UC-NRLF *B S11 ^fi° CD 00 m\>vwms» LIBRARY OF THE UNIVERSITY OF CALIFORNIA. Class Digitized by the Internet Archive in 2007 with funding from Microsoft Corporation http://www.archive.org/details/adventuresof1000phiprich THE ADVENTURES £.1000 NOTE; RAILWAY RUIN REVIEWED. THE HONOURABLE EDMUND PHirPS. Each substance of a grief hath twenty shadows." — Richard II. JUmtron : JOHN MURRAY, ALBEMARLE STREET MDCCCXLVI1I. : PREFACE. Are Railways the chief cause of the present crisis, or are they only the principal sufferers from it 1 Do they convert floating into fixed capital, or only present to it those means of profitable investment without which floating capital possesses no value ? Is the interruption of works upon profitable rail- ways, already commenced, the proper remedy for present embarrassments, or will it be the means of aggravating them to an unheard-of extent t Mendicity Societies and Fever Hospitals are announcing to the public exhausted funds and a double increase of applicants. "Workhouses are crowded with sturdy labourers, highway robberies by armed bodies have begun, and the public re- venue is diminished : we see saving banks parting with their deposits, trade stagnant, and mills work- ing short time: credit is shaken, and enterprise dead. Does overwhelming necessity require us in such times to discourage rather than promote labour upon incomplete works which Parliament has solemnly pronounced to be of great public utility \ These are questions quite unconnected with party politics, upon the correct solution of which depends not only property that is reckoned in millions, but the common welfare of all. If nothing is done, or if what is attempted be in the wrong direction, ruin may advance with giant strides. This little brochure is intended to offer, in a familiar form, some materials for solving inquiries of such vital importance. ^ THE ADVENTURES OF A £.1000 NOTE " The country will never bear it," said I, as I gazed fondly on my thousand-pound bank-note. It was the first time I had had so large a sum in that form, and my pleasure was proportionate. I considered it, too, to be in some degree earned by my own foresight. The great Harwich and Bristol Trunk Line having been (as I casually heard) intended to pass the corner of my little box in Essex, I immediately converted an old cow- house that stood in its line into stables of very imposing appearance, and gave them the alternative of a purchase at a thousand pounds, or furious opposition. The thing would not have stood for a moment before legal inquiry. Still, being fortified by the possession of a second cousin who was the habitual chairman of one of the committees of merits, and having a friend among the directors, I pre- vailed, and by means of fear, favour, or affection, got the promise of my thousand pounds. The opposition on the part of landlords who had more reason to complain, and less hope of being appeased, was terrific. At length, to my great joy, the bill was passed, and now, at the moment when they would have gladly given up operations alto- gether, the company had been obliged to exchange for my cowhouse a thousand-pound note. It was this that made me gaze on it with such interest, and which turned my thoughts to railways, while still I exclaimed, " The country will never bear it !" " The country will never bear what ?" asked Sir George Ferrier, a benignant-looking political economist, if such a creature can be conceived possible. " What the railways are doing." " Nay," said he, " if they are in the habit of giving a thousand pounds for a cowhouse, the country may think it right to interfere to protect the shareholders. It has interfered before now with much less cause." " I was not speaking of that" I replied, somewhat peevishly ; " I mean that the country will never be able to meet the surprising, the astonishing, the astounding, amount of the calls." I thought I had been emphatic, whereas I had been merely guilty of tautology. " I have been counting them up, and there are eighteen millions to pay in the next twelve months." " Pooh !" said Sir George. " Pooh?" 1 exclaimed, somewhat surprised. " You do not see, my dear fellow, that one call, when disbursed, helps to pay another. I will make it all clear to you." Sir George was one of those men who, having given you, in a few words, the pith of what they have to say, prose on in explanation, till, like the commentator in Pope, they " explain the meaning quite away." His first words had been a revelation to me, and, as he talked on, my mind revolved on the first idea, while my eyes were mechanically fixed on the thousand-pound note. At length the monotonous sound of Sir George's expla- nation stole " faintly, and more faintly still," o'er my drowsy senses, till it was entirely neutralized by a sharp distinct voice : it was that of my thousand-pound note, which narrated to me its adventures as follows : — I was born in a back parlour in the City ; my respected mother being generally known by the name of the Old Lady of Threadneedle Street. I call her respected, because it is the fashion to give that epithet to all old ladies, particularly if they are rich, and my mother had more than she knew what to do with. I owe her, how- ever, not much respect ; for on the very day. of my birth, she was base enough to sell me for a thousand sovereigns. I had, to be sure, the satisfaction of hearing afterwards that they did not do her much good for some time, but lay in her vaults without being of the slightest real ad- vantage to herself or any one else. Nor was my life, for sometime, a very active or even a useful one. I passed into the possession of a rich mar- quess, who had a pride in keeping his pocket-book well stocked. His public reputation was indifferent, but his consolation was Horatian — " populus me sibilat at mihi plaudo Ipse clomi simul ac nummos contemplor in area." Here I lay in uselessness and obscurity, like many a femme incomprise before me, longing to issue forth and give the world a taste of my quality. Upon his death I was carried to his bankers, and then I fondly hoped my time for " coming out " had at length arrived. But no ! they were an old-fashioned firm who liked to have cash to any amount ready to answer a check at a moment's notice. I was consigned to their strong box ; the senior partner remarking, as he snapped down the Chubb lock, that " money was a drug on the market. " How long I remained there I know not, but when I emerged to daylight, the whole aspect of the place was changed. The counter, before deserted, was crowded with customers. The clerks, who had formerly had leisure for wagering on the number of omnibuses that should pass the window in five minutes, were busy with dividend warrants, scrip receipts, transfers, and letters of call, and an air of business pervaded every countenance. From this time forth my unceasing movement formed so strong a contrast to my former inactivity, that it would occupy too much time were I to attempt the detail of all my adventures, or even to glance at the benefits which I scattered in every direction. I assisted to cut the way through hills, to bridge over mighty rivers, to tunnel through mountains, to drain or fill up morasses, to form an aerial path for thought to travel o'er with lightning speed, and thus far " annihilate both time and space." I disemboweled iron from depths before deemed