Blackwood's Edinburgh Magazine, Volume 66, No. 410, December 1849

"It is one great evil of the present age, that it persists in regarding the debt as perpetual. Immediately the expenditure is exceeded by the revenue, there is a demand for the reduction of taxation. We, a commercial people, brought up at the feet of M'Culloch, with the books of national debt as a constant study, with the interest on the national debt as a constant remembrancer, persist in scoffing at any idea of decreasing the encumbrance: and when a Chancellor of the Exchequer proposes a loan of eight millions, we growl and grumble, call it charitable, trust for better times, and read the Opposition papers with renewed zest.

There is no doubt that the resources of the nation are equal to far more than is now imposed; but it can only be done by an efficient revision of our taxation, and this will never be effected till the wolf is at the door. A war which greatly increased our yearly imposts would, with the present system, crush the artisan, paralyse the middle class, and scarcely leave the landed proprietor unscathed. The convertibility of the note of the Bank of England would cease; and it would be impossible to preserve the charter of Sir Robert Peel in its entirety, while twenty-eight millions were claimable yearly in specie, and the gold of the country went abroad in subsidies.

In an earlier portion of the volume, the writer briefly advocated annuities as one mode of treating the national debt. There would in this be no breach of faith to the present public; there would be no dread of a general bankruptcy; there would be no need of loans; and, had this principle been carried out, the national debt would be yearly diminishing. In ten years, nearly two millions of terminable annuities will expire, and it behoves the government to inquire into the effect which the conversion of the interminable debt into terminable annuities would have on the money market.

It is absolutely idle for the Financial Reform Association to think of effectually lowering the taxation of the country, while twenty-eight millions are paid for interest; and it is to be feared that great evil will accompany whatever good they may achieve. That there are many offices which might be abolished; that it is a rule in England that the least worked should be best paid; that an extravagant system of barbaric grandeur exists; that the army and the navy, the pulpit and the bar, are conducted unwisely; and that great men are paid great salaries for doing nothing, – is indisputable; but it is equally so that great savings have been effected, and that greater efforts are making to economise further. There is a faith pledged to the public servant as much as to the public creditor; and, whether he be a colonel or a clerk, a man of peace or a man of war, it is impracticable, imprudent, and unjust to attempt that which would as much break faith with him, as to cease to pay the dividends on the national debt would be to break faith with the national creditor.

These things are paltry and puerile compared with that which, excepting a total revision of taxation, can alone materially meet the difficulties of England; and the gentlemen of the Reform Association are aware of this. They may cut down salaries; lower the defences of the country; abolish expensive forms and ceremonies; amalgamate a few boards of direction; reduce the civil list; and do away with all sinecures. But the evil is too vast, and the difficulties are too gigantic, to be met in so simple a manner. Nor will these gentlemen be satisfied with it while there are eight hundred millions at which to level their Quixotic spear. Repudiation was darkly alluded to at one meeting of the Association, and, though it has since been denied, it is to be feared that time only is required to ripen the attempt."

Turn we now from the national debt to its eldest offspring, the Exchange. Marvellous indeed are the scenes to which we are introduced, whether we read its history as in the time of William of Orange, enter it at the period when the South Sea bubble had reached its utmost width of distension, or tread its precincts at a more recent date, when railway speculation was at its height, and the Glenmutchkin at a noble premium. John Bunyan could not have had a glimpse of it, for he died in 1688: nevertheless his Vanity Fair is no inaccurate prototype of its doings. No stranger, indeed, may enter the secret place where its prime mysteries are enacted: if any uninitiated wight should by chance or accident set foot within that charmed circle, the alarm is given as rapidly as in Alsatia when a bailiff trespassed upon the sanctuary. With a shout of "Fourteen hundred fives!" the slogan of their clan, Jew, Gentile, and proselyte precipitate themselves upon the rash intruder. In the twinkling of an eye, his hat is battered down, and amidst kicks, cuffs, and bustling, he is ejected from the temple of Mammon. But, lingering in the outer court and vestibule, we can gain some glimpses of the interior worship; imperfect, indeed, but such as may well deter us from aspiring to form part of the congregation.

