced to cultivators to assist them in digging wells, and in making agricultural improvements. By means of paper money, freely receivable into the treasuries as Government revenue, and freely circulating in the district, among the cultivators whom the notes wUl have befriended in a manner beyond their previous experience, the advances could be made on a larger scale, and with the resolute determination to supersede the functions of the village banker, who generally extends his operations over several villages, or through sub-agents over a whole district. Of the provision of an outlet for the liberated capital of the village bankers we shall presently speak. The effect upon the ryots or cultivators would be that which has been observed in Europe. Mr. Bagehot wrote : — 'A note issue is mainly begun by loans; there are then no de-- posits to be paid. But the mass of loans in a rural district are of small amount; the bills to be discounted are trifling; the persons borrowing are of small means and only local repute; the value of any property they ■wish to pledge depends on local changes and local circumstances. . . . The way in which the issue of notes by a banker prepares the way for the deposit of money with him is very plain. "When a private person begins to possess a great heap of bank notes, it will soon strike him that he is trusting the banker very much, and that in return he is getting nothing. He runs the risk of loss and rob- bery just the same as if he were hoarding coin. He would run no more risk by the failure of the bank if he made a deposit there, and he would be free from the risk of keeping the cash. No doubt it takes time before even this simple reasoning is understood by un- educated minds. So strong is the wish of most people to see their money, that they for some time continue to hoard bank notes; for a long period a few do so ; but in the end common-sense conquers. The circulation of bank notes decreases, and the deposit of money with the banker increases. The credit of the banker having been efficiently advertised by the note, and accepted by the public, he lives on the credit so gained years after the note issue itself has ceased to be very DIFFICULTIES TO BE OVERCOME. 163 important to him. ... A system of note issues is therefore the best iatroduction to a lai-ge system of deposit banking.' And so would it be with, the district currency notes payable in silver wbicb have been suggested in a previous chapter, and with the District Savings Banks which Govern- ment has established, but of which the progress hitherto has been slow. That progress cannot be other than slow, and the deposits other than small, so long as the masses of the population are indebted to village bankers, or to others, at rates of interest exceeding that which the Government Savings Banks allow; in other words, the millions do not save ; and the many thousands who do save are able to lend the money to the indebted classes at high interest. By the Government becoming the sole creditor of these indebted classes, the rate of interest would fall, and greatly aug- mented deposits would appear in the balances of the District Savings Banks. As pointed out by Mr. Bagehot, the cultivating classes, from being borrowers from the Government, would become lenders to it. This might take time, but not the less surely would it come about in the end. The deposits thus obtained, and savings attracted from the existing lending classes who might find no better investment elsewhere, could be employed in redeeming sterling loans which bear higher interest or the same rate of interest. The success of any such measure for superseding the f auctions of the village bankers would depend on the largeness of the issues of notes, and upon their conver- tibility. If may be said that these two conditions cannot be combined without locking up a large amount of silver, which would make the enterprise too gigantic for a Government that would be in the throes of a currency reform. It is, however, from the nettle danger that we pluck the flower safety. The embarrassing part of the currency reform would be to get rid of the silver without any great sacrifice. This could only be done by selling it gradually, to the extent of M 2 164 A HANDBOOK ON GOLD AND SILVER. the yearly absorption by tbe demand for ornaments and for boarding, in India. On the balance in band, during these gradual sales, there would be a loss of interest. Hence, there would be an especial advantage in holding this silver as a reserve, in the several districts,' for maintaining the convertibility of the district notes payable in silver, which win have been issued to ryots under circumstances that would ensure the popularity of the notes. The interest obtained from ryots on the loans to them of district notes, would amply compensate for the interest incurred on the smaller silver reserve that would be kept for maintaining the convertibility of the notes. Hence, we may assume — first, that the English successors of native Governments who received payments of land revenue in kind, from cultivators, would be quite equal to the extrication of the cultivators from indebtedness to village bankers, by advances (in district paper currency) which would be recoverable as land revenue ; and secondly, that, in the manner just explained, deposits large enough to make a sensible impression on the amount of India stock in England would accumulate in a few years. The village bankers are children of the soil, of a class not given to emigrate ; and as they are shrewd, active, enter- prising men, we may be sure that their liberated capital would be transferred to other profitable employments, which would increase the productive powers and resources of India. We should thus secure both the reduction of foreign debt and an increased application of capital in India. It is the Native banker class, great and small, that we must use for the development of the resources of India. The rich Native bankers command resources inferior only to those of Lombard Street ; but more than their wealth, they ' Perforce, the liberation of ryots from the thraldom of the village bankers would not be attempted simultaneously in all districts ; it would be under- taken in a certain number of districts at a time. CONDITIONS OF INDIAN SOCIETY. 165 prize rank and station, and they desire rank from no ignoble motive or vulgar feeling : their ideas are princely, and a thousand acts of munificence attest their eminent fitness to bear worthily, and to enhance, any honour and dignity which may be conferred on them. The Government can utilise the strong craving, so to speak, among this class, for high rank, in a way that would confer vast benefits on the country. At present the rewards, distinctions, and honourable career within reach of the Natives of the country are but limited. Some may gain admission into the covenanted civil service ; others may be enrolled in the Order of the Star of India ; but these rewards or distinctions fail to impress the Oriental imagination. As marking the estimation in which the member of the Order of the Star of India is held by the foreign rulers of India, the honour is prized ; but a Native member of the order, when moving in his own circle, or living upon his estate, finds it of little social worth : it does not stir the sympathies, because it does not harmonise with the traditions of the Native population ; and it does not awaken in its possessor and in his dependents the un- bought loyalty which honours more in accordance with native feeling would evoke. An order of merit for the landed Native gentry in India might vu-tually, though not formally, be created by con- ferring the title of Eajah on wealthy Natives, if they are also landholders who have signalised the management of their estates by care for their tenantry and by acts of judicious liberality and beneficence. In England, which has reached the highest state of civilisation, the peerage is recruited from the bar, the bank- ing, and commercial classes ; in a word, the efficiency and vigour of the peerage are renewed by the best intellect and life-blood of the nation. India, in a much lower state of development, needs the infusion into the class of her landed gentry of the energy, the activity, the liberal yet judicious 166 A KANDBOOK OS GOLD AND SILVEE. use of wealth which distinguish the banking class ; and if the Native aristocracy of India are not to beconae effete, the ranks of the titled territorial gentry must be recruited by the nomination, as rajahs, of rich bankers who, having proved themselves humane and enlightened zemindars, are worthy of honour, and are certain, if thus honoured, to fertilise the agriculture of India from new streams of wealth. Had this policy been adopted from the outset of the permanent settlement, the difficult subject of the relations of landlords and ryots which every now and again forces itself on public attention in the Lower Provinces of Bengal would not embarrass the Bengal Government. The English landed gentry, whom Lord Cornwallis took as a model for Bengal zemindars, are not constrained by any law into the liberality which they show to their tenantry ; and the local Govern- ment may do much to infuse a like spirit into the relations between landlords and ryots in Bengal, by conferring the dignity and title of Eajah on any native zemindars who prove by their deeds that they emulate and even surpass the English landed gentry in charity and beneficence. The formation thus of a titled landed gentry, animated by an enlightened liberality, and worthily spending princely incomes, would set before the zemindars of Bengal ex- amples which they dare not refuse to emulate, lest they force rulers and people to inquire why they should any longer be permitted to possess rights which the new members of their class translate into the humane duties that property owes in virtue of its rights. In this manner there would be provided for the Lower Provinces of Bengal that relief to the cultivating classes, and those means of ameliorating their condition, which in the rest of India would be supplied by the Government's mea- sures for extricating the ryots from indebtedness to village bankers, and liberating for other more productive uses in agriculture and industry, the large capital of these bankers PEOSPECTS OF INDIA. 167 ■which is now employed in keeping the cultivating classes in a condition scarcely illumined by a single ray of hope. The cultivators in India have little to learn from their rulers respecting the best processes of agriculture. Their special disadvantage is their poverty. Transformed into thrifty peasant proprietors, and with the village bankers settling among them as a superior class of landed pro- prietors, the face of India would be changed, and her con- tribution to the wealth of the world would be doubled. But, as we said before, with a continuing silver currency, the only outlook for- India would be into the darkness of Erebus, the gloom of despair. 168 A HANDBOOK ON GOLD AND SILVEE. CHAPTER XIII. SUMMAET. Silver has played the miscliief with some political econo- mists, confusing their ideas, so that when they tell us that gold is for the West, and that a silver currency is good enough for India, we may believe that it is the very worst for India. Their faith is, gold for themselves and silver for India, while the vindication of the second article of this creed forces them into outrageous heterodoxy, viz. : — 1. That instability of value in the standard of value is of no consequence. 2. That, in order to create an increased balance in favour of India, imports must be restricted, even by recourse to in- ferior local manufactures. 3. That a bounty upon exports is good for India when it comes in the form of depreciated and ever afresh depre- ciating silver, though all bounties are paid, with a heavy reckoning, by the country which sends forward exports under that stimulus. 4. That silver is for the East and gold is for the West ; though the law which regulates the transmission of the precious metals from one country to another presupposes the use of a common money in the trade between foreign countries. Of late, India's export to Europe of gold has been considerable, her export of silver insignificant. 6. Dear wheat would be good for manufactures, said the ' Economist,' the pronounced organ of free trade, on Septem- ber 30, 1876, through misapprehending the general depi-es- CHANGES NEEDED FOR INDIA. 169 sion of trade, of which the accumulation of gold in the West, with a consequent demonetisation there of silver, is a main cause : — ' Of course, the prospect of another year of cheap food is on the whole a favourable one, in an economic view. . . . That this continued cheapness must also, with other things, be preparing the way for a great revival in trade, is equally certain. On the other side, however, it may be admitted that a stimulus would probably be given to many trades, which would make a conspicuous interruption to the present stagnation by a rise in wheat. The agricultural interest throughout the world has been suffering for two or three years, and this suffering reacts on our exports to many distant countries. A rise in price would benefit that interest, and would probably revive to some ex- tent our own export trade.' The Corn Law League demanded cheap wheat for increas- ing the export trade ; their organ in the present day longs for dear wheat to bring about that result. Perhaps, however, the closing sentence in this extract simply breathes an aspiration that wheat may be somewhat dear abroad, but cheap at home, for the encouragement of British exports. Any how, the propounders of these heresies in political economy are thereby disqualified to be heard when they further contend with much sophistry, that silver, which has been demonetised in the West, should not be demonetised in the East. This and the converse, that gold is for the West, may be golden sayings ; but a yearly loss by exchange, ranging from one and a half million sterling to five millions, and ad infinitum, would be too dear a price for treasuring them. The price of silver has fallen below all record in history ; and the experience of the past three centuries shows that each drain of it to the East only results in its further depre- ciation in the West. This was the case when silver was common money, with gold, in the West ; henceforth this expectation must be surer, now that silver is demonetised in the West. The increase of exports of merchandise from the 170 A HANDBOOK ON GOLD AND SILVER. East has as yet had no effect in raising the price of silver in London ; it has fallen in the face of that export — nor can it be otherwise. Exports from India, in payment of the enlarged tribute to England, or in exchange for imports of depreciated silver, will only lower the price of Asiatic pro- ducts in Europe, while the price of silver in the West sym- pathises with the price there of Asiatic products, rising when they rise and declining when they fall. Even the advocates for the retention of silver as money of full legal tender are prepared to give up their cause as hopeless, should France adopt a single standard of gold. All the known facts during the past three years, respecting the changes in progress in her paper and metallic currencies, show that, with a rare financial ability and skill, France has been silently preparing for the demonetisation of silver. In her wake would follow Spain and the countries of the Latin Union. In the United States, the farthest that the Ame- ricans will go in favour of silver will be to retain it as legal tender up to fifty dollars — the limit which in these observa- tions has been suggested for India. Not only has silver fallen in price, never to rise again ; it has become unstable — its fluctuations in the market are as variable as those of wheat, and with a tendency to progres- sive decline, from the competition in London between bullion dealers, who sell silver, and the Secretary of State for India, who sells silver rupees deliverable in India. With each fresh fall in price, commerce would indeed work out a fresh equilibrium by increasing exports and reducing imports; a given quantity of imports would exchange for an increased and increasing quantity of exports. Manchester's business may droop, but other British exports would go abroad for purchase of silver, until the Americans dispense with England as their produce broker, and send silver direct to India. Meanwhile, India would buy all the silver which London has to sell : a comforting thought ! INDIAN TAXATION. 171 With each fresh fall in price, and while commerce might be actively working out a new equilibrium on a lower level, those who administer the finances of India would have an opportunity for the display of the genius which laughs at impossibilities. With exchange at Is. 8^d. (that is, with silver at about Bd^d.) the loss to the Indian Government by exchange would amount to about If million sterling (in 1873-4-5 it was somewhat below one million). With exchange at Is. 6d. (that is, with silver at 47d., a point which was touched in 1876) the loss would amount to five millions sterling, and it would increase by one million for every addi- tional fall of one penny in the price of silver. To meet this there is nothing. The only new tax which has been de- vised for India since 1859, viz., the income tax, could not, at the highest conceivable rate for its imposition, yield more than sufficient (if sufficient) for meeting the augmented expen- diture for increasing salaries on account of the depreciation of silver. The usual heads of revenue give but slender prospect of increase ; and the ordinary growth of those revenues would barely suffice for meeting the ordinary growth of expenditure, plus the charge for interest, which progresses at the rate of about £175,000 a year. Thus a financial deluge would interrupt commerce in its working out of a new equilibrium, through that interesting play of the bounty from depreciated silver, upon exports, which has been oSered as a clear and sufficient solution of the silver difficulty. And England, while bewailing the ruin of her Indian Empire, would have humour enough left to laugh at this abrupt ending of the game of commerce, with its juggling play upon the bounty from depreciated silver, upon which those who talk glibly about the depreciation base the policy of doing nothing ; for experience will have taught her that each fresh display of this jugglery had always ended in a re- duction of her exports through their displacement by silver. 172 A HANDBOOK ON GOLD AND SILVER. All this evil is to be encountered, British exports reduced, Manchester's industry paralysed, the material progress of India checked, her financial ruin almost deliberately encom- passed, because, in defiance of the laws of political economy, the West would deny to India a common money with foreign countries, in her trade with them. Gold is the only and sovereign common money ; sent to India, where it is not money, it fetches its full price, and even commands a pre- mium. Mr. Bagehot told us that silver sent to London is mere merchandise, as tin. We are not concerned in removing fears of what would happen if all the countries in the world were to adopt a gold currency, though the facts show that nothing but good would happen. The only present candidates for the fresh yearly production of gold are Germany (which has nearly completed her coinage reform), the United States (where the gold premium has nearly disappeared, and where the Gold Ring has been closed), and India. The adoption of a gold currency by India would not raise the value of gold, because, first, the India Council drafts for the yearly amount of 15 millions sterling worth of silver rupees, which now act on the London market like the import of a corresponding amount of silver, in lowering its price, would, when issued for 15 millions sterling worth of gold rupees, act similarly like an import of gold in pre- venting an enhancement of its value ; because, secondly, silver would still act upon prices as an effective subsidiary currency. By putting more silver into the Indian rupee, so as to bring it nearly to an intrinsic par with gold according to the present value of silver, — by then demonetising it, but receiving it freely in Government treasuries in payment of Government demands, — and by keeping the limit of its legal tender as high as one hundred rupees, silver, for transactions of internal trade, would be as efiective a cuiTency as gold, and the action of both together, upon prices, would be the BENEFITS OF A GOt.D STANDARD. 173 same as the action of silver alone, in the present currency, would have been but for its depreciation. The Land revenue of India would not be affected, as some apprehend ; while the purchasing power of the present amount of that revenue would be reduced, if depreciated and depreciating silver were not demonetised. It stands to reason that a gold currency, with a silver currency raised to gold value by its being reduced to a token coinage, and of at least the same amount in the aggregate as the old currency (if not of a larger amount), could not lower prices. Hence, and for other reasons which have been discussed, the alteration of standard from silver to gold would not injure either debtor or creditor ; and the relative value for the transition from silver to gold might be fixed at 15^ to 1, which is the valuation observed by the countries of the Latin Union, Spain, and Germany, and which was the ordi- nary or normal relative value before the sudden depreciation of silver since 1875. If the Government of India had foreseen the course and permanency of the depreciation of silver when it began, there is no doubt that the evils of it would have been averted by an instant change to a gold standard. But the Government is one of mortals not gifted with prescience ; therefore it cannot be held to have ac- quiesced in and accepted the depreciation which it has hesitated to correct. Accordingly it is free (and in correc- tion of its own shortcomings through want of prescience, it is bound), when at last its eyes are opened, to correct the depreciation retrospectively, by adopting the valuation of 15^ to 1, and not any worse valuation; for the latter would perpetuate more or less of the depreciation, and burden India with a permanent extra taxation on account of the shortsightedness (unavoidable shortsightedness) of its rulers. No one will be injured by the adoption of the relative value of 16i to 1. When the alternative is a gold standard or financial ruin, 174 A HANDBOOK ON GOLD AND SILVER. it is superfluous to discuss nice shades of advantage or disadvantage to debtors and creditors who would be drowned in the financial deluge. From 1853 to 1876, the solvent countries in the world have absorbed 25 millions sterling a year of gold ; and as this amount has been absorbed principally in the West, it is assumed by writers and commercial men that there is nothing to spare, out of the yearly supply of gold, for the countries in the East. In this hasty conclusion the fol- lowing considerations are overlooked. a. The 24 millions sterling of yearly fresh supply have been absorbed, not by an ordinary yearly demand which must ever recur, but by an exceptional demand which, once satisfied, will not occur again. France and the countries of the Latin Union, and Germany, and the Scandinavian King- doms absorbed the 24 millions a year of gold, not in re- placing wear and tear and providing for a gradual increase in previously existing gold currencies, but in replacing the bulk of their silver currencies with a gold currency. This work, once done, is done for ever ; thereafter, the yearly require- ment of these countries for replacing wear and tear is of no account, for the proportion of yearlj' wear and tear of gold coins is infinitesimal; nor should any but an incon- siderable rate of yearly increase of gold currency for coun- tries already possessed of it be hastily assumed, because, first, the use of cheques and notes has greatly increased, and must yet extend, beyond the experience from 1853 to 1870; secondly, with gold as universal international money, silver could be enthroned more completely than it now is, as the money for the internal trade of each country, thereby lessening the use of gold in that trade. b. Owing to the huge growth of national indebtedness, the public securities of the various countries are largely employed for remittances in the course of trade ; the export GOLD AND PAPER. 175 or import of securities has the same effect as an export or import of gold. c. Of the countries which have an inconvertible paper currency, those which are insolvent are of no account, in the present inquiry ; the two solvent countries in this cate- gory, viz., France and the United States, will emerge from their state of inconvertibility of notes with a smaller de- mand for gold than when they suspended specie payments, because, in the interval, their peoples have become habi- tuated to the use of paper money, and France, moreovei', has been at especial pains in extending the use of cheques and biUs of exchange in internal trade. d. In the period from 1853 to 1870, there was a drain of silver to the East, from the high price of cotton, and the small amount of the India Council drafts ; and the pur- chase of this silver in European markets, with gold, created special movements of gold in those markets. This drain has revived solely through the depreciation of silver. Were silver to be demonetised, and a gold currency introduced into India, there would be but little demand by India on the yearly supply of gold, after the completion of her coinage reform — by reason, first, of the yearly 15 millions sterling of Council drafts on India ; secondly, the purchasing back by India, under the system of a gold currency, of Indian secuities which are now held in Europe; thirdly, the economising of gold through the control which the Bank of England should acquire over the exchanges with the East, by establishing agencies in Calcutta, Bombay, Rangoon. e. If the considerations a to cZ be regarded, it is impos- sible that 37 millions sterling a year of gold and silver, which is the present production, can be needed for the ordinary currency requirements of the world. Even the 22 mil- lions sterling of gold would be excessive, unless its use as 176 A HANDBOOK ON GOLD AND SILVEE. money be extended to the East ; for it must not be forgotten that with a gold currency in India, the Indian Council drafts which would be payable in gold rupees would be tantamount to a yearly import into England of 15 millions sterling of gold, so that the effective gold supply would be not 22, but 37 millions sterling a year. Thus the future ordinary demand will be well within the future yearly supply of gold. As to any present exceptional demands, we find, on taking stock of them, that the unsup- plied balance of special requirements of some countries is less than the excess supply of gold which other countries ha.ve accumulated, and which they must shortly liberate. The United States cannot require much beyond the hoards already in the country, which the disappearance of the now attenuated gold premium would call forth. Again, India's requirements of gold would be less than the general estimate, if, first, as seems reasonable and prudent, the new subsi- diary silver coin be made to contain 10 per cent, more silver than the present rupees, and if the limit of its legal tender be fixed at one hundred rupees ; and if, secondly. Bank of England notes be declared legal tender in India. Against these two special requirements of the United States and India, we have to set off the consideration that France, on resuming specie payments, will liberate a large amount of gold, and that Germany, with an excessive metallic currency, must do the same in the end. Hence, there are abundant grounds for dismissing, as imaginary, the fear that the markets of Europe would be disturbed by the adoption of a gold standard. During the time that Germany was acquiring gold for her coinage of more than 70 millions sterling, France was also accu- mulating gold for her monetary reform. Yet these two powerful causes did not raise the rate of interest very high or disturb it very violently ; the average minimum rate of discount charged by the Bank of England in each month. DUTY OF THE ENGLISH GOVERNMENT. 