unprofita- ble, I diffused content and happiness among those who but desired (and yet had desired in vain) to banish hunger and misery, by the toil of their honest hands and the sweat of their sturdy brows. I made my appearance in remote regions where a fellow of my " mark and likelihood " had never been seen before, and by the command of substantial nourishment which I afforded, I added to the physical strength, the thews and sinews of a before-dwindled population. These were but some of my immediate performances ; such were but a few of the tangible benefits I left behind me. But my works did not die with me, and looking back to the results of two years, I may congratulate myself on not only having added to the enjoyments of all classes, and the general facilities of trade, (with which all are more or less connected,) but having brought within the reach of the poor man, comforts which he had sighed for in vain ; such as increased facility of intercourse with those near to him in affection, though far removed by the business of life ; " Physic from the fields in draughts of vital air;" and those beauties of nature which he had heard of and pined for, but which had appeared to be an indulgence too expensive for his limited means. I had extended the market for his produce, facilitated the diffusion of his labour, and cheered his domestic hearth with fuel and warmth, where, before this, the scattered branches of a winter storm had alone formed his precarious resource. I pass over even the hasty enumeration of a thousand other benefits which were incidentally conferred, not only, as I firmly believe, without detriment to any other interest, but with increased prosperity to all except the less efficient appliances for a locomotive public, which I had assisted to supersede. After the sketch I have given of my earlier days, it would not be much to boast, that I did more good in a month than I had effected in a year before; but I will go further, and say, I do not believe that one thousand-pound note evertravelled so fast or conferred such benefit in the whole history of its race. I proceed, however, (as likely to be more useful,) to the detail of one day's adventures, at a period when the eloquence of the most eloquent and the might of the mightiest had begun to be employed in fostering and in increasing consternation at " the enormous amount of railway calls." It was about twelve months ago that I proceeded towards the City, firmly buttoned up in the breeches pocket of Mr. Omnium, the great capitalist. " Funds closed badly last night," said he to his friend as they threaded Cheapside together — " funds closed badly — promised to open worse this morning — sold at a lower figure after the regular hour — foolish, unfounded alarm — must abate soon : if I find it still prevailing to-day, I shall certainly buy." " How can people be otherwise than alarmed !" said his friend. " Have you seen the Times' article ? Have you read the calculations — twenty millions of calls in the next eighteen months ?" " Ingenious fallacy!" replied Mr. Omnium, in his peculiar mode of delivering his speech in separate instalments. " Ingenious fallacy— -summed up all the 8 calls together — assumed the total amount to be deducted from floating capital, and sunk for ever. Not so : one Set of calls spent, and become floating capital again, before another set is wanted. Do this a dozen times in the next eighteen months. Ingenious fallacy — deceive some time — seen through at last. I shall buy." " That may be very true, when spread over eighteen months," objected his friend, relieved of a portion of his anxieties for the public weal, " what do you say, however, to-day, when there are eight calls from eight different companies, to be paid this very morning ?" " Don't mind that — plenty of money — one will help to pay the other. But here we are — good-morning." In a short time Mr. Omnium had effected, on terms which the temporary panic rendered unusually favour- able, an investment in the funds, of which I furnished only an inconsiderable portion. I was at length, then, for the first time, invested in the funds : a contingency of which I had a sort of mysterious awe, as being to my disturbed imagination the commencement of perpetual imprisonment. What was my surprise to find, that the sole result to myself personally was, that I was transferred to the pocket-book of a very smart West-end dandy, who, after carefully inquiring his way from the Bank to Cornhill, (to the great amusement of a vendor of straps who had been fluctuating between the two for the last twenty years,) entered the banking house of the bankers to the great Andover and Bolton Railway, and paid a call of £.5 on 200 shares. No sooner had I performed this office, than I was transferred by the bankers to the credit of the Bolton and Carlisle connecting line, in which the Andover and Bolton had subscribed for some thousands of shares, and on which a call happened to be second on the list for the day. The Bolton and Carlisle connecting line was fast advancing to completion ; the works had been pressed on night and day ; and the payments of the Contractor were in advance of the calls. He was even now waiting at the office for repayment, and I was immediately drawn out and handed over to him by the directors with others of my sisterhood. " That is a large payment for us to make to you at one time, Mr. Jackson, for labour alone," remarked one of them. " Yes, Sir," said Mr. Jackson, " but remember the pro- gress that has been made ; remember, too, the hundreds that have been converted by it, from sturdy paupers, or short- timed operatives, starving cottagers, or perhaps even disciples of Swing, into happy and honest men. Big Tom, the best man in my tunnel gang, was a more than suspected stackburner twelve months ago ; and there are, among them, a round dozen, who, on the strength of good victuals, can do half as much work again as when I first employed them. Good-morning, gentlemen." Mr. Jackson, in the progress of the gigantic works he had superintended and executed, was become a great capitalist. A part of his earnings he, from a natural esprit de corps, invested in railways, and he bethought him that there was next door the office of the Dee Valley Extension. This embryo railway, having obtained its bill in more promising times, had put forth a modest call of £.1 per share, which, it was much to be feared, would not be met with corresponding alacrity. Mr. Jackson had had a thousand shares allotted to him, and the call was this day due. He entered the office. At a green table, covered with prospectuses and blank letters of call, was seated the secretary, a veteran candidate for a moderate competence, who, after twice wasting two hundred pounds upon imaginary appointments, offered to 10 him for the douceur his advertisements promised, was at length installed in the comparative sinecure of secretary to the Dee Valley Extension, which had as yet neither commenced operations nor seemed very likely to do so. By the fire, alternately rubbing and toasting his fingers, sat one who, in every sense of the word but one, was evidently a warm man. I was duly paid over to the secretary by the honest Mr. Jackson, and credited to him in the books. In two instances already had I experienced, that the sinking, or tying up, or absorption, with which I was threatened, upon