BETWEEN the years 1630 and 1640 the goldsmiths of the City of London set up a special organization for collecting and sorting coin. They paid the bookkeepers of the merchants 4d. per cent. per day to leave the merchants' money with them. As soon as they got the money they picked out all the full-weight, unclipped silver pieces, replaced them by underweight, clipped pieces, and then returned the money. The good pieces were now melted down, in spite of the severe penalties attaching to this crime, and exported. “Here,” says A.E. Feavearyear, “was the beginning of banking in England.”
Banking elsewhere began in much the same fashion. It was ever the wish of Kings and their people to prevent loss of money—and so deflation—by export of the precious metals; it was ever to the profit of bankers to export these metals. Bankers, therefore, from the beginning found themselves in opposition to the national interests.
In the second half of the Seventeenth Century trade with the East offered investors a rich new field of enterprise. The East India Company in 1676 paid a bonus of 100 per cent. A few years later its stock was quoted at 360. Since the natives of India did not wish to buy English woollen goods, but did wish to acquire, in exchange for their produce, English silver, silver money began to be exported in great quantities. The embargo upon the export of coin had not been raised; but bullion produced from English coin could be passed through the Customs by swearing that it had not been so produced.
The outflow of silver continued through the Eighteenth Century. When London triumphed over Paris as the financial Center of the world, French silver began to flow across the Channel. The outbreak of the French Revolution was followed immediately by a great increase in this tide. There was, as has been said, a virtual disappearance of metallic money from France, due in part to hoarding and in part to export by financiers and bankers who wished to have their treasure in a place of safety. These people saw in the death of Robespierre the opportunity for which they were anxiously waiting. Now was the time to regain their power in France by lending to the French Government.
But no Government which possesses a stable paper currency needs to borrow. The destruction of the Assignat became, therefore, the chief object of finance. Barras and his friends were instruments to this end of a type very agreeable to the masters of money. They were open to bribery in its worst and most unconscionable forms, and they were bribed. Robespierre had enforced the law giving the Assignat an exclusive monetary privilege — that is to say, forbidding the use in competition with the Assignat of gold and silver as money. Barras showed himself less irreconcilable. Because the premium on the metals exceeded that on the exchanges it paid to import gold and silver into France. The financiers, French and English, contrived to place these metals in competition with the land-paper, which at once lost value. Everybody distrusted the Government; everybody, therefore, wished to be paid in coin. In April 1795 a law was passed permitting free dealings in gold and silver; this law was a further blow at the value of the Assignat. More gold and silver came in to earn profits for finance. The Assignat became so unpopular that its value almost wholly disappeared. France was now given over to army contractors and moneylenders, who grew rich while the mass of the population went hungry and the poor starved.
In England, on the other hand, the enterprise of the financiers in sending silver to India and gold and silver to France, in order to earn the largest possible profits, brought about an acute lack of money, a matter of grave concern seeing that England was at war with France.
“In August 1795,” says Mr. Feavearyear, “another and a greater cause of drain was added to the Government borrowings. The value of France's paper currency, the Assignat, which had been tumbling headlong for some months, reached zero for all practical purposes early in 1795. The French Government thereupon determined to restore the gold standard. There was immediately a great revival of confidence among the French people. They began to transfer their savings home again. Gold, which had been driven out by the Assignat, rushed back. Metal from France which had helped the Bank of England to replenish its stock after the collapse of 1793 was now drained away from it. By 1796 the reserve was down to 2½ millions.”
This spectacle of the Bank of England repaying, in time of war, the enemy's gold is a remarkable one. Guineas, as it happened, could not be exported legally in any circumstances; but, as Mr. Feavearyear testifies, “there was little difficulty in getting them away and large quantities were going.” How much of this gold was French and how much English cannot be determined, but, as has been said, it was profitable to send gold into France.
The Bank of England reduced its commercial discounts. Money began to earn larger profits in London, and very soon some of the French gold—again in spite of the state of war—recrossed the Channel. Most of this gold was, later, withdrawn from the Bank of England by the provincial banks.
The French Government displayed more activity in face of the drain of gold from France than had been displayed by the English Government when gold was leaving London. Now that the Assignat had disappeared, money in France was very scarce. (St. Cyr, for example, reported that the Army of the Rhine and Moselle had been compelled, from want of metallic money, to abandon its espionage, and the Army of the Rhine had been compelled to resort to requisitions because the farmers refused to accept paper.) In these circumstances the war indemnities imposed by General Bonaparte in Italy, as the result of his successful campaign against the Sardinians and Austrians, were a matter of great importance. Bonaparte sent back 23,000,000 francs in gold and silver during 1796, and it was some of this money which found its way to London. The conqueror of Italy was not yet in a very strong position, but he complained bitterly, in May 1796, that he was unable to pay his soldiers and that the Government had not kept its promise to send him back 31,000 francs for the upkeep of his artillery. Later in the same year, when he felt more secure, he addressed sharper remonstrances. Barras became anxious, and it was decided to take such action against England as would convince Bonaparte and the French nation that the rumours about the export of gold to London were unfounded. At the end of 1796 a fleet was ordered to sail from Brest towards Ireland. It achieved nothing and soon returned to its home ports. This demonstration was followed, on February 25, 1797, by a descent on the Welsh coast. Upwards of 1,000 men were landed but none showed fight. The Frenchmen proved to be convicts put into uniform for the occasion.