177 from 1871 to 1875, was never so high as in 1861, or as in 1866 (a year of financial crisis) ; in only nine of the sixty months from 1871 to 1875 did the rate exceed 5 per cent, per annum. And, at the present time, when the rate of interest is exceptionally low, it were better surely that the rise (which must follow sooner or later) should be occa- sioned by measures for giving to India a common money with Europe, which will result in her largely adding to the material riches of the world, than that it should accompany another outburst of the greedy speculations and rash enter- prises which issued in a considerable destruction of capital, and the reaction from which is one of the causes of the present stagnation of trade. Instead of fearing injury from the adoption of a gold currency in India, England should promote the measure, even with substantial help, as one of two effectual means of removing an ever-present danger in the delicate mecha- nism of her own system of currenej' and credit. The grievous burdens under which the United States and some of the fairest regions in Europe are bowed down, are attributable to the fearful growth of national indebtedness ; and that has been fostered by an enormous accumulation of deposits in English banks. To one phase of these transac- tions, viz., the exportation to other countries of the British capital which should have invigorated British agriculture, must also be ascribed the wretched condition of the English agricultural poor. Capital had the excuse that the English land laws prevent the free application of capital to the land, but not the less was the excessive exportation of it to foreign countries a serious injury and a grave social and political danger to England. In the days of our sturdy grandfathers, who refused to take their law from the ruler of the Con- tinent of Europe, Mr. Thornton, the author of the Essay on Paper Credit and Paper Money, wrote : — 'A prosperous nation commonly emploj's its growing wealth, not so much N 178 A HANDBOOK ON GOLD AND SILVER. in augmenting the debts due to it from abroad, as in en- larging its capital at home.' The principal agents for foreign investments of British capital were the joint- stock finance companies and the stock- brokers, and they derived their power of using deposits from the absence of other sufficient means of regular or floating investments of balances by the banks. This power should be much restricted and curtailed by two expedients, viz., first, a revision of the land laws ; and secondly, the floating of increasing amounts of gwasi -exchequer bills to be issued by the Secretary of State for India. The first measure would lead to the formation of land mortgage banks, which could afford to offer to depositors higher rates of interest than are given by bill brokers, and thus would retain at home the bulk of English deposits in safe, remunerative forms of investment; and, in connection with the second measure, would restore to the Bank of England its control over the rate of interest, and would increase both England's independence of foreign markets, through an enlargement of the home market for her manufactures and her command of them with British manufactures, with the result that, as in France, her foreign trade would be less disturbed by crises, and her system of currency and credit would be more stable. But without a gold currency, the floating of the Indian Secretary of State's exchequer bills in England (and, as a counter- poise, the circulation in India, of the notes of the Bank of England) would not be practicable : with it, these measures would strengthen instead of endangering the mechanism of credit and currency in England. It is not necessary to repeat here the grave political and general considerations which demand a revision of the land laws, such as would facilitate the application of capital to the land, and give stability to England's monetary system. But for those considerations, the laws will not be revised ; with such revision, England's currency system would be so ENaLISH AND INDIAN INTERESTS. 179 effectually secured that, if she had another dependent empire as large as that of India, both might change from a silver to a gold standard, without causing the least monetary- disturbance in England. Even were no substantial advantage to be gained, and were some risk to be incurred by England, during the peiiod of transition in India from a silver to a gold standard, ought not that risk to be encountered for the sake of the millions in India from whose country financial ruin wo.uld _be averted, and who (the agricultural classes) would be freed from their bondage of indebtedness to village bankers, by one of the incidental measures of the coinage reform? That measure, by liberating the capital of the village bank- ers for productive employment in other fields of industry, would have the same effect as the discovery of a gold mine in India ; the same effect in enriching, but a more human- ising effect in changing the apathy and despair of indebted- ness into the hope and self-reliance that accompany thrift ; and in elevating the condition of masses of an agricultural population, whose improved means and better scale of living would then return a double blessing to England of the kind nearest to Manchester's heart, namely, an increased demand for British manufactures. The details of the plan for the introduction of a gold currency into India need not be repeated. But one feature of it deserves marked attention, viz., the means of utilising, and of eventually selling in India, the surplus silver ; so that the amount of silver which Germany has yet to sell, the farther amount which France may sell, and the future yearly produce of the silver mines, lose their interest for India. The universal depression of commerce marks, among other things, a depletion, not of England's gold but of England's capital ; and, as a consequence, grave social and political danger ; a widening gulf between rich and poor ; an aristocracy and landed gentry in whom the resolute wiU s 2 180 A HANDBOOK ON GOLD AND SILVER. of their fathers, ever prompt to act, under the generous, invigorating influence of land, is being enfeebled by the in- fluence of commei'ce, ever ready with reasons for not acting, unless to gain 5 or 10 per cent. Of this disunion, of classes, severance of rich from poor, emasculation of resolute will in England's natural and hereditary leaders, we have, fortu- nately, but premonitory symptoms. They are sufSciently marked however, to awaken the thoughful concern of states- men, at a time when England should be preparing to with- stand an irruption of the barbarians ; and they are traceable to the unsatisfactory condition of the agricultural classes, from the very insufficient application of capital to the land. While these dangers are assailing the heart of the British Empire, financial paralysis is threatening its Asiatic limb. The measures demanded for the respective needs of England and India fit into one another; a common money would bind India closer to England, and help in bracing up the agriculture, manufactures, credit, and currency of England. APPENDIX I. PRODUCTION OF GOLD AND SILVER. Mr. W. L. Fawcett, the author of ' Gold and Debt, a Handbook of Finance,' after consulting various estimates, — ^perhaps all -well- known estimates, — of the yearly production of gold and silver, wrote respecting gold, that the entire gold product of the world was constant at 13 to 14 million dollars (2-6 to 2-8 millions sterling a year), from 1800 to 1826. In that year began a development of the Russian and Siberian mines, and the production rose from one million sterling a year, between 1825 and 1830, to 3f millions a year between 1840 and 1850. ' This, together with some revival of the gold product of South Am.erica, contributed to increase the total annual gold product of the world to about 6 millions sterling in 1846,' which is the estimate of ' Birkmyre, who made a table of the gold and silver product of all countries in the world, exclusive of China and Japan, with the foUowiag results for the year 1846 : — (jyiillions of dollars •) North and South America Europe, Asia, and Africa Total Gold Silver . 6-5 26- 22-5 6- 29 32 £ 5-8 6-4 Mr. Newmarch, in his ' History of Prices,' vol. vi., quoted and framed estimates which gave 8 to 10 mUlions sterling as the yearly production of gold by 1848. The smaller estimate being favourable to the views of the present writer, the larger estimate of 10 mil- lions sterling will be adopted. 182 A HANDBOOK ON GOLD AND SILVEE. 2. M. Chevalier estimated tte total yearly production of silver in 1848 at 8 millioiis sterling. M. L6on Faucher estimated in 1851 that the annual production was then nearly 1^ million more than in 1848, thus raising M. Chevalier's estimate to 9-8 millions sterling- M. Herzog, keeping within this sum, began his estimate with 9 millions for 1851. M. Bonnet starts with 8-1 millions for 1852. The silver committee of 1876 adopted M. Bonnet's estimate. All the subsequent increase is from additions to this amount of the increased production since in the United States ; the silver production of all other countries having (according to the evidence given to the Committee) been comparatively stationary since 1862. 3. The presence of gold in the gilt silver obtained from Nevada in the United States has thrown uncertainty over the statistics of gold and silver production in those States, for the earlier years since the discovery of the Nevada mines, by causing an understatement of the amount of gold and an overstatement of that of silver pro- duction. Imperfect registration, imperfect records, and the exporta- tion of large amounts of gold without their passing through the custom-house, also vitiate the returns of Australian and Californian production from the outset. For the earlier years there was possibly a compensation of errors ; overstatements in inaccurate returns being neutralised by the unreported amounts sent away or carried away by miners. The two first-mentioned causes of error have been corrected of late years, but the third source of error, or the unreported export of gold, still continues. A leading Oalifoiiiian paper, quoted by the ' Eco- nomist' in the Commercial History and Review of 1876, observed : — ' The yield of the gold mines generally, unlike that of the silver mines, is not published regularly. Many gold mines are worked on a small scale, sometimes by two or three men. Kew of them are incorporated in San ITrancisco ; the stook-holders are usually few, and live at the mines ; they can get information by letter or orally ; and, as the treasure is much more attrac- tive to robbers than silver, the managers try to keep the amount of production and the times of shipment secret.' 4. Sir Hector Hay submitted to the Select Committee on the Depreciation of Silver an estimate of the yearly production of gold and silver which is substantially that published by M. Victor Bonnet, in the ' Journal des Economistes.' For the United States, however, it may be well to abide by official figui'es which were carefully revised by the Commissioner of Mining Statistics, and which are adopted by the well-informed 'New York Financial Chronicle.' For Australia an estimate may be made as follows, viz. : — APPENDIX I. 183 a. Down to 1866, and later, the only mint in Australia was at Sydney in New South Wales. Hence, if the actual production of New South Wales be taken, the net exports from VictoM, down to 1866, may be taken as the production of Victoria. h. New Zealand, actual production, except for 18-52 to 1854, for which years net exports have been taken. c. Queensland, actual production, or, where not available, net exports, as from New Zealand. Figures down to 1874 have been ascertained on this plan for Australia. For Russia, the statistics obtained and the estimates framed by the ' Economist,' for other countries, the sums estimated by Sir Hector Hay, though he has not taken note of the increase of produc- tion in Africa. The imports into the United Kingdom from West and South Africa amounted to £110,000 in 1862, J96,000 in 1873, and £425,000 in 1876. How much went elsewhere is not known. 5. The figures which may be presented are given in the table on page 184. 6. The following remarks arise on this table : — I. M. Bonnet's estimate of the yearly gold production does not differ materially from the estimate which has been compiled from the sources already described ; and perhaps the chief difference arises from the adoption in the latter estimate, of the ' New York Financial Chronicle's' return of the gold production of the United States, which may be accepted as the best statement that is available. II. The estimates of silver production for 1875 and 1876 are the amounts for the United States, given by the ' New York Financial and Commercial Chronicle,' plus the recognised 7 millions sterling for other countries. III. For silver, M. Herzog, the delegate from Switzerland to the Latin Mint Conference at Paris, framed an estimate of yearly produc- tion down to 1870, which is somewhat higher than that of M. Bonnet, viz., a total production of 74 millions from 1852 to 1859, of 75 millions from 1860 to 1865, and of 71 millions from 1866 to 1870, or in all 220 millions, against M. Bonnet's estimates of 57, 56, and 51 millions for the three periods, or in all 164 millions. 184 A HANDBOOK ON GOLD AND SILVER. Production of Gold and Silver, and their Distribution. {In millions sterling.') Estimate oj? Gold Exports to Gross a a PR0D^^CT102^ AS M. 30NKET'S THE Bast, Imports into m ■St=! EXPLAmED IN Estimate M. DE British 3 fH T° Paras. 3, 4. Quiteville India To Feb. 28, 1877 316-76 153-50 50- (saj) 520-26 2 Remaining on : March 31, 1876 . 741-77 37-25 91-73 870-75 Feb. 28, 1877 . 610-83 -7-25 91-73 (saj) 695-31 The following remarks are added. I. Deducting one-third, instead of the German Government's one- fourth, Herr Soetbeer (' Economist,' June 3, 1876) estimated the outstanding thaler currency of December 31, 1871, at 989 million marks. The German expert, whose memorandum was communicated by Lord Odo Eussell, estimated the amount at 900 millions at least. Blue Book, 1876. JSconomiH, March 31 and April 7, 1877. APPENDIX II. 243 The withdrawals of two-thaler pieces have exceeded even the higher estimate of the German Government. II. In September 1875, Herr Soetbeer and other German autho- rities estimated the total silver coinage then outstanding at 38 millions sterUng, viz., 30 millions in one-thaler pieces and 6 millions in two- thaler pieces.' And a member of the Reichstag (a banker) reckoned the total amount of thalers outstanding, including the sums held by banks and in treasuries, at Si millions sterling. On September 30, 1875, the thalers withdrawn amounted to 153 million marks; on March 31, 1876, to 245 millions, and on February 28, 1877, to 520 millions; giving 367 millions of marks, or 18 millions sterling, as the withdrawals from September 1875 to February 1877. On the basis of the estimates in September 1875, there should have been only 16 or 18 millions sterling outstanding on February 28, 1877. Yet, in June following, the well-informed "Vienna correspondent of the 'Economist,' and in July the editor of that journal, wrote as follows : — a. ' There were, and there are still (June 5, 1877) more silver thalers in circulation than the Government oared to believe at the time. The recol- lection of the examination of all the banks and public pay offices which, on September 30, 187.5, announced the existence of but 30 million thalers is striking at this moment. Camphausen, the Minister for the Board of Finance, declared at the time, that under such conditions the Currency Act could be put into execution with the greatest ease possible. However, although the Bundesrath was authorised in January 1876, to degrade the silver thalers to imperial silver coins, still, this part of the law has not yet been carried out. . . . Still the circulation of old silver thalers is at present valued at 500 to 600 million marks. A great part of them stream into the Eeichsbank, as the other note banks are trying to refuse them. We have no figures to give us a precise idea of the amount of silver and gold in the tills of the bank, because the latter makes a secret of the proportion. We must therefore trust to private information. On the introduction of the Coinage Act of 1871, but very little gold was to be found in the Prussian bank's tills. After the intro- duction of the new Currency Act, the newly-coined gold, little by little, replaced the silver ; still, I am informed by a friend from Berlin, that the greater half of the Imperial Bank's coin and bullion consists of silver to the amount of about 300 million marks. This large proportion of silver makes the Bank feel every demand on its stock of coin and bullion in quite an extraordinary manner, most likely, because its stock of gold is too small for its requirements.' — Economist, June 9, 1877. }. ' Official reports state that the amount of old silver withdrawn from circulation at the end of May 1877 was 798 million marks (say 40 millions sterling) of which 404 millions (say 20 millions sterling) were taken for recoinage, as shown by the Mint returns for the beginning of last month. ' Econonnst,, December 11 and 25, 1875. E 2 244 A handbook: on gold and silvee. Of the difference (about 20 millions sterling, nominal — although it is difficult to he exact, because of the wear of the old coins and the low intrinsic value of the new silver currency) — 16 millions have been sold, and 5 millions remain for sale. But the sum which has yet to be sold will be further aug- mented by an unknown quantity, viz., the quantity of old thaler coins which are yet to be withdrawn. . . . The great final step in the German coinage reform will not have been taken until the 1 -thaler pieces are demonetised or debased to the rank of token coins. We see estimates— there have all along been estimates which have varied much, because the guiding facts have been so few — that the quantity of silver which the German Government will have henceforward to sell will reach 25 millions sterling, — and that the four years which have elapsed since such sales began will stretch into another foiir years, and perhaps eight years more, before the demonetised silver currency is altogether cleared out of Germany. It is clear the silver crisis is not yet done with.' — EconomAst, July 14 and August 25, 1877. And yet Mr. Pietsch, who claimed to speak with knowledge and apparent authority, coirecting a higher German estimate of 20 to 22 millions, stated in July 1876 that the sUver remaining to be sold amounted to only 13 millions sterling. 48. It appears from paras. 45 and 47, that up to February 28, 1877, the withdrawals of gulden, two-thaler pieces, and Hamburg and other currency except thalers, were as follows : — {In millions of mm •hs.) Gulden 2 Thaler Pieces Ham- burg and other Total 1 Thaler Frac- tional Thalers Total Gross coinage in Dec. 1871, outstanding . Withdrawn, to Feb. 28, 1877 Percentage of gross coinage withdrawn^. 236 196 83 195 154 79 27 14 52 458 364 79 1,103 317 28-7 189 50 26-5 1,750 731 41-7 Of the gulden currency 83 per cent., and of two-thaler pieces 79 per cent, have been withdrawn ; while of the total thaler cur- rency of full value, only 38 per cent, has been withdrawn, the withdrawals of one- thalers and of fractional thalers having amounted to only 28 per cent, of the gross coinage estimated to be outstanding in December 1871. In the Blue Book of 1877, relating to silver, it is stated that of the thaler coinage, two-thaler pieces were iii'st with- drawn, as being the largest and most available for melting. For the same reason they must have been preferred for export, during the drain of silver to the East, and whenever the exchange was unfa- APPENDIX II. 245 "vourable to Germany. Hence, since 79 per cent, of tlie gross coinage of two-thaler pieces was withdrawn up to February 28, 1877, the proportion of the ultimate withdrawals of one-thaler pieces and of fractional thalers must be greater. Reckoning it at a not much higher proportion, viz., at 83 per cent., the same as in the gulden currency, the amount of ultimate withdrawals becomes 1,027 millions, of which 367 millions were withdrawn up to February 28, 1 877, leaving 660 millions of marks, or 33 millions sterling, as outstanding on that date. This accords, in a measure, with the estimates quoted in para. 47, section II., that 25 to 30 millions sterling of silver currency remained for withdrawal at the end of May 1877. Inasmuch, however, as the 300 million marks (15 mOlions sterling) of silver in the Imperial Bank, in May 1877 (para. 47, section II. a.) must be reckoned with the coin which remains for withdrawal, and as large amounts of thalers are still in circulation, the outstanding silver coinage probably exceeds 30 millions sterling, exclusive of 3 millions sterling of Austrian thalers which are redeemable by the German Empire. The British Secretary of Legation at Stuttgart wrote on September 25, 1876 ; ' Thalers are used very extensively in the ordinary daily transactions of the public, in place of the bank notes of small amount withdrawn from circulation.' 49. Including silver token coinage, the total withdrawal of silver currency, to the end of Jime 1877, was £40,941,000; and if 34 mil- lions be added for further withdrawals, the gross total becomes 75 mil- lions. Up to August 31, 1877, there had been coined 20 millions sterling of silver; and to the end of May 1877, 15 millions worth had been sold (' Economist,' August 25, 1877), giving a total of 35 millions : so that some 40 millions sterKng of silver remain for disposal, unless the limit fixed by law for the silver token coinage be raised from 10 to 15 marks per head of the population. Lord Od. ' The case of New York, where the value of personal property has diminished in amount about 38 per cent., and that of real estate by nearly as much, since 1873, is only a typical one, and no doubt there has been a similar, though it may be a less heavy decline, throughout the whole country. The crisis, therefore, has not nearly arrested its progress ; it has also caused an enormous, and as the figures show a continuous loss of wealth. The country is poorer than it was, and it has therefore been compelled to restrict its expenditure, and to buy less than it formerly did of foreign commodities. Looking at it in this light, the excess of exports over imports, upon which there has, in America, been some self - congratulation, becomes an evidence hot of increased prosperity but of diminished wealth, and a less degsee of well- 302 A HANDBOOK ON GOLD AND SILVER. being among the mass of the people. . . . The state of Pennsylvania in 1870 had a population of 3J millions ; at the present time it is scarcely so much as the population of London (3J millions) ; yet, I believe, there are more persons, able and willing to work, out of employment in this State than there are in all England. . . . The only immigrants to the United States now required are agricultural labourers, and persons who can buy land and settle on it. c. ' The leading result of this table of failures is the rapid increase of the insolvencies in each year, since 1873. In New England the increase in 1876 over 1873 was nearly three-fold ; in the Middle States double ; and in the Southern States 50 per cent. Another leading result is, that in each year the insolvencies embrace a smaller and poorer class of traders.' d. Tte circular dated January 17, 1877, of M'Culloch and Co., of New York, describes as follows the prostration of that leading centre of American trade : — ' There is a degree of torpor apparent in all interests, that is somewhat discouraging as respects the prospects of the opening season. Several causes seem to conduce to this state of things. The influences surrounding the political situation are unhealthy. Then, the presentation of the annual state- ments of States, Cm-porations, and finamoial institutions, has not produeed favourable i/mpression. An unwelcome picture of excessive debt, oppressive taxation, bad debts, heavy losses, and light profits is presented ; and the effect for the time being is anything but encouraging. Then, the severity of taxa- tion is being very keenly felt. The reduction of these burdens has been nominal, compared with the diminished ability of the people to bear them ; and the pressure now begins to tell with great effect upon business. The tax receipts of this city, which are collectable at this season, are not equal to 30 per cent, of the usual amount, simply because the people cannot pay them ; and yet there is some twelve million dollars of arrears of previous years. 1877. e. ' Here is a population of nearly or quite 45 millions, possessing a soil and climate varied and desirable in the highest degree, ample water communication in all directions, and a great network of railroads begging for freight : nevertheless, probably one-third of the people are without ade- quate remunerative employment, and many who would gladly have work to do have none at all ; railroads are going into receiverships, and their employes are deserting their work to engage in unprecedented acts of violence, while, what transportation there is to be done is thus interrupted. On one hand, capital needing investment is so plethoric in abundance that it takes many millions of bonds at a rate of interest contrary to all the past ; on the other hand, both skilled and unskilled labour want employment and wait for it. What is the thing that keeps apart the capital and the industry which ought to come together ? ' GERMANY AND AUSTRIA. 1875. ' The commercial crisis in Prussia appears by no means to have come to a, close. Not many days ago a private deputation of large employers of labour waited on the Minister of Commerce to represent the alarming con- APPENDIX III. 303 dition of the artisan class of the capital. Three of the chief manufactories, which averaged in their employment, not long since, 2,000 hands each, can barely now find work for a third as many, and it was stated that in the city there are at present no fewer than 23,000 artisans or skilled labourers, mliolly witlumt anything to do, and every prospect of the number of those turned adrift for the want of orders increasing. Under these circumstances it was urged that Government should take such measures as the budget allows for promoting a demand for labour.' 1876. After a table of the companies started in 1871-2, and of the prices of their shares on December 31, 1872, and December 31, 1875 : ' At the end of 1875, the market prices showed a loss of fully one-third, say 54 millions sterling, on the par amount of the 170 millions involved in the 432 companies ; and the probability is that the large part of the residue of 116 millions must be regarded as a dormant and contingent asset yielding no present revenue to the holders. Now, 170 millions sterling is equal to nearly six years' public revenue (30 millions) of Prussia, and 116 millions are equal to nearly four years' revenue. Prussia is a country of small fortunes and small incomes ; and it is not easy to exaggerate the disturbance of trade, and the curtailment of expenditure, inflicted by so large and sudden a diminution of the dividend-bearing character of a total sum representing a very large proportion of the savings of the country. February 3, 1877. ' The organs of the democratic party in Germany demand the immediate construction of public works as a remedy for the depression of every branch of business. These organs protest against the neglect of this part of the Government's duty.' February 28, 1877. ' In the Prussian Landtag, the Government has been advised to undertake a great number of public works, with a view of allevia- ting the general distress. The Secretary of the Board of Trade was reproached with having made but little use of the credit granted by the Keiohsrath, and he defended himself by stating that the Government had just commenced the construction of several railway lines that would demand a capital of over 100 million marks.' March 24, 1877. 