ONE of Robert Owen's staunchest supporters was the Duke of Kent, the father of Queen Victoria. The Duke actually took the chair at a meeting addressed by Owen, and until the end of his life, in 1820, remained the mill-owner's friend.
For, if Parliament had enthroned money, the Royal Family of England remained to dispute that act of usurpation. All that can be said against King George IV, whether as Regent or Sovereign, has been said. It remains to add that he suffered, along with his brothers, in the affliction which now visited the English people, and that, like them, he desired ardently to rescue his subjects from these afflictions.
In this respect he resembled the other European Kings, Francis I of Austria, Frederick William of Prussia, Alexander I of Russia, and even Louis XVIII and Charles X France. All these Kings were being compelled to effect the "stabilization" of their paper money on pain of the refusal of further loans. The farmer everywhere had therefore to give more of his produce to secure the means of paying his debts ; in consequence he had everywhere less to spend on manufactured goods. And so the manufacturers were compelled to cheapen production, to cut wages, and at last to dismiss their hands. They could not pay taxes; all the Budgets of Europe were unbalanced.
The cry of the out-of-work and the dispossessed ascended to Heaven. The Kings, who retained the bowels of mercy, tried to borrow money for schemes of relief, only to find that they had no credit. Those financiers who had been eager to discount their paper when the object was the destruction of Napoleon returned now insolent refusals or demanded rates of interest which were prohibitive. When Kings and nobles in bewilderment tried to resort to their ancient methods and to act with a high hand they were met by an opposition which caused them, instantly, to desist.
Necker's methods were in use once more. Necker, as has been seen, had destroyed King Louis XVI by allying himself to the nobles and had then destroyed the nobles with the Liberals' help. Thanks to the Revolution the Liberals were now both numerous and active in Europe. Finance made common cause with them. When Kings protested that their people were being destroyed, when nobles resisted the drain of young men and women from the countryside to the factories, they were met by shouts of execration about "privilege," "landlordism," and "feudal abuses." It was the fate which Napoleon had prophesied for them and they were powerless to resist it. Money controlled the Press; Money was demanding already Parliaments purged of the "landed interest"; orators, agitators, and demagogues stumped all the countries declaring that the prevailing distresses were due to the greed of the "drones" who, in their castles, devoured the hard-won substance of the poor.
These Liberals were, of course, perfectly sincere men. They had imbibed the doctrine of finance as expounded by a number of brilliant writers, notably Adam Smith and Ricardo. They lay under a sense of horror not less lively than that which vexed the minds of Kings and nobles. Somebody they felt must be responsible for this shambles. Who more likely to be responsible than the reputed great ones of the earth ? They declaimed therefore against "paper money," against "rotten boroughs," and against the laws prohibiting the free import of wheat, which, as they convinced themselves, existed solely in the interests of landlords.
It is only when these charges are examined in the light of the Money System that their real sources can be determined. It is of the essence of the Money System, as has been said, and must constantly be repeated, that it makes its loans in the most profitable areas and, in consequence—by means of forced exports—keeps the European countries in a condition of permanent deflation. There is never enough buying power in any European country to enable the inhabitants to absorb the goods produced by themselves. Consequently the export trade is always a matter of life and death for producers and manufacturers, and it is constantly being stimulated, in the manner described above, by new foreign investments. Goods must be sold at prices which will enable them to compete with the goods of other countries. Wages, therefore, must be kept down to the lowest possible level.
It is the price of bread which, everywhere in Europe, determines this lowest possible level. Cheaper bread means lower wages. When the Money power demanded the Repeal of the Corn Laws and the introduction of a system of free imports it was demanding, in fact, a general reduction of wages, or rather, since wages had already in many cases been forced down below reasonable subsistence level, a higher standard of nourishment—and therefore of working power—for the same wages. The chief obstacle to repeal was the existing House of Commons in which the interests of agriculture were predominant. The Money power, therefore, began to agitate vigorously for Parliamentary Reform and to subsidize the "Radicals."
In the first years after Waterloo the nation was split up into parties each one of which saw in the other a mortal enemy. The process of making the sterling notes worth more gold, which proceeded actually twice as quickly as had been intended, threw ten per cent. of the population, some 2,000,000 men, women, and children, out of work by causing a slump in prices and so making production unprofitable. These wretched creatures were compelled to seek parish relief or starve, and engaged in riots and other disturbances. Fear of them was abroad and they were quelled with cruel violence. Their former masters, the manufacturers, were by the same slump in prices brought in many cases to ruin, and large numbers of mills were closed. Master and man were, therefore, set in opposition to one another, because the men believed that their masters wished to enslave or starve them, and the masters saw in the demands of the men for wages on which they could live a deadly threat to their own power to compete in foreign markets—and so to their solvency.
