NAPOLEON defined his system as the application of the resources of Government, including finance, to the uses of his people for the greater glory of God. He set agriculture first, “for that is the soul of the people.” Industry came second, “for that is the people’s comfort.” The export trade ranked as a bad third.
“In France,” he told Las Cases at St. Helena, (1816, June 23.) “we are still far behind on those delicate matters (of finance) which remain unperceived or ill-understood by the mass of Society. And yet how much progress we have made and what clearness of thinking has become possible as a result of my recognition of this order of importance in the nation’s activities—namely, agriculture, industry, and foreign trade. Agriculture is the soul, the foundation of the Kingdom: industry ministers to the comfort and happiness of the population. Foreign trade is the superabundance; it allows of the due exchange of the surplus of agriculture and industry. ... Foreign trade, which, in its results, is infinitely inferior to agriculture, was an object of secondary importance in my mind. Foreign trade ought to be the servant of agriculture and home industry; these last ought never to be subordinated to foreign trade.”
This system is the exact opposite of that of the masters of Money. The Money System (let it be urged again), by its transferences of credit to the most profitable foreign borrowers, is able, if its plans are not carried out, to deprive the home markets, in all European countries, of their purchasing power and so to compel producers to export the goods they cannot possibly sell at home. Foreign trade, therefore, comes first; if it languishes, the country dies. Both industry and agriculture, as has been shown, are therefore bent to the uses of the export market. A rise of wages which makes it impossible to compete in foreign markets is tantamount to the ruin of the nation.
Napoleon never could understand why the other European Kings failed to grasp a point of such supreme moment to themselves.
“ In the great cause of which I saw myself the chief and the arbiter,” he told Las Cases on another occasion, “one of two systems had to be followed : either to make Kings listen to reason from the people or to conduct the people to happiness through the instrumentality of their Kings. As it is well known that, once the People are in full cry, it’s no easy matter to restrain them, I thought it wiser to count on the wisdom and intelligence of rulers. I supposed that I was entitled to believe that those rulers were possessed of enough intellect to see where their own true interest lay. I was wrong.
“ The Kings gave no consideration to the position in which they stood. In their blind fury they let loose against me forces which I had studiously refrained from arousing against them. (1816, March 11.)
“ Peoples and Kings misunderstood me. Yet I had restored thrones, I had recalled nobles. These thrones and these nobles may again find themselves threatened. (Let them remember that I fixed and consecrated the reasonable limits of the People’s rights.) Vague, peremptory, undefined claims may once more be made. ... Such work as mine is not done twice in a century. I saved the Revolution as it lay dying; I held it up to the people shining with fame. I inspired France and Europe with new ideas which will never be forgotten. ... France’s finances are the best in the world. To whom does she owe them ? If I had not been overthrown I would have made a complete change in the appearance of commerce as well as of industry. The efforts of the French people were extraordinary. Prosperity and progress were growing immeasurably. Enlightenment was making giant strides. New ideas were everywhere heard and published, for I took pains to introduce science among the people. ... If I had been given time there would soon have been no more artisans in France; they would all have become artists.”
He was not given time. Pitt completed his coalition, and Austria, Russia, Sweden, and Spain attacked France. Napoleon defeated these enemies in the campaign which ended at Austerlitz; but he lost the Battle of Trafalgar and with it his last faint hope of maintaining himself at sea. Meanwhile, during his absence from Paris, the men whom he had placed in charge of his funds had allowed themselves to be seduced by financiers, notably the banker Ouvrard, and had embarked on a huge speculation in Spain. Their calculations were unsound and a financial panic occurred in the capital.
Napoleon returned in triumph and sent for the culprits. Inevitably he saw the hand of international finance — that is to say, of Money — in the trouble. Ouvrard and the others were stripped of all their possessions and sent to the prison of Vincennes. Napoleon founded the Bank of France with himself as its president, but so great was his suspicion of finance that he refused to entrust even to this bank the care of the Treasury account, lest secrets of his policy might leak out and be made the basis of speculation.
Napoleon was now his own banker and could direct the stream of credit wherever he chose. International finance found a great part of Europe closed to its operations, and the hatred against the Corsican entered on a new phase. In 1806 Prussia was induced to declare war on him, and a new coalition consisting of that country, Russia, and England took the field. The army which Frederick the Great had led so gloriously was destroyed at Jena, and this year Napoleon entered Berlin instead of Vienna. From Berlin he promulgated his Continental System, the object of which was to strike at England’s foreign trade with the Continent and so, since England was compelled to import wheat, to bring about a drain of gold from London. Loss of gold, Napoleon felt sure, would cause the financiers to become peacemakers; and he had no doubt about their influence with the English Government. Further, loss of gold would prevent the financing of armies to fight against France. The campaign extended from Germany to Poland and ended, when the Russian army had been defeated at Friedland, in a reconciliation between the Emperor of the French and the Emperor Alexander of Russia.