'The Prussian Government has published a report on the present condition of general distress, in which it is stated that for railway works done 70 million marks have been expended during the past year, and that further works will be given over to public competition.' March 17, 1877. ' It is a surprising fact that the immense depression of business has not decreased the import of articles for food and luxuries ; on the contrary, they are rather increased.' August 11, 1877. ' The iron and coal industries in Germany are, according to the FrankfuHer Zeitung, going from bad to worse. Forced sales are every day on the increase.' — New Tm'Tt Financial ClirmAcle. January 30, 1877. (Austria). ' In the five years from 1871 to 1875 there were sold 803,136 estates of the annual value of 2,135 million gulden. These figures prove what an enormous influence the crisis has had also upon landed property ; and (February 20, 1877) efforts are being made in Vienna to relieve the general distress. The municipality of the town has chosen a committee which has already proposed the construction of some public works 304 A HANDBOOK ON GOLD AND SILVER. as a remedy. A deputation of some members of the Eeichsrath of the Land- tag of Lower Austria, and a number of mayors of neighbouring towns has been received by the Minister of the interior. They all demand State help in relieving the universal distress. The Minister answered that parishes and provinces are the first that must help ; but that the Government is certainly disposed to do all it can ; as,- for instance, to grant to the parishes loans ■without interest, if they but consent to redeem them. He advised them to send in their projects for such a purpose.' GERMANY. An Article in the Revue des Dean; Mondes on the commercial crisis in Germany thus sums up : — ' With regard to the operative classes, their con- dition was not much improved, though in many cases their wages were doubled, and their hours of labom- reduced by one-half. Extravagance and indolence united to rob the labourer of his earnings. The deposits in the savings bants did not increase ; the house of the mechanic and the labourer was no better furnished ; and his family were no better lodged and no happier ; so that when the day of panic and cessation of work arrived, the mechanic, after all his increase of wages, found himself as poor as before, but more discontented than ever, and more ready to believe in the magical power of strikes, revolutions, and political or financial chimeras. . . . There remains nothing of the increased earnings of the workman, nor of the immense sums expended upon ill-advised railroad schemes, upon houses badly built, upon colonies without colonists, and upon workshops which have remained empty ; so that, after all, Germany has been unquestionably weakened and im- poverished.' — Sankers' Magaaine, January 1877. BELGIUM. August 1877. ' It is estimated that in this country the mercantile capital engaged in industrial pursuits has undergone a shrinkage of from twelve to twenty-five per cent, during the last year and a half. The vast losses which have thus been brought upon our people have been the subject of considerable remark. The Economiste Frcmqais of May 26 has an interesting article showing how a similar shrinkage has been going on in Belgium, between the years 1874 and 1876, in the value of government and municipal bonds, shares in banks and finance companies, in railways and other industrial enterprise, and in foreign bonds and shares, which represent somewhat more than one- fifth of the whole. In 1874 the values amounted to 177 millions sterling ; in 1876 to 154 millions, showing a depreciation of thirteen per cent., and the country is poorer to that extent. What has become of the 23 millions sterling of capital which has thus disappeared, and how long Belgium will have to wait before this vast sum of latent capital can once more be recovered and realised, are questions which, in the present depressed condition of the bourses of Europe, it is quite impossible to solve with any approximation to accuracy.' — New Trn-k Bankers'' Magazine. SWITZERLAND. The railway crisis in Switzerland is now (February 13, 1877) spreading to industry also. Thus, the watch industry of Geneva is in a very depressed APPENDIX III. 305 condition. In Montroux and Geneva 26 hotels and pensions are said to have failed, and the Federal Government is obliged to construct more public roads to find work for the needy.' FRANCE. ' The absence of demand at remunerative prices for nearly all kinds of manufactures, but especially for iron, coal, and hardware, has now lasted for four years in this country (England), the United States, Germany, Austria, Hungary, Italy, and, during the last year and a half, in France. Since July 1876, the depression has been deepened and complicated by political appre- hensions, arising out of the dispute in the South East of Euiope. . . . Since the summer of 1873, there has been a notorious diminution of the means of consumers— that is, of the cash demand for commodities of all kinds, but especially coal, iron, and hardware. This has been most marked in Germany and Prance.' — Economist, May 5, 1877. ' In the discussion of the Conseil Supgrieur du Commerce et de I'lndustrie, last month, it was stated that some of the largest and most important iron and steel works in France have been five and seven years without paying a farthing of interest or dividend to shareholders ; and Mons. Tezenas de Moncel adds : " At the present moment the shares of metallurgical establish- ments are in such discredit on the Lyons Exchange that if these great iron and steel works, or blast furnaces, which employ millions of workpeople, were to cease work, and be obliged to borrow capital, they would find it difficult to get what they want." ' — JEconomist, June 2, 1877. RUSSIA. An empire in which discontent is smouldering among the working classes and the peasantry ; a people freed from serfdom yet demoral- ised from the despair engendered by heavy taxation, bom of the deep indebtedness of the Empire. There is a deficiency of floating capital in the country, and owing to the great depreciation of the currency, none is imported. And even what floating capital there is cannot find full employment. ' The rate of interest on cm-rent accounts, allowed by the State institu- tions of credit, which was i per cent, up to the Crimean war, was subsequently reduced to 3 per cent, in consequence of the superabundance of capital then lying unemployed within the country. This rate was continued by the State Bank, which absorbed the various credit institutions, from 1860 until 1875, in April of which year it was reduced to 2 per cent. But a week or two ago the State Bank intimated, by means of circulars to the private banks, who had a, credit of about 46 millions at the Imperial institution, that it would no longer allow any interest whatever on current accounts. Afterwards the State Bank agreed to allow 1 per cent, to the private banks on their current accounts, but with the stipulation that the latter should reduce the rates they allow on the sums deposited with them by the public, by 1 per cent. By these means it is hoped to check the accumulation in the banks of unemployed capital. It seems from this, that means for the employment of capital are extremely limited.' — Economist, May 12, 1877. X 306 A HANDBOOK ON GOLD AND SILVER. This is stated of an extensive empire, traversed by railways and capable of great development. Apparently, burdensome taxation, by crippling the means of consumei-s, lessens demand, and the need of capital to meet it. ' The country, though it has considerable natural riches, besides such resources as spring from the introduction of an immense system of banks and railways, has for the time exhausted its credit abroad, and the immediate limits of the taxation of its population appear to have been nearly reached. Apart from the annual produce of the soil, Russia has at the moment few resources beyond what can be forced from her people by such devices as issuing paper currency.' — Mconoitmgt, September 15, 1877. UNITED KINGDOM. Though England has not borrowed, but on the contrary has reduced her debt, yet, as the piincipal offender, she could not escape the general depression which has overtaken the rest of the world ; for, unless she had lent, the indebted nations could not have borrowed the stupendous amounts, which, though easily enough expressed in figures, the mind cannot adequately gi-asp. The ' PaU Mall Gazette ' wrote of the year 1876 as follows : — ' The three years of distress, 1874 to 1876, have cured effectually the undue conversion of floating into fixed capital. They have purged away most , of the abuses and excesses of credit, tut they home not yet irovght down the cost of production to a point which tempts capital, by reason of cheapness, to rely upon the prompt and effectual response of consumption. Still, rapid progress is being made in that direction. The losses of manufacturers, mer- chants, dealers, and tradespeople have become so general, and the lessened dividends upon all capital invested in joint-stock companies have so seriously impaired large classes of incomes, that the process of correction is now at work with accelerated force. During 1876, all attempts of trade imions to resist reduction of wages have been more or less defeated, and the decrease of employment has enabled the masters to get rid of the less eiScient hands, and thus amend, somewhat, the circumstances of production. Emi- gration to the United States and Canada is almost stopped, and steamers from New York bring back to Liverpool, weekly, hundreds of artisans in search of work in the old country. Moreover, in particular industries, the competition of Belgium and Germany has become active in some trades in this country hitherto wholly native. Added to all these correcting influences, there is the effect of sharp necessity, all over the commercial world, com- pelling retrenchment, contrivance, and extra work. We see already the effects of these causes in the fall of the rate of discount in this and other countries, a. fall so far due, less to surplus income than to lessened trade ; but still, a significant fact, as indicating that we have already reached the first positive stage towards the cheapness of commodities, namely, the cheap- ness of borrowed money. h. ' In this country (England) there is the largest niunber of such solid APPENDIX III. 307 fortunes ; in declining progression, they exist in the following countries ; — Holland, France, Germany, Austria, Italy, Russia, Spain. In America, New England States present the same phenomena as does this country, but upon a scale comparatively small. The creation and increase of these solid fortunes is one of the most beneficent results of civilisation and law. Among ourselves, at this moment, it is the expenditure of the opulent class which, in spite of the distress among manufacturers and merchants, keeps in profitable em- ployment the large industries devoted in supplying the wants of the wealthy and well-to-do. But for this, a collapse of manufacturing enterprise would mean, as it did mean in former periods, a collapse of nearly all the trades and employments of the country. We have therefore assured to us, by reason of these accumulations of capital, a home and foreign trade of no small magnitude, but a trade which, from its nature, varies little in character or extent — a trade of the same nature as that of Holland, a country almost wholly dependent on the expenditure yielded by capital invested in secu- rities.' — Ibid. XIII. Let us take special note of the facts whicli are so well stated in these two extracts from the ' Pall Mall Gazette.' 1. 'Ihere has been universal commercial distress for the past three years, but the following faint streaks of silver lining in the cloud are visible, viz. : — ■ 2. Failures, losses, and a shrinking of credit, have been effectually correcting the undue conversion of floating into fixed capital. 3. But they have not yet brought down the cost of production. Still, rapid progress is being made in that direction by a reduction of wages. 4. From this diminished income of the working classes look away towards the colossal fortunes which have been accumulated, and the owners of which are only waiting a diminished cost of production to embark on a fresh career, financial and commercial, which, after the usual cycles of unhealthy excitement, temporarily increased wages, failures, and intelligent speculations on the causes of general com- mercial distress, shall bring the world back to the present result. 5. In the meanwhile, the fortunes which have been accumulated are doing good service ; for the expenditure of their owners keeps in employment the large industries that are devoted to the supply of their wants. 6. For we have assured to us by these accumulations of capital a trade like that of Holland, a country almost wholly dependent on the expenditure yielded by capital invested in securities. XIV. In short, the cold comfort afforded in these facts is that England is commercially approaching the condition of a nation retired from business; politically she has, perhaps, already retired z 2 308 A HANDBOOK ON GOLD AND SILVER. from the working world, which, is busy in act and deed. But what shall the next stage be ? Will England, if content merely to live upon her savings, be able to retain within her islands the strength and manhood, the bone and sinews of the nation, by which she protects the accumulated fruits of her labour 1 And in. the facts which have been passed iu review, is there assurance that the savings, however securely protected, will not be reduced by the diminished income of the debtors in whose securi- ties the savings are invested 1 XV. The subjects which have been discussed are — 1. The growth of Public Debt, or of the indebtedness of States. This means — the might and the rivalry of colossal Empires, and their imitation by second-rate Powers ; a civil war in America, of gigantic proportions, liie everjrthing else in that country ; and a nation which desired nothing better than to lend to these States, and that they should take out the loans in goods. 2. The growth of joint-stock companies, and of banking, railway and industrial enterprise — ^which means, the marvels of science in its application to industrial arts, to locomotion, to communication with the ends of the earth — the triumphs of the railway, the tele- graph, and steam ; the organisation of the world's industry through the wondrous power of ubiquitous finance ; the concentration of the world's products in the world's market ; and the world's bankers fast lapsing into citizens of the world, till awakened into patriotism (not a whit too soon) by the exhibition of armaments which have brought the world into their debt, but with a dangerous increase of strength, though insufficient, as yet (let us hope), to plunder the Bank and find a new way to pay old debts. 3. Increase of taxation, and of the excise revenue; collapse of credit ; stagnation of trade ; disorganised relations between labour- and capital. 4. These facts mean pressure on the springs of industry of the working millions, of whom one portion, raised during the past fifteen years, by education and the high wages which they have enjoyed, to a higher, and now accustomed scale of living, find it hard to descend from that scale to the lower wages which are considered necessary for prosperous trade ; while another part, which wasted high wages in drink, infuses suUenness into the relations between capital and labour. On the continent and in America, men willing to work cannot get work j on the Continent, in the midst of abundant food, public works on a large scale are undertaken as a measure of industrial famine APPENDIX III. 309 relief ; and in America, ' an unwelcome picture of excessive debt, oppressive taxation, bad debts, heavy losses, and light profits is pre- sented ; the severity of taxation is being very keenly felt ; and seventy per cent, of the taxes is not realised, simply because the people cannot pay them.' XVI. The general commercial depression is explained by the euphemism of the undue conversion of floating into fixed capital. The facts are, that since 1848 the indebted nations have borrowed enormous amounts from, principally, two or three countries which had both money to lend and goods to export ; that, on the one hand, the borrowing was in great part for unprofitable expenditure which could not last for ever ; and, on the other hand, tlie provision of a considerable part of the loans in the form of goods created an increase of production which, though originating in a temporary cause, has thus far resulted in continuous over-production, from the necessity of keeping in work the additional mills, mines, and machinery which were provided for the special increase of demand. The special demand having ceased, it is hoped that, by cheapening the prices of goods, an additional ordinary demand may be created, with the virtual result of meeting part of the interest on the loans borrowed since 1848, by a rediiction of wages of the working classes in the creditor countries. The expectation is not unreason- able, but this final stage of the distribution of the wealth acquired in the past thirty years, which this reduction of wages would involve, is disorganising the relations of capital and labour ; and, supposing the reduction to be completed, will an increase of the ordinary demand commensurate with the past special demand which has ceased, be much nearer practical attainment ? The producers may offer at cheaper rates, but will the consumers, with incomes diminished by heavy taxation, imperial, local, and municipal, be able to buy much more than they now do, especially as the trade, henceforth, will to a great extent be conducted, not as between countries which have goods to interchange, each giving to the other that which it produces cheaply, and so buying the exchanged article at a cheap rate, but as between a debtor country which sells its goods at a disadvantageous rate in payment of interest, and which therefore cannot afford to buy as freely from the creditor country, goods for which its own products are not given in exchange ? XVII. The situation is a dead-lock. Production has outstripped the ordinary demand abroad ; under ordinary circumstances, a reduction of price would raise the demand to the amount of existing production; 310 A HANDBOOK ON GOLD AND SILVEB. but the diminished incomes of peoples that are staggering under heavy loads of taxation induced by the indebtedness of nations, states, and municipalities, cloud the prospects of escape, in this way, from the commercial depression which for long has prevailed throughout the world. Meanwhile, capital or labour must suffer. XV ill. The outcome, then, in less than one generation, of the mani- festations of power and might of colossal empires ; of a mental activity which, proud of its achievements, is even more astonished at them ; of an enterprise which has covered the ocean with steamers, the 'West with railways, joined the West to the East by the Suez Canal, and by the telegraph has put a girdle roiind the earth ; the outcome of all this ambition, energy, and mental power, — which have produced triumphs of civilisation, — and of a money-seeking and money-getting which have multiplied manifold the wealth of the world, is a waU of distress from suffering myriads, that they cannot get work in a world in which labour was constituted the inheritance of man. Herod, clad in his royal robes, and vain and proud like the civilisation of the nineteenth century, was shortly eaten up by worms : is that civilisation, amid all its triumphs, rotten at the core t The fabric of enormous wealth, which is chiefly owned by the creditor countries of England and Holland, is comprised mainly of debts which the indebted nations may soon be unable to pay ; and its base rests upon miUions of labouring poor among whom the agricul- turists have no hope, — the artisans — many of them — are ceasing to have work ; and the rest include numbers who maintain the prosperity of the finances through the excise revenue. If humility be the royal road to knowledge, perhaps these results of the civilisation of the nineteenth century only herald some greater achievements yet, of its intellectual pride. Debtor and creditor nations alike shut their eyes to these evils. Already is Russia engaged in a war which must add many miUions to her debt, other millions to her taxation, and almost unbearable burdens to those which now oppress her working classes ; and already, leaders of English thought, fascinated with the grandeur of colossal fortunes, are looking forward to a fresh career of commercial progress, and of accumulations of still vaster fortunes, which are to be brought about by a reduction of wages. That reduction is inevitable; but the fall may be broken and arrested. It will perhaps be found on reflection that a strong curb should be put on the too facile disposition to lend to foreigners, and that the destruction which swept over England in the commercial APPENDIX III. 311 crisis of 1866, and over the Continent in the crisis of 1873, is distinctly attributable to the gi'owth of joint-stock companies under the law of limited liability. The expansion of credit, through these companies, has worked mischief which is ascribed to an insufficient supply of gold. Without them the enormous loans which have been spent on bloated armaments, and in other unprofitable ways, could not have been obtained, and the heavy butcher's bill which has startled and hon'ified Europe in the present war in Eastern Europe might not have occui'red. XIX. One of the besetting difficulties of commerce is the over-pro- duction induced by excessive competition. The abolition of the law of limited liability for new banks and joint-stock companies, and the prohibition of payment by deposit banks of interest on floating accounts, would apply a check not more effectual than wholesome- Accompanied by facilities for investments in land, the yearly savings of the people, now sent abroad, to invigorate foreign competition, would be applied in the improvement of the land, to the doubling of its produce, the increase of agricultural labourers' wages, and such a growth of the home trade as would not only compensate for feeble progress of the foreign trade, but would restore its vitahty ; for the certainty of a home market for covering the expenses of a total manufacture is an effectual help in selling cheaply abroad. XX. The vast amount of deposits, and not the moderate amount of gold in the country, constitutes the real danger to the metallic basis of the currency of the United Kingdom. With trade and finance constituted in the way just described, the danger would be mitigated. Under the influence of the measures suggested, England would also gradually recede from the unsatisfactory position in which she now stands, in the double relation of banker and merchant, to the rest of the world. The relations are conflicting in cases where, as banker, England has lent money to foreign States for non-productive expendi- ture. In such cases, the interest paid to England as banker is so much subtracted from the amount of goods which would have been purchased from England as merchant. In other words, English producers now suffer, though English investors may grow rich. The foreign trade wotdd not he so frequently convulsed, if the land laws be revised, and the law of limited liability be repealed, to the extent above indicated. There are two schools of finance : — one would cut down expenditure, leaving the revenxxe to grow, and reducing debt, or repealing inexpe- dient taxes, as the revenue increased ; the other would pursue what is 312 A HANDBOOK ON GOLD AND SILVER. termed an enligh.tened and liberal policy in expenditure, for the de- velopment of tlie country's resources, and would raise the income to the level of the enlarged expenditure by fresh taxation, if necessary. Man- chester has supported the former school at home, the latter abroad. The first-mentipned school was encouraged by Manchester's policy of peace at any price to reduce expenditure until England lost her former pre- ponderating influence of material and visible power in the councils of Europe. With that power unimpaired she could long since have prevented or reduced the bloated armaments that are cnishing Europe with a grinding debt and taxation, from which England is now suffering in her trade and industry, and may yet suffer in her political position, — ^which God forbid. Through the diminished influence of England on the Continent, a policy of peace at any price has led to fearful wars, and created for England a grave political danger. Wherever the other school of finance, led away by the seductive applause of a liberal and enlightened policy of Government expendi- ture for developing a country's resources, has entered on a course of large borrowing, we find that public works extraordinary have pro- duced financial disorder, as in Canada, Egypt, Australia. Both schools of finance might derive profitable lessons from this chapter on national indebtedness. APPENDIX IV. PRICES. Gold wMcli has fallen in value cannot also have risen in value ; but the latter having been affirmed in the United States, the facts relating to the depreciation of gold must be stated. 2. High prices, induced by an addition to the metallic currency, or by the greater rapidity of its circulation, denote a depreciation of the precious metals ; but the same may not be aiBrmed of the inflated prices which prevail in periods of excitement and speculation. 3. A certain amount of credit, which we may call normal credit, rests upon gold or silver, namely, the credit of those who can discharge their obligations, as they fall due, in a form convertible into legal tender which rests upon gold or silver. Obligations secured by Government stock, or other substantial security which is readily convertible into an amount of legal tender equal to the value of the obligations, would also come within this category. Prices which result from the action of this credit may be regarded as metallic prices. 4. But in periods of speculation and excitement various forms of paper money are created, which further multiply credit. The pur- chases made from this credit are additional to those which were possible with only the normal amount of credit ; and the demand created by the exti'a purchases causes additional production, with its attendant multiplication of credit. So long as the excitement and speculation continue, prices lise, or remain at an inflated level, stimu- lating production. When the collapse comes, the credit which had set the additional purchases and new industry in motion, collapses ; prices, which had risen with the expansion of credit, fall with its con- traction; and they fall the more surely from the over-production which continues after the crisis, through the diflBculty of disengaging the fixed capital which had been sunk for increasing production during the period of excitement. 314 A HASDBOOK ON GOLD AND JSILVER. 5. A similar enliaiicement of prices, not induced by an increased production of tlie precious metals, might be predicated from a long course of borrowing, by the nations of the world, on a scale which dwarfs the productions of the gold-fields in California and Australia — and which developed or created vast industries, but which yet involved, not so much a transfer of gold and silver, as a transfer of credit, from the lender to the boiTOwer. Ani a similar decline of prices (as on the contraction of credit after a financial or a commercial crisis), might be expected from the sudden arrest of the borrowing, and of the demand upon the various industries for production, distribution, and supply, which the several thousand mUlions sterling of borrowing had em- ployed for many years. More especially would this depression continue, from the diminished means of purchase of the nations, now burdened with heavy taxation on account of their indebtedness. 6. The value of the precious metals is measured by the prices of the articles which they buy ; but the variations in these prices depend upon accidents which afiect (1) the metals, or (2) the articles, or (3) the expansion or contraction of credit. Only where the variation arises from the first cause are we warranted in speaking of an appre- ciation or depreciation of the precious metals, at least so far as any safe practical inference can be drawn from the use of the terms. The inflation of prices by excessive credit, and their undue depres- sion by a rigid contraction of credit after a crisis, are well recognised. Thus— a. Mr. Patterson, writing on the rate of interest during commercial and monetary crises,' observed — ' I have not at hand any commercial price list relating to the crisis of 1866 ; but during the shorter and less severe crisis of 1867 (when the Bank rate was raised from 5J to 10 per cent, in a mouth), the fall of prices in the markets is shown in the following extract from the " Commercial Daily List " of November 1857, which gives the prices of the undermentioned articles before and during that crisis. Before During Before During s. per cwt. *. per cwt. 4. per cwt. 8. per owt. Tallow . 60 50 Turmeric . 60 30 Sugar 55 35 SheUac . 120 80 Saltpetre . 65 45 Jute 28 20 Linseed oil 40 32 Hemp 36 30 Tin . 135 122 ' statistical Jov/nuil, September 1871. APPENDIX IV. 315 By the depreciation or appreciation of gold must be understood the change produced in its value by an increase or diminution of its yearly supply for the world. The violent change of prices in a mercantile crisis, as in the preceding table, is attributable not to any circum- stances of the gold supply, but to the contraction of credit. 6. Professor Cairnes wrote in 1858 — ' But what renders the present time peculiarly important as a point of comparison with former periods, is its being in immediate sequence to a severe commercial crisis. The effect of the crisis of last winter has been efEectually to eliminate one great disturbing element from those causes to which a rise of price might be attributed, the element of credit. Trade is now suffering depression in almost all its branches, and prices, after a period of undue inflation, have, through an ordeal of bankruptcy, been brought to the test of real value. In the fluctuations of commerce we have reached the lowest point of the wave. Whatever, therefore, be the range of prices at the present time, we may at least be sure that no commercial convulsion is likely to lower it.' c. In the same sense wrote Professor Jevons, in May 1869 — ' The present year is especially suitable for a retrospective inquiry, because we have just passed through nearly three years of commercial pro- stration, during which the use of credit has been undoubtedly reduced to its minimum, and prices have suffered a corresponding depression. Taken in connection with the similar depression which followed the collapse of 1857, this gives ample means of judging whether a real rise of prices has been established, because it assures us that any rise of prices which may be detected is not due to a temporary cause, such as the inflation of prices by credit.' 7. Hence, in comparing prices at moderate intervals, the suitable periods for comparison are the first or second year after each crisis, such as the crisis of 1847, that of 1857, that of 1866, and the crisis of 1873 on the Continent and in America. The standard years for com- parison would be 1849, 1858, 1867, and a period after 1873. In the commercial history and review of the ' Economist,' the average of the prices in the six years from 1845 to 1850 is taken as the standard, and the prices of subsequent years are estimated by the proportion which they bear to that standard. But in this way the subsequent increases of price, if regarded as measuring the depreciation of gold, are overstated in the table ; because, as pointed out by Mr. Newmarch, or the writer of the earliest of the reviews, 1846-50 ' "Was a period of small demand, and great stagnation, in consequence of the pressure of the railway calls ; it included the Irish famine, the commer- cial panic of 1817, the French revolution of February 1848, and the year of war which followed it all over Europe. Hence the prices of 1845-50, when 316 A HANDBOOK ON GOLD AND SILVER. reduced to an average, present a low datum line, and con rey a false impressioii of the changes in subsequent years.' 