Both masters and men, meanwhile, were persuaded that the farmers were their foes. For the farmers desired to retain the Corn Laws, which were their last shield against ruin Masters and men were not less hostile to the nobles and land-owners, and in this hostility had the support of the farmers, who could obtain only very low prices for their produce and yet were compelled to pay the same rents as they had paid when prices were high—when, that is to say, the pound was worth much less in terms of goods.
It was to these distracted and suffering people that the economists and radicals preached the doctrines of the Money power about human rights. Misery and starvation found the doctrines irresistible. A republican spirit began to manifest itself and hostility to the Royal House was openly shown. Noblemen were held up to execration and even the Duke of Wellington became an object of hate. In vain the nobles urged that her agriculture was England's soul. In vain they pleaded for the village as against the industrial town with its foul dens and its squalor. They were fighting for their privileges. Away with them.
The House of Commons became alarmed and set up a Committee on Agricultural Distress which reported in June 1821. This Committee expressed the view that some part of the fall in prices was due to the reduction in the quantity of buying power occasioned by the effort to make pounds, shillings and pence worth more gold at a time when so many other countries were doing the same thing and when, therefore, gold was scarce and dear. Similar depressions, it was pointed out, prevailed all over Europe. Though Charles Western, the Member for Essex, fought a stout battle for the farmers, Parliament, now subservient to its new sovereign in the City of London, refused to take any action. Ricardo was put up to defend the Money power.
But a year later the situation had become so desperate that a fresh "insurrection" broke out. The Government now actually dared, in opposition to the City of London, to allow some 500 country banks to issue unlimited quantities of £1 notes payable to bearer on demand, in gold. The Bank of England, at the same time, was urged to afford all the help in its power.
The Bank of England had not forgotten its protest against Sir Robert Peel's surrender to the Money power. The Directors of the Bank heartily disapproved of that surrender, refused to play the part of a Central Bank, and continued to look on themselves as the servants of King and people—that is to say, as the managers of the King's money for his Majesty's advantage. What could be more to the advantage of his Majesty than that the productive powers of his people should be used fully for his people's good ? The withdrawal of buying power, consequent on the permission to melt and export the King's money, had paralyzed the national life. The Directors were ready, even eager, to restore buying power by making money more plentiful.
The effect exceeded every hope. Prices rose. The farmer was thus enabled to earn his living and to buy from the manufacturer, who, in turn, was enabled to employ labour. As labour was not too plentiful for the needs of a thriving industry, wages began to rise. So bright did the prospects seem that a great expansion of trade began and more than 600 new companies were formed within two years. It seemed, for a moment, as if the years of gloom had been, miraculously, dispelled for ever.
But only for a moment. For this making of money plentiful to meet the needs of the King and his people was an act of rebellion against Money of the most serious kind. Because money was plentiful prices were rising. Money therefore was losing some of its value ; it bought less goods ; the time had come to invest it in countries where its value was higher. Exports were forced up and prices began to fall, but the fall was not catastrophic enough to please the Money power.
The usual propaganda against "speculators" and "bubble flotations" now began in order to prepare the public mind for what was coming. Lord Liverpool, in March 1825, warned the "speculators" that gold was "leaving the country." The country banks remembered that (thanks to Peel) the duty of giving gold for their £1 notes had been laid upon them. Terrified, suddenly, they began to refuse to lend to their customers and a sharp restriction of buying power at once took place. Instantly prices began to fall really sharply. All the calculations which had been based on the idea that high prices would be maintained were falsified. The whole producing world feared bankruptcy. Holders of paper notes and persons with balances of money at their banks clamoured for gold. There was no gold, for, as has been seen, the Money power lends £10 for every £1 which it possesses on the assumption and in the hope that people will not ask for gold in any large amount.
The Government now submitted unconditionally to the sovereign in the City against whom it had dared to rebel by allowing money to be made plentiful. It actually promised to give no help of any kind to the "speculators," and The Times thus addressed its readers :
"As for relief from the King's Government, we can tell the speculating people and their great foster-mother in Threadneedle Street (the Bank of England) that they will meet with none—no, not a particle—of the species of relief which they look for. The King's ministers know very well the causes of the evil and the extent of it and its natural or appropriate remedy, and we may venture to forewarn the men of paper that no such help as they are seeking will be contributed by the State."