These gestures achieved their object. French public opinion was satisfied. In England the effect was different. A run on the banks took place. The Bank of England appealed to Pitt, who sent an urgent message to King George III at Windsor. The King hurried to London. On February 26, a Sunday, a Council was held at the palace and it was resolved that the Bank should stop payment in gold. Next day The Times adjured the nation to stand firm and accept the Bank's notes. The effect was to put an end to the excitement and to tie up the French balances of gold. The notes were made legal tender and regulations were enforced to prevent a return of silver, which, had this not been done, would have earned large profits and might have brought about a depreciation of the paper pound in the way in which the depreciation of the paper Assignat had been effected. The boot was now on the other leg. France was back on gold; England was on sterling paper. The Continental speculators lost their interest in London and busied themselves in trying to repatriate their capital—an enterprise now rendered very difficult.
The chief obstacle to the prosecution of the war against France—namely, the necessity of paying in goldwas now removed from the English Government. Notes were issued according to the needs of the population, and a period of prosperity began which had the effect of attracting gold from the hoards within the country and also from the countries of Europe which felt themselves threatened by France, notably Portugal. The Bank was able to increase its reserve of gold and by means of its reserve to finance the enemies of France on the Continent. The Bank, in other words, obtained gold at relatively low rates, and lent the gold again at high rates.
Meanwhile, Bonaparte returned in triumph from Italy and set sail with a great fleet for Egypt with the avowed intention of cutting the Suez Canal and so opening a short route to India. This threat to the basis of the international financial operations of London was met by loans to the Austrians, who were eager to re-conquer Italy, and by the despatch of troops to India. Nelson's victory at the Battle of the Nile, however, quickly dispelled the anxiety. Bonaparte's fleet was destroyed and Bonaparte himself shut up, with his army, in Egypt. The Austrians crossed the Alps, drove the French out of Lombardy, and laid siege to Genoa as a preliminary to the invasion of France. Money flowed again into London and was duly distributed to the quarters where the highest rates of interest were obtainable.
These events engaged the attention of Bonaparte. He had been a close friend of Robespierre's younger brother, Augustine, and had observed with astonishment the rise in the value of the Assignat during the Reign of Terror. Before he began his campaign in Italy, he had reached the conclusion that France's greatest need was a King, and had even suggested bringing back the Bourbons. Unhappily for this idea the brother and heir of Louis XVI, who called himself Louis XVIII, was receiving a pension from the English Government, and had threatened to employ the help of England in quelling his rebellious subjects. Behaviour so unkingly made restoration impossible. The campaign in Italy convinced Bonaparte not only that he was a soldier of exceptional ability, but also that his was the only head upon which the crown of France could possibly rest. Long before anyone even of his own family had the least suspicion of what was in his mind, this man, as his actions show, was preparing to ascend the throne. In Italy, at a moment when the French Government was persecuting the Church, he showed respect to Pope and Cardinals and refused to allow any kind of sacrilege. Emigrant nobles and priests obtained his protection. His proclamations to his soldiers and to the French people were couched in the language of a King.
“The French nation,” he declared later, “needs an hereditary chief. I feel so deeply the necessity of conferring this boon on France that my reason has marked out the work of securing it as one of my duties no matter on what head or in what family the French may choose to place the dignity (of the crown). I would even urge the restoration of the Bourbons if, today, they possessed in Europe any other title to consideration, any other power than that which they derive from the despicable salaries they receive from England, and if Frenchmen had not such good reason to fear that their return would bring down on the heads of their subjects the contempt in which their feebleness is held and would result in the destruction of our existing institutions at the hands of followers and hangers-on who hold these institutions in detestation.”
Bonaparte saw the Revolution as Mirabeau had seen it—namely, as a purging of the Feudal System of its abuses.
“At the beginning,” he said, “the Revolution took its course under the leadership of Louis XVI. The great mistakes of the Three Estates and the evil counsels of foreigners, but especially the false advice of England, which knew better than anybody what an advantage France was gaining through real liberty, destroyed the fine beginning.”
The reference is to Necker, whom Bonaparte looked upon as the architect of ruin, and who, as he continued to believe, acted throughout in the interests and on the advice of his partners in the City of London. Money, Bonaparte held, had come to the rescue of privilege, and by destroying the Throne had prevented the real Revolution. He himself was determined to carry this real Revolution through by re-establishing the Throne. That, as he knew, meant curbing the power of Money, which would certainly, unless he was prepared to come to terms, offer him a bitter opposition.