8. Our immediate iaqniry is, whether the depreciation of gold from the gold discoveries ia California and Australia is stUl going on, or whether it has been arrested, and the current has turned, so that prices are now lower than those metallic prices which measured the fall in the value of gold before the inflation that culminated in the prices and the crisis of 1873. In any useful investigation of this point, the course of depreciation since 1848 cannot be disregarded ; but it will save an elaborate array of statistics to state the conclusions formed respecting the greater part of the period by authorities of repute. I. M. Lavasseur, quoted by Professor Caimes. Summarising conclusions from the official statistics of French prices, including all commodities produced or consumed in France from 1847 to 1856, in- clusive, M. Lavasseur observed : — ' But passing by these considerations, the important facts remain that French prices, comprehending those of all articles produced or consumed in France, have, after making liberal allowance for the effects of war, scarcity, and undue speculation, undergone since 1847 a marked rise, and that the rise has taken place (so far as the classification has been carried), in the manner according to which, supposing it to have proceeded from an increase of money, it might be expected to take place : ' Namely, to the greatest extent in natural products, and in a less degree in manufactured products. II. Professor Cairnes, on a review of tables constructed by him, containing altogether about one hundred commodities, observed ; — ' Out of the whole number of commodities, only six have fallen (1858) since the epoch of 1849-51 ; the remainder have all risen, and the greater number in a very marked manner. In this progress of prices, the advance has, on the whole, taken place in the order in which, as I have endeavoured to show, prices may be expected to advance under an increase of the precious metals. Thus, he will find Victorian prices to have advanced in the propor- tion of about 200 per cent., or rather more. He will find the movement in English and American prices, on the whole, greater than in the prices of Continental Europe ; while these latter show a greater advance than prices in Asia. This local divergence of prices will be very remarkable if we take some leading commodities of British and American produce, and contrast them with some of the leading products of Asia. Thus, if we take provi- sions and butchers' meat, the metals, agricultural produce, raw cotton, and tobacco, and compare these with some principal Asiatic products, as cotton, silk, coffee, tea, sugar, rice, and spices, we shall find that while the prices of the former articles have risen from 15 to 45 per cent., as compared with their APPENDIX IV. 317 prices in 1849-51, the prices of the latter have in no case risen more than 15 per cent., and have in several cases probably fallen, in one important article, rice, by so much as 1 1 per cent. The only important Asiatic products in which a marked rise has taken place are saltpetre and indigo, and in both these cases the rise is ovring to causes of an exceptional nature. ... It will be seen, too, that on the whole, the other doctrines of the paper are pretty well borne out. Thus the advance in raw materials is much greater than in manufactured articles, while amongst raw materials the advance is more marked in animal than in vegetable products ; such articles, e.g., as leather, tallow, provisions, and butchers' meat showing a very remarkable rise. ' In the fluctuations of commerce we have reached (1858) the lowest point of the wave ; whatever, therefore, be the range of prices at the present time, we may at least be sure that no commercial convulsion is likely to lower it. We have further to remember that in an age like the present, in which science and its applications to the arts are, in all civilised countries, making rapid strides, there exists, in most articles of general consumption (but more particularly in the finished manufactures) a constant tendency to a decline of price, through the employment of more efficient machinery and improved processes of production. Now, taking all these circumstances together, the propitiousness of the seasons, the action of free trade, the absence of war the contraction of credit, and the general tendency to a reduction of cost proceeding from the progress of knowledge, it appears to me that, were there no other cause in operation, we should have reason to look for a very considerable fall of prices at the present time (1868), as com- pared with (say) eight or ten years ago. Prices however, as the following table will show, have not fallen ; they have, on the contrary, very decidedly risen ; and the advance has moreover, as the same tables will also show, on the whole proceeded in conformity with the principles which I have in this paper endeavoured to establish. And this is my ground for asserting that the depreciation of our standard money is already, under the action of the new gold, an accomplished fact.' III. Professor Jevons, taking 1849 as his datum point, and the prices of about forty of the chief commodities from 1789, and of about fifty from 1847, arrived at the following results : — Average Ratios of the Price of about 40 or 50 of the chief articles of commerce during the past eighty years, i.e. the average ratio of prices to the prices of the year 1849 : Ratio Ratio Ratio Ratio Ratio 1789 13.3 1847 122 1853 116 1859 120 1865 121 1799 202 1848 106 1854 130 1860 124 1866 128 1809 245 1849 100 1855 125 1861 123 1867 118 1819 175 1850 101 1856 129 1862 124 1868 120 1829 124 1851 103 1857 132 1863 123 1869 119 1839 144 1852 101 1858 118 1864 122 318 A HANDBOOK ON GOLD AND SILVER. a. 'Between 1809 and 1849, prices fell in the ratio of 100 to 41, partly from the improvement, extension, and cheapening of production at an acce- lerated pace, and partly from the production of gold, from 1810 to 1830, having been one-half the previous amount. b. ' When prices were highest here (Europe), between 1810 and 1815, the prices of eastern produce were not higher than they had been, and conse- quently, in comparison with the prices of other articles, had fallen. o. ' The years 1836-39 form a temporary but remarkable exception to the fall of prices from 1810 to 1849. In 1849-52 prices were imprecedentedly low, and, other things being equal, we might have expected that, after an- other period of speculation, and its corresponding relapse of trade, prices should descend still lower. But prices in 1858 were still 18 per cent, above those of 1852. d. ' The range of prices since 1853, has always been considerably above the point they attained in 1849. The three great collapses of credit and enterprise occurred in the years 1847, 1857, and 1866 ; and the depressions of prices thereby occasioned were respectively 22, 14 and 10 per cent. It is perfectly fair, therefore, to compare together the three lowest points thus attained in the years 1849, 1858, and 1867, and we thus learn that there has been a net or permanent rise of 18 per cent, accomplished in the prices of about fifty of the chief materials and commodities. The still greater eleva- tion of 32 per cent, in 1857 and of 28 per cent, in 1866 are partly due to the inflated credit and excessive speculation of those periods. e. ' I cannot help, then, reasserting with the utmost confidence that a real rise of prices to the extent of 18 per cent., as measured by fifty chief com- modities, has (May 1869) been established since the year 1849. This is an undoubted depreciation of gold, and one which covers a real depreciation of more than 18 per cent. ; for the gold discoveries reversed a decidedly downward course of prices, so that the new gold has both promoted a further fall, and occasioned a rise in its stead.' lY. Von Dr. E. Lespeyres ; Professor T. E. Cliffe Leslie, in the 'Fortnightly Review' for November 1872, wrote — 'An eminent German statician has recently published an elaborate- analysis of the prices of 312 commodities from 1846 to 1865, in the market of Hamburg. Among the results is a classification of the 312 com- modities in eleven groups, with the comparative prices of successive quinquennial periods, indicated in the following table, in which the prices of the first period, 1846-50, are represented by 100. APPENDIX IV. 319 No. ot Each period of five years Fifteen Commo- dities Yeai-a 1861-66 1846-60 1851-5 1855-60 1861-6 I. Products of Soutli Euro- pean plants (wines, fruit, &c.) . . . . 23 100 121 143 136 133-7 II. Agricultural products. Continental Europe (corn, teans, peas, &c.) 41 100 122 133 128 127-8 TIT. Hunting and fishing products .... 19 100 116 135 131 127-8 rV. Products of syl-viculture 17 100 109 113 160 127-2 V. Products of European cattle-rearing . 29 100 113 137 125 1241 VI. Edible colonial products 44 100 110 125 129 121-8 VII. Non-edible colonial products .... 44 100 105 115 123 114 VIU. Fibrous manufactures 12 100 102 107 127 112-2 IX. Chemical manufactiu-es 40 100 111 117 102 109-9 X. Mineral and metal manu- factures .... 22 100 107 111 101 106-4 XI. Products of mining and smelting (coal, iron, &c.) . 24 100 107 108 97 104-1 312 100 111-2 122-1 123-3 118-98 The first seven groups consist of animal and vegetable products, or raw materiaLs ; and in them the rise of price has been much greater than in the remaining three groups, which consist of manufactures ; thus confirming the conclusions of Professor Cairnes in 1858. The exceptional rise in fibrous manufactures in 1861-5 was from the cotton famine. v. ' It is compnted that the purchasing power of gold has lessened only 25 per cent, instead of 50 from its increased production. ' — Westminster Reviere, January 1876. 9. The 'Commercial History and Review' of the 'Economist' gives a table of prices of raw materials, and of some articles of food and drink. Free trade, the repeal of the navigation laws, and a vast increase of t,onnage have countervailed the tendency of the increased production of gold and silver to raise the prices of these commodities in particular. The gro-wth of indebtedness of the agricultural countries from which these products come has also, since the great diminution of foreign loans, tended to lower the price of raw materials. The depreciation of gold, as evidenced by the actual figures of the ' Economist,' is to be estimated, therefore, not by those figures, but by a mental 320 A HANDBOOK ON GOLD AND SILVEE. addition thereto, on account of the further reduction below actual prices, which the iacreased supplies of the precious metals have pre- vented. 10. The proportions which the prices of subsequent years bear to the average prices of 1845 to 1850 are thus stated by the ' Economist :' Prices in England on 1st of Januaey of bach yeae. (Pfices in Proportion to the Average Prices in 1845-50, taking 100 as representing that Avei-age.) 1869 1867 1868 1869 1870 1871 1873 1876 1877 I. Iron 100 88 86 85 88 87 141 125 104 Lead 125 114 111 109 109 103 124* 131 126 Timber . 91 95 94 97 99 115 187* 128 128 Indigo . 117 145 154 143 151 137 169* 130 173 Leather . 116 1S8 136 136 128 128 144* 147 144 Sheep's wool . 131 144 115 104 96 88 157 133 141 Tallow . 116 106 98 111 105 102 98* 120 102 /•Butchers' meat . 114 121 112 117 123 133 144 153 138 Tobacco 166 200 800 167 167 155 195* 256 211 A J Coffee 129 149 141 187 134 125 171* 183 178 Tea . 119 108 104 105 102 100 100* 100 100 (wheat 75 113 127 96 80 100 104 84 97 IL Sugar (A) . 80 66 73 78 83 83 74 67 88 Oils . . . 118 140 138 127 126 114 118 116 114 Silk, raw 124 183 161 183 174 183 169 87 187 Flax and hemp 11.S 116 121 124 116 116 118 105 99 Tin. 145 99 118 129 138 160 171 99 95 Copper . 121 98 96 89 83 81 105 100 93 III. Cotton . 95 227 100 155 173 118 138 107 94 Cotton wool, Per- nambuco only- 97 191 181 139 144 106 186 106 82 Cotton yarn . 1 124 215 118 149 154 138 154 123 108 „ cloth . 112 178 114 131 135 118 126 111 113 IV. Silver 103-9 10209 10126 101'68 101-46 101-46 99-48 94.13J - 11. The following remarks are suggested by this table : — I. The prices of articles in the first group, excepting tea, were greater in 1876 and 1877 than in 1859 ; those in the second group, excepting sugar, were dearer in 1859, from special circumstances to be presently mentioned. The position of cotton is exceptional. On the whole, the table indicates a depreciation of gold in 1876 and 1877, compared with 1859; when, as ascertained by Professor Cairnes, APPENDIX IV. 321 M. Lavasseur, Professor Jevons, and Von Dr. E. Lespeyi-es, a con- siderable depreciation had already taken place. II. There has been a gradation in the rise of prices of articles in the first group, excepting iron, lead, and tea ; prices having been higher in 1867, after the crisis of 1866, than in 1859 ; and higher in 1876 and 1877, after the American and European crises of 1873, than in 1867. The articles forming exceptions, in the comparison of 1867 ■with 1859, are — a. Iron. Low in 1867, from over-production in years before 1866 ; but after a depression for two years more, or in 1870 and 1871, prices rose inordinately, from the undue extension of foreign railways, to 41 per cent, above the rate in 1859, till the rate gradually fell, after the crisis in 1873, to 25 per cent, in 1876, and 4 per cent. on January 1, 1877, below 18S9, over-production having continued, from its own momentum, independently of the reduced demand, owing to the difficulty of closing works which had been established for the excessive demand before 1873. b. Lead. A slight depression, which was soon followed by an increase, until the price on January 1, 1876, exceeded, and that on January 1, 1877, was about the same as that in 1859. c. Tea. The reduction of the tea duties has admitted of the im- portation of inferior kinds, which have been brought within reach of vast additional numbers ; and the augmented importations, with an increasing admixture of Indian with Chinese teas, have combined in cheaperdng the article. III. The exceptions in the second group to the rise in prices since 1859 are— a. Sdgak ; as with tea, the reduction of the sugar duties, and the consequently increased importation of the lower class sugars, including beet-root sugar, explain the diminished price, in the same way as a deficient manufacture of beet-root sugar explains the enhancement of previous prices in 1876. h. Oils. Decline, from the immense importations of petroleum oil, which have reduced not only its own price, but the prices of other oils, one or other of which it has partially displaced, the displacement causing, among the rest, a competition which has lowered prices. The importations of linseed oil have also been large, whilst the Continental demand must, to a great extent, be now supplied direct. c. Silk, Raw. The revival of the growth of .silk in Europe, pai-- ticularly of the cheap Italian sorts, has increased the consumption of cheap silks, and has lowered the price of other silk by reducing the y 322 A HANDBOOK ON GOLD AND SILVER. demand for it. The competition of foreign manufactured silks in the English markets has also reduced the price of raw silk in the TJnited Kingdom. The failure of the European crop in 1876 caused the great enhancement of price in that year. d. Flax, Hemp, and Jute. With the revival of the cotton in- dustry, cotton has recovered its position in some of the fabrics in which it had been displaced by flax, jute, &c., during the cotton famine. The Continental demand has also fallen off. On the other hand, the importations have greatly increased. {1 n millions of cwts.) 1861 1866 1869 1870 1872 1873 1874 1875 1876 Flax and hemp . Jute 2-1 •9 3- 2-1 26 2-5 3-5 2-4 3-2 4-0 3-5 4-0 3-7 4-2 31 3-4 2-6 3-8 3- 5'1 5-1 6-9 7-2 7-5 7-9 6-5 |6-4 The total importations in 1871 were 6-3 millions. The abundant supplies since, and the inferior quality of much of the additions, together with the lessened demand from some quarters, as above- mentioned, have reduced prices. The fall in the price of silver also enables exporters from India to sell at a lower gold price in England. e. Tin. There was a steady rise of prices from January 1, 1867, to January 1, 1873, which shows that the price was affected by the demand. After the panic in the United States, the demand fell off, and prices declined. /. Copper. A largely -increased importation; the competition of new countries, including Chili and Japan, and the displacement of sailing vessels by steamers, account for the reduced price, as compared with 1859 ; the price, however, was higher in 1876, and on Januaay 1, 1877, than in 1871. 12. On the whole, where there has been an exceptional increase of production, as of articles in the second group, much exceeding the rate of increase of production of the precious metals, with latterly a les- sened demand for the articles, prices have fallen below those of 1859. But in other respects, so far as inferences either way can be drawn from the table, the conclusion seems warranted, that, on the whole, gold was of less value in 1867, after the crisis of 1866, than in 1859, APPENDIX IV. 323 and was of still less value in January 1877, after three years of depressed trade since the inflation of 1873, than in 1867. 13. It appears also that out of twelve articles in the first group, the prices of eight, on Januaiy 1, 1877, were higher than, or as high as on January 1, 1873, notwithstanding the knovm inflation of prices in 1872 and 1873 from an inflation of credit; thus showing that various circumstances of demand and supply must be considered, before any confident opinion can be formed, from only three or four years' prices, of a rise in the value of gold. 14. Such hesitation would be only prudent when it is considered that nothing occurred from 1872 to 1875, to depreciate gold in 1872 and 1873, when prices were inflated, or to raise its value in 1874 to 1876, when prices fell ; the facts, indeed, were all the other way. In 1872 there was a net export of gold from the United Kingdom of 1^ million, and in 1873 a net import of only 1^ miUion, and yet prices were excessively high. In 1874 the net importations of gold amounted to 7^ millions, in 1875 to 4^ millions, in 1876 to nearly 7 millions, and yet prices receded from those of 1873. Throughout this period, the currencies of Germany and France were full to repletion ; the inconvertible note paper in the latter was at par, that is, it was as good as gold ; iand the metallic circulation in the former was excessive ; for, with the whole thaler currency raised to gold value, and with the new gold currency circulating in addition, there was a manifest excess of specie. In England, as above shown, there was no depletion of currency. These facts discountenance the theory that gold rose in value from 1873 to 1876. 15. Of late the 'Economist' has selected certain articles for showing the course of prices. Taking the prices of March 1873 as 100, the proportion of the subsequent prices of these articles, to the prices in that month, are as shown in the table on page 324. 16. The following remarks are suggested by this table : — 1. Seven of the eight articles in the first group were dearer in July 1877 than in March 1873, and the eighth was no cheaper than in 1873, thus testifying on the whole to a fall in the value of gold ; but on January 1, 1877, three of the articles testified to a rise and fi.ve others to a fall in the value of gold. In earlier years their evidence was just the reverse ; those articles which on January 1, 1877, indicated respectively a rise or fall, having in the earlier years indicated conversely a fall or a rise in the value of gold. The evi- dence may be put aside ; the fluctuations in the prices of the articles V 2 324 A HANDBOOK ON GOLD AND SILVER. being too great to be attributable to any circumstances affecting the supply of gold. II. Of tbe eight articles in the second group, the prices of five were, in July 1877, 32 to 54 per cent, below, and those of the other thi-ee were 23 or 24 per cent, below, the prices in March 1873 ; that is to say, adopting the inflated prices of 1873 as a standard, gold has risen in value since that year more than it had depreciated since the gold discoveries. Actual Price Ratio of Price to that in March 1878 1871 1872 March July March July June June June Jan. July 1873 1877 d. 1873 1873 1874 1875 1876 1877 1877 I. d. d. d. Beef, inferior . 52 18 54 40 100 126 97-6 127-6 110 105 100 Sugax, foreign, 8. s. s. s. Muscovado . — — — — 100 87-2 82-1 83-3 73-1 101-3 101-3 Coffee . 60 67 85 87 100 94-2 108-1 104- 93-1 101-7 100-57 Wheat, gazette average 52,^ 66^ 66i 64i 100 108-7 109-8 77-7 87-5 94-6 116-74 Wheat, American, Bed Spring . — — — 100 98-7 80-1 83-4 98-0 110-69 Flour, town made . — — . — — 100 110-6 107-4 76-6 81-9 95-7 110-64 „ New York . d. d. d. d. — 100 100 84-8 80-0 98-4 104 Beef, prime, small . 66 64 58 66 100 109-5 101-6 106-4 100 96-2 105 n. s. s. s. s. Iron, Scotch, pig . 58i lOli 117i 641 100 91-3 81-6 61-8 48-6 47-7 46-23 Coals, Hetton Wallsend . 19 23i £ 40 £ 19 £ 100 86-6 74-6 67-2 62-7 62-7 67-91 Tin, Straits . 187 — 147 60 100 89-3 69-4 67-0 60-9 51-6 46-7 Copper, Chili bats . 66 85i 91 69 100 90-5 88-6 91-6 84-9 82-7 77-09 Cotton, middling d. d. d. d. upland . 8A 'M' 91 6ii 100 94-6 89-2 80-4 66-9 78-7 68 Pepper . n *S 100 98-9 88-6 86-2 66-6 69-0 66-48 Cotton, No. iO mule twist . 134 16j 14 10 100 90-5 88-6 91-6 84-9 82-7 77-09 Wool, Southdown, 5. s. s. s. Hogs . 13 21i 22i 16S 100 97-6 76-8 82-9 70-7 82-9 76-61 m. Sugar, Mamitius . 30i 31i 29 31i 100 87-9 76-3 71-9 69-1 88-6 87-91 Saltpetre ~ 30 28 27 100 " 70-3 85-6 79-3 89-2 97-29 III. In the III. group, as in the other two, the circumstances of demand and supply of the articles, and not any deficiency of gold supply, explain the decrease of price below the inflated prices of 1871 to 1873. IV. In reality the table only confirms the testimony to the depre- ciation of gold which is afforded by the table in paragraph 10. Down to 1873, the immense borrowings by foreign States, and subscriptions of capita] for railway and joint-stock companies abroad, kept up prices, 1st, by sparing the borrowing countries, so long as the loans APPENDIX IV. 325 continued, an export of goods in payment of interest on debt ; 2nd, by creating an exceptional demand for exports from the lending countries. With the collapse of credit of most foreign States in 1873, and with the discredit which then overtook railway and other joint- stock enterprise, the circumstances which had restrained exports by the borrowing countries ceased, and those exports multiplied, while the special demand for the goods of the cieditor countries, which had been intense down to 1873, collapsed with a suddenness which pre- vented an immediate decrease of production. The straitened income of the heavily taxed debtor countries also reduced their ordinary purchases. Prices, therefore, should have fallen, not from any scarcity of gold, but from a contraction of demand and of credit ; and if, 1st, they have not fallen for a number of articles, or 2nd, with a decrease in production are gradually rising in price, or 3rd, have fallen below the price in 1873 incommensurately with the great contraction of credit since that year ; insomuch that, still, they are higher than the prices in 1867 and 1868, the conclusion which the table in paragraph 10 supports, of a continued depreciation of gold since 1859, seems to be confirmed. 17. The course of prices in India is traceable through the prices current of Chambers of Commerce, as regards articles of the seaborne foreign trade of India, and through returns in the local government gazettes, of the prices of food grains in India. These latter are not quite reliable, nor can they be effectively used in the absence of any record, in an accessible form, of the character of the seasons, from year to year, in the several provinces of British India. 18. The rupee quotations for exports in the prices current of the Chambers of Commerce are read at a disadvantage, without their con- version into sterling at the current rates of exchange, at least for the period of low exchange, since the depreciation of silver; and they must be read with the further caution that, down to 1868 or 1869, there was a special external demand, stimulated by a brisk foreign competition ; whereas, of late years, the prices of Indian productions have been determined by the greater urgency now laid upon India, through a sluggish foreign demand, of competing in European markets, with other countries, for the sale of her products. Hence, in this later period, the prices in India of her exports were dominated by prices in the London markets, in such manner that the rise or fall in them, if evidencing the action of any of the precious metals, would show a rise or fall in the value of gold in Europe, but would not be satisfactory evidence of any appreciation or depreciation of silver in 326 A HANDBOOK ON GOLD AND SILVKE. India, where the articles concerned are produced principally for export. 19. Taking 100 for the prices of January 1850, the proportions of prices in other years to those of 1850 have been as follows : — Pbices IN CAIiCUTTA. Imports Exports Gold at i i 1 1 a 9 1-3 02 ii mm p^ i t, I Jan. 1844 102 87 198 124 96 98 142 121 65 126 100 „ 1847 108 125 126 112 109 100 122 99 71 137 98-9 „ 1848 113 130 146 98 96 108 108 98 67 100 100-8 „ 1850 100 100 100 100 100 100 100 100 100 100 100 „ 1851 93 85 90 102 131 105 104 137 73 121 96-9 „ 1852 87 72 76 97 84 87 90 116 49 142 98-3 „ 1853 116 115 111 100 140 111 96 140 90 129 97-3 „ 1854 129 150 157 104 140' 140 101 163 93 147 96-7 „ 1856 149 185 174 159 149 116 107 140 159 142 97-5 „ 1858 144 155 178 207 1 124 162 114 168 97-1 „ 1860 129 130 137 268 190 147 124 236 114 221 95-8 „ 1862 114 115 111 207 236 129 128 , 120 147 95-9 „ 1864 115 112 103 220 168 222 122 187 127 163 97-4 „ 1865 104 102 96 1821 192 169 128 210 131 221 96-9 „ 1867 109 145 205 183 190 173 145 286 165 263 98-5 „ 1868 95 130 161 198 208 149 139 247 147 168 98-5 „ 1869 99 102 135 244 228 160 128 304 169 221 98-5 „ 1870 89 112 109 244 254 180 145 292 155 168 98-3 „ 1871 86 112 97 244 236 227 136 286 149 184 98-5 „ 1872 93 126 94 237 266 213 130 239 147 189 97-7 „ 1873 105 147 96 203 202 142 — 247 167 184 996 „ 1874 116 210 106 280 240 249 180 245 167 279 100-8 „ 1875 119 167 118 244 228 204 122 169 158 247 103-1 „ 1876 113 137 144 220 193 200 122 140 131 211 108-9 July 1876 115 132 147 190 N. 191 116 222 133 210 127-1 The following remarks are suggested by the table : — I, For Impobts, silver was depreciated to its lowest, or by 40 to 50 per cent., in 1856 to 1858, the increased importations of the precious metals to double or treble the amount down to 1854-5, having begun in 1855-6. II. For EXPOETS, prices rose markedly after 1852, and (after fluctuations at high rates) reached the maximum, for one or other of the articles, in 1867 to 1870. The continuous net imports of gold and silver, in amounts ranging from 9^ to 24 millions sterling, and ' July. APPENDIX IV. 327 aggregating 223 millioiw from 1855-6 to 1869-70, with a yeai-ly average of nearly 15 milliona sterling; ended in 1869-70 with a net importation in that year of nearly 13 millions sterling. Measured against prices in 1850, the depreciation of silver was from 50 to 200 per cent, on the several articles, the average being about 100 per cent. III. On the whole, except for jute, prices have receded below the maximum that was attained in or before 1870 — but they still remained in July 1876 at a point which showed a depreciation of silver in India, much greater than the depreciation of gold in Europe. The deprecia- tion of silver in India was both quicker and greater than that of gold, because an amount of silver equal to the whole of the new production of gold since 1848 was exported to the East. IV. It is not surprising that the increase of exports from India, on account of the reduction of borrowing in England, should correct some of the abnormal depreciation of silver just mentioned ; the fact is quite compatible with the recent depreciation of silver in Europe, relatively to gold. V. Indeed, it is noteworthy that when silver was depreciating in India, its gold price was highest in Europe ; and since it has been appreciating in India, its gold price in Europe has declined. The high price of Indian commodities in Europe coincided with the high price of silver in Europe. "VI. But if the price of silver in Eui-ope is in accord with the price of Indian commodities in Europe, then (more especially since the cessation of silver coinage in Europe) silver is degraded there to a mere commodity or article of merchandise in the commerce of the East with the West ; that is, to a position in which it has ceased to be a standard of value. VII. Hence, if it were indeed the case that the decline of prices of commodities in Europe since 1873, and of the price of silver with those commodities, denotes a rise in the value of gold, it shows that silver has become degraded to the same level with commodities, and that accordingly gold is now the sole standard of value. VIII. It follows also, from the sympathy of the European price of silver with the gold price of Indian commodities in Europe, that the hope of silver regaining its former value through an increase of Indian exports is delusive. The nations have not now — as in the years from 1858 to 1870 — to solicit India for her exports. Under an imperious necessity India has to send forward her exports in payment of interest on her yearly increasing debt, or of a tribute to the amount of 15 millions sterling a year ; and she must offer them at a lower gold price 328 A HANDBOOK ON GOLD AND SILVEE. abroad, to which the sympathetic European price of silver will respond. Owing to the lack in India of cheap transport over great distances, a favourable season or two may cheapen food grain in some districts so as to reduce the price gi-eatly below the general average. Allowing for this circumstance, the prices of food grains in India seem to con- firm the evidence of the prices of articles which are exchanged in the foreign trade. These prices are shown in the following tables : — Prices of Food Geains in India. {Seers per Rupee (1 seer = 2,057 lbs.') BENGAL. EICE Midna- pore Calcutta Backer- gunge Dacca Chitta- gong binage- pore Mon- gliyr Moors- hedabad Cuttack Budwan 1861 31-96 19-65 24-26 37-60 28-69 32-35 23-73 22-86 33-46 20-58 1862 31-72 19-56 24-26 32-91 19-12 32-65 31-38 18-19 27-40 24-26 1868 32-19 19-32 22-86 27-30 19-12 29-49 26-53 17-03 26-66 29-86 1804 31-49 16-18 22-86 23-22 28-66 27-65 18-62 16-88 31-16 28-00 1865 22-63 12-57 21-46 17-86 18-66 15-20 17-85 14-23 22-60 26-12 1866 9-66 11-40 10-73 11-22 26-86 24-69 21-43 11-43 8-34 9-79 1867 20-06 16-76 15-97 23-22 20-06 33-27 28-08 22-39 16-46 18-66 1868 23-66 14-89 19-36 26-02 22-16 26-94 19-13 21-46 27-86 28-00 1869 20-53 16-13 18-77 19-64 19-13 26-63 22-96 18-66 22-98 25-66 1870 23-33 15-83 22-27 22-96 20-06 26-89 25-26 21-93 80-00 26-19 1871 24-66 20-00 20-87 23-08 23-28 38-90 24-04 23-14 26-96 2.1-74 1872 23-29 17-80 26-69 30-18 23-65 28-66 18-30 20-47 28-79 21-69 1873 22-72 11-82 24-37 26-38 21-63 22-33 15-39 17-13 28-55 18-97 1874 16-90 11-86 14-97 14-04 12-54 15-01 12-40 12-39 26-27 13-50 ]875 17'68 14-25 19-60 20-00 19-33 26-00 17-60 19-08 24-70 19-26 1876 23-53 12-28 18-88 19-44 13-74 21-80 16-96 18-69 24-16 22-24 WHEAT JOWAB GUDH Bknoai OUDH Bengal Lnck- now Fyzabad Sultan- pore Patna Mozul- ferpore luck- now Fyzabad Sultan- pore Patna Mozuf- ferpore 1861 20-60 26-00 28-60 23-24 26-61 26-00 32'00 32-00 44-83 16-73 1862 28-76 28-60 28-60 16-21 27-56 34-50 35-76 32-00 44-38 15-30 1863 26-66 27-00 27-00 32-77 26-51 31-00 38-50 33-76 68-86 17-86 1864 18-00 22-00 26-76 16-21 22-45 17-76 26-60 30-00 58-06 16-76 1866 14-60 16-60 16-00 16-89 12-26 19-00 20-25 20-25 26-42 14-28 1866 13-26 13-76 19-00 10-.M 10-20 15-25 18-60 30-60 18-37 13-26 1867 18-26 23-50 19-00 13-19 19-29 25-60 33-26 30-50 88-79 18-37 1868 20-Ou 17-60 20-00 30-61 19-39 29-25 83-26 20-25 37-98 17-35 1869 11-26 13-75 12-75 13-04 14-28 14-00 20-00 16-00 19-61 15-73 1870 16-00 19-00 13-75 12-02 15-73 19-60 24-50 16-50 29-69 16-30 1871 22-81 24-66 23-26 23-04 19-90 23-44 35-78 21-00 33-40 1872 16-73 16-30 13-57 18-57 14-80 18-66 25-38 20-62 84-09 __ 1873 14-61 14-31 14-15 15-20 11-66 16-64 23-04 19-64 28-82 1874 17-34 16-18 17-26 16-88 12-39 20-68 21-02 20-52 20-84 1875 24-63 24-43 24-75 23-48 18-34 82-50 34-34 80-00 20-20 __ 1876 27-61 26-96 27-90 25'39 19-74 41-53 4301 40-00 30-00 — APPENDIX IV. 329 Pricbs op Food Grains in India — (continued). N.W. PROVINCES WHKAT BAJEA Saha- runpur BareiUy Agra Cawn- pore Mirza- pore Saha- runpur BareiUy Agra Cawn- pore Mirza- pore 1861 9-60 15-00 14-25 17-25 26-00 16-00 20-50 to-00 21-50 31-00 1862 35-00 34-50 26-00 27-50 24-00 38-26 9-76 31-75 35-26 30-00 1863 30-00 28-00 26-26 28-60 24-00 35-00 62-00 27-25 36-00 80-00 1864 24-50 20-00 18-00 19-75 17-00 25.50 15-00 20-00 19-25 22-00 1865 20-50 15-50 15-75 16-75 15-00 24-00 18-26 19-00 20-00 17-00 1866 20-50 14-00 15-60 14-00 13-00 20-00 30-00 25-75 20-50 16-00 1867 22-25 18-00 18-00 16-75 18-75 2200 20-00 25-00 28-00 26-00 1868 16-00 16-00 18-00 20-00 17-00 14-60 18-76 23-00 23-25 19-75 1869 11-00 9-60 11-25 11-50 11-60 10-50 10-50 15-25 14-25 14-76 1870 17-00 16-00 16-00 15-50 14-75 26-50 20-76 25-26 23-60 20-00 1871 25-.