This was a new and very severe blow to London. The period was now ended during which Napoleon might have been England’s friend. The English people, thanks to the policy of their masters, were in real danger and were under the necessity of defending themselves. Thus patriotism was summoned to repair the damage wrought by gold. It was not summoned in vain. Englishmen have never, in their history, failed to sacrifice themselves for their country, or are they apt, on the day of sacrifice, to ask questions about the policies which have made sacrifice necessary. The common people rallied round the Throne, ready to spend their blood.
Napoleon bad only one object now—namely, to drain gold out of London. The means to this end, as has been said, was destruction of the English export trade; success depended on the possession of the European seaboard from the mouth of the Baltic to the Straight of Gibraltar. Denmark and Spain became, therefore, the chief object of French interest. Napoleon had established relations with the rulers of both countries and had little doubt that he would succeed in bending them to his will. In the case of Denmark success was certain; the Prince Royal was bitterly hostile to England. But Canning acted with promptitude; Copenhagen was bombarded, without even the delay necessary to make declaration of war, and the Danish fleet brought to English waters.
Napoleon now seized Portugal and placed the House of Braganza in the trying position of having to decide between him and England. The House of Braganza, with the spectacle of Copenhagen before its eyes, decided for England and took ship for its overseas empire of Brazil. Shortly afterwards Napoleon possessed himself of Spain. The Peninsular War now began, because it was essential, if gold was to be prevented from flowing out of England, that the Mediterranean as well as the Baltic should be kept open to English ships.
England, in other words, could not afford to finance both her import trade and her foreign allies; and as her foreign allies were necessary to the defeat of her great enemy, and so to the defeat of his system, the export trade was a matter of life or death. But even this fact did not hinder the financiers from keeping a careful eye on their private interests.
Napoleon had placed his brother Louis on the throne of Holland. This young man quickly fell under the influence of the Dutch bankers to such an extent as to allow the import of English goods in great quantity. The trade, which was exceedingly lucrative, was financed by, among others, Sir Francis Baring. All went well until the price of gold began to rise sharply on the London market. The price of foreign currencies in terms of the English paper money increased at the same time by over twenty per cent. Sir Francis Baring and his friends experienced a lively anxiety. Were their Dutch and German debtors to be enabled to repay them in depreciated sterling ? A further shock awaited them. Napoleon, they learned in February 1810, meant to depose his brother Louis and annex Holland to his Empire. In that case they would not get paid at all.
Baring opened negotiations with Napoleon through his, (Baring’s) son-in-law, Pierre-Cesar Labouchère, the head of a great Amsterdam banking house. The banker Ouvrard, who had been in prison in Vincennes since 1806, was liberated by the French Emperor and became involved in the scheme, in which also Fouchè, Napoleon’s Minister of Police, was intimately concerned. Napoleon’s object was to hoist the bankers with their own petard. He knew that Sir Francis Baring exercised a great influence in London both over the Government and over the City. He proposed to enlist this influence in the cause of that peace with England which he so urgently desired. King Louis of Holland was instructed by his brother to forward to his Dutch ministers a letter setting forth the plans of the French Emperor and to urge these ministers forthwith to send Labouchére into England with proposals that peace be made.
“He” (Labouchére) the letter ran, “shall inform the English Government that the destiny of Holland depends on the arrangements made by England to arrive at a speedy peace with France or at least to bring about a real change in the measures adopted by the said Government in the attitude adopted towards the commerce and shipping of neutrals.
“Labouchére shall use the channels he may find most convenient to inform the English Government of this state of affairs, and he is at liberty to state that he is authorized by the Dutch Government in the matter.
“He shall then try to show the English Government how greatly it is to England’s interest that Holland should not fall under the sovereignty of the French Empire. If he find the English Government persuaded of this fact, or if he succeed in making them realize it, he shall try to persuade them to contribute to the maintenance of the political existence of Holland by showing readiness to join in the negotiations for a general peace.”
Labouchére reached London on February 6, 1810, and went at once to his father-in-law, Sir Francis Baring, a director of the East India Company, who had already secured that he would be received immediately by the Marquis Wellesley, Canning’s successor in office. This had not been difficult, for Wellesley was indebted to Baring for his position, his fortune, and he credit. Wellesley received Labouchére on the evening of February 7, the day after his arrival. He received him again on the 12th and told him in so many words that the fate of Holland was a matter of indifference to the British Government.
Baring was in despair. He turned his attention immediately to the inflation of the English note issue which was evidently proceeding as was indeed essential to the safety of the country during a state of war and one of his friends, Francis Horner, in this same February 1810, called for returns of the quantity of bank notes in circulation at various dates, the rates of exchange with certain countries, and the price of gold. On Horner’s motion a Committee of the House of Commons was appointed, with the unanimous assent of the House, to inquire into the high price of gold bullion. The Bullion Committee, as it was called, at once began its sittings.
“With the exception of Sir Francis Baring,” says Feavearyear, “the Bullion Committee called no witnesses who had made any particular study of currency theory. The witnesses were nearly all chosen for their knowledge of the facts of the trade and monetary position. They were bullion and exchange dealers, bill brokers, country bankers, officers of the Mint, the Customs and the Clearing House, and the principal directors of the Bank. Only two or three of them were asked their opinion regarding the effect of paper issues upon the exchanges and the price of bullion. It is not too much to say that the leading members of the Bullion Committee had made up their minds beforehand upon the theoretical question.”