being connected with a call, might be purely imaginary ; but on being paid over to the secretary of a railway, of which only one sod had been turned up, and that by a great man who, it was to be presumed, had done it gratis, my spirit sank within me, and visions of being retained in strong boxes until operations should commence, began to haunt me. Hardly, however, had Mr. Jackson left the office, when the warm man rose and extended his hand towards me. " Now then, Sir," he exclaimed, " you will be able to settle my little account." He was a silversmith. Not only had a silver-handled plough, a silver trowel, and a silver wheelbarrow been furnished for the great man, but when premiums ran high, and the Dee Valley Extension was expected to ruin a rival long since defunct, but then in high favour, a handsome service of plate had been voted to the originator and principal director by a grateful and enthusiastic meeting of shareholders ; and, in less smiling times, all this had to be paid for. A certain number of sovereigns was returned to the secretary out of the silversmith's account, to be devoted towards the future progress of the Dee Valley Extension, unless immediately required for 11 the discharge of some further " preliminary expenses," and I accompanied my new possessor to his shop. As he looked around and calculated the large amount of unproductive capital which encumbered his shop without bearing interest, or appearing to diminish in quantity to the degree he had expected, he heaved a deep sigh. The large fortunes lately amassed with great rapidity had caused a corresponding increase of luxury. He had believed it impossible to add too largely to the tempta- tions of his stock. A change, however, had commenced, and the demand for silver plate had stopped. He "sighed and looked, and sighed and looked, and sighed again;" at length he bethought himself of the Bath and Bodmin, in which five per cent, was allowed on calls paid in advance. The money was at the moment otherwise useless, the security unexceptionable, the necessity of payment at a later period certain. The arrangement suited him in every way, and was acted on immediately. The Bath and Bodmin had purchased land to a large extent, and I need hardly add, at a high price, from the Earl of F . No wonder the purchase-money had been so often applied for, as a marriage (long announced as " on the tapis") could not take place till the amount to be settled by the Earl of F was paid up. The impatience of the young couple could now be indulged, and within an hour I had passed from the bankers of the Bath and Bodmin to the solicitor who had been employed upon the marriage settlements ; and from him to a bond fide seller of Consols ; in short, after four calls, I found myself in the very same predicament as that which had alarmed me so three hours before. I w T as invested in the funds, or, in other words, I took my departure with a lady of quality, of ample flounce and dazzling skin, who had sold out, and who paid me according to printed 12 request received by post ten days before, as a first call of £.5 on two hundred new quarters in a Scotch trunk line, from which she entertained great expectations of ultimate gain. The parliamentary contest between this and its rival had been terrific. The proverbial caution of the Scot had been swallowed up in his equally proverbial regard for the main chance, and sums immense had been sunk, as it is called, in solicitors, agents, witnesses, and barristers. Among the last was the Honourable Mr. Montgomery. He had carried on for years an ineffectual struggle against the disadvantageous effect of his proenomen, affording as it did a standing proof that he had no attorney connec- tions. At length, after setting up a wife and family upon the prospects of a profession that occasioned expen- diture rather than furnished means, he had, by great good luck and some little patronage, been included among the lucky dozen of more or less eminent barristers, who for sixty days had urged before the committee the compara- tive claims in point of gradients, traffic, and public accommodation, put forth by the contending rivals. His had not been a merely nominal service ; he had not peeped into the Great Northern, shaken out his powder around the Devonshire disputants, settled a ticklish point by the mere force of his name among the wise men of the East, nor earned a double meed from some desperate disputant, by promising to confine to such claims so sup- ported the powers he had pledged to so many. One room with its crowd of anxious faces had been to him a little world of excitement in which he had tarried, exert- ing his whole energies, and giving his bodily presence, without a day's or an hour's intermission, as long as it could be of service, and until it was successful. As the fees gradually mounted up, their disposal (the frequent subject of domestic discussion) took a higher 13 purpose. At first, some summer treat, some long-coveted article, or some object of immediate enjoyment; but as the tens swelled into hundreds, and the hundreds attained the unexpected proportions of a thousand-pound note, an investment in the funds, an ultimate provision for the boy, and an immediate annual addition to their narrow means, was the fixed and irresistible idea. The Bill had been passed, and yet no fees ! A further call must first be realised ; the unexpected amount of the preliminary expenses had cramped the powers of the company. On this day, however, all was to be right, and in anticipation of the expected funds from a first call on the new quarter shares, the long-expected cheque was given. As the fine lady left the bank of Messrs. Debenture and Co., Mr. Montgomery entered it, and received me in exchange for his cheque, with a few odd pounds, which he speedily converted into a bracelet for his wife's arm. What merry tones were heard, what happy faces were assembled round him in his dingy lodgings, as /was dis- played ; the greatest and most interesting curiosity that had ever been exhibited in the family circle. At length the supposed danger of keeping so immense a sum in the house, and the actual risk it incurred in a contest between the two children, as to who was to have the first look, interrupted their glee. The project of investment must be immediately executed. Mr. Montgomery cabbed it to the Bank, the market had taken a turn upwards, the panic had been shown to be without foundation, prices were J per cent, higher, and at the very moment the order to purchase stock to the amount of £.1000 was given in a degage tone by the happy barrister, Mr. Omnium, who had been w r aiting for some such turn in the market, became a seller, and I retired from the alley in the same capacious pocket in which I had arrived. I had made a pretty good day's work of it ; I had paid 14 off a tradesman's bill; I had afforded liini a temporary investment for a part of his surplus capital ; I had secured the comforts of life for some weeks to come to a hundred poor fellows, who but twelve months before had been victims of poverty, disease, and crime; I had ad- vanced the day of happiness for an eager young couple, and ensured the increased future comfort of a painstaking but disappointed professional man : I had done all this, but what surprised me more than all, I had paid five railway calls ; and yet so far was I from being