-)6 25-93 22-56 24-11 19-18 30-88 27-01 22-04 25-39 20-82 1872 22-82 19-81 19-02 18-00 16-00 20-91 18-31 16-73 21-62 18-50 1873 18 61 15-99 16-32 15-69 12-98 22-62 18-68 17-49 19-98 15-64 1874 21-29 17-03 16-42 17-36 14-76 20-32 17-19 17-60 21-72 18-79 1876 28-01 21-46 20-56 23-28 19-56 26-89 23-36 26-20 27-09 25-26 1876 24-93 25-06 24-96 26-10 22-17 24-21 31-25 29-89 36-11 29-00 PUNJAB. WHEAT JOWAB Delhi Amrit^ Hawal- Mooltan Pesha- Delhi Amrit- Hawal- Mooltan Pesha- war 1861 15-86 17-08 29-04 15-62 22-86 20-58 17-56 27-99 16-32 40-12 1862 29-04 29-46 26-69 20-36 26-89 33-47 86-22 30-66 28-10 47-68 1863 26-60 31-20 29-74 20-81 30-79 29-16 37-32 37-84 31-62 48-87 1864 20-47 26-01 26-42 13-70 24-80 24-61 31-37 37-44 17-84 42-67 1866 17-08 17-78 23-38 12-77 21-92 25-60 26-12 38-37 16-32 33-70 1866 18-48 22-06 22-86 16-86 22-80 26-42 24-37 23-96 18-25 32-07 1867 24-66 19-65 19-36 13-23 16-21 27-40 25-36 33-69 20-06 23-16 1868 26-83 11-19 12-66 13-41 16-61 18-25 12-69 16-04 14-92 20-36 1869 10-55 9-44 13-29 9-68 16-62 14-26 16-04 14-17 13-64 24-31 1870 15-97 16-38 16-09 12-30 14-98 1411 20-29 25-31 17-72 22-97 1871 23-41 — 17-92 16-49 13-34 31-13 31-82 26-76 18-91 1872 20-93 20-87 17-56 18-43 15-31 21-78 19-93 23-26 21-62 19-50 187.1 18-76 24-26 17-46 19-46 18-29 26-11 31-97 24-13 24-65 26-68 1874 20-14 24-63 23-66 17-62 21-07 24-94 30-66 26-18 24-23 27-20 1876 22-01 24-39 28-91 19-31 23-59 26-00 30-72 30-82 27-00 29-75 1876 25-71 24-24 32-48 19-76 24-76 32-08 32-26 42-00 25-00 28-28 330 A HANDBOOK ON GOLD AND SILVER. Prices of Food Grains in India — (continued). MADRAS. JOWAH RAGI Ganjam Bellary Tanjore Tmne- veUy Salem Ganjam BeUary Tanjore Tinne- veUy Salem 1861 32-80 24-70 . 26-80 20-90 20-70 36-30 27-00 28-50 22-90 21-40 1832 33-60 25-30 25-60 20-60 20-70 36-00 28-70 27-00 21-60 21-70 1863 25-80 20-50 26-60 16-60 22-80 32-60 23-30 30-20 19-80 24-90 1864 32-60 12-00 25-80 16-90 26-60 39-90 14-30 28-70 19-60 28 90 186.5 23-00 12-40 I860 12-60 20-80 29-30 15-10 23-60 13-80 24-40 1866 11-90 10-80 17-00 12-20 16-10 14-40 12-20 20-30 13-50 17-70 1867 14-40 9-20 1280 20-00 11-60 16 00 10-20 15-20 14-00 12-30 1868 33-40 19-50 18-10 17-20 16-30 38-80 20-70 20-90 20-60 16-80 1869 24-40 28-50 2000 18-20 18-60 26-10 32-80 24-90 20-60 20-10 -1870 22-80 27-50 24-40 20-30 22-30 30-20 32-10 20-00 21-60 23-20 1871 3361 34-70 34-34 29-38 44-23 38-89 42-40 44-86 30-94 52-67 1872 23-21 3012 28-00 25-73 42-94 30-66 37-49 37-63 28-33 48-84 1873 34-85 23-22 26-95 — 21-64 3K-95 32-60 28-53 20-73 28-16 1874 29-80 28-29 24-32 — 22-29 37-12 34-46 26-12 16-59 26-47 1875 28-90 22-88 28-38 — 24-66 41-05 27-88 29-99 21-11 27-32 1876 27-10 17-63 23-76 — 1802 37-86 17-71 23-81 20-08 19-13 * BOMB^ lY. WHEAT BAJRA Surat Khan- desh Ahmed- Shtor- Surat Khan- desh Ahmed- Karaoii Shikar- (Dhulia) (Dhulia) 1861 13-60 19-00 18-60 19-68 19-11 15-26 26-00 30-50 25-43 28-31 1862 12-30 18-00 15-50 15-24 21-16 16-99 19-50 19-76 23-68 26-47 1863 12-67 16-00 13-00 15-00 17-90 16-17 16-00 14-75 21-25 21-66 1864 7-17 8-50 10-00 10-25 11-31 6-80 11-50 16-00 10-06 13-97 1865 6-80 5-60 10-60 11-66 14-32 8-45 9-00 26-50 9-81 19-60 1866 6-62 7-00 10-60 11-75 16-06 13-50 13-00 24-110 14-37 20-62 1867 9-67 7-76 11-75 13-33 18-42 12-21 10-00 17-26 17-50 29-86 1868 8-00 8-26 14-60 13-87 19-06 12-21 11-75 26-00 17-37 25-92 1869 8-45 7-25 10-00 13-62 12-86 11-21 7-60 16-26 14-68 17-37 1870 6-RO 9-25 8-75 10-28 9-66 8-99 16-50 20-25 12-06 14-20 1871 9-93 15-16 14-30 11-67 12-80 11-72 18-72 15-92 15-27 23-19 1872 8-98 12-07 12-37 13-27 16iU 13-21 13-68 14-26 16-66 28-97 1873 11-80 13-46 16-90 12-66 15-44 16-49 20-66 24-09 18-33 29-76 1874 13-57 19-76 23-26 13-17 16-05 18-28 24-61 32-68 19-53 28-15 1875 1307 17-31 17-46 13-71 17-63 16-33 24-25 29-14 18-96 24-65 1876 12-46 16-22 16-95 13-06 18-14 14-20 19-66 18-71 16-17 27-27 APPENDIX IV. 331 These tables do not begin early enough ; much of the depreciation of silver occurred before 1861, there having been a considerable rise in prices from 1850 to 1860. Only the further depreciation since 1861 is shown in these tables, from which it appears that generally silver reached its utmost depreciation from 1867 to 1870, or earlier in some places ; since the latter year silver has been rising in value in India, whilst its gold price has been falling in Em'ope, as, conversely, in previous years when silver was falling in value in India, its gold price was high in Europe. On a review of the conclusions suggested by this summary of prices in Eui'ope and in India the sum of the matter seems to be that, down to 1867 or 1870, the effect of the gold discoveries in raising prices was moderated in Europe by the displacement there, by the new gold, of silver, which was exported to the East. Thereby, the bulk of the addition to the metallic currencies of the world, from the new gold, occurred in the East, and only to a very small extent in the West. In accordance with this course of the precious metals, prices rose in India earlier, and by a much higher percentage than in Europe. Since 1870, the new production of gold has been accumulating in the West, and the result should have been a great rise of prices in Europe. There has been a rise, though not to the extent that might have been expected ; a collapse of credit, and the displacement of silver by gold in the Grerman currency and in that of the Scandinavian Kingdoms, having partly counteracted the effects of the block of gold in the West, since 1870. APPENDIX V. WAGES. The depreciation of the precious metals, as estimated by a rise of prices, is also illustrated by an increase of wages, out of which the enhanced prices of food and necessaries are paid. 2. FRANCE. "With a caution that the statistics were applicable only to the chief towns, and were, perhaps, not always carefully verified, the ' Pall Mall Gazette' of December 22, 1874, summarised som.e of the results given in a recent publication of the Bureau of General Statistics of France. I. Exchiswe of Paris, the average wages, with board, paid throughout France to labourers of all kinds amounted in 1853 to 96 centimes a day, or very nearly 9Jif. In 1871 this pay had risen to If. 40c. In the eighteen years, therefor'e, the increase had been slightly over 45 per cent. During the same period the maximum wages had risen from If. 23o. to If. 82c. ; an increase of nearly 48 per cent ; and the minimum had risen from 74c. to If, lOc, being a little over 48 per cent. The wages of labourers who did not receive board had risen from If. 89c. to 2f. 65c. — an increase of only 40 per cent. The maximum increased 32 per cent, and the minimum 43 per cent. The rate of increase has been highest in the case of those who receive board with wages ; and the difference of wages, where board was and was not given amounted in 1853 to 93c. or just ninepence a day, and in 1871 to 125c., or exactly a shilling. We may conclude, we presume, that the cost of feeding a man in the two years is represented with tolerable accuracy by these figures. If so, it follows that the cost of the necessaries of life had risen in the eighteen years, as nearly as possible, one third, and therefore that the increase of wages was greater than the increase in the cost of living. In other words, the working classes have shared, whether proportionately or not these figures do not enable us to say, in the increased prosperity of France. APPENDIX V. 333 II. Another writer in. the ' Ediaburgh Review ' for January 1875 observed — ' There is no country in which the emigration of the rural population of the large towns has been more felt than in France, and it has led to a con- siderable improvement in the condition of the labourer. To speak generally, the rise in wages has been, on an average, 50 per cent, during the last thirty years, an advance which has been checked only by the stationary dispo- sition engendered by the possession of small plots of land. ... Of the whole number of agricultural labourers, it is supposed that not less than three- fourths are small proprietors.' III. Mr. Fred. Brittain, who was employed in 1876 by the associated Chambers of Commerce to visit France, and investigate the comparative condition of the leading trades in that country and the United Kingdom, gives the following as the average annual wages earned in France in coal and iron mines — 1864. 1869. £ & Coalmines 24 30 Iron mines 30 34 The average rate of wages per day, in what is called the Petite Industrie, which includes nearly all but the large works, was given as 1858. 1871. 1872. s. d. s. d. s. d. 1 8i 2 4 2 4J lOi 1 2i 1 3 Men .... Women .... On these figures, the increase since 1858 has been 39 to 43 per cent. BUEOPBAiJ CONTINENT. Mr. T. E. Cliffe Leslie, in the ' Fortnightly Review ' for June 1874, wrote — I. In Bblghjm, where farm wages had been rising for twenty years, they have lately sprung in some districts from 2^ francs to 3^ francs and upwards. n. In France, M. de Lavergne estimated the general rise in the decade 1855-1865, at 20 per cent ; but it was much greater in many places, and continued down to the war. Dr. Baur and Professor von der Goltz put it at 60 per cent, in the north of France, in the last 20 years ; and one cannot doubt that the rise throughout the country would have been greater, and would be still going on, but for the late war, the drain of money which has followed it, and the uncertain state of political affairs. in. In GrBEMANY there are four different classes of agricultural labourers, and a calculation of the rise in wag'es is embarrassed by the difference in the modes of payment, and payments in kind ; but for the present purpose we need concern ourselves only with the earnings, measured in money, of the two classes called Mnlieger and Semsler (the latter having cottages of their own, and the former being lodgers) who share the designations of day 334 A HANDBOOK ON GOLD AND SILVER. labourers and free labourers. Dr. F. von der Goltz, Professor of Rural Economy in the University of Konigsberg, a writer of great practical expe- rience, in the new edition of hia work on the German agricultural labourers' question, measures in money the rise of the wages of the classes of labourers referred to at 100 per cent, in the Rhine province, and from 50 to 60 per cent, in the eastern province of Prussia, in the last ten to twenty years. A table in the last number of the Journal of the Agricultural Society for Rhenish Prussia puts the rise in one district at from 75 to 100 per cent, in the last four years, in another district at 200 per cent, in the last twenty years, and in a third at 200 per cent, in the last ten years. At Tubingen in Wurtemburg, Dr. Gustav Cohn tells me, the rate was Is. 2d. a day in 1850-55 ; 1«. id. in 1860-65 ; Is. S^d. in 1866-70 ; and is 2s. OJrf. in 1874. At Wessen in the Rhine Province, on the border of Westphalia, Mr. W. Wynne, a resi- dent English engineer, states, ten years ago agricultural wages were Is. 2^d. a day, measured in money ; about that time railway works commenced, and they rose very quickly. At present they are about 2s. a day — a fall after the exaggerated rales of last year. Mr. White, British Consul at Danzig, one of the best informed and most intelligent Englishmen in Germany, although remarking (April 27) that the price of labour in Germany has quite lately entered into a retrogressive stage, measures the general rise in the price of agricultural labour at from 50 to 100 per cent, in the last twenty years, and speaks of great alarm on the part of farmers, with respect to the future. The foregoing estimates (continued Mr. ClifEe Leslie) are in accordance both with facts ascertained by myself in several visits to Germany, and with recent information from authorities as high as Professor Nasse of Bonn, Member of the Prussian Parliament, Mr. W. T. Mulvaney of Dusseldorf , and Herr Bruck, formerly Secretary to an East Prussian Agricultural Society, and now to an important Society in Rhenish Prussia. It may be concluded from these authentic data, that the rise of farm wages in some parts of Germany much exceeds the rise, according to Mr, Caird's estimate, in England. IV. (The foregoing relates to agricultural labour ; in other indus- tries, wages materially lost in 1875 and 1876 the increase which they had gained in 1871 and 1872.) NAPLES. According to statistics published in 1874 by the Chamber of Com- merce of Naples, wages of skilled workmen had doubled in ten years from 1862 to 1872; but the price of provisions had increased at about the same rate. AMERICA. I. Mr. D. A Wells, Special Commissioner of Eevenue, United States, reported in 1868 that ' An examination of the statistics of manufactures shows a clear increase in wages in 1866, of upwards of 60 per cent., as compared with the wages APPENDIX V. 335 paid in 1860. Allowing for the depreciation of the paper currency, the increase was about 40 per cent.' In a paper published in 1872, in the second series of the 'Cobden Club Essays,' Mr. Wells observed — ' A recent investigation made in one of the large manufacturing cities of the Atlantic States, of the comparative prices of labour, rents, and commodi- ties, in 1860 and 1871, afforded the following results. The lowest class of imskilled labour, which in 1860 earned one dollar (gold) per day, or six dollars per week, received in July 1871 ten dollars currency per week, or in gold at 112 (the average market price) 8| dollars, showing an increase on a gold basis, in eleven years, of 46| per cent. Labour earning two dollars (gold) per day, or twelve dollars (gold) pet week, in 1860, received in 1871 twenty dollars currency, or seventeen dollars (gold) for the same service ; showing an increase in eleven years of 46| per cent., but vrith no benefit whatever to the labourer, owing to a corresponding increased price of rents and commodities.' II. But with the crisis of 1873 there occurred in the United States 'a very decided fall in wages, which continued through 1874 and 1875.' The ' Commercial History and Review ' for 1875 quoted McCulloch's ' New York Circular ' as follows : — ' 1876 is opening with a very general attempt on the part of manufac- turers to effect still further reductions of wages. . . . The renewed reduction of wages, following previous ones so quickly, meets with very general oppo- sition from the persons employed, and strikes are resulting ; but as the work- men are in no condition to hold out, such resistance can only be temporary.' The ' Eeview ' for 1876 completes the story. ' In spite of Protection, all the protected industries remain in collapse ; and in spite of inconvertible paper money and unlimited land, the working classes are worse off in the United States than in any other part of the world.' III. In 1877 the railroad companies reduced wages by 10 per cent., or from 1 dollar 50 cents to 1 dollar 35 cents, for a day's labour. The extensive strike of the men, accompanied with violent acts, was put down ; and the reduction of wages has been accepted. The large numbers of unemployed men who were available for replacing the men on strike defeated the movement. The 'New York Finance Chronicle ' (July 28, 1877) upheld the right of the railway companies to fix the wages which they deem it expedient to pay, but added — ' On the other hand, those who speak flippantly of the matter, saying that there is no hardship, that a dollar a day is enough for bread, and whoever cannot live on bread and water is no man at all, do not show either a wise head or a feeling heart. Hardship undeniably exists. It is a hardship that 336 A HANDBOOK ON GOLD AND SILVER. men should be forced down to such scanty pay, as it is a hardship and a proof of something widely wrong, that men willing and anxious to work can find no work to do.' UNITED KINGDOM. I. Agricultueal Laboub. — Mr. Caird, in a letter published in the ' Times ' of January 2, 1874, stated the wages of agricultural labourers in England as follows : — 1770. I860. 1873. Terage weekly wages : In Northern counties ». d. . 6 9 <. d. 11 6 <. d. 18 In Southern counties . 7 e 8 5 12 The increase since 1850 has been 56^ per cent, in the north, and 42^ per cent, in the south; and ('Economist,' July 15, 1876) there has been a slight improvement since 1873. In Ireland the increase since 1850 has been 50 to 100 percent. ('Statistical Journal,' March 1870. II. Wages Gbneeallt. — a. A writer in the ' "Westminster Re- view ' for October 1874 estimates the rise in wages since the gold discoveries at 30 per cent. 6. Owing to the crisis in 1857, there was probably in the next two years, a reduction in wages, prices having fallen to their lowest in 1859. It does not appear, however, that there were any strikes up to 1858, inclusive, subsequent to the strike of the amalgamated engineers in 1851, and of the Preston operatives in 1853. In 1859 and 1860 there were strikes among a limited class, namely, in the building trade in London. The notices in the following sections, of the subsequent course of wages, are taken from the ' Economist,' from its ' Commercial History and Review.' c. In 1861 there was distress in Lancashire, with necessarily a reduction of wages. But with the expansion of trade in 1863, from the growth of joint-stock enterprise, production and wages of all kinds rose, step by step, from 1863 to 1865. In 1865, with a general tendency to further increase, additions of 10 to 15 per cent, were actually allowed in many cases.' d. In 1866 wages fell in several large trades from 10 to 20 per cent ; ' and that year will be remembered as the one in which the advancing tide that, for a long period, had promoted the advance of wages, was stopped.' e. The ' Commercial History and Review' of 1867 observed : — APPENDIX V. 337 ' Speakiilg generally, prices and wages are about 15 per cent, lower than in 1865 ; ' (that is, about the same, apparently, as the enhanced rates of 1863, if not 1864). And in the ' Review ' for 1868 it was stated that 'wages were much the same as in 1867, that is, about 20 to 25 per cent, below the limits which had been reached early in 1866.' (Thus again describing, apparently, a reversion to the rates in 1863, plus a portion of the advance in 1864.) f. The trade of the years 1869 and 1870 showed a I'ecovery from the depression in 1866 and 1867 ; and in several trades wages ad- vanced in 1869 by 3 to 7 per cent. In 1871, wages in the silk trade were above 25 per cent, higher than in 1870 ; in 1872 there was a general and rapid rise in the prices of commodities, and in the wages of labour. In September 1873 occurred the financial crisis in the United States, which was followed by crises in Germany and Austria, and these crises were attended with a very decided fall in wages ; bvit a simUar decline in the United Kingdom only took effect in 1874, and continued in progress through 1875 and 1876, which latter year, ' Until quite the close of it, has been marked by dull and limited trade, restricted confidence, the rigorous application of reduction and economies, lessened wages, and the failure of numberless commercial and manufacturing concerns. This description applies with even more force to North America, Germany, Austria, Eussia, and Belgium, than to this country. g. 1877. Trade in England continues very bad, and wages are falling in every direction. There seems to be some prospect of a bad winter, more especially if it should be a severe one ; and the working classes are already beginning to cry out.' — New Yorh Financial Clvronicle, August 18, 1877. h. But yet the final result is, that a large escess over wages in 1848 still remains with the working classes. Thus : — ' Nor must we mix up with the excess of imports another point of which Mr. Kathbone also speaks, viz., the increased proportion of the income of the country which is said now to go to the working men, and the fear that they may not save so much of it as the capitalist used to do. And no doubt English working men are not as saving as English capitalists, perhaps never will be. No doubt they drank out an immense amount of whatever aug- mented wages they have received ; but this is not a reason for regretting the increased import of food and other invigorating things. These are one of the best ways of saving, for they increase the strength of an increasing population.' — Economist, February 10, 1877. III. Cotton Industry. — a. In the cotton trade the advance of wages averaged 10 to 25 per cent, in 1859 compared with 1839. For a spinner the rates of weekly wages were 20«. in 1850 ; 22s. in 1853 ; 27s. iu 1860 ; and -SOs. in 1865, being an increase of fifty per cent, since 1850. The crisis of 1866 did not afiect Lancashire opera- 338 A HANDBOOK ON GOLD AND SILVER. tives, except by a reduction, not of rates, but to short time ; but there was distress in Lajicashire in 1869; followed, however, by a rapid increase of wages in subsequent years. Part of this increase has ceased, and the operatives endeavoured to regain it in the second half of 1876 ; but ' The lock-out of operatives in MaDehester has been averted, the masters not giving way to the demands of the operatives.' — EcanomAU, November 25, 1876. On July 15, 1876, the 'Economist' published 'returns recently furnished to inquiries on the subject of wages,' in which it was stated of Manchester spinners that — ' Since 1870, the price of wages to the spinning and weaving operative hands in Lancashire has not varied 3^ per cent., if the reckoning of wages is taken by the piece. The great point, however, as bearing on the question, is that machinery has been improved so much that, in some mi^s, or some districts, the operatives, getting paid on the same basis as in 1870, actually earn more money, that is to say, the machinery turna off a greater weight of yarn or cloth, and so an operative earns more, but there are hardly two mills exactly alike in this respect.' S. ' In many branches of manufacture a chronic controversy exists be- tween masters and men. It comes to the surface in bad times, and is peculiarly active just at present in several centres of the Cotton Trade, especially at Blackwall and Bolton — in the latter of which towns an exten- sive strike is at this moment threatened. Trade is dull, demand stagnant ; the cotton manufacture in most of its branches is unprofitable or worse ; stocks are accumtJating, and unsaleable at remunerative prices. Under these circumstances the masters have called upon their operatives to bear their share in the general difficulty, and to submit to a reduction of wages to the moderate extent of 5 per cent. The operatives resist this reduction; and declare they will strike, rather than accept it. There are about 150 mills in Bolton, and from 10,000 to 12,000 persons are under notice. The workmen plead that as stocks are accumulating, the mills should work short time, whereby (1st) more would be saved to the manufacturer, than by a reduction of wages if the mills continued to work full time ; (2nd) over-production, the cause of the existing difficulty, would cease ; (3rd) the workmen would forego a larger proportion of the amount of their wages, but without a reduction of rate, than the five per cent, which the masters desire to reduce from the rate. The masters reply that by working their mills short time, with full rate of wages, the cost of production is greater than»by working full time, with a reduced rate of wages ; because certain fixed charges, viz., interest on capital, depreciation and wear and tear, and the yearly salaries paid to the superior officers, superintendents and overseers, in a factory remain the same, with the diminished production on short time, as with the production on full time. The result of the whole is as follows — as shown by a careful calculation in certain average cases we can vouch for. There are factories which consume a large amount of raw material. The cost of pro- APPENDIX V. 339 duction when working full time (6 days) was 3-75d. per lb. ; when on short time (4 days) it rose to i-25d. ; when working fall time, with a reduction of wages to the amount of ten per cent., it fell to S-Sd. ; that is, short time added a halfpenny per pound to the cost of making the calico, which in the case of the ordinary mill, turning out 48,000 lbs. a week, means a difference of :£5,000 a year ; while a reduction in wages to the extent of ten per cent, would reduce the cost by a farthing per lb., or economise £2,500. The diminished cost of production, by reducing the selling price, would extend sales. . . . The experience of the operatives might remind them that some ten or twelve years since, wages in their districts rose gradually above 25 or 30 per cent., with no effort and little reluctance ; while since 1872 there have been two or three successive reductions, in spite of the most eager struggles to avert them.' — Economist, September 1, 1877. c. On the whole, wages appear to be above fifty per cent, higher than they were in 1848. TV. Other Textile Manufactures. — The operatives ia these manufactures participated in the general rise in wages until 1870, and in the exceptional rise after that year. The rates given in the returns published in the 'Economist' of July 15, 1876, show that wages in 1876, compared with those in 1870, were higher by about ten per cent, in the worsted trade (Bradford) and in the woollen trade (Huddersfield), and even fifty per cent, higher in the woollen trade in Leicester. V. Coal and Iron. — a. There had been an inflated demand for iron in 1864, 1865, and 1866; and there was a large increase of wages in 1864 and 1865. In 1867-8 there were reductions, and in 1868 there was a strike against a reduction of wages. In 1869 wages were increased in Cleveland by two instalments aggregating 15 per cent, to January 1, 1870; but from January 1, 1871, they were reduced five per cent, to ten per cent, in advance of the rate in 1868. I. Thus wages were, in 1870, fifteen per cent., and in 1871 ten per cent, in advance of the rate in 1868. c. In 1871 there was a rise in wages of probably 15 to 20 per cent., and compared with 1861 the rise was 25 to 30 and 35 per cent., except for moulders (17 per cent.) and for fitters (12 per cent). In 1872 there was a further increase, which raised the aggregate advance to 50 per cent, since August 1861. In 1873, without a reduction of rate, there were endeavours to work short time, which led to strikes ; and in 1874 wages were reduced to what they had been before the increase in 1872, or (as it is stated) to about 25 or 30 per cent, higher than the lowest rate paid in 1871. In 1875 a further reduction was eflfected, and was under arbitration z 2 340 A HANDBOOK ON GOLD AND SILVER. in others ; or, as one of tte trade circulars put it, ' speaking gene- rally, it may be said that wages in the coal and iron industries have been brought down to within (i.e. above) ' 15 or 20 per cent, of the rates paid in 1868-9. d. E«specting 1876, Messrs. "W. Fallows and Co., of Liverpool, report : — ' The iron trade has passed through a year of extreme adversity and depression. During its course some of the largest and wealthiest manufac- turing concerns had to succumb to the severe reaction which succeeded the inflation of 1872 and 1873, whilst the operatives suffered in no small degree by the decreased demand for labour, and greatly diminished wages. During 1876 there has been a fwther reduction ira the wages paid to pnddlers and millmen of 7i to 12^ per cent., and miners of 10 to 15 per cent. This will bring wages back to about the old level of 1868 ; but there still remains the question of the Jumrs of laiow (which were reduced dtiringthe last few years), and it may yet be necessary to revert to the old standard in this respect also.' e. The extent of the late reductions of wages is further illus- trated hy the following return, which was published in the ' Econo- mist' of July 15, 1876 :— Price of Puddling peb Ton. 1868 1870 1873 1876 Jan. to June North of England . Staifordshire . s. 8, 7, and 6§ 7i 9J for all mixtures 8J 13^ 8i 8i f. It appears from the preceding that the rates were about the same in 1868 as in 1861 or 1864; and that in 1874 they were 35 or 40 per cent., and in 1875, 15 or 20 per cent, higher than in 1868 ; while in 1876 they were brought down to about the same level as ill 1868. In March 1877, owing to a fall in the price of iron, of 8s. 3d. per ton since February 1876, the ironmasters gave notice to their workmen of a proportionate reduction in the rate of wages,' but the final report in the ' Economist' of May 12, 1877, does not accord with these results. Messrs. T. W. and J. Walker, of London and Wolverhampton, in their quarterly report on the iron trade, to the end of April 1877, observed : — ' When we consider that coal is about 2s. per ton higher in price now than in June 1872, and that workmen's wages are after all but slightly reduced ' Uoonomist, April 7, 1877, APPENDIX V. 341 (in comparison to the above percentage of decrease in price of iron, viz., 46 to 50 per cent.), we can understand the terrible disadvantages that manu- facturers are at present labouring under, and the dwindling profits, not to speak of loss.' So that wages appear to be still in considerable advance of the rates in 1868, 1861, and 1848. g. In the collieries wages were advanced during 1870 to 1873, beyond the rates in 1869, by about 58 per cent. ; but most part of the increase was withdrawn in 1875 and 1876, still leaving, however, some advance beyond the rates in. 1869. It appears from this account of the rise in wages in the United Kingdom, that in the several industries, including the agricultural, the increase has been considerable; and, unlike the state of things on the Continent, where a rise in wages was accompanied by a cor- responding rise in the prices of necessaries, the advance of wages in England has been accompanied by a reduction of the price of wheat. Measured by this last fact, the rise in wages has been greater than it seems ; and hence, the depreciation of gold, so far as it can be measured by a rise of wages, has been proportionately great. But the sudden increase of wages in several industries, by more than fifty per cent, from 1870 to 1873, and the summary withdrawal since, of the greater part, or, in some instances, of the whole of that increase, show that the inflation of prices and of wages in those years, and the subsequent decline, are not due to the depreciation or appre- ciation of gold ; they were caused by the expansion and contraction of credit. APPENDIX VI. TRADE OF THE UNITED KINGDOM AND BRITISH INDIA. OF UNITED KINGDOM. The annual averages of the trade are as follows : (MSlions sterling.) 