The "natural and appropriate remedy" was to make money scarce again and so to increase its value. This, of course, meant a fall in the prices of goods and so ruin for landowners, farmers, manufacturers and merchants, and the small country banks which had served their needs, and starvation for the entire working class. So violent was the crash produced that panic seized upon the whole country and troops had to be called out to protect the country banks. On Monday, December 12, 1825 ("Black Monday") the panic reached its height.
"To intensify the mental gloom of that Monday," says Feavearyear, "the city was wrapped in one of those blacknesses which only London can manufacture. Throughout the week every day brought news of a fresh crop of country failures. In three weeks sixty-one country banks and six important London houses ceased payment. The terrible despair and helplessness of everyone in the first week of panic in face of the complete refusal of both the Bank and the Government to render assistance were remembered for many years."
The Bank's refusal to help was, in fact, imposed on it by the Government. Throughout the week the Directors kept urging that help in the form of an increased amount of money should be given, for they had not, to their honour, accepted the view, now everywhere being dinned into the public, that the crash and the panic were a visitation in the form of "inexorable economic law" which had somehow been violated. The Bank of England, in other words, had not yet been wholly subjected to the Money power. The Directors found in their vaults a box of small notes dated 1818 which had never been issued and demanded of the Government the right to issue them. Because the ruin was so universal this was granted. The Directors now exerted their utmost efforts—by discounting doubtful paper and by every other known means of increasing buying power and raising prices—to rescue the nation. They succeeded ; by the end of the year the financial crisis was over.
But the wreckage remained. The Money power, seated again on its throne, pointed to this wreckage as proof of the evil of making money plentiful and goods dear (whereas it had been caused solely by making money scarce and goods cheap), and demanded in menacing tones that the Bank of England must be brought at once into subjection and for ever rendered powerless to multiply and cheapen money in such fashion. Parliament met in February 1826 and immediately passed an Act (March 22, 1826) forbidding the issue in England and Wales of any more banknotes of smaller denomination than £5 and ordering the redemption of all existing notes within three years.
Meanwhile the suffering and tragedy which followed the collapse of prices of 1825 exceeded anything formerly known in England even in times of famine. Distress, however, has always furnished the Money power with fresh arguments against its opponents. As the agony of the working classes increased, the demands of the Radicals for Parliamentary Reform (as the necessary preliminary to the repeal of the Corn Laws) grew in violence. A nation frantic with suffering began to look forward to "Reform" as to the Millennium, and was encouraged in that attitude, every day, by those organs of the Press which expounded the doctrines of the Money power.
The Press in England, and throughout Europe, remained entirely faithful to Money. It owed its origin, at least in its modern form, to finance. Except for the years during which Napoleon had bent it to the uses of the service-system, it had served always the uses of the system of gain. Its complete freedom was therefore insisted upon as a first article of faith of Financial Liberalism. So much so, indeed, that when King Charles X of France, the last surviving brother of Louis XVI, who owed his throne to the conquerors of Napoleon, took pity on his oppressed and starving subjects and, in the Napoleonic manner, tried to muzzle the Paris newspapers as a preliminary to dealing with the Money power, the throne of the Bourbons was flung finally into the gutter. The French peasantry, thus instructed about who their master was, cast longing eyes at Napoleon's son, the King of Rome, Metternich's prisoner in Vienna ; but Money set Louis Philippe, the "bankers' King," upon the throne.
That the English Press would have effected a similar change, had any attempt to restrain it been made, is certain. As has been said, a strongly republican spirit was abroad ; the sovereign in the City had no love of its rival at the Palace and would have attacked without compunction, for there lingers, unsleeping, in the mind of Mammon the fear of the King's grace. As it happened King George IV died in 1830 and was succeeded by his brother, King William IV, who enjoyed a very great popularity. Wellington, who was Prime Minister, was defeated and resigned, and Lord Grey succeeded him. Four months later Lord John Russell introduced his Reform Bill. It became law the following year, 1832. King William for a time refused to create enough Whig peers to force it through the House of Lords, but a sudden and threatening " run " on the Bank of England, which was deliberately organized by the supporters of the Bill, achieved its purpose of creating panic, and so alarmed the King that he gave way.
Nobody, during this period, questioned the right of the bankers to issue unreal (credit) money. The sole concern was to prevent action which might have the effect of shattering the illusion that bankers possess the means of meeting all their liabilities in gold. Obviously had bankers really possessed such means the crisis of 1825 could not have occurred. A series of financial panics extending over more than a century has not yet taught people that so long as banks are allowed to create money out of nothing—no matter in what proportion to the money held by them—the means of meeting all their liabilities must always be lacking.