exhausted, that I found myself as strong as ever, and actually occu- pied the same position in the same pocket that I held in the morning. I felt, too, that I should be as fit to go through the same work the next day ; and as I have been much mixed up in calculations from my youth, I reck- oned that, at this rate, I might in one year, omitting Sundays and holidays, beside all the incidental benefits I should confer in my progress, discharge, in my own proper person, and by a chain of direct connection, calls to the amount of more than a million and a half. It will thus be very easy for you to fancy how, in the course of a year, eighteen millions of railway calls may be paid with one. The last sentence was delivered in a tone so different from the sharp clear voice in which the rest of the narra- tive had been conveyed, that I positively started. My eyes met those of my friend, Sir George, who was in the attitude of one who seems to " pause for a reply." I looked down to my thousand-pound note. It lay in placid repose before me, and said nothing, except it were to repeat that most agreeable promise of all, the promise to pay. " Have I made it clear to you?" inquired Sir George. My candour prevailed ; and pleading late hours the night 15 before, I confessed to him, I had dreamt out the solution of his problem, and detailed its circumstances." " I have often put people to sleep before," said the good old man, with a smile, " but never to so much pur- pose. The circumstances you have fancied, might all have happened : you have only supplied that combina- tion of concurrent events which it is in the power of chance at any time to bring about, and, therefore, within the province of the fancy to suggest. The whole thing, indeed, would more probably have been effected without the thousand-pound note ever leaving the pockets of Mr. Omnium or travelling at all. It would have been carried on by cheques and transfers of accounts. I will make it clear to you in a moment." " Pray do not," said I, hastily, " for it is clear to me already; but, perhaps, the way in which it figured in my dream has traced the progress of the original sum more pointedly. Do you, then, really think," I continued, after musing for a moment upon a result so startling and so incompatible with what my own experience would have suggested. " Do you then think that the paying up of so many railway calls, causes no embarrassment, and absorbs no floating capital, to the injury of other claimants?" " To think that," said Sir George, " would be to contra- dict one's every-day experience, and to fall into as absurd a fallacy as that which I am anxious to correct. It causes embarrassment to individuals, because each new call requires an investment beyond what his means sanction or his original intentions contemplated. If he were able to sell some of his shares at the price he had paid, he might continue his investment at the original amount, with a mere diminution in the number, and increase in the value of the shares he holds. The fall of value, however, caused partly by a fallacious panic cry, and partly by a real deficiency in the supply of floating 16 capital, much exaggerated as it is, produces such a decline in the original value of his shares, as makes him un- willing to sell, and hence his embarrassment." "You allow, then, that there is a deficiency in the sup- ply of floating capital V " No doubt ; and for this reason : all commercial enter- prises, involving the expenditure of money, require a con- siderable balance in hand for their continued progress, and the larger the number of such undertakings in England, and the greater their extent, the more considerable must be the total amount of such balances. The expenditure of a large portion of the calls we have supposed to be, and most probably was, as immediate as you have assumed ; and in that degree would the temporary diminution of the float- ing capital of the country be counteracted; for to that extent would it be returned directly to the general stock from which it had been withdrawn? The remaining portion, however, of calls would remain for a time locked up*, and if many works proceed at once, the mere combined amount of such balances would, no doubt, affect the ordinary distribu- tion of floating capital. The amount of such floating capital varies so little under ordinary circumstances (beyond the steady accumulation supplied to it by profits), that a very slight disturbance in its regular distribution affects all in- terests dependent upon it. Such disturbance is caused by either, first, a demand for it in the country, increasing more rapidly than the supply it is continually deriving from pro- fits; or, secondly, a withdrawal of it from the country, from accidental causes, particularly if such withdrawal has not been sanctioned or caused, as it sometimes is, by a want of power in the country to absorb the whole of it profitably." " Which of these causes has been operating this year?" * Unless placed in a bank, for then, though for ever so short a time, it would still circulate. To the banker even temporary deposits combine to make up that average upon which he can reckon as, from time to time, available in his hands, for accommodations or investment. 17 *' Unfortunately both at one and the same period," replied Sir George. " First the railways in progress, and, therefore, producing no return, were attempted simultaneously, to an extent that, no doubt, required for the whole, at any one given moment, a large balance in hand. This is the extent of the mischief they caused. To reckon up the whole amount of any one of their calls as permanently, or even for any length of time, withdrawn from the floating capital of the country, I have shown to be a fallacy, occasioned by a disregard of the mode and rate at which they are disbursed ; but to add together the total number of calls, any one of them, or all of them together, make in a year, is the height of absurdity, as it is notorious that the preceding calls (exclusive of the per- manent floating balance carried on) are spent before the succeeding ones are received. Their contest is not to hold, but to spend, and then to hold again what they have thus, by their expenditure, rendered available. In short, to use the expression 8$ Ovid, from whom one would least expect to find truths of political economy neatly expressed — * Quaerere ut absumant, absumta requirere certant.' " " You do not, then, allow that there has been a large permanent extra absorption of floating capital in the country V " Not by the railways ; but by another claimant, not only more powerful, but obliged, from necessity, to promote the second disturbing cause to which I have alluded, namely, an actual withdrawal of a considerable amount of floating capital from the country." " You allude to the eight-million loan ? " " I do. Here was a large sum swallowed up upon terms which were so nicely to vary with the exact market value of money at the moment, reference being had to the nature of the security, that it was sure to beat an/ B 18 other competitor. The terms might turn out more or less favourable to the Government, but they could be and must have been modified, till they procured the sum required. If the amount thus raised had been paid up in instal- ments only, and expended meantime in England, com- paratively little inconvenience would have