1854 to 1867 1868 to 1860 1861 to 1866 1867 to 1872 1873 to 1875 1876 Meechaotjise. Exports : British produce . Foreign and colonial mer- chandise Total. Imports .... Bullion (gi-oss imports). Gold Silver Mbrcttattoise. Imports : Oounti'ies not indebted France, Belgium, and Aus- tralia .... Indebted countries . Exports : Countries not indebted France, Belgium, and Aus- tralia .... Indebted countries . 107-7 21-8 127-6 25-7 151-8 47-0 204-9 60-6 239-4 67-4 200-6 56-2 129-5 164- 1533 184-7 19-9 10-6 40-8 25-4 118-6 40- 26-1 87-2 198-8 255-6 17-7 9-6 51-8 41-0 162-8 63- 42-0 103-8 255-5 309-1 17-6 10-1 61-9 69-3 187-9 72-6 48-0 134-9 296-8 371-8 20-6 11-8 72-4 78-6 220-8 86-0 62-9 147-9 256-8 375-1 23-6 13-6 75-2 81-1 218-8 72-4 61-3 123-1 APPENDIX VI, 343 2. The following remarks are suggested by the table : — I. The countries reckoned as indebted are Russia, Spain, Portugal, Turkey, Wallachia, Moldavia, Austria, Italy, America, the East, and Gibraltar. II. The trade for the undermentioned years was — (Millions sterling.') 1866 1869 1871 1872 1873 1874 1875 1876 Exports : British pro- duce Foreign and colonial . Imports 188-9 50- 189-9 47-1 223-1 60-5 256-3 58-3 255-2 55-8 239-6 58-1 223-5 68-1 200-6 56-1 238-9 295-3 237-0 295-5 283-6 331-0 314-6 364-7 311-0 371-3 297-7 370-1 281-6 373-9 266-7 375-1 In 1870 the exports amounted to 199-6 millions of British pro- duce, and 44*4 millions of foreign and colonial. The latter has receded a little below the amount in 1871 ; but it yet greatly exceeds that in 1870, notwithstanding the opening of the Suez Canal. The exports of British produce had declined in 1876 to the amount in 1870, and there has been a further decrease in 1877. III. While foreign countries were borrowing, and taking part- payment in dear goods, British trade advanced ' with leaps and bounds ' which excited the admiration of a statesman and financier who steadily reduced debt. After the collapse of foreign credit in 1873, exports of British produce rapidly declined; but imports have continued to increase. rV. The trade with countries not indebted shows a greater pro- portionate and also absolute increase of exports than that with indebted countries. Countries not indebted Indebted countries 1860 1867 to 1872 1876 1860 1867 to 1872 1876 Imports . Exports . 36-6 39-3 61-9 72-6 75-2 72-4 135-2 94-3 187-9 134-9 218-8 123-1 The commerce with countries not indebted is on the sound normal footing of an exchange of equivalents in merchandise; the healthy 344 A HANDBOOK ON GOLD AND SILVEE. regulation of which is the proviace of Political Economy. But the trade with indebted countries forms a chapter in finance, not in political economy. The crises which, at successively shorter intervals, convulse commerce, occur in this part of the trade ; and the battle between free trade and Protection rages round this part. The nations which borrow, being obliged to supplement their exchange of equiva- lents in merchandise, by a further export of produce in payment of interest, endeavour to provide the interest by taxes, which both bring in revenue and increase the excess of exports. The philosopher may call this cutting off the nose to spite the face ; but perhaps the prac- tical result is an enforced economy in the borrowing country, which consumes less goods of the kinds that are taxed, and is enabled, by the saving, and from the proceeds of the tax, to pay interest on debt. In theory, the tax should fall entirely on the consumer; but the necessity under which, for some time, British exports have been sent abroad at a loss, in some trades, shows that this is not wholly the case. When a nation combines the functions of banker to other nations and of merchant, it must expect that the debtor countries, with incomes reduced by heavy taxation for meeting the interest due to it as banker, will not be able to buy freely from it as merchant. Disquisitions on free trade are unmeaning platitudes to nations which, whether they will it or not, are forced to sell heavily to the creditor country in payment of interest. V. It follows that, in the trade of the United Kingdom, imports, which depend so much on the necessity of other countries to sell, inde- pendently of an exchange of equivalents in merchandise, should show a steady progress, while exports, which depend more upon their ability to buy, would show less elasticity, and a slower progress, after cul- mination of the charge for iuterest, that is, of the amoimt of taxation, at the end of a long course of borrowing. The statistics of the Board of Trade show a progress of imports and exports which is in accord- ance with this remark. YI. The great falling off in exports is partly explained in the ' Economist ' by the export of foreign securities, through the discredit into which they have fallen in England; but this only means a diversion of part of the export and import trade to the countries which have bought the securities, and that, but for these sales of securities, the imports into the United Kingdom would have been greater. VII. Some might consider the United States a notable exception to these remarks. Interest on debt, and the amount of taxation by the Federal Government, have been reduced ; and yet the exports to APPENDIX VI. 345 those States have greatly declined ; but, first, the taxation of the separate States and municipal taxation are heavy ; secondly, the rapid decline of the gold premium necessitates a readjustment (through these diminished imports into the United States, among other ways) of expenditure to income. VIII. Since 1865, national debts have increased by more than one-fourth ; taxation in the indebted countries, exclusive of municipal, by about one-third ; deposits have more than doubled ; large amounts of capital have been sunk in abortive enterprises ; and upon all this has supervened a collapse of commercial credit and of foreign loans, which, with the growth of unemployed deposits, has diminished in- comes ; even the wages of the poorest among the working classes. At the same time a heavily augmented taxation presses on this diminished income of the mass of consumers with a severity which has reduced their power of purchase beyond the experience of the year or two following former crises. All the causes of commercial depression which prevailed in those years are intensified in the pre- sent depression after the crisis of 1873, by the vaster accumulation of debt bearing interest, the more extensive collapse of national and commercial credit, a greater decline of wages below the point reached in the year of crisis, a heavier taxation, and the combination, in the present depression, of all these causes ; while in the year or two after the crises of 1857 and 1866, some of these did not operate, and others were not so intense in their operation. Add to this, the rapid reduc- tion of gold premium in the United States, and an accumulation in the West of most of the fresh yearly production of gold since 1867 — without the export of a cori-esponding amount of silver to the East — and we have causes sufficient to account for a discordance between cost of production and market prices of goods ; for diminished means of purchase from England ; and for a diminished expenditure which is in course of adjustment to a reduced income. Some of these causes will endure for many years ; others are removable. IX. The complacent feeling that England gets a large portion of her imports in return for investments abroad, and not in exchange for equivalents in merchandise, may be pleasant to a nation retired from business, but not to the working bees and captains of industry who have raised England to her present supremacy among the nations. These may be excused if they feel that some better vocation and some dearer interests should attach them to their fatherland, than the defence of creditors of indebted nations, goaded by heavy taxation, who (now become adepts in borrowing) would borrow from the histoiy 346 A HANDBOOK ON GOLD AND SILVER. of the Roman Empire, an easy way of paying old debts, were the strength and manhood of England to be weakened by an emigi-ation to other parts of the earth, fi-om want of remunerative employment at home. X. But perhaps this feeling of complacency merely disguises a sense of imesisiness. In May 1876, Mr. Bagehot wrote : — ' England acts for the United States as produce broker on a vast scale- both sends on the silver to the countries which want it, and pays indirectly for what she buys, to the countries that she buys from. That we are able so to pay is one of the many instances in which, in trade, most is given to those who already have most. Our export trade is so much greater and so much more easily augmented than that of any other country, because we are able to settle any debt in commodities far better than any other nation. If the United States buy of Nation B, B is more likely to want something of England than of any one else ; or if, instead, B buys of C, is so likely, and so on through the alphabet, tiil at last you come to England. Our predomi- nant international trade (that is, our export trade) gives us, in a biisiness such as this, an assured pre-eminence.' The shrewdest nation in the world will not be long in finding a way to dispense with the commission of the rich produce broker. 3. The imports are shown in the table on page 347- — classing the stimulant of tobacco with food and drink. 4. The followiag remarks are suggested by the table : I. The gross and the net imports alike are progressive ; though the periods compared are the years of crises, and those preceding or following a crisis. The progress is under every head excepting raw materials (grist for the mill), in which there was a falUng off after each year of crisis, but notably after 1873 — and excepting 'other articles ' which have declined since 1872. II. The excess of 211 milKons in 1876 over 1858 includes 98 millions in articles of food and drink (partly cattle for agriculture and food for cattle), and 60 millions gross, or 45 millions net for raw materials : the latter increase is in a proportion much inferior to that under the other heads. III. The increased imports of articles of food and drink are principally from agricultural countries which are indebted to Eng- land. In one view, they benefit manufactures by reducing the cost of production ; in another, they denote diminished markets for manu- factures, abroad and at home ; abroad, because, to a considerable extent, the imports are received not in exchange for equivalents in merchandise, but in payment of interest, which implies diminished means of foreign consumers : at home, because the largeness of the impoi-tations of the products of agriculture indicates a formidable APPENDIX VI. 347 Imports and Ee-exports of the United Kingdom. (^Millions sterling.) 1868 I860 1865 1366 1869 187] 1872 1873 1876 Imports. I. Food and drink : Oorn and rice . 22 33 22 31 40 45 55 55 55 Oxen, bulls, cows, sheep and lambs, and farm and dairy produce e 11 19 20 21 23 24 31 38 Fish and groceries . 24 26 33 32 37 43 47 46 48 Spirits and wine 3 6 6 7 7 10 10 12 11 Tobacco .... 3 2 3 3 2 3 3 4 4 58 78 83 93 107 124 139 148 156 II. Raw materials : Fibres .... 50 63 101 112 88 96 92 94 79 Other .... 27 36 40 39 41 47 45 58 58 in. Manufactures 77 99 141 151 129 143 137 152 137 4 7 14 16 19 19 20 21 25 Miscellaneous ^ 6 7 8 8 9 10 9 10 11 Other articles . Grand total 19 20 25 27 31 35 50 40 46 29 34 47 51 59 64 79 71 82 164 211 271 295 295 331 355 871 375 Re-exports. Com and rice . 1 1 1 1 1 1 2 3 2 Groceries .... 2 3 7 6 7 9 9 10 9 Spirits, wine and tobacco . 2 2 2 2 2 2 2 2 2 5 6 10 9 10 12 13 15 13 Raw materials : Fibres .... 8 11 30 28 22 25 23 20 20 Other .... 4 5 5 5 5 7 7 7 7 12 16 35 33 27 32 30 27 27 AU other articles Total .... 6 7 8 8 50 10 47 16 60 15 58 14 56 16 66 23 29 53 Net imports 141 182 218 245 248 271 297 315 319 ' Petroleum, oils, cotton seed, oilseed cake, and clover and grass seeds. 348 A HANDBOOK ON GOLD AND SILVER. competition -with British agiiculture which is a main support of home manufactures. The increase under spirits indicates but imperfectly the increased consumption of liquor which deteriorates the quality of labour, and creates a craving for short hours and short time. 5. In the eight months ended August 31, 1877, the total imports amounted to 264 millions sterling against 251 millions in the corre- sponding period in 1876 ; while the re-exports were £1,200,000 less than in the eight months ended August 31, 1876. The picture, un- favourable to the prospects and to the efficiency of British labour, which is presented by the growth of the import trade down to 1876, will be painted in somewhat darker colours by the year 1877. 6. The exports of British produce and manufactures have been as follows : — {Millions sterling.) 18S8 I860 186S 1866 1869 1871 1872 1873 1876 BkIIISH PEOinjCB AND MaS'OT'ACTTJRES. I. Fibres: Yam Manufactures, piece goods. Apparel and slops, haber- dashery and millinery . 16 49 5 17 61 6 20 78 7 22 93 8 123 24 84 7 115 .26 96 8 130 28 108 10 146 26 97 10 133 20 82 7 109 70 84 105 II. Coals .... Machinery and steam en- gines .... 3 4 3 4 4 4 5 4 6 5 6 5 10 5 13 5 9 7 7 7 8 9 10 11 15 18 16 III. Metals : Iron and steel Other sorts Telegraphic wire 12 4 13 4 15 4 17 4 22 5 1 26 5 2 36 5 38 5 2 21 6 1 IV. Other articles 16 24 17 28 19 34 21 36 28 37 33 49 41 54 45 69 27 49 Grand total . 117 136 166 189 190 223 256 265 201 V. Net imports of fibres . 42 52 71 84 66 71 69 74 59 VI. Excess of I. over V. . 28 32 34 39 49 59 77 69 60 Excess of V. over VI. „ VI. over V. . 14 20 37 45 17 12 8 15 9 APPENDIX VI. 349 7. The following remarks are suggested by the table : — ■ I. The total exports in 1876 exceeded those in 1858 by 84 millions sterling, of' which 39 millions, or forty-six per cent., occurred in manufactures of fibres, which gave England her commercial supremacy. But these manufactures attained to then- largest amounts in 1866, 1872, and 1873. Between 1866 and 1871 they ranged under 100 millions sterling. If 1876 be compai-ed with 1872, the results of the comparison with 1858 are reversed ; the total exports show a decrease of 55 millions, including 37 millions ia textile manufactures, 14 millions under metals, and the remainder (six millions gross) under articles other than coals, machinery, and steam engines. These last alone show an excess of one million sterling in 1876 over the amount in 1872. It has been found in every country on the Continent, in America, in India, that railways stimulate exports more than imports, the prosperity which they promote by more extended markets for exports, creating or improving various industries for the supply of home markets with manufactures. Partly at England's expense, foreign countries have obtained a fall equipment of railways — this effectual handmaid of home manufactures ; and hence the exports of iron and steel show a considerable decline. The next stage in which foreign manufacturing industries need help, is in the instru- ments of manufacture, viz., steam engines and machinery. Accordingly, these show an excess in 1876 over 1872 of two millions sterling, or (including implements and tools), two and one-third millions, not- withstanding the general commercial depression. The position is, that agricultural industries abroad send us more of their produce, and manufactming industries abroad lead foreign countries to take less from our industries. II. The exports of textile manufactures exceed the net imports of fibres by amounts which, down to 1871, were greater, but from 1872 have been less than the amount of those imports. The apparent inference is, that the home consumption of manufactures has fallen off of late years ; and, in this regard, the increase of imports of foreign textile manufactures is suggestive, viz. : — {Millions sterling.) 1858 1860 1865 3-38 5-23 10-98 1866 1869 1870 12-48 15-51 19-65 1871 1872 1873 14-27 14-67 15-17 1874 1875 1876 17-19 17-61 18-55 350 A HANDBOOK ON GOLD AND SILVER. III. The import of the facts in I. and II. is not afifected by any consideration that the quantities of exports have iacreased, though the values have diminished. Where the supply of raw material is limited, as with cotton, an increasing quantity of exports only denotes that less is consumed at home. The railway traffic receipts, indeed, have increased greatly, but perhaps not more than is involved in the increased importation of corn and other bulky goods. IV. The production of both coal and iron has progressed faster than the export ; the consumption depends mainly on a home demand, ■which perforce slackens when factories and (for one of them) mines are not in full work. But for coal there is a solacing consideration, that with the fall in its price, many collieries on the continent must be closed. And the iron industry too has an advantage, in that the produce of pig iron from British ore was increased by only half a miUion tons (from 6 to 6-6 miUions) in 1871, beyond the production; in 1870, of which three hundred thousand tons had been reduced in 1876, so that the correction to be applied here is only the subsidence of the inflation of prices and wages, after the excitement in 1871. And this has nearly been effected, with the result that the continental production, which had been stimulated by the high prices of 1873, has collapsed. V. On the whole, it appears that coal, iron, and the jute manu- facture are, or will soon be, in good condition ; but that the prospects of the remaining exports, on which many important industries depend, are discouraging. 8. The average gross imports of gold and silver into the United Kingdom have been — {MiUions stei-Unff.) 1868 to 1860 1861 to 1866 1867 to 1872 1873 to 1876 Gold Silver . 19-3 10-e 17-7 9-7 17-6 10-1 21-4 12-3 29-8 27-4 27-7 33-7 These figures do not suggest a dimininished production of gold. The gi-oss imports of silver into the United Kingdom in 1876 amounted to 1 3f millions sterling. APPENDIX VI. 351 IT. Foreign Trade op British India. 9. The trade has been as follows — (In millions sterling.) Merchandise t3 01 e iMPOHTa ExpoaTS 1 ^^'1 1 ^1 q'3) a,.s I5I ■si? ^1 1 1 a J." ^ Sg 11 si Z%^ a is 1 Si 3 1 ^1 MS (S g, £SS SI 1854-5 6-7 6-3 13 2-4 16-6 19 6 •8 ^ — ■4 — 21-4 6IA 1855-6 6-4 7-6 14 3-3 19-7 23 9 11 1-6 •6 23-6 61t'i 1856-7 6-1 7-9 14 4-4 20-6 26 11 13 2-8 — 1- — 24-1 61A 1857-8 6-7 9-3 15 4-3 22-7 27 12 15 •6 — 1-7 — 24-6 6li 1858-9 9-8 12-2 22 4-1 26-9 30 8 12 •1 — 1-4 — 25-8 «4 1858-60 11-7 12-3 24 6-6 22-4 28 4 16 •0 — 1-4 — 260 62i° 1860-1 11-0 12- 23 7-3 26-7 33 10 10 •0 — 1-2 2-1 26-0 6IM So-7 6i-3 112 29-0 137'° 166 54 76 S'o — 72 — 1861-2 10-2 11-8 22 10-2 25-8 36 14 14 1-2 •0 1- 1-9 23-9 60^3 1862-3 9-6 18-4 23 18-8 29-2 48 26 19 6-6 ■1 •7 1-7 23-9 60K 1863-1 11-9 151 27 36-9 301 66 39 22 9- •0 •4 1-5 23-9 6l| 1864^5 18-2 14-8 28 37-6 30-4 68 40 20 6-8 •0 •6 1-2 23-9 61j 1865-6 13-8 15-2 29 36-6 29-4 65 36 24 7-0 •0 1-2 1-9 23-8 SWo 1866-7 1 (11 months) ; 1867-8 16-1 13-9 29 16-5 26-6 42 13 11 5-1 •1 1-2 3-3 23-2 61J 17-7 18-3 36 20'1 30-9 61 15 10 4-1 •1 1-1 3-8 23-8 soA 1868-9 lS-8 17-2 36 20-1 32-9 53 17 14 3-7 ■2 1-6 2-2 23-1 60i 1869-70 16-2 16-8 33 19-1 33-9 63 20 13 7-0 •2 1-6 1-8 23-3 SOi'n i26'5 I36'5 263 213-9 268-1 482 219 147 S°-5 "7 9 3 19-3 — — 1870-1 19- 16- 34 19-4 36-6 66 21 3 8-4 ■6 1-5 2- 22-6 60A 1871-2 17-5 14-5 82 21-3 41-7 63 21 10 10-3 •4 1-4 •9 23-0 60; 1872-3 17-2 14-8 32 14-0 41- 66 23 3 13-9 ■8 1-4 •5 22-8 69} 1873-4 17-8 16-2 34 13-2 41-8 66 21 4 13-3 1- 2-2 •8 22-4 1874^5 19-4 16'6 36 15-3 40-7 56 20 6 10-8 •9 2-6 ■9 22-2 58A 90-9 77-1 168 83-2 200-8 284 106 26 56-7 3'7 9'i S'l — 1875-6 19-3 19'7 39 13-S 44-7 58 19 3 12-4 1-4 2-3 1-1 21-6 66J 1876-7 18-7 18-3 37 11-7 49-3 61 24 7 12-7 — — — 38-0 38*0 76 2S'o 94-0 119 43 10 25-1 — — — _ _ Trade to Sept. 30 1875-6 90 9- 18 9-4 19-6 29 11 2 — — — — — 1876-7 8-6 8-4 17 7-5 22-5 30 13 1 — — — — 1877-8 9-6 9-6 19 5-7 25-3 31 12 6 — — — — — — 10. The annual averages of the trade are shown in the table on page 352. 11. The following remarks are suggested by these tables : — I. Imports and exports were doubled in the period from 1854-5 to 1862-3-4, or in nine years ; but they were not trebled, on a com- parison with 1854-5, until 1875-6, or in a further period of thirteen years, that is, at a diminished rate of development. Since 1875-6 the imports have declined. II. The increase has been greater in cotton goods than in other imported goods ; the former having more than trebled, and the latter 352 A HANDBOOK ON GOU) AND SILVER. only doubled by 1875-6 compared with 1857-8. Excluding govern- ment stores, and stores expoi-ted to India by tbe guaranteed railways, the imports, other than cotton goods, have increased by only two or three millions sterling since 1863-4 to 1865-6. If the income of the people may be measured by what they consume of foreign goods, this rate of increased consumption, which includes that of Native States within, and of countries beyond British India, does not promise much for additional taxation. Kate of exchange on Home Government's bills . Price per ounce of bar silver .... Imports : Cotton goods Other . Exports : Raw cotton Other . Net exports . Net imports of gold and silver .... Home Government's bills on India Government stores pur- chased in England Stores for guaranteed railways exported to India .... 1864-5 1856-6 to 1860-1 1861-2 to 1869-70 1870-1 to 1874-6 d. d. d. d. 21-4 23"6 to 26 23-9 to 23-3 22-6 to 22-2 above 61i eiito e2i eojto 61f eojto 58A Merchaitdisb. 1875-6 and 1876-7 6-7 6-3 8-4 10-2 14- 15-2 18-2 15-4 13- 18-6 29-2 33-6 2-4 16-6 4-8 22'8 23'7 29-8 16-6 40-2 19-0 27-6 53-5 56-8 6- 9- 24-3 23-2 •8 12-8 16'3 5-2 3-7 •8 5-6 11-3 ■4 1-2 10 1'8 — — 2'2 1- 21-6 to 56Jto 19- ID- SB- 12-6 47- 59-5 21-5 5- 2-3 III. The imports of cotton goods reached 19 millions sterling in 1870-1, with exchange at Is. lO^d. per rupee. They fell off from that amount for three years, and latterly have exceeded it somewhat, but with a low exchange which diminishes the returns of the impoi'- ters, insomuch that, for long, Manchester's exports to the East have been unprofitable, and have sometimes entailed loss. The limit to the cotton supply also restricts the importation of cotton goods. APPENDIX VI. 353 IV. Before the cotton famine, the flovernment's obligation to remit for the Home charges did not interfei'e with Manchester's inerests ; the imports of cotton goods exceeded the exports of raw cotton by only three millions sterling, and silver was not depreciated. Now they exceed the exports of raw cotton by above six millions sterling, while the Home Government's bills will range henceforth at about 15 millions, and silver has depreciated. In its extremity Manchester has wildly assailed the Indian cotton duties, instead of the Indian currency. Y. The slow progress of the mass of the exports should also check the sanguine expectations of those who hope that a very great expansion of exports will restore the former price of silver. The staple exports are raw cotton, grain, coffee and tea, indigo, jute, hides and skins, seeds and opium ; excluding these, the remaining exports have amounted to the following sums in millions sterling — 1856-7 7-2 1869-70 7-4 ] 873-4 8-6 1861-2 6-9 1870-1 7-4 1874-6 8-9 1865-6 7-4 1871-2 7-7 1 1875-6 9-1 1867-8 6-7 1872-3 9-0 i 1 1876-7 10-8 The drop in the exchange below 23 pence in 1870-1, and again from 1872-3, coincides with the increase of these exports, which had re- mained at about seven to seven and a half millions sterling, while the exchange was above 23 pence. A similar remark appUes to the bulk of the imports other than the staple imports, or those for which there is a special demand. These increased whUe exchange was high, and fell off with the dejwession of the exchange. VI. The export of opium has increased from seven milKons in 1856-7 to twelve millions in 1876-7, which last amount was also attained or exceeded in the years 1867-8, 1871-2, and 1874-5. The amount of above one half of the export depends on the quantity which the Government of India chooses to produce in its opium agencies, in the regulation of the opium monopoly. VII. The exports of raw cotton are detailed in a previous table ; from 2^ millions sterling in 1854-5 the export increased to 37^ mil- lions in 1864-5, after which it steadily declined, with but slight recovery in one or two years, to 11| millions in 1876-7 ; while in the six months ended September 30, 1877, the export amounted to only 5| millions against 7^ millions in the corresponding period in 1876. Its reversion to at least the amount of six or seven millions sterlins:. A A 354 A HANDBOOK ON GOLD AND SILVEE. as before the American Civil War, against 13 millions ia 1875-6, wlien the great depreciation of silver began, seems certain. VIII. Two other staple exports are indigo, and hides and skins. Five-sixths of the imports into the United Kingdom in 1876 con- sisted of Indian indigo — which, notwithstanding its command thus of the London market, has declined since 1873-4. In 1856-7, the exports amounted to nearly two milUons sterling ; in 1869-70, to three and one- fifth millions ; in 1873-4, to three and three-fifths mil- lions ; but since then the amount has ranged below three millions. In hides and skins, the exports increased from three-fifths of a million in 1856-7 to one and three-fifths million in 1869-70, and to nearly three millions in 1872-3. They have since fluctuated about that sum; the exports in 1876-7 amounted to three milUons. The six months of 1877-8 show one and seven-tenths million, against one and three-tenths in 1876, and one and four-tenths million in the corre- sponding period in 1875 ; but any great expansion of this trade is not probable : the agriculture of India has certainly not an over-abundant supply of cattle ; the demand for butcher's meat is but limited ; and the development of the American meat trade will give to the United States even a more commanding position in the London market than it now occupies in respect of hides. IX. The remaining staples are — {Millions ^fei-ling.) Jute Seeds Coffee Tea Eioe Wheat and other grains Total 1856-7 •3 1-1 ■1 ' _ 2-3 ■3 41 1861-2 •5 1-2 •5 •2 3-6 ■1 6-1 1865-6 ■8 1-8 •8 •3 4-9 •3 8-9 1867-8 1-3 2-2 ■8 •7 3-6 ■3 8-9 1870-1 2-6 3-5 ■8 1-1 4-1 •3 12-4 1871-2 4-1 2-7 1-4 1-5 4-4 •4 14-5 1872-3 41 1'5 1-6 1-6 5-7 •4 14-9 1873-4 3-4 2-4 1-8 1-8 6-5 1-1 160 1874-5 3-2 3-2 1-3 2- 4-7 Only wheat •5 14-9 1875-6 3-3 5-5 1-6 2-2 5-3 •9 18-8 1876-7 3-4 5-3 1-3 2-6 5'7 1-9 20-2 To Sept. 30 1874-5 1-0 2-9 •6 I'O 2-3 •5 8 3 1875-6 1-4 3-3 •6 1-2 21 1- 9-6 1876-7 1'4 4-7 •6 1-4 2-4 2-2 12-7 X. The following remarks are suggested by this table : — a. The Crimean war gave rise to the exports of jute, but the trade APPENDIX VI. 355 was not developed until the cotton famine. The largest amount attained was in 1871-2-3 ; since then the value of the export has remained stationary" at about three and one-third millions sterling, and any tendency to increase will be counteracted by the progress of the jute manufacture in India. b. In seeds the largest amount attained before 1876-6, viz. in 1870-1, was not exceeded until 1875-6, when there was an increase of two millions sterling. The spurt in 1875 was apparently from the low exchange ; and in 1876 additionally from the failure of sup- plies of Unseed and rapeseed from Southern Russia. If the progress gained, with a million sterling more, can be permanently secm-ed, it will be well ; but an indefinite development, after Russia shall have resumed her southern exports, is not probable, the consumption of linseed in the United Kingdom showing only a moderate progi'ess, while the increase of imports of rapeseed from 289,000 quarters in 1874 to 460,000 quarters in 1876 into the United Kingdom ia only a partial recovery from a depression of the trade, which had reached 665,000 quarters in 1871. c. In thirteen years after 1854 the consumption of tea in the United Kingdom increased by 49 millions of j)Ounds, or from 62 millionsin 1854, when the duty was Is. 6^^., to 111 millions in 1867, when the duty was &d. In the nine years since 1867, the increase has amounted to 38 million pounds, that is, at a faster rate than in the earlier period. The increase in value, however, of the imports in those nine years has been only 2f milUons sterling. Hence, though the exports of Indian tea have increased by 1-9 million sterling since 1867, the further extension must fall far short of the requirements for correcting the Indian exchanges. d. The demands for rice for distillation, and for uses inferior to its use as human food, must keep the Indian export somewhere about the present limits. The consumption in the United Kingdom has declined since 1872, when it reached 7 million hundredweights, against six and a half millions in 1876. Japan is appearing as a new competitor for the supply of Europe. e. In wheat there has been great progress since 1873-4, the increase having amounted to one and three-quarter million sterling ; but a rise of local prices from the importation of silver into India, and the circumstance of India not having an abundance of cattle, precludes hope of a very great extension of the trade. /. On the whole, it is satisfactory that through the exports of the staples which have been passed in review, a great deal of the decline A A 2 356 A HANDBOOK ON GOLD AND SILVER. in the export of raw cotton has been compensated ; but the next exports from India (para . 