The Bullion Committee had the effect of frightening the Cabinet so much that, in March, Baring felt able to reopen his negotiations with France. Napoleon had seized a part of Holland and was about to marry the Archduchess Marie Louise of Austria. Fouchè and Ouvrard both perceived unlimited opportunities of wealth. Labouchére was told to stand by in Amsterdam, and from that city to transmit to Baring in London the messages he would receive from Paris. Napoleon was not told about what was happening and Labouchére was not told that Napoleon had not been told. Baring, therefore, fell into a trap which two of the cleverest rogues in Europe, Fouché and Ouvrard, had set for him in the hope of making great profit for themselves. Ouvrard acted as messenger and, in the middle of March, carried this note to Labouchére in Amsterdam :
“It appears that he (Napoleon) is now, though only on the occasion of his marriage, ready to yield on the following points. Malta, Sicily, Naples, the Ionian provinces, the Hanseatic towns, Holland, Portugal, and the greater part of the Spanish colonies.”
Labouchére wrote to Baring on March 21, and enclosed a note for Wellesley dictated by Ouvrard which ran:
“From a conqueror he (Napoleon) is becoming a preserver; the first result of his marriage to Marie Louise will be that he will make an offer of peace to England. It is to this nation’s (i.e., England’s) interest to make peace, for it has the command of the sea; on the contrary, it is really to the interest of France to continue war, which allows her to expand indefinitely and make a fresh fleet, which cannot be done once peace is established. Why does not the English Cabinet make a proposal to France to destroy the United States of America, and by making them again dependent on England, persuade Napoleon to lend his aid to destroy the life work of Louis XVI? . . . Peace will allow England to pour her industrial products over the Continent. If only for this motive it is to her (England’s) interest to conclude peace and to flatter Napoleon’s vanity by recognizing his work and his imperial title.”
Ouvrard carried the letter and its enclosure to London. He saw Baring, who, at midnight on April 5, 1810, was received by Wellesley. Wellesley took council with Canning, and on April 14 the two statesmen agreed that the proposed American settlement and the outlet for English goods which peace with France would afford offered a very favourable basis for England and should be submitted for the Cabinet’s approval.
The Cabinet discussed the proposals and approved them. Wellesley at once hurried to Baring’s house to give him the good news. Baring was not at home. The minister called three times before seeing him.
Baring could now congratulate himself that the Bullion Committee had not sat in vain. He had expressed himself freely before the Committee about the Bank of England, saying that it had allowed mere clerks with no business experience to open credits to the tune of £10,000 each, a charge which alarmed the country. He had good hopes of seeing the note issue made convertible to gold. If that happened and peace with Napoleon was concluded the Dutch would be able to pay and would be compelled to pay in gold.
Unhappily Napoleon found out what was afoot and took somewhat strong objection to the plan of a joint attack on the United States. He arrested Ouvrard, dismissed and exiled Fouchè, and published the whole story, to the grave distress of Wellesley and Baring. The Bullion Committee, meanwhile, reported early in June 1810. The report was shelved. The Bank continued to issue notes and the price of gold continued to rise.
But a year later, in May 1811, the report was debated in the House of Commons the question being: “Ought the convertibility of the notes into gold to be restored within a period of two years?” This was the Committee’s recommendation. Had it been carried out it would almost certainly have lost the War to England, for the power of England to finance her allies and feed her people would have been seriously weakened. It was rejected by 180 votes against 45.
A measure of the sincerity of Baring and his friends was furnished by the financial crises which occurred in 1811, just before the debate on the Bullion report. This crisis would have swept away many financial houses had not a measure of relief in the shape of an issue of £6,000,000 of Exchequer bills been carried out.
“It is possible,” says Feavearyear, “that the issue of Exchequer bills prevented a wholesale collapse of credit and a rapid deflation of note issues. The opponents of the Bullion Committee accused the latter of inconsistency in condemning the Bank for inflation while they raised not the slightest protest against this issue of Government paper. After all, the Exchequer bills were issued in March 1811 to counteract a shrinkage of credit, and a shrinkage of credit was just what the Bullion report had recommended in 1810....”
How often have Governments come to the rescue of the Financial System only to be told later that they have been playing the prodigal and living beyond their means !
Napoleon had the satisfaction of exposing the patriotism of Money to the world and of revealing what a great extent the English Cabinet was able to be influenced by the City of London. He was to pay dearly and soon for his pleasure. There we no more agitation against the issue of notes while the War lasted. On the contrary, every available ounce of gold was invested in the armies of Russia, Prussia, and Austria, paper promises by these countries to pay being accepted in London at very severe rates of discount. The bankers won. Louis XVIII was restored by British arms and British diplomacy to the throne of his ancestors. Loans were placed at his disposal, though Napoleon had left a France which enjoyed a credit balance.
A year later the man whom every King and every banker in Europe called usurper won back his throne with 800 men and without the firing of a single shot. On this occasion he had no option but to raise a loan for the defense of France. The City of London accommodated him with £5,000,000. With this sum he equipped the army which Wellington defeated at Waterloo.