been felt: indeed the process would have been precisely similar to that we have been describing with railways. It was not ultimately contributed in instalments, but with some diffi- culty and sacrifice was all paid up within a short period. Even then, if it had been as rapidly disbursed in England, the embarrassment would have been but temporary." " I see it now," I interposed, " it was all either spent in Ireland on works not immediately productive, or dis- bursed in foreign lands for food and other articles for the same country, which in ordinary years would have been supplied from their soil without such disbursement." "A similar export of money was necessitated in England," continued Sir George, " by a similar calamity, to an extent that no consequent extension of trade has had time to replace, while the poverty of many of our foreign cus- tomers, occasioned by the same cause, has diminished that resupply of floating capital which ordinary profits would have furnished. A further withdrawal of floating capital from the country was caused by foreign railways, which, while they increased the riches of the country in which they were constructed, did not, like our home works, either mediately or immediately, return the money as they spent it, to the sources from whence it came. Another com- petitor that engulphed a considerable portion of floating capital, ordinarily at our command, was the French loan. These all form a permanent, and with each call (unlike our own railways) an increasing drain upon our floating capital, changing it, as long as it there continues, into a fixed investment in another country," 19 " To which of all these causes do you ascribe the greatest effect ?" " I believe that, to any one of them singly, the elasticity of the country would have offered such a resistance as would have made the effect hardly sensible. It is the unfortunate concurrence of all at one and the same moment, each acting on and aggravating the other, that has produced the present crisis. We have had, at one and the same moment, an increased demand (though it has been enormously exaggerated in amount) for float- ing capital in England, and immediately upon the scarcity of that commodity, (which such excess beyond the usual demand, and in anticipation of the natural increase, was sure to cause,) a diversion in other directions of a large portion of the very supply that was already deficient." " You think, then, these combined causes necessarily produced the present crisis ?" " I will not even say that. Precautionary measures had been already adopted, and promised success. The less profitable schemes had been postponed or abondoned ; the completion of many lines promised the means of furnishing to themselves their own ordinary balance from their own receipts. The further opening of the Great Northern of France, and the Rouen and Havre, not only diminished the ruinous demands from that quarter, but furnished an opportunity of restoring what had already been there expended by sales in the French market, which had been naturally postponed till they could be more favourably effected. Hope began to revive. If things could only have remained in that repose and rest which a first shock often produces for a few months longer, all might have come round. Unfortunately, in last August and September, failures to the extent of millions occurred among the corn importers, /will not 20 brand them as speculators, because the course, and the beneficial course, of all trading is to regulate the supply by anticipation to the probable demand. In some trades, such as the country shoemaker or butcher, this never or very slowly varies ; in others, such as the London mercer, the variations are remarkable, but are in easily foreseen proportions ; in that of the corn importer, there is one element of demand, namely, the extent of the home supply, varying each year, and whose variations no foresight can anticipate. That the money, therefore, thus expended abroad was not only lost for the present to the country, but did not procure for him that had disbursed it his money's worth, was a mere accident, which, (while it involved him in ruin), deranged the credit as it cut off the expected receipts of all those numerous traders with whom the men who deal in millions must necessarily be connected. The benefit derived from the enterprising purchases concluded early in the season by corn importers in the foreign market, would have been general if we had been visited with another scarcity ; it would, in fact, have been the saving of the country. The loss which did, in fact, result to them from a contrary event has been of almost universal consequence." " How did this immediately produce the crisis V " Each man's legitimate expectations being thus disap- pointed, for the effect of such failures spreads like circles in the water, with a continually increasing extension, some source from whence to supply the unexpected losses must be sought. Under a natural disinclination to sell, when fixed capital was accidentally and temporarily de- preciated, by the want of floating capital to devote to it, sales had been postponed as long as possible, credit had been extended to the utmost point, and the balances usually left on deposit had been withdrawn. Sales, long postponed, could, however, no longer be delayed, and 21 everybody wished to sell, which is the same as to say, in other words, that nobody wished to buy. The article to be offered was fixed capital, in many cases unproductive, and where not so, yet certain (as it seemed) to undergo still further depreciation. No one who had in his pocket an article which had acquired so sudden and adventitious a value as money, would be fool enough to give it away for that which he was almost certain to command (unless the supply of money could be temporarily increased) each day at a lower price. " This, then, was the moment when some temporary assistance from the Bank would have been most valuable. " Yes ! this was the time when it would have been salva- tion to many. Had it been facilitated by law, it might have been then afforded without risk to the credit of the Bank, loss to the country, or any danger of again bring- ing on that feverish speculation which we most deprecate, but which, after all, as it is always caused, so it can only be renewed, by an excess in the supply of money." " You seem to think, then," I urged, that in all this English Railways are the least to blame of all the dif- ferent causes*." * It would be curious to trace the immediate effect of some of the other causes. In September 1846, (though calls had been going on to a great extent,) consols ^vere at 9GJ, wheat being then at 47s. a quarter, discount at 2 per cent., and money " a drug in the market." January 4th, 1847, (still notwithstanding calls,) 95£ with the dividend. Two millions had now been expended on Ireland, and a loan began to be talked of. The week before it was announced, consols were 91J ; the week after they were 89§, continuing to decline to 87§. By August (calls still going on) they had recovered to 89, but failures to the extent of three millions occurring in three weeks, they declined to 86f , recovered to 87§, till again influenced by still more failures, simultaneously with the announcement of the French loan for £.15,000,000, they tumbled in one week from 84f to 80§. They have again touched 87 with the dividend. If railway calls are the only or even the principal cause of the crisis, why these violent ups and downs, and final im- provement ill the face of a continuing, and, according to some, an accumula- ting cause of disturbance ? 