9) are stUl a long way below the amount 1862-3 to 1865-6 ; and they are now under the disadvantage that every material increase of the exports will reduce the gold price of the staples in Eiu-ope, while in 1862-3 to 1865-6 the gold price of Indian cotton was high. • It has been shown in another appendix, that there is a sympathy between the prices in London of Indian exports and of silver, their gold prices rising and falling together. 12. As yet, the increase of Indian exports by five millions sterling since 1874-5, and by one million sterling additional in the eight months ended September 30, 1877, beyond the amount in the cor- responding period in 1876, has been unavailing to raise the price of silver. Instead of elevating that price, the amount of exports has only been stimulated by its fall. The price of silver was 67^d. in January 1875, 54|d. in January 1876, 57d. in January 1877, and 54|(i. in October 1877. It would not be enough that the amount of net export in 1862-3 to 1865-6 should be regained, the circunist.ances being so dissimilar, owing to the increase of the Home Government's bills on India, and to the decHne in Europe of the gold price of Indian productions compared with the excessive price of cotton in those years. Indeed, the net export in 1 876-7 did amount to 24 millions sterling against 25 millions in 1862-3 ; but the price of silver was nearly QO^d. an ounce in 1862 ; against 52|rf. in 1876. 13. The course of the Indian trade and of prices since 1854-5 shows that a mere increase of exports from India will not improve the exchange and the price of silver, unless the exports increase from a special foreign demand for them which may raise their gold price in European markets. The figures respecting the net imports of treasure (para. 9) also indicate that the depreciation of silver, as measured by the prices of articles, was completed in India in the period from 1855-6 to 1869-70. In the first six years of that period, the net imports of bullion amounted to 76 millions sterling, or at the rate of nearly 13 millions a year; in the next nine years they amounted to 147 millions, giving a yearly rate of 16 millions; and in the next seven years from 1871 to 1876 to 36 millions, or at the yearly rate of five millions. It does not requii-e any detailed exhibition of prices to show that they reached then- highest in or before 1870, and that their subsequent fall simply denotes that silver had depreciated, down to 1870, in India, in a greater degree than gold had depreciated in the same period in Europe, and that silver had since 1871 been regaining a portion of the value which, from extra depreciation, it APPENDIX VI. 357 had lost' in India. This circumstance is quite compatible with the depreciation, since 1870, of the gold price of silver in Europe. In India, silver is a standard of value ; in Europe it is mere merchandise, like Indian commodities, and its gold price rises or falls with theirs. Any increase of Indian exports which shall lower their gold price in Europe, as it needs must do, will lower, not raise the gold price of silver. 14. As a circumstance affecting prices, it is useful to note that the sailing vessels and steamers which entered and cleared at ports in the United Kingdom amovinted in 1855 to 15 million tons, and in 1875 to 39 million tons. The tonnage has trebled since 1855 ; and the increase is principally in steamers, only 5 millions of the increase being in the tonnage of sailing vessels. Increase of tonnage, which means diminution of freight, and the attraction of the world supplips to the centres of trade, has counteracted, in a measiu-e, the deprecia* tion of gold. APPENDIX VII. COTTON AND THE COTTON TRADE OF THE UNITED KINGDOM. Manchester is apt to forget a fact which she ought to remember, at least when she clamours for the repeal of the Indian, import duty on her manufactures, viz., that the cotton industry and trade are not susceptible of indefinito expansion, because the supply of cotton is limited. The number of spindles and the consumption of cotton are as follows : — (Three OOO's omitted). Spins and Spindles Consumption Conti- nent United States 2,500 9,600 Total Great Britain Grand Total Conti- nent United States Total Great Britain Grand Total 1846 1861 1870 1876 7,585 19,440 10,086 28,940 17,500 30,387 34,695 39,000 27,585 67,940 Bales 908 1,776 1,722 2,605 Bales 491 843 928 1,357 Bales 1,399 2,619 2,650 3,962 Bales 1,561 2,635 2,760 3,017 Bales 2,960 6,264 5,410 6,079 Compared with 1846, the spindle power in Great Britain maintains its old preponderance. The superiority over the rest of the world is greater than it seems, the English machinery in 1876 being more efficient than that in 1846, and representing a proportionately smaller outlay of capital. On the other hand, the number of spindles in the United States and in Continental Europe is now only one and a half million less than the number in Great Britain in 1861 ; whilst their consumption in 1876 was one million bales more than the consump- APPENDIX VII. 359 tion of Great Britain in 1846. This excess has been gained since 1870, the spindle power of Great Britain having also been increased since that year by 4,300,000 spindles, for, however, not quite 260,000 bales of extra consumption ; that is, in great disproportion to the extra consumption. In the hope, among other things, of correcting the effects of this mistake, Manchester desires a repeal of the Indian import duty on cotton. 2. The supply of cotton in the three periods was as follows, stated in thousands of bales : — Supply Consumption United states other kinds Total Conti- nent Unilel states Total Great Britain G-rand Total 1846 1861 1876 2,170 3,826 4,669 377 1,058 2,306 2,547 4,884 6,975 908 1,776 2,605 491 843 1,357 1,399 2,619 3,962 1,561 2,635 3,017 2,960 5,254 6,979 Of the increased siipply of United States cotton in 1861 (season 1860) compared with 1846, viz., 1,656,000 bales, the bulk was for Europe, only 352,000 of the additional bales having been consumed in the States; but of the excess of 843,000 bales in 1876 over 1861, 514,000 bales were retained iu the States, and only 329,000 bales were sent to Europe. The supply for 1877 (season 1876-7) is 4,485,000 bales, showing an excess over 1876 of only 184,000 bales, and the quantity retained for consumption in the States is 1,435,000 bales against 1,357,000 in 1876 ; that is, the States retained 78,000 out of the 184,000 bales, or less than half, but still a considerable proportion, of the additional supply. The crop of the season 1877 is 4,500,000 bales. If, out of this, a larger quantity than the home consumption of 1877 be retained in the States, the supply for Europe will recede. 3. Pursuing the subject in greater detail, the supply of cotton in Great Britain, Continental Europe, and the United States, stated in thousands of bales, is as follows for the cotton seasons from October 1 to September 30 : — 360 A HANDBOOK ON GOLD AND SILVER. {In i housands of bales.) Season Supply Deliveries for Consumption United Other sorts States imported Total United Conti- Total Great Grand crop into Europe States 927 nent Britain Total 1858-9 3,994 791 4,785 1,525 2,452 2,179 4,631 1859-60 4,824 992 5,816 972 1,712 2,684 2,560 5,244 1860-1 3,826 1,058 4,884 843 1,776 2,619 2,635 5,254 1865-6 2,314 3,156 5,470 733 1,588 2,321 2,319 4,640 1866-7 2,204 2,601 4,805 853 1,791 2,644 2,414 5,058 1867-8 2,499 2,654 5,053 884 1,867 2,751 2,822 5,573 1868-9 2,489 3,110 5,549 1,017 2,002 3,019 2,587 5,606 1869-70 3,155 2,479 5,634 928 1,722 2,650 2,760 5,410 1870-1 4,352 2,383 6,735 1,140 2,327 3,467 3,222 6,689 1871-2 2,974 3,680 6,654 1,067 1,779 2,846 3,132 5,978 1872-3 3,930 2,488 6,418 1,214 2,099 3,313 3,335 6,648 1873-4 4,170 2,762 6,932 1,315 2,397 3,712 3,149 6,861 1874-5 3,833 2,717 6,550 1,194 2,369 3,563 3,077 6,640 1875-6 4,669 2,306 6,975 1,357 2,605 3,962 3,017 6,979 Calendar year, 1876 — . — 1,362 2,513 3,875 3,145 7,020 Season 1876-7 4,485 1,435 Yearly ave- rage from : 1865-6 to 1869-70 2,522 2,780 5,302 883 1,794 2,677 2,680 5,257 1870-1 to 1875-6 3,988 2,722 6,710 1,214 2,263 3,477 3,155 6,632 4. The following remarks arise from the table : — • I. The bales are not of uniform weight, but the general result is not thereby materially affected, it being much the same as in the following statement of consumption, in bales of the uniform weight of 400 pounds each. United States Continent Total Great Britain Grand Total 1873 1874 1875 1876 1,321 1,441 1,306 1,484 1,970 2,267 2,363 2,545 3,291 3,708 3,669 4,029 3,108 3,167 3,076 3,255 6,399 6,875 6,745 7,284 II. The total supply has increased by two millions of bales since 1860-1, including an excess in the season 1875-6, over the season 1860-1, of 1,500 million bales in the supply of other sorts than United APPENDIX VII. 361 States cotton. The supply of these other kinds, however, is declining. It never exceeded 3,680,000 bales, even under the stimulus of ex- cessive prices dui-ing the cotton famine ; their average supply -was 2,780,000 bales from 1865-6 to 1869-70, and 2,722,000 bales from 1870-1 to 1875-6, whilst in 1875-6, they amounted to only 2,306,000 bales, vyter United States cotton regained its supremacy, the other kinds barely maintained the footing they had acquired during the cotton famine; and in 1876 they receded through the low prices induced by the increasing production of American cotton. III. At the same time, any very great extension of supply from the United States, except in an unusually good season, cannot be predicated ; the acres planted having been as follows, according to the statistics of the ' New York Financial Chronicle ' : — (^Three OOO's omittecT). Acres Crop, Crop, Pounds Pounds , planted lbs. bales per Acre per Bale 1869-70 7,833 1,381,800 3,155 176 438 1870-1 9,985 1,906,800 4,352 191 438 1871-2 8,911 1,.305,700 2,974 147 439 1872-3 9,560 1,729,400 3,930 181 440 1873-4 10,816 1,830,800 4,170 161 4,39 1874-5 10,982 1,682,700 3,833 154 440 1875-6 11,635 2,054,360 4,669 177 440 1876-7 11,501 4,485 — — 1877-8 11,825 — 4,500 — • — The total consumption of cotton in Europe and America has in- creased by one-third since 1860-1 ; but the bulk of the increase has occurred in the United States and in Continental Europe. The States' supply has not materially increased since 1870-1, whilst prices have fallen since that year for middling uplands by more than one-third, and for fair Surat by above one-half. The area of average, however, has increased, and falling prices have, since 1875, been met by diminished cost of production, which ('New York Financial Chronicle,' March 17, 1877) has been brought down to 6-60 cents per pound, against a selling price, at the time, of about 9|^ cents per pound. This affords a liberal margin for the higghng of the market, between producers and exporters, when the latter lose the advantage of the premium on gold, which already has well nigh ceased. India wotild need to reduce, similarly, her cost of production, should the 362 A HANDBOOK ON GOLD AND SILVER. low exchange from the depreciation of silver be corrected by an alteration to a gold standard. 5. The imports of the various kinds of cotton into the United Kingdom, and the price of cotton, have been as follows : — Imports into the United Kingdom. {In millions.) 1 Average S a Price of s CD •u fl B Cott»n ■1 'c ft 1 1 1 8 ■3 1 1 1 fl ■^^ u P M H B H o H s [zi ocb S 3 Bales of 400 lbs. each d. d. 1858 833 19 38 890 134 10 1,034 150 885 — 6^ ^ 1859 962 22 38 1,022 192 12 1,226 175 1,051 — 6f 5 1860 1,116 17 44 1,177 204 10 1,391 250 1,141 — tii 6 1861 819 17 41 877 370 10 1,257 1,298 959 — «^ «^ 1862 14- 23 50 96 393 35 524 215 309 1-124 m m 186.S 6- 23 94 123 434 113 670 241 429 1-191 '2Si m 1864 14 38 126 178 506 210 894 245 649 1-403 27^ m 1865 136 55 177 368 446 165 979 303 676 1-796 19 14* 1866 520 69 118 707 615 55 1,377 389 988 2-227 15^ 12 1867 528 71 126 725 498 40 1,263 351 912 2-386 10-i 8^ 1868 574 99 129 802 494 33 1,329 423 1,006 2-490 10^ 8i 1869 457 79 161 697 481 43 1,225 274 947 2-347 12 H 187C 716 64 144 924 341 74 1,339 238 1,101 2-679 H 8- 1871 1,039 86 176 1,301 461 46 1,778 362 1,416 3-014 8^^ 5^ 1872 626 112 178 916 443 50 1,409 273 1,136 2-938 10^ 7. 1873 833 72 205 1,110 367 51 1,528 220 1,308 3-115 9 e^ 1874 884 80 171 1,135 412 28 1,575 259 1,316 3-165 8 5A 1875 816 68 168 1,052 388 19 1,459 252 1,207 3-076 74 5 1876 905 54 199 1,158 287 15 1,460 194 1,266 3-186 6t ^ Pence per lb. in 1877. Jan. 26 March 2 April 6 May 4 June 1 July 6 August S Sept. 14 Middling up- lands . Suiat, fair . 6— 6| 5* 7| 5| 7| 5f 6i 5| 6| fill 6. The following remarks are suggested by the table : — I. The long stapled cottons, viz. United States, Brazilian, and Egyptian, have provided the whole of the increase ; and whilst the APPENDIX VII. 363 competition of UniteJ States cotton has greatly reduced imports of tlie short staples (East Indian and others), the imports of Brazilian and Egyptian have materially increased beyond their amounts in the years of the cotton famine. In 1876, however, the imports of Brazilian fell off from the great decline in price below the prices of 1874 and 1875 ; but in 1877 there has been a recovery in Brazilian and a decline in Egyptian imports. II. The increase of net imports of the long staples is still gi-eater : — {In millions of bales.} 1867 18GS 1869 1870 1871 1872 1873 1874 1876 1876 Tmpoeied rtfio Gebat Bkiiain. American, Brazilian, and Egyptian East Indian Others 1-8 1-5 •2 2-1 1-4 •1 1-7 1-5 •2 2-2 1-1 •2 3- 1-2 ■2 2-4 1-3 •2 2-7 1-1 ■I 2-8 1-0 ■1 2-6 1-1 ■0 2-7 •8 •1 EXPOETS PEOM GeEAT Beitain". 3-5 3-6 3'4 3-5 4-4 3-9 3-9 3-9 3-7 3-6 American, Brazilian, and Egyptian . Ea.=it Indian Other kinds •3 ■7 ■1 ■3 •6 •2 ■6 •2 •5 •4 ■5 ■2 •6 •2 ■4 •2 •5 •2 •5 ■1 5 Net Impoets. 1-1 •9 ■8 •7 ■9 ■8 ■6 ■7 •7 •5 American, Brazilian, and Egyptian East Indian Other kinds 1-5 •8 •1 1-8 •8 •I 1-6 •9 ■2 2-0 ■6 •1 2-6 ■7 •2 2-2 •7 •2 ■1 2-6 •5 •1 2-4 6- 2-6 •4 •1 2-4 2-7 2-6 2.8 3-5 3-1 3-3 3-2 3-0 31 Of long staples, the gross imports have increased by only one-half, but the net imports by seven-tenths, since 1867. Of East Indian, the gross and the net imports alike have fallen off by one- half ; the proportion of decline in the other kinds is greater. III. During the cotton famine, the high prices offered by Liver- pool drew all the cotton supplies to England ; and the factories on the Continent were starved. With the revival of the American supply the exports from the United Kingdom to the Continent in- creased, until the opening of the Suez Canal diverted direct supplies 364 A HANDBOOK ON GOLD AND SILVEE. from India to the Continent. The direct supplies from America to the Continent of Europe have also increased. The total deliveries of cotton on the Continent have been as follows : — {In thousands of bales.") 1871 1872 1873 1874 1875 1876 American and Brazilian Mediterranean East Indian Other 1,325 186 727 116 1,095 208 806 94 1,070 195 765 89 1,197 196 905 90 1,190 200 984 72 1,288 270 894 61 2,354 2,203 2,119 2,388 2,446 2,513 Another statement by Messrs. Findlay, Muir &, Co. gives the following return, in bales, of the exports of cotton from Bombay : — {I n thousands of bales.) 1871 1872 1873 1874 1875 To Deo. 28, 1876 To Great Britain . •■„ Continent . „ China 807 339 53 664 259 39 736 227 24 845 412 19 810 456 37 585 412 1,199 962 987 1,276 1,303 997 IV. It appears from II. and III. that the United Kingdom manufactures the finer staples, using the short staples or lower kinds for mixing. The Continent receives half its supply of East Indian cotton direct, and the other half from England ; but the total supply to the Continent has been stationary since 1874, and so far as Con- tinental manufactures depend on East Indian cotton, their progress is checked by a limited supply : the limitation being virtually applied by the progress of cotton manufactures in India. The use of long- stapled cotton on the Continent shows, since 1873, a slight progress which would no doubt be accelerated were there more of East Indian cotton to mix with the long staples. Manchester does not see that the Indian cotton manufacture is a better friend to her than the Secretary of State for India would be were he to repeal the Indian cotton duty. While long-stapled cotton is cheap, the production of APPENDIX VII. 365 short staples will be checked, and the supply for Continental factories will be restricted. But were the Indian import duty to be repealed, the displacement of Indian by British manufacttires would liberate, for export to the Continent, cotton which is now used up in India ; and this additional export would be promoted by a rise in the price of long-stapled cotton from an increase of the British demand for it. With a larger sujpply of raw material, the Continental manufacture would flourish, prosperity would stimulate improvements, and gradu- ally the Continent, while extending the manufacture of the coarser fabrics from short staples, would resume its competition with Liver- pool for the long staples, and with Manchester for the finer fabrics. Manchester, finding in the Continental manufacture a more formidable competitor than the Indian, would assail the Secretary of State for India with sorrowful reproach, for having brought misfortime upon her by the repeal of £800,000 a year of Indian import duty on cotton goods. Mr. Malet, Secretary of Legation at Rome, in his report on the trade of Italy for the five years ending December 31, 1875, quoting statistics, showed that the import of English cotton goods into Italy had decreased by 6 million francs, while that of French cotton goods had increased by seven million francs, in 1875, compared with 1871. 'We must acknowledge that the French manufactures are more welcome in Italy than ours,' and that it is not the Italian import duty any more than the Indian import duty, through which, chiefly, the consumption of British cotton manufactures does not advance. 7. The statistics of the manufacture of cotton in the United Kingdom are shown in the table on p. 366. 8. The following remarks are suggested by the table : — I. During years of plentiful supply, the waste in spinning is about one-ninth of the cotton consumed ; in years of restricted supply, when inferior cotton was accepted, it was somewhat greater. Of the yarn produced, generally one-fifth is exported, and the remainder is made into cloth. Latterly, from disuse or decrease of sizing, more yarn is put into a given quantity or weight of cloth than in former years. II. The quantities of yam and piece goods exported have steadily increased ; but the quantities retained for home consumption and stock, and the estimated actual home consumption, were less in 1875 and 1876 than in the years 1859 to 1861, and were less than in the prosperous year 1871. Considering the increased numbers and means of the population, the stationary character of the home consumption is singular. 366 A HANDBOOK ON GOLD AND SILVER. III. The total cotton consumed, and the total manufacture, are greater by one-fourth or one-fifth than in the years 1859 to 1861, and they have steadily increased since 1869. (ira millions.) 1869 1860 1861 1868 1869 1870 1871 1872 1873 1874 1876 1876 1. Cotton consumed 2. Less waste in spin- ning .... 3. Yam produced . 4. Exported in yarn 5. „ in piece goods and apparel . 6. Retained for home consumption and stocks 7. Total as above . lb. 878 103 lb. 1,079 113 lb. 1,005 105 lb. 996 119 lb. 989 122 lb. 1,072 129 lb. 1,206 132 lb. 1,176 135 lb. 1,246 168 lb. 1,266 146 lb. 1,23C 141 lb. 1,274 143 878 966 900 877 817 943 1,073 1,040 1,078 1,120 1,0891,131 192 501 182 875 197 543 226 966 178 496 226 900 174 549 164 170 635 112 186 616 140 193 680 200 212 698 130 216 688 176 221 726 174 216 232 1 713 735 1 160 164 877 817 942 1,073 1,040 1,078 1,121 1,0891,131 VALUB OF MAW1JFACTTIRE8. 8. Tarn exported . 9. Piece goods 10. Estimated Talue ot home consiunption . 11. Total value ot goods produced , 12. Cost of cotton con- sumed 13. Paid in wages and other expenses . 14. Balance left for in- terest and profit 16. Total 16. Value of piece goods exported per Board of Trade Returns . £ 9-46 43-06 19-70 £ 9-87 46-26 24-47 £ 9 29 41-61 23-53 £ 14-71 57-34 19-67 £ 14-16 87-66 U-38 £ 14 67 61-42 17-06 £ 1506 63-38 23-52 £ 16-71 69-90 16-66 £ 15-88 68-13 20-60 £ 14-52 65-93 20-11 £ 13-17 63-97 18-31 95-4.5 36-53 58-92 £ 12-78 59-30 17-78 89 86 32-86 .57-01 72-22 80-69 74-33 91-72 86-20 93-14 101-96 102-27 104-61 100-56 27-58 30-33 14-31 28-91 33-60 18-08 80-59 32-20 .31-36 10-77 74-33 40-99 34-94 16-79 91-72 43-77 32-0.5 10-38 4214 51-00 40-81 61-15 48-05 54-22 45-44 59-17 40-22 60-34 72-22 86-20 93-14 101-96 102-27 104-61 100-56 96 45 89-8G 38-74 42-14 lb. 740 173 37-68 lb. 674 174 52-97 lb. 723 160 53-02 lb. 705 126 d. 124. 3A 56-76 57-76 63-47 61-47 59-73 .')8-60 54-85 17. Tarns and goods ex- ported 18. Estimated actual home consumption . lb. 693 172 lb. 802 140 lb. 873 186 lb. 917 145 lb. 903 160 lb. 947 174 lb. 929 165 lb. 967 170 Price of middling up- lands .... Price of SJ lb. shirtings Difference on margin . d. 65 13, d. 6i IS 7 d. d. lOi d. 14ii ■i d. d. 9 131 d. 8 12J 4A d. iP d. 10; APPENDIX VII. 367 This may be supplemented by the results of a census of cotton manufactures of Great Britain, taken at the close of 1874. Nmnber of Number of hands employed Spindles Power looms Males and females under 13 Females above 18 Total Males above 13 Grand total 1861 1870 1874 30,387,467 34,695.221 37,515,772 309,992 440,676 463,118 39,788 43,281 66,900 251,306 251,551 258,667 291,094 294,832 325,567 160,475 155,255 153,948 451,569 450,087 479,515 IV. Judged by the quantities manufactured, the industry is flourishing, though not materially progressive ; but the outlay and returns may sho-w a different result. Certain it is, that the margin for manufacturing expenses and profit, or the difference bet-ween the Liverpool price of cotton and the Manchester price of snirtings, -was Id. or l^d. a pound in 1859 or 1860, but only 4:\d. iu 1874 to to 1876. The latter figure may, however, be compatible -with a iiourishing manufacture, for the margia was only 4fc?. in 1871, which is regarded as the most prosperous year of the cotton industry. V. The discrepant statements of the value of the cotton manu- facture interfere somewhat with any estimate of its profitable cha- racter. The value of piece goods exported is retui-ned by Messrs. Ellison and Co. in theii- circulars, and by the Board of Trade, as follows : — {Millions sterling.) ! 1869-1869 Yearly average 1 1874-1876 Yearly average Messrs. Ellison Board of Trade 130-82 43-61 118-46 1 39-49 1 189-20 173-18 63-06 57-73 In the earlier period the excess valuation by Messrs. Ellison was four millions, in the later period, five millions a year. The difference, and the increase of difference, affect an estimate of the probable and comparative profits in the two periods. Probably Messrs. Ellison and Co. give the credit price, while the returns of the Board of Trade are based on cash prices. VI. Adopting the statistics of Messrs. Ellison and Co., the figures are — 368 A HANDBOOK ON GOLD AND SILVER. (In miUio7is.') 1859 186U 1861 Total 1873 1874 1875 Total Yearly average 1876 lb. lb. lb. lb. lb. lb. lb. lb. lb. lb. Total manufactures . 875 960 900 2,741 1,078 1,121 1,089 3,288 1,096 1,131 £ £ £ £ £ £ £ £ £ £ Value of preceding . 72 81 74 227 105 100 95 300 100 90 Cost of cotton con- sumed . 27 29 32 88 46 40 36 122 41 33 Bal anee left for wages and other expenses, and for interest and profit 45 52 42 139 59 60 59 178 59 57 After paying for cotton, there remained for the expenses of manufacture, in the first period, 139 millions sterling for 2,741 millions of pounds of cotton manufactured, and in the second period 178 millions sterling for 3,288 million pounds; the yearly averages being 46 millions sterling for 914 million pounds in the first period, and 59 millions sterling for 1,096 million pounds in the second period. On the surface, the prosperity of the years 1859 and 1860, and the large profits to manufacturers in 1861, were surpassed in 1873 to 1875 ; but unfortunately such a conclusion cannot be adopted without a knowledge of the expenses of production in the later period. This information, which is of especial value on account of the rise in wages, is omitted in the circulars from 1870. VII. "We may attempt, however, a rough approximation of the working expenses. a. In the period from 1859 to 1861, the yearly average paid in wages and other expenses, other than the cost of cotton, was 31 J millions sterling. b. In 1874 (table in para. 7) there were 28,000 hands more than in 1861, but the increase was entirely (36,000) among boys and females, who receive about half or less than half the wages of men, the manufacturers having endeavoured thus, by improved machinery which admitted of the freer employment of boys and women, to counteract the effect of a rise in wages ; but the decrease in the males above 13, viz. 6,500, was too smaU to have given substantial relief. c. The advance of weekly wages averaged 10 to 25 per cent, in 1859, compared with 1839. For a spinner the weekly wages were 20s. in 1850 ; 22«. in 1 853 ; 27s. in 1860 ; 30s. in 1865 ; 42s. t« 50s. in 1874. After the crisis in 1866, there was a reduction, not of rates. APPENDIX VII. . 369 but to short time ; and the distress in Lancashire in 1869 was followed by a rapid increase of wages in subsequent years. Wages in 1874 were 15 shillings in excess of the wages (27s.) iu 1860, involving an advance of fifty-five per cent. If, on this account, the yearly average sum paid in the first period (a), viz. 32 millions, be increased by about one-third (the prices of coal and iron have increased, as well as wages), the yearly average of working expenses in the second period from 1873 to 1875 would be 43 millions, which, deducted from the 59 millions available for working expenses plus profit, would leave 16 millions as the profit, including interest on capital. For 1876, the amount would be 14 millions. In the period from 1859 to 1861, the corresponding amount was 14 millions. d. The financial result appears, then, not to have improved with the increase of production since the years from 1859 to 1861 ; and in 1876 there was a positive deterioration ; there must also be considerable abatements — (1) If the increase of one-third beyond the working expenses in 1860-1 be too little for the reduction of full time by one hom% for the rise in wages, and in the prices of iron and coal, since that year. (2) If Messrs. Ellison's valuation of exports, which greatly exceeds that of the Board of Trade, be an over-estimate. (3) Interest should be deducted on the additional amount out- standing, for the larger proportion of business, than in 1860, which is done on credit ; the bills created by the allowance of credit bearing interest. e. Another correction remains. The exports of cotton piece goods to the East — that is, to the countries from which, owing to the depreciation of silver, it is difficult to get back returns without heavy loss — are increasing, and they form one-half of the total trade. An abatement of ten per cent, from the value of half the exports would amount to some three and a half millions sterling. If this be deducted from the returns from 1874 to 1876, the results for those three years may be considered poor, and the prospects of the cotton industry to be unpromising. This loss by exchange is recoverable through a higher selling price, but that has not been obtained yet ; and with diminished consumption from a higher seUing price, the result may be unchanged. f. In 1877, much of the cotton trade appears to have been con- ducted at a loss, or without profit ; and there has been reduction of wS,ges. B B 370 A HANDBOOK ON GOLD AND SILVER. 