He saw clearly the forms which opposition would take. Money, as he knew, never comes into the open, but acts always through agents who may or may not be aware of the objects they are serving. There was international money already behind every foreign enemy; there was international money behind Louis XVIII and the whole Royalist party; there was international money behind the Jacobins. Barras and his friends had been speculating in London with the gold won in the Italian campaign. Whoever would reign in France, therefore, as King must be able to command the love and loyalty of those who cannot be bought—namely, the peasants. He must be capable of driving back the foreign armies, of restoring the altars and recalling the emigrants, and of establishing the principles of equal service, equal justice, and equal honour. He must be able, too, to show that legitimacy and heredity are not the same thing, but that, on the contrary, a King reigns by that Grace of God which is bestowed only upon him who shows himself capable of uniting the nation and compelling all men to service. France knew now that popular election could not bestow sovereigntythe Reign of Terror had proved it. She knew that, without Kingship, a people is at the mercy of force, which will express itself either in terms of greed or in terms of fear.
That Bonaparte attempted this task is proof of his courage, for the idea of service was gone wholly out of fashion and all were persuaded of their rights. He relied, however, on the common people, those countryfolk who had shown themselves ready to die for France and to follow anywhere a leader of whose patriotism they were persuaded. These were the people whom Necker, by his propaganda, had inflamed against Louis XVI and Marie Antoinette so that, for a time, they had supposed the banker to be their deliverer. Bonaparte employed every means at his command to bind them to himself, using most of all the means of a call to service. Thus, for the guillotine which Robespierre had set up, he presented a new symbol, the man in the grey coat, the hero of Arcole and Lodi and RivoliHimself.
When he returned from Egypt the people called him Saviour. A few weeks later, when he made an end of Barras and leaped into the saddle as First Consul, they gave him a new title — namely, The Man. The year 1799, and with it the Eighteenth Century, was passing away. Consul Bonaparte surveyed a world in which, as he could see, the system of service was everywhere in melancholy decline. In the old monarchies a privileged class glared with hostile eyes at the merchants and bankers who already were disputing their privileges. In England, the reign of George III, which had begun so bravely, was fallen under eclipse. The King, since his humiliation in America, no longer dared to act against the wishes of the City of London. Financial houses exported and imported the precious metals without regard either to the law or to the state of war. Their operations went unpunished because those who should have punished them were partners in their enterprises, and were reaping handsome rewards. Privilege was not challenged in England because the bankers and merchants were sure already of entry into the privileged classes. The case of France was not greatly different from that of England. In France, also, financial houses were setting the law at defiance, while the Middle Class established itself in the places of power. But this movement was not apparent to spectators in England and in Europe. The terror inspired by Robespierre lingered side by side with the resentments which Louis XVI and Turgot had engendered. The aristocracies hated the Revolution because it had begun by an attempt to abolish privilege and restore service, and had ended by the abolition of aristocracy itself; the Money Power hated it because, under Turgot, Mirabeau, and Robespierre, it had denied the right of money to seek the most profitable investment. The old order, therefore, was everywhere joined to the new in opposition to Revolutionary France, though, in fact, the principle of the old order—namely, servicewas the same as the principle of the Revolution as expressed by Louis XVI, and was, like it, wholly opposed to the principle of the new order.
There is no doubt that, at first, Bonaparte expected to find support among the English people. No man cherished a livelier admiration for England and for her institutions. In England, as he often insisted, a clear distinction had always been drawn between heredity and legitimacy, so that James Stuart had been replaced on the throne by William of Orange and Anne had been succeeded by George. In England, too, Kingship had survived and embodied Revolution. The First Consul of the French Revolution knew that, though London has become rich, a bitter poverty held in its grasp the English worker, both in agricultural and industrial. Would the English people in their misery join him against the common oppressor?
“All thing are possible for humanity,” he told the English Ambassador two years later, “to England and France united.”
Bonaparte had thought, now, of disputing England's command of the sea. The Battle of the Nile had taught him that, in his own words, “with the incessant efforts of ten years and the employment of all my resources I should not be able to equal your navy.” What he wanted was peace and co-operation so that he might carry through his plan of ascending the throne of France and completing the Revolution.
Fortune helped him. The year 1799 was lean so far as the harvest in England was concerned. It became necessary to import large quantities of wheat from the Continent, and when the wheat was paid for the exchanges went against England. A flight from the pound occurred. Golden guineas began to be melted for export to countries where as gold they commanded e better price. They were replaced by paper; the note issue increased from about 12,000,000 to nearly 16,000,000 and the cost of living rose sharply. The speculators in wheat made fortunes; the poor were brought to the verge of starvation. The circumstances were thus favourable to the proposal of peace which reached London from France, for peace promised a reduction of expenditure by the Government and a cheapening of the price of wheat.
Peace was concluded at Amiens, and London and Paris were illuminated. Bonaparte, who had defeated all his enemies, recalled the exiles, and re-established religion, heard a solemn Te Deum in Notre Dame. The Londoners took the horses from the carriage of the French Ambassador and drew it through the streets. The price of bread in London fell and the exchange moved in favour of London. Gold began to return to its headquarters.