22 " Not only the least to blame," he replied, " but that they have conferred such benefits as far outweigh any derangement they may have caused. What were the great evils under which we laboured before their time, according to all the political economists ? A superabun- dant population ; excessive competition in trade, which reduced profits by overstocking markets ; and the fear- fully increasing amount of pauperism. For over-popula- tion, one remedy suggested was emigration ; excellent when judiciously directed, and to a moderate extent, but then utterly inefficient to the object in view ; and when not judiciously directed, or immoderately extended, en- tailing more misery that it removed. What was it but adding the endurance of that misery, away from humble friends, from richer benefactors, and from that sure, though last resource of all, the legal provision offered in their own country. The other remedy was an absorption of the rural in the town or manufacturing population, often to the contamination of health and morals, and involving with it alternate fits of prosperity and misery. Add to all this, that either foreign or home emigration, without money, or even skill in the sort of labour required, was madness. For your over-population railways have afforded a remedy. Those who had formerly alternated between the poor-house and the farm, now a general burden, and now the cause of depreciation in his wages to the regular labourer, may again recruit their half- starved frames ; amass, if well advised, what is to them a little capital, and by their absence raise the general rate of farm wages. Is it said that the construction of rail- ways cannot last for ever? This is true as to England, though even when all are completed, there are innumera- ble situations of trust and labour which before had no existence, and which they offer to the honest, the intelli- gent, and the industrious, while it is certain that their 23 maintenance and repair will always afford employment to many. I say nothing of the additional demand for labour which they indirectly, yet more permanently, cause in iron and coal mines, in lime and stone quarries, in draining and woodcutting. But even granting that this can never ab- sorb all those employed in their construction, there are the colonies, and foreign countries, not so thickly populated, in which the employment of the English navigator will be matter, not only of choice, but of necessity. This would be indeed to emigrate, but it would be to do so with equal profit to the settler and those among whom he comes, which is, alas! but seldom the case at present. What was the second evil under which I said the country had laboured ?" " The too great competition in trade." " True, and the only remedy then suggested to this evil, caused by a superabundance of money, was a more cautious trading, a reduction of produce, and the ceasing to invest capital in branches already overstocked. Had this alone been done, without any other investment pre- senting itself, it is probable that the money would have been carried abroad, causing there a general reduction in the rate of interest, and afford to the foreign manu- facturer a share of the advantages before possessed exclusively by ourselves. It was at this period that railways fortunately, or perhaps I should say conse- quently, made progress, and thus furnished not only a home investment for the superabundant capital, but hun- dreds of thousands of rich customers, to take off a part of the excess of the manufacturer's produce. The third evil that formerly cried out for a remedy, was the alarming increase of pauperism, and, of its inseparable companion, the poor rates. This might be treated as a mere conse- quence of the first cause, inasmuch as sturdy, able-bodied labourers cannot or ought not to be receiving parish relief, except in consequence of general or local over-popula- 24 tion and excess in the number of labourers to the labour provided for them. It is obvious that railways, winning their way as they do into the most remote rural dis- tricts, in their progress from one town to another, o'er " high wild hills and rough uneven ways," must cure this evil ; and it is notorious that they have done so. Toward the total pauper expenditure thus materially diminished in so many points, whence is derived so magnificent a contribution as from the railways themselves? What rich or barren acre, what south bank or marshy moor, pays so great a proportionate contribution to the rates as do the few acres which in any one parish are marked with iron- stripes instead of ridge and furrow ?" " None, indeed," said I. " It is unnecessary in fancy to reverse the picture and retrace the steps in that contrary direction which their forced interruption must necessitate. I only trust, for our common country's good, that we may not see it accom- plished in reality, instead of being thus glanced at. Give way but a little further to a senseless cry ; reduce and cripple ever so little more, either by legislative impediments to their temperate progress, or interfer- ence in their internal regulations ; or, what is worse, un- justly damage their credit with the public by fallacies ingeniously calculated to deceive, but which are still fallacies (though they may not be exposed), and mark the consequence. Already, innumerable thousands wander through your lanes, or throng your streets in unwilling idleness, in idleness not required by the real position or wishes of their employers, but suggested to them by Act of Parliament, or necessitated by the consequences of an unfounded panic cry. Shortly, very shortly, these thousands must return to their parishes to burden the poor-rates, unless you can give them work. Can you do so ? Where are you to look for the support of the aged parents, sick wives, or infant children, whom these sturdy 25 arms could earn sufficient to relieve from dependence on public charity ? Where, then, will be the additional amount of your Excise and other duties which their in- creased consumption has furnished in aid of your free- trade experiments ; or which, in the shape of surplus revenue, was returned to your floating capital by the Commissioners for the Reduction of the National Debt ? Whence will you bolster up your revenue ? By a resort to those sources which you have so lately declared to be inexpedient and inadmissible, or by such increased tax upon profits as must still further paralyse your drooping trade ? Impossible ! If you reduce the profits of railways, by obliging them to protract the time for which their incomplete, and, therefore, unprofitable works must continue to be so, will not your claim to the same contribution to your rates, or the large support to your income-tax receipts, be each day less productive ?" " This is all very gloomy," said I, " yet something must be done. What would you suggest ?" " I would first do to all as I have been trying to do to you — explain the degree in which apprehensions have been exaggerated with respect to the insufficiency of our present available amount of floating capital for that upon which it is to be employed. I would next attempt to remove that deficiency which must, to a certain extent, be admitted to exist. I would do this not merely, or not so much, by reducing the demands (after the present Pro- custean fashion) to the exact proportions which are arbitrarily assumed, as by increasing in various modes the necessary supply. I would authorize the Bank, by an issue, and upon the terms suggested in a little pamphlet lately published*, to increase the circulation * The Monetary Crisis, with a proposal for present relief, and increased future safety. Ridgway, 1817. The details of the plan there proposed it would be impossible to explain by extracts. 