9. Manchester's proper course is to urge the adoption in India of a gold standard, the change to be effected at a valuation between the rupee and sterling, which would correct the injurious effect of the recent depreciation of silver. More relief would be obtained in this way than from the mere five per cent, which Manchester, with a short-sighted policy, seeks from the repeal of the Indian import duty, which protects Manchester more effectually than it protects the local industry. It should not be forgotten that the manufacture of cotton goods is limited, for Manchester, by the supply of fine-stapled cotton, for which the Continental factories would compete in increased measure, if, through the extinction of the Indian manufacture, more of East Indian cotton became available on the Continent for mixing with the fine staples. APPENDIX YIII. WHEAT AND THE PROSPECTS OF BPITI8S AGRICULTURE. The depressed condition of the foreign trade increases the dependence of British manufactures on the home trade. The latter is affected by the consumption of the urban working classes, whose wages are falling, and by the prosperity of British agriculture. At the same time, those who are troubled by the effects upon Indian finance of the depreciation of silver cherish a sanguine hope that matters will be righted by a great expansion of the Indian wheat trade. 2. That hope should, however, awaken concern whether the agricultural interests of Great Britain will be able to endure a com- petition from wheat which India may export, under the stimulus of a low exchange, that for the time operates like a bounty. 3. Mr. Caird observed ' that the farmers, if diiven from the cultiva- tion of wheat by the importation of foreign wheat, would find their advantage in bestowing more attention on oats, barley, dairy produce, meat, and the like : ' The steadily advancing price of these articles, and of barley, is the true explanation of increasing rents and agricultural prosperity, notwithstanding receipts of foreign com. ... In the production of barley, as in that of long lustrous wool, this country is still without a rival.' Opportunities for acting on this advice have been afforded, but somehow it has been unavailing, or hard to follow. 4. The agricultural returns give the following statistics for the United Kingdom :— ' Journals of the Statistical Society for Jime 1868 and March 1869. n n 2 372 A HANDBOOK ON GOLD AND SILVER. 1870 1871 1872 1873 1874 1875 1876 Oorn crops, viz. : Wheat . Barley . Oats . Eye, beans, and peas Green crops Clover and grasses . Permanent pasture . Horses for agriculture and for breeding . Cattle Sheep 3-77 million 3-83 s of act 3-84 ■es.) 3-67 3-83 3-51 3-12 2-62 4-42 2-02 4-36 2-54 4-34 2-57 4-20 2-51 409 2-75 4-18 2-76 4-29 7-04 •95 6-98 1-02 6-88 -98 6-77 ■98 6-60 •93 6-93 •96 7-05 •89 11-76 511 6>32 11-83 5-27 6-24 11-70 5-11 6-35 11-42 4-97 6-24 11-36 4-96 6-28 11-40 5-06 6-34 11-06 4-96 6-44 23-19 22-09 23-34 22-52 23-16 22-84 22-63 23-36 22-60 23-68 22-80 23-77 22-46 24-05 45-28 LivJi £ 1,750 9,235 32,787 45-86 >IOCK ( 1,743 9,346 31,403 46-00 in thorn 1,748 9,718 32,247 45-90 ands). 1,760 10,154 33,982 46'28 1,789 10,281 34,837 46-57 1,820 10,163 33,492 46-51 1,863 9,997 32,253 Millions of atirea Thousands Wheat Barley Oats Permanent pasture Cattle Sheep 1868 1869 8^95 3^98 2-35 2-48 4-47 4-48 22-16 22-81 9,083 9,078 35,607 34,250 5. The following remarks are suggested by the table : — I. The area under corn crops has decreased since 1870 by 700,000 acres, including a gross decrease of 650,000 acres under wheat ; barley has gained only 140,000 acres; and oats have lost 130,000 acres. II. Since 1869 the wheat area has decreased by 830,000 acres • and permanent pasture has increased by 1,240,000 acres, or since 1870 by 1,960,000 acres. Inasmuch, however, as the tot&l area under corn crops, green crops, clover and grasses, exclusive of per- manent pasture, has decreased since 1870 by only 730,000 acres, the remaining 1,230,000 of excess under permanent pasture arises from the inclusion of new returns. But as new returns must occur also APPENDIX VIII. 373 under the other heads, the real decrease of wheat cultivation is probably greater than the apparent decrease. III. The increase of permanent pasture has not been accompanied by an increase of cattle and sheep. Mi-. Caird's crumbs of comfort appear to have been picked up by foreign birds. IV. Even vegetables give but scant hope; market gardens in Great Britain showing an increase of only 2,000 acres since 1872. In green crops there is a slight decline, 6. Mr. Caird did not anticipate the considerable increase which has occurred of importations of barley, oats, and maize. Yearly average in 1841 to 184C 1847 to 1863 1854 to 1860 1861 to 1868 1869 to 1876 Wheat. Other kinds of corn Wheat meal and floiu- . Other sorts of meal (Thousi TTlds of qx larters.) 1 ( Thousands of cwts.) 1,578 1,172 3,516 4,G97 3,962 4,866 34,784 27,728 48,392 47,213 2,750 8,213 8,828 62,512 95,605 {Thousands of cwts.) 1 Imperial quarter 1,324 34 4,842 466 3,424 27 = 3| cwt. of wheat flour. (In millions of cwts.) Barley Oats Maize Total other Total of otber Idnds than wheat Wheat & wheat flour Total com 1868 7-5 8-1 11-5 27-1 4-2 31-3 36-5 67-8 1869 8-0 7-9 17-7 33-6 3-2 36-8 44-5 81-3 1870 7-2 10-8 16-8 34-8 3-6 38-4 36-9 75-3 1871 8-6 10-9 16-8 36-3 4-3 40-6 44-4 85-0 1872 15-0 11-5 24-5 51'0 4-7 55-7 47-6 103-3 1873 9-2 11-9 18-8 39-9 4-4 44-3 51-6 95-9 1874 11-3 11-4 17-7 40-4 4-8 45-2 49-3 94-5 1875 11-0 12-4 20-4 43-8 5-7 49-5 69-5 109-0 1876 9-8 11-2 39-9 60-9 6-2 67-1 53-3 120-4 1877 to Aug. 31 Year fi-om 7-6 8-9 — — 3-7 — 32-7 — Sept. 1 to Aug. 31 1874-6 13-1 12-2 17-2 42'5 4-8 47-3 49-7 97-0 1875-6 8-1 110 34-3 53-4 5-8 59-2 5.'?-6 112-8 1876-7 13-2 12-8 .34-0 600 5-9 65-9 4o-2 111-1 374 A HANDBOOK ON GOLD AND SILVEE. From 1861 to 1868, which furnished Mr. Oaird's latest experience, when he wrote, the imports of wheat exceeded the imports of other kinds of corn; but in the eight years after 1868 the percentage of increase of wheat was considerably less than the proportion of increase in other kinds of corn. 7. The following remarks are suggested by the last table : — I. Barley, oats, and maize are used respectively for malting or distillation, or as food for cattle and horses, the three being also used as human food, xiz : barley to a considerable extent in Wales, West- moreland, Cumberland, and Scotland ; oats in Scotland ; Indian corn in Ireland. The last mentioned is also in great demand for distilla- tion, and as food for stock, since it has become cheaper than oats, and cheaper than any other kind of corn, the produce of the United Kingdom. II. The requirements of malting and distillation have indeed increased, but not in the proportion of the increase in the importations of the three grains. As food for cattle, maize may have partially displaced oats, bvit only to liberate the oats for use as human food. On the whole, miich of the increased importations of barley, oats, and maize must be held, from their use as human food, to modify the usual estimates of requirements of wheat for consumption in the United Kingdom. III. Mr. Caird's advice notwithstanding, the remunerative cha- racter of the cultivation of oats has not prevented a decline of that cultivation from 4"47 million acres in 1868 to 4-29 million acres in 1876, or of the sales reported from 150 towns in England and Wales, from 249,867 quarters in 1867 to 148,878 quarters in 1876, though the importations of foreign oats increased under prevailing prices by three million cwts., or by nearly 40 per cent. IV. It is held that the charges of transit of Californian wheat to the Atlantic seaboard, and freight thence to England, set off the rent paid by British farmers; the immensely increased importations of cheap maize seem to denote, however, that the expenses of transit are less than is generally supposed. The competition of canals with the railways ' keeps down the expenses. The shipments of grain from the the United States in 1877 have exceeded those of last year by nearly 40 per cent. ; and the crop in those States this year is 25 million bushels greater than in any previous year. The price of wheat which stimulated the cultivation of that crop was 46s. 2d. in 1876, after Economist, July 7, 1877. APPENDIX VIII. 375 45«. 2d. per quarter in 1875. In a paper in the ' Statistical Journal' for March 1869, Mr. Caird observed : " When the price of wheat falls below 50s., the farmer begins to turn his attention to other crops.' The increase of agricultural wages since 1869 has not lessened the farmer's expenses of cultivation; on the whole, the cultivation of wheat is pursued in the United Kingdom in the face of a very trjdng competition. 8. The conclusions in section III. of the preceding paragraph have to be so far modified for the present, that the decUne of the cultivation of oats and barley has occurred wholly in Ireland, the Agricultural Returns for which country were brought to a state of accuracy some years before the returns for Great Britain were commenced in 1867 ; in England and Scotland the cidtivation shows a slight increase since 1870 ; but, first, we have seen that an enormous area of permanent pastui'e has been added for 1876 from new returns which were not included in the earlier year, and the comparison for wheat, barley, and oats, in favour of 1876, may include an over-statement from the same cause ; secondly, the use of maize on the large scale on which the importation is now established, and the increasing importations of foreign barley and oats, which have advanced since 1869 at a greater rate than the home production (notwithstanding the diminished cultivation of wheat), must continue to grow. 9. English and foreign writers have been speculating that as the trade of jute was diverted from Russia by the Crimean war, so her trade in grain may be injured by the present war, thz-ough the perma- nent transfer of a part of it to other countries. England has had similar experience in her own agriculture. The bulk of the increased importations of oats and maize in the five years from 1847 to 1853, compared with the five years from 1841 to 1846 (para. 6) occuned in the year of the Irish Famine. The extended footing which foreign oats and Indian com for human consumption in Ireland then acquired has been permanently maintained ; and, in Kke manner, the second considerable spurt which oats received in 1870, and maize in 1869 (same para.) has been maintained with a steady improvement since, in oats, and with yet another spurt for maize, of which the importa- tions reached 34 million hundredweights in the harvest years 1875-6 and 1876-7, against 12 millions in 1868, and 17 to 18 millions in the subsequent calendar years down to 1874. 10. We must look a little closer into the facts of this foreign competition. The imports of wheat, wheat meal, and flour from the principal foreign countries are as follows : — 376 A HANDBOOK ON GOLD AND SILVEB. (Jn thousands of cwts., OOO's omitted.) I. Ausiaia and Turkey Germany . Bussia Egypt Britisli North America United States . CMU Total of I. II. France . III. Other coimtries Grand total . Price of wheat 4,.561 3,837 1,634 171 430 1860 1,041 6,90.') 5,660 868 14,464 1,311 9,315 34 11,017 8,125 2,3 1,468 2,691 6,668, 7,931 4,5401 5,766 1,474 3,304 14,140 19,682 1863 1864 1865 623, 627 6,729 6,843 4,639 5,129 2,323i 367 3 ! is'isio 19,362 25,124 4.688 2,138 21,498 s. d. 53 8 33,602 1,360 2,786 37,647 s. d. 66 4 5,119 21,765 347 27,231 46,813 1,962 1,267 60,042 13,114 12,8( 1,187 7,224 8,094 10 1866 I 1867 16,515 3,198 1,1 11,869,16,077 2821 198 628 1,498 170 9,181 34 17,936 16,849 12,107 28,463 24,973 18.711 1,857 2,854| 6,059 668 1,010 1,073 30,888 28,837 s. (J. I 8. d. 44 9 : 40 2 26,843 d. 41 10 60 986 312 19,824 8,023 2,026 29,372 3,154 7,873 14,166 1,472 26,669 836 5,092 2,098 34,690 2,141 2,306 s. d. 49 11 89,137 s. d. 64 6 I. Austria and Turkey Gennany . . . Itussia ... Egypt British North America United States . Chili Total of I. n. France . m. Other countries Grand total . Price of wheat , 1869 1870 1871 4,317 7,224 10,066 3,237 3,133 7,647 9,187 1,029 24,833 798 6,753 1,478 9,029 33,862 847 1,797 20,896 3,396 15,320 580 957 4,488 10,32' 107 15,879 3,403 15,067 643 19,296 19,103 2,258 4,269 16,697 909 23,123 1,287 6,183 17,939 2,361 26,770 3,783 16,626 690 40,192,34,982143,121 2,163 1,060] 182 2,103, 864 1,069 44,448 36,906 44,362 s. d. \ s. d,' s. d. 63 9 48 2 46 10 s. d. 66 8 2,1.57 9,634 1,673 13,469 1873 1874 1876 732 908 1,733 1,823 3,019 4,012 6,613 3,488 9,694 1,272 14,717 4,316 21,775 1,837 6,799,10,1.58 8,912 298 2,112| 2,249 11,017 20,616 4,2981 4,070 27,206 26,372 903 27,928 40,239 4,654 2,820 47,613 42,646 3,256 6,730 s. d. \ s. d. 67 58 S 44,728 1,126 3,470 31,346 51,961 3,674 4,012 69,647 s. d. 3. d. s. d. 45 2 16,472 2,777 22,223 1,012 26,012 42,484 1,663 7,767 51,904 46 2 11. The following remarks are suggested by the table : — I. The two competitors for the world's supply of wheat are France and England ; the former competing only when her own harvest is deficient, and exporting to England when it is plentiful. II. The importation of 29 million hundredweights in 1859 was equal to 4-9 million quarters, and that in 1860 was 7-3 million quar- ters. The yearly averages have been — APPENDIX VIII. 377 Quarters Quarters 1841 to 1846 1847 to. 1863 1854 to 1859 1,956,000 4,900,000 6,789,000 1860 to 1870 1871 to 1876 8,199,000 11,697,000 The increase in the seventeen years since 1853 was three and one- third million quarters beyond the annual average in the seven years from 1847 to 1853; while in only six years, from 1871 to 1876, the increase beyond the average in the seventeen years to 1870 has amounted to three and a half million quarters. The yield of British wheat cultivation in 1876 was estimated at 10,600,000 quarters, including 800,000 quarters for seed, which left 9,800,000 quarters for consumption ; so that the foreign wheat now exceeds the home pro- duce by nearly one-fifth. III. The imports from Germany include Hungarian wheat ; so that nearly all the imports in section I. of the table are from countries which are indebted to England; their debts have been greater since 1867 than previously ; and during the same period there has been a great extension of railways in the indebted countries. IV. The high wages on the Continent have arrested some of the supplies which used to come from Germany, the people who formerly consumed rye bread now consuming wheat. Y. Among the indebted countries, the supply from Russia is dependent more on the seasons than on the price ; as a reference to the importations and prices in 1860 to 1862, and 1870 to 1876 will show. The great expansion of the wheat trade has been with the United States and Canada ; the imports from which countries were only fifteen or sixteen million hundi-edweights in 1861 and 1863. From 1869 to 1871, they ranged at about nineteen millions, and then at a bound reached twenty-six millions in 1873, and thirty-one or thirty millions in 1874 and 1875. In 1877, the United States' crop has greatly exceeded that of any previous year, and the im- portations of wheat will be proportionately greater. VI. The permanency of the supply from the United States is assured. Mr. Caitd, in his letter to the 'Times' of September 19, 1876, observed that the sudden rise in the imports from the United States and Canada was stimulated by four previous years of high prices. ' More capital was put into the business, chiefly in California and Oregon ; ' whence it follows that the persons who have sunk capital will be under the necessity of producing and exporting so 378 A HANDBOOK ON GOLD AND SILVER. long as there is the smallest margin of profit. Any endeavour to ascertain that margin from a comparison of the ruling prices of wheat at New York and in London can only mislead. Thus — Jan. 1, 1876 s. d. Jan. 1, 1877 s. d. Average price in England per quarter . 45 3 60 6 No. 2 Ohicago Spring, per hushel . „ „ per quarter . . 1-25 . 10- $ 1-38 11-04 The intrinsic par of the gold dollar is £1=4-8665 dollars. The price of gold was 112| on Dec. 31, 1875, and 107| on Dec. 30, 1876. It is evident that the differences between the prices in the two periods have no reference to the cost of production. The ' New York Financial Chronicle' of January 27, 1877, from which the figures are taken, observed : — ' It is very probable that many who, last August, when No. 2 spring wheat was selling in Chicago at 85 cents a bushel, were certain it would decline to 75 cents, have latterly been buyers there at ^1.30, feeling equally certain of an advance to ^1.40. When a great staple like wheat has been abnormally depressed, it reaches, on the reaction, extreme figures in the opposite direction, and vice versa.' Thus, 12 million hundredweights were imported from the United States in 1863, when wheat was at 44«. 9d. ; 10 millions in 1864, with wheat at 40«. 2d., when harvest charges were heavier than now ; 15 millions in 1870, 26 millions in 1875, and 22 miUioas in 1876, with prices at 46s. lOd., 45s. 2d., and 46s. 2d. respectively. The lowest paying price, in London, for the importation of American wheat is evidently below 44 shillings, whilst Mr. Caird pointed out in March 1869, that when the price of wheat falls below 50 shillings, the farmer begins to turn his attention to other crops. Hence, Mr. Caird perhaps fell into an inadvertence when he wrote in the 'Times' of September 19, 1876, that the price then ruling, viz., 46s. 8d. a quarter, left very little more than three shillings profit on Califomian and Oregon wheat. Even at that rate, however, the profit was nearly one- fourteenth, or seven per cent. 12. During the period from 1847 to 1876, the price of wheat has ranged as follows, viz. : — (1) From 1847 to 1860 : a. At above 60 shillings a quarter during eight years „ below „ „ six years APPENDIX Vin. 379 (2) From 1861 to 1876 : b. At above 50 sliillings a quarter during eight years „ below „ „ eight years. The good and bad seasons were distributed in about the same proportions. In the thirty-six years from 1841 to 1876 there were sixteen bad seasons, of which nine occurred in the first twenty years down to 1860, and seven in the other sixteen years; that is, they occurred in equal proportion to the other seasons in tlie two periods. Of the other sixteen seasons from 1841 to 1876, eight were very good, namely, four in the first period of twenty years, and four in the other sixteen years down to 1876. The average, or nearly average seasons, were seven in the first and five in the second period. On the whole, the advantage has been in favour of the sixteen years from 1861 to 1876, during which the average price of wheat was 51s. 8d., against 53s. llcZ. in the twenty years down to 1860. During the last eight years the average price was 51s. 9d., or about the same as in the past sixteen years. 1 3. The high prices occurred generally in the years of high wages. 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Modern Cookery for Pri- vate Families, reduced to a System of Easy Practice in a Series of careftilly- tested Receipts. By Eliza Acton. With 8 Plates and 150 Woodcuts. Fcp. 8vo. 6^. Our New Judicial System and Civil Procedure as Reconstructed under the Judicature Acts, including the Act of 1876 ; with Comments on their Effect and Operation. By W. F. FiNLASON, Barrister-at-Law. Crown 8vo, 10s. 6d. Willich's Popular Tables for ascertaining, according to the Carlisle Table of Mortality, the value of Life- hold, Leasehold, and Church .Property, Renewal Fines, Reversions, &c. Also Interest, Legacy, Succession Duty, and various other usefiil tables. Eighth Edition. Post 8vo. los. HISTORICAL KNOWLEDGE for the YOUNG Epochs of English His- tory. Edited by the Rev. Mandell Creighton, M.A. late Fellow and Tutor of Merton College, Oxford. 8 vols. fcp. 8vo. Early England, up to the Norman Conquest. By Frederick York Powell, M.A. With 4 Maps, price IS. England a Continental Power, from the Conquest to Magna Charta, 1066 - 1216. By Louise Creighton. With Map, gd. The Rise of the People, and Growth of Parliament, from the Great Charter to the Accession of Henry VII., 1215-1485. By James Rowley, M.A. With 4 Maps, price gd. The Tudors and the Re- formation, 1485-1603. By the Rev. Mandell Creighton, M.A. With 3 Maps, price gaT. Thie Struggle Against Absolute Monarchy, from 1603- 1688. By Bertha Meriton Cor- DERY. With Two Maps, price i)d. The Settlement of the Constitution, from 1688 to 1778. By James Rowley, M.A. With Four Maps, price ^d. England during the American and European Wars, from 1778 - 1820. By O. W. Tancock, M.A. [In the press. Modern England, from 1820-1875. By Oscar Browning, M.A. \In preparation. INDEX. PAGE Acton's Modem Cookery 24 Alpine Club Map of Switzerland 20 Alpine Guide (The) 20 Amos' s Jurisprudence 6 Primer of the Constitution 6 Anderson's Strength of Materials 12 -Armitages Childhood of the English Nation 4 /J ?-»2iiroKP''j Organic Chemistry 12 Arnolds (Dr.) Christian Life 17 Lectures on Modern History 2 = Miscellaneous Works 8 ■- School Sermons 17 Sermons 17 (T. ) Manual of English Literature 8 Beowulf 21 Amott's Elements of Physics., 11 Atelier (The) du Lys 20 Atherstone Priory..... 21 Autumn Holidays of a Country Parson ... 8 Ayres Treasury of Bible Knowledge 23 Bacon's Essays, by Abbott 7 -^— by Wkately »... 6 Life and Letters, by ,^ir(fifz»^ ... 6 Works 6 ^flz'/^yj Festus, a Poem 22 ', Bain's Mental and Moral Science 7 on the Senses and Intellect 7 Emotions and Will 7 Baker's Two Works on Ceylon 19 Baits Guide to the Central Alps 20 ■G uide to the Western Alps 20 -, Guide to the Eastern Alps 20 ^^rry on Railway Appliances 12 Barry ,&" Bramwell's Lectures on Railways and Locomotives 16 Beaconsfield' s (Lord) Novels and Tales ... ,20 Beclier's Charicles and Gallus 20 Beesly's Gracchi, Marius, and Sulla 4 £/flC/l'j Treatise on Brewing 23 " Bldckley's German-EngUsh Dictionary 9 Blaine's Rural Sports 22 Bloxam's Metals 12 Bolland and Lang's Aristotle's Politics 6 Boultbet on 39 Articles , 16 Bournes Catechism of the -Steam Engine . . 16 ■: Handbook of Steam Engine r6 Treatise on the Steam Engine ... 15 Improvements in the same 15 BowdUr's Family Shakespeare 22 Bramley-Moore's Six Sisters of the Valleys . 21 Brahde's Dictionary of Science, Literature, and Art 13 FAUB firaj«yj Voyage of the Sunbeam 19 Browne's Exposition of the 39 Articles 16 Browning' s Modern England, 1820-1875 2° Buckle's History of Civilisation 2 Posthumous Remains 7 Bvckton's Health in the House 14 Bull's Hints to Mothers 24 Maternal Management of Children . 24 BulUnger's Lexicon to the Greek Testament 9 Burgomaster's Family (The) 21 .5a?-^«'j Vicissitudes of Families 5 Cabinet Lawyer 23 Campbell's Norway 20 Capes' s Age of the Antoniues 4 Early Roman Empire 4 Carpenter OTi Mesmerism, Spiritualism, &c, 7 Cates's Biographical Dictionary 5 and Woodward's Encyclopaedia ... 3 Caji/eyj Iliad of Homer 22 Changed Aspects of Unchanged Truths ... 8 Chesney's Indian Polity 2 Modem Military Biography 2 Waterloo Campaign 3 Colenso on Moabite Stone &c. 19 'j Pentateuch and Book of Joshua. 19 Commonplace Philosopher in Town and Country 8 Comte's Positive Polity 5 Congreve's Politics of Aristotle 6 Conington's Translation of Virgil's .^neid 22 Miscellaneous Writings '8 Contanseau's Two French Dictionaries ... 9 Conybeare and Howson's Life and Epistles of St. Paul 17 Cordery's French Revolution to the. Battle of Waterloo 4 Counsel and Comfort from a City Pulpit... 8 Cox's (G. W.) Aryan Mythology 3 Athenian Empire 4 Crusades 4 General History of Greece 3 Greeks and Persians ^ History of Greece 3 ■ Tales of Ancient -Greece ... -2i Creigkton's Age of Elizabeth 4 ■ England a Continental Power 20 r- Tudors and the Reformation 20 Cresy's Encyclopaedia of Civil Engineering 16 Critical Essays of a Country Parson,.,...i... 9 Crookes's Anthracen j.... 16 '■ Chemical Analyses .-i ........... 14 — • Dyeing and Calico-printing 16 26 NEW WORKS published by LONGMANS &■ CO. Culley's Handbook of Telegraphy 15 Curteis's Macedonian Empire 4 D'Aubignfs Reformation ~ Pe Caime and Le Maouts Botany , De Tocqueville's Democracy in America... Dobson on the Ox Dave's Law of Storms Daweir s HistoTy of Taxes Doyle's (R..) Fairyland Drtemmonits Jeviish Messiah Eastlake's Hints on Household Taste Edwards's Rambles among the Dolomites ■ Nile Year in Western France Elements of Botany Ellicotts Commentary on Ephesians — ■ Galatians — ■ Pastoral Epist. ^—^— Philippians,&c. -Thessalonians . ■ Lectures on Life of Christ Elsa, a Tale of the Tyrolean Alps Epochs of Ancient History Modem History Evans' (J.) Ancient Stone Implements ■ (A. J.) Bosnia . £a/a/(i'i History of Israel Antiquities of Israel.. 18 13 5 23 10 6 14 17 IS 20 19 19 13 17 17 17 17 17 17 21 4 4 13 19 18 18 Fairhaim's Application of Cast and Wrought Iron to Building... •^^^^^^ Information for Engineers Life Farrar's Chapters on Language - Famihes of Speech i^««/flji?K' J Judicial System . Fitxwygram on Horses and Stables.. Forbes' s Two Years in Fiji , Framfton's (Bishop) Life Francis's Fishing Book , Freshfields Italian Alps Froude's Enghsh in Ireland History of England ' Short Studies 16 16 4 8 8 24 22 19 s 22 19 ■Gairdner's Houses of Lancaster and York Ganot's Elementary Physics — Natural Philosophy Gardiner's Buckingham and Charles Personal Government of Charles I. First Two Stuarts Thirty Years' War Geffcken's Church and State Cerman Home Life Gilbert &' Churchill's Dolomites . Girdlestone's Bible Synonyms Goldziher's Hebrew Mythology.... Goodeve's Mechanics Mechanism Grant's Ethics of Aristotle Graver Thoughts of a Country Parson., (Jnra/zV&'j Journal Griffin's Algebra and Trigonometry Griffith's Behind the Veil Grohman's Tyrol and the Tyrolese 2 4 4 6 8 20 17 17 12 12 6 8 18 19 PAGE Grove's Correlation of Physical Forces ... 11 • Grove (F. C.) The Frosty Caucasus 19 Gwilt's Encyclopaedia of Architecture 15 Hale' s YaWoi i\is Stuarts , 4 //a:?-/&j''on the Air 10 Hartwi^s Aerial World 12 Polar World 12 Sea and its Living Wonders ... le Subterranean World 13 Tropical World 12 Haughton's Animal Mechanics ir .ffiiyOTa?-(f J Biographicaland Critical Essays 5 Heer's Primeval World of Switzerland 13 Heine's Life and Works, by Stigand 4 Helmholtz onTone 11 Helmholiz s Scientific Lectures 11 .ff CO. 27 PAGE Lewis's Biographical History of Philosophy 3 Z«i/2j on Authority 7 Liddell and Scott's Greek-English Lexicons 9 Lindley and Moan's Treasury of Botany .. . 23 ^/(T^i^'j Magnetism 11 Wave-Theory of Light 11 London Series of English Classics 7 Longman's (F. W.) Chess Openings 24 Frederick the Great ... 4 German Dictionary ... 9 (W.) Edward the Third 2 Lectures on History of England 2 Old and New St. Paul's 15 Loudon's Encyclopaedia of Agriculture ... 16 Gardening 16 Plants 13 Lubbock's Origin of Civilisation 13 iLat^/tTw'j American War 4 ■ Lyra Germanica lii Macaulay's (Lord) Clive, hy Bowen 7 Essays i History of England ... i Lays of Ancient Rome 14, 21 Life and Letters 4 Miscellaneous Writings 7 Speeches 7 Works I . Writings, Selections from 7 McCulloch's Dictionary of Commerce 9 Macfarren on Musical Harmony 15 MacUod^s Economical Philosophy 6 Theory and Practice of Banking 24 Elements of Banking 24 Mademoiselle Mori 21 Jl/a/i;A Annals of the Road 22 Mannings Mission of the Holy Spirit 18 Marlowe's Doctor Faustus, by Wagner ... 7 Marshall s Physiology., 14 J/arjAOTa«'i Life of Havelock 5 Martineau's Christian Life 19 Hours of Thought 19 Hymns 18 Afaa«if47-'j Biographical Treasury 23 Geographical Treasury 23 Historical Treasury 23 Scientific and Literary Treasury 23 Treasury of Knowledge 23 Treasury of Natural History ... 23 Maxwells Theory of Heat iz May's Histo'ry of Democracy 2 History of England 2 Melville's Digby Grand 21 General Bounce 21 Gladiators 21 Good for Nothing 21 Holmby House 21 Interpreter 21 Kate Coventry 21 Queen's Maries 2r Memorials of Charlotte Williams- Wynn 4 Mendelssohn s \.sAXsx% S Merivale's Fall of the Roman RepubUc ... 3 General History of Rome 3 Roman Triumvirates 4 Romans under the Empire 3 Merrifiehls Arithmetic and Mensuration... 12 PAGE Miles on Horse's Foot and Horse Shoeing 23 on Horse's Teeth and Stables ;. 23 MillQ.) on the Mind 6 Dissertations & Discussions 6 Essays on Religion 17 Hamilton's Philosophy 6 g.S.) Liberty s Political Economy 5 Representative Government ... 3 System of Logic 6' Unsettled Questions 5 Utilitarianism '5 Autobiography 5 Millers Elements of Chemistry 14 Inorganic Chemistry 12 Mitchells Manual of Assaying 16 Milton's Lycidas, by Jerram 21 Paradise Regained, by Jerram ... 7 Modern Novelist's Library 21 MonselVs Spiritual Songs 18 Moore's Irish Melodies, Illustrated Edition 14 Lalla Rookh, Illustrated Edition.. 14 MoreU's Mental Philosophy 6 Moreton on Horsebreaking , 22 Mozart's Life, by Nohl 4 Mailer's Chips from a German Workshop. 8 Science of Language 8 Science of Religion 3 Neison on the Moon 10 Nevile's Horses and Riding 22 New Testament, Illustrated Edition 15 Nicols's Puzzle of Life 13 Northcott's Lathes & Turning IS O' Conor's Commentary on Hebrews iS Romans 18 St. John i8 Osbom's Islam 3 Oa)«»'j Evenings wiih the Skeptics 7 (Prof.) Comparative Anatomy and Physiology of Vertebrate Animals 12 Packe's Guide to the Pyrenees 20 /'a?-?'y-r Origines Roraanse 21 . Reges et Heroes 21 Pattison's Casaubon S Payen's Industrial Chemistry , 15 Pewtner's Comprehensive Specifier 24 Pierce'^ Chess Problems 24 Pole's Game of ^Vhist ,... 23 Popes Select Poems, by Arnold 7 Powell's Early England 20 Preece & Sivewright's Telegraphy 12 Present-Day Thoug:hts 8 /Vorf(jr'.f Astronomical Essays 10 Moon 10 Orbs around Us 10 Other Worlds than Ours 10 Saturn 10 Scientific Essays (Two Series) ... 12 Sun 10 Transits of Venus 10 Two Star Atlases 10 Universe 10 Protherd s Tie M.OTAfon 2 PubUc Schools Atlas of Ancient Geography 9 Atlas of Modern Geography 9 28 NEW WORKS puUished by LONGMANS 6- CO. PAGE Rawlinson's Parthia 3 ^ Sassanians 3 Recreations of a Country Parson 8 Redgravi s^Kcivmar} oi KxiiAs 14 Reeve's Residence in Vienna and Berlin ... 19 Reiliysyia.^ of Mont Blanc 20 Monte Rosa 20 Reresbys Memoirs S Reynardson's Down the Road 2z Rich's Dictionary of Antiquities 9 Rivers's Rose Amateur's Guide 13 Rogers's Eclipse of Faith 17 ■ Defence of Eclipse of Faith 17 Essays. S J?, Thesaurus of English Words and Phrases 8 Ronald's Fly-Fisher's Entomology 22 ^OTCi?^' J Outlines of Civil Procedure 6 Rothschilds Israelites 18 ^oa;/«yj Rise of the People 20 = — r- Settlement of the Constitution ... 20 5arerfa?-yj Justinian's Institutes 6 fSfflKfeyj Sparta and Thebes 4 Savile on Apparitions 8 on Primitive Faith 17 Schelleris Spectrum Analysis 10 Scott's Lectures on the Fine Arts 14 Poems 14 Seaside Musing 8 Seeiohnis Oxford Reformers of 1498 3 ■ Protestant Revolution 4 .S«