26 upon ample security, and at the same time to re-convert a certain portion of the fixed capital of the country into available floating capital. To the mode in which this is there proposed to be effected, and to its sufficiency for the purpose, I have never heard any tangible objection. I would further promote, as far as possible, the return in the shape of money of the capital now invested in other countries in foreign railways, in foreign funds and bonds. You would no doubt deem it Utopian to expect, from the patriotism of those who have so invested it at periods when the superabundance of capital in England made it justi- fiable, that they should reclaim it, now times are changed." *" I should, indeed." " What, then, if we can show that it is their interest to do this, or if not, should make it become so ?" " How can it be their interest, when all such invest- ments are now fallen so much below their original value ?" " The fall is not there so much greater in proportion than it has been here, if we take into account the conveniences of home investment, the advantages of home controul, and the security of our home position. The fall, as yet, has not been so much greater, but it will soon be far more. De- prived, as it now must be, of its original amount of support from British capital; influenced by the instalments of the present French loan, and the possibility of another, things must fall lower in France, while it is probable, from many causes, that they will improve, though slowly, here. Not only patriotic (without intending it,) but happy and wise will he be who sells out of foreign, and buys into English railways or stocks at the present relative prices. He will be pretty much in the same position as if he had originally invested in the latter; but the golden oppor- tunity will soon be lost." " Supposing they will not see or act upon what is their interest ?" 27 " I would make it still more decidedly so, by imposing a higher rate of income tax upon dividends received from foreign railways, than that to which our own are subject." " Would not this be rather contrary to your own prin- ciples of political economy ?" " It would certainly oppose the maxim, that anything which disturbs the most perfect freedom as to the invest- ment of capital, discourages its accumulation and its influx. Not so much so, however, as the absolute inter- dict upon home investment, which the more intemperate alarmists are now invoking on the same plea of public policy. A provision of the kind I suggest would not affect the value of those shares in their own market, to their own people. It would, therefore, not prevent, while it would render advisable their realization by English holders; and it would but form a compensation for the passenger tax and poor rate deductions, to which English profits are subject, and from which the French are exempt. I trust, however, that self-interest may render such a step unnecessary. I reckon much, too, on a gradual diminution of the disadvantages under which English railways labour." " How would you diminish them 1" " Let us first inquire what they are. The enormous expense of obtaining their concession, and the absence of any known principle by which it is regulated, so that after money has been wasted to an enormous extent, chance, favour, or prejudice may defeat the most worthy claimant, and crown with ruinous honours a weaker com- petitor. 2nd, The constant apprehension and occasional infliction of direct competition, after a lengthened exam- ination should have implied those exclusive rights which can alone render concession a boon. As no committee would think of conceding at one time, and out of the same group, two rival lines, so should no subsequent and 28 independent tribunal inflict that rivalry upon mere abstract principles, which the original inquiry was in- tended to avoid. No railway should be conceded that does not afford what is apparently the best line with reference to all the mixed questions which must influence the decision ; but once granted, the implied compact ought to be scrupulously kept." " Truly," I remarked, " the Legislature does not take means to insure the exclusive or even preferential invest- ment of capital in our own railways." " Just the contrary," said Sir George ; " it destroys or neutralises the advantages we actually enjoy, which are not small. Our iron is far cheaper ; our labour, though nominally more highly paid, is so much more effective, that our navigators are welcomed in all foreign railway enterprises ; our travellers are able to pay higher fares, and our interchange of merchandize and materials is beyond compare greater than that of any other country. In what, then, do the advantages of foreign railways consist?" " I never could make out." " In their freedom from enormous parliamentary ex- penses ; in their exemption from the passenger tax, and parish-rate — deductions from their profits ; and, in the absence of that restless desire of public interference, for assumed public benefit, and with the professed intention of diminishing their supposed excess of profits." " You speak of a supposed excess of profits ; what do you say to a regular ten per cent., and occasional bonuses ?" " The bonus, if you mean the creation of new shares, has already, in most cases, for the present ate into the ten per cent., though it is probable that on the better lines it may again be realized ; but even this, what is it to the original holder, but a fair compensation for the loss^ * It is this peculiar feature of railways that was overlooked by the legisla- 29 of interest, fluctuation in value, and uncertainty of prospect to which, during its construction, his under- taking was originally exposed. To the purchaser at a later period who does not incur those risks, the conse- quent rise in price, gives even less interest than almost any other mercantile adventure, of which the profits are involved in risk and uncertainty. To diminish, then, to the original holder, or to such a purchaser, his present moderate returns for interest foregone, risk incurred, or capital invested, upon any abstract idea of checking excessive profits, is to the highest degree ridiculous and unfair." " Would you, then/' I inquired, " have no public inter- ference in the management of railways?" " I would restrict it to three points : first, the decision of a public board upon rival competitors for the same district, formed upon written statements embodying therein the original prospectus, with a discretion reserved to the board of requiring further proof upon any state- ment that seemed to them to require it ; each party risking the certain rejection of his project, if any portion should turn out to be exaggerated or untrue." " Would you make the decision of that board final?" " As far merely as the exclusion of all other projects. The selected project should then stand the ordeal of, first, a ture when it refused (with the best intentions) to allow the payment of interest on calls, thus creating one of the principal difficulties in the way of procuring money for them. Such a refusal has the effect of starving at present to ensure greater plenty in future, and of leaving to he compensated to another by a sudden rise in the value of his capital that depreciation which has so grievously affected the original holder. Original shareholders as a body are not so much railway carriers as persons who bind themselves to advance capital for the commencement and completion of a given under- taking, and, as such, they ought at least to have interest upon their advances paid from the very beginning. An additional temptation is a share in its profits as a trading concern, but the first point is, that it should, on its com- pletion, be at least worth the capital invested in it, with interest thereon from the beginning. No undertaking that cannot promise that, and give besides an ample profit on its working, is worth commencing at all. 30 parliamentary committee, on the single question of whether it inflicts any unnecessary or excessive private wrong, and before such committee landholders' objections only should be heard, if they preferred, (as they seldom would), that tribunal to the railway board. The final decision should be that of the whole house, upon the question that the bill be read a third time, on which the ministerial influence would be legitimately directed to support the decision of the board." " What would be your second interference V " I would require detailed accounts to be prepared, not for the railway board, but for the shareholders of each company, in a form (more stringent than the pre- sent,) to be settled once for all, verified by the trea- surer, secretary, and two of the directors, and open to the inspection of shareholders, one clear month before each half-yearly meeting. My last proposal would be, that in the case of any and every accident caused by their own defective arrangements, or negli- gence on the part of those employed by the companies, not only should ample compensation be made to the suf- ferer or his family, but a fine to the Queen should be pay- able, its amount (the utmost extent of which would be limited) to be settled by the Justices in Quarter Sessions assembled. The effect of such a measure would, I believe, be not only to cause greater care in examining into the character and skill of those employed, but the universal requirement of security from such persons, that a part of the fine so imposed should be forthcoming from their own pockets, or that of their security; thus furnish- ing the highly influential motive of self-interest to increase their caution." " You think these provisoes would be sufficient? " " With these three provisoes I believe that projectors, shareholders, and directors, might henceforth be left to 31 themselves. By the first, prospectuses would become less sanguine and less delusive, as it would be a very different thing to address a greedy and intoxicated public, or an official and independent board, before whom each intentional or careless mis-statement would be certain ruin. The second would make each scheme find its true value, and all parties would see the impossibility, if not the folly of the present system of, in many instances, unresisted delusion as to the dividend declared. The third would render the interest of the companies so manifestly and so exactly in accordance with their duties to the public, that additional security would be afforded. At present, the loss to the company is only in proportion to the accidental extent of the damage done, and not, as it should be in any ratio, to their own deficiences, or their servants' misconduct." " Where you do interfere," I remarked, " your strin- gency is wonderful for a favourer of railways." " I neither wish to favour nor oppress them," replied Sir George ; " on the one hand, I do not wish to see them bolstered up by false promises, false figures, and false economy ; on the other, I would save them from being retarded or injured by gratuitous interference, and an interested or ignorant cry ; I would by a few words in time rescue them from having their credit damaged, their resources cut off, and their progress impeded by a fallacy so patent that it only requires to be touched to fall to pieces. Make but (by truth and a restoration of the disturbance in your floating capital, which has arisen from other causes) railways become a rising instead of a falling market, and the difficulty about calls will dis- appear as by magic." " What say you to the general accusation, that by railways the floating or circulating capital of the country has been converted into fixed capital ?" 32 " That those who say so mistake the terms they use. The only use of money or circulating capital to its tem- porary possessor, is to disburse it on, or convert it into, fixed capital, and thus to derive profit, either present, continuing, or deferred. Till he does this, his circulating capital is of no use to him. Each individual, therefore, has only done what is natural, in converting his floating capital into fixed. To the country, however, such floating capital still retains its original character, unchanged in nature or quantity. It is only transferred through rail- ways into new hands, while the nation is richer by the additional value it adds in its passage to that fixed capital upon which it is disbursed. The real want, then, is of yet more floating capital, to finish, and secure a return for what otherwise must remain incomplete and unprofitable." " You would, then, advise me to return my thousand- pound note to the place from whence it came, by investing it in some good railway ?" " As long as you in some way add it to the general circulation, it will matter little to railways whether you transfer it to them directly, or enable others to do so, by increasing to that extent the available supply of floating eapital. Money, like air, will find its way where there is a vacuum, either immediately or by replacing that which has done so. My only advice is, that you invest it in some way ; as the mere contemplation of it, which seems to give you so much pleasure, is rather an expensive luxury, and costs you at the present moment somewhere about a guinea a-week." I immediately determined to send out, on further ad- ventures, my thousand-pound note. It would be well if the Bank of England could, and each individual would at the present moment, and in different channels, send out more of " its lovely companions," with the same views. ~~£* rr - " " ' ' „,---■• : S . PRINTED BY T. BRETTEJ/T:, RUPERT STREET, HAYMARKET, LONDON. BY .THE SAME AUTHOR. THE MONETARY CRISIS; WITH A PKOPOSAL FOR PRESENT RELIEF, AND INCREASED SAFETY IN FUTURE. RIDGWAY ; AND ALL BOOKSELLERS. LONDON : PRINTED RY T. BftETTELL. RUPERT STREET, HAVMARKLT. 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. This book is due on the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. 7-10C5 8 3 pgC'P LP H\H25'66-9ftM JULMJ991 mm APR 8 1991 LD 2lA-60m-3,'65 (F2336sl0)476B General Library University of California Berkeley C031flMz bl4 vL |Hg : m