The creation and transferable character of public funds, necessarily involved the existence of a class of men who deal in such securities. That class multiplied apace, and multiplied so much that, after a time, the commissions exigible for each boná fide transaction could not afford a decent subsistence for all who were engaged in the business. People who buy into the stocks with a view to permanent investment, are not usually in a hurry to sell; and this branch of the profession, though, strictly speaking, the only legitimate one, could not be very lucrative. Gambling was soon introduced. The fluctuations in the price of the funds, which were frequent in those unsettled times, presented an irresistible temptation to buying and selling for the account – a process by means of which a small capital may be made to represent fictitiously an enormous amount of stock: no transfers being required, and in fact no sales created, the real stake being the difference between the buying and the selling prices. But, the natural fluctuations of the stocks not affording a sufficient margin for the avarice of the speculators, all sorts of deep-laid schemes were hatched to elevate or depress them unnaturally. In other words, fraud was resorted to, from a very early period, for the purpose of promoting gain. The following may serve as an example: – "The first political hoax on record occurred in the reign of Anne. Down the Queen's road, riding at a furious rate, ordering turnpikes to be thrown open, and loudly proclaiming the sudden death of the Queen, rode a well-dressed man, sparing neither spur nor steed. From west to east, and from north to south, the news spread. Like wildfire it passed through the desolate fields where palaces now abound, till it reached the City. The train-bands desisted from their exercise, furled their colours, and returned home with their arms reversed. The funds fell with a suddenness which marked the importance of the intelligence; and it was remarked that, while the Christian jobbers stood aloof, almost paralysed with the information, Manasseh Lopez and the Jew interest bought eagerly at the reduced price." The whole thing was a lie, coined by the astute Hebrews, who then, as now, accumulated the greater part of their money in this disgraceful and infamous manner, and doubtless had the audacity even to glory in their shame. A more ingenious trick was played off in 1715, when a sham capture was made in Scotland of a carriage and six, supposed to contain the unfortunate Chevalier St George. The news, being despatched to London, instantly elevated the funds, "and the inventors of the trick laughed in their sleeves as they divided the profit." Modern jobbers will doubtless read these records with a sigh for the glory of departed times, just as a schoolboy bitterly regrets that he was not born in the days of chivalry. Universal rapidity of communication, and the power of the press, have rendered such operations on a large scale almost impossible. The electric telegraph has injured the breed of carrier pigeons, and more than half the poetry of fraudulent stock-jobbing has disappeared.

The range of the jobbers speedily extended itself beyond the comparatively narrow field presented by the funds. Exchequer bills with a variable premium were invented and brought into the market, a large and lucrative business was done in lottery tickets, and even seats in parliament were negotiated on the Stock Exchange. Joint-stock companies next came into play, and these have ever since proved an inexhaustible mine of wealth to the jobbers. Nor were they in the least particular as to the nature of the commodity in which they dealt. Thomas Guy, founder of the hospital called after his name, acquired his fortune by means similar to those which are now made matter of reproach to the Jews of Portsmouth and Plymouth. It is a curious feature in the history of mankind, that money questionably amassed is more often destined to pious uses than the savings of honest industry. The conscience of the usurer becomes alarmed as the hour of dissolution draws nigh. "His principal dealings were in those tickets with which, from the time of the second Charles, the seamen had been remunerated. After years of great endurance, and of greater labour, the defenders of the land were paid with inconvertible paper; and the seamen, too often improvident, were compelled to part with their wages at any discount, which the conscience of the usurer would offer. Men who had gone the round of the world like Drake, or had fought hand to hand with Tromp, were unable to compete with the keen agent of the usurer, who, decoying them into the low haunts of Rotherhithe, purchased their tickets at the lowest possible price; and skilled seamen, the glory of England's navy, were thus robbed, and ruined, and compelled to transfer their services to foreign states. In these tickets did Thomas Guy deal, and on the savings of these men was the vast superstructure of his fortune reared. But jobbing in them was as frequent in the high places of England as in 'Change Alley. The seaman was poor and uninfluential, and the orders which were refused payment to him were paid to the wealthy jobber, who parted with some of his plunder as a premium to the treasury to disgorge the remainder." But frauds and injustice, even when countenanced by governments, have rarely other than a disastrous issue to the state. So in the case of those seamen's tickets. That the wages due to the sailor should have fallen into arrears during the reigns of Charles and of James, need excite little surprise, when we remember that the revenue in their day never exceeded two millions annually. But that the abuse should have been continued after the revolutionary government had discovered its easy method of raising subsidies – more especially when ample proof had been given of the danger of such a system, by the want of alacrity displayed by the English seamen when the Dutch fleet burned our vessels in the Thames and threatened Chatham – is indeed matter of marvel, and speaks volumes as to the gross corruption of the times. So infamous was the neglect, that at length the sailors' tickets had accumulated to the amount of nine millions sterling of arrears. Not one farthing had been provided to meet this huge demand; and in order to stay the clamours of the holders – not now mariners, but men of the stamp of Thomas Guy, – parliament erected them into that body known as the South Sea Company, the transactions of which will ever be memorable in the commercial history of Great Britain.

The existence of this company dates from the reign of Queen Anne; but for some years its operations were conducted on a small scale, and it only assumed importance in 1719, when exclusive privileges of trading within certain latitudes were assured to it. We quote from Mr Doubleday the following particulars, which utterly eclipse the grandeur of modern gambling and duplicity.

"As soon as the act had fairly passed the Houses, the stock of the company at once rose to three hundred and nineteen per cent; and a mad epidemic of speculative gambling seemed, at once, to seize the whole nation, with the exception of Mr Hutchison, and a few others, who not only preserved their sanity, but energetically warned the public of the ultimate fate of the scheme and its dupes. The public, however, was deaf. The first sales of stock by the Court of Directors were made at three hundred per cent. Two millions and a quarter were taken, and the market price at one reached three hundred and forty– double the first instalment according to the terms of payment. To set out handsomely, the Court voted a dividend of ten per cent upon South Sea Stock, being only a half-yearly dividend, payable at midsummer 1720. To enable persons to hold, they also offered to lend half a million on security of their own stock; and afterwards increased the amount to a million, or nearly so. These bold steps gained the whole affair such an increase of credit, that, upon a bare notice that certain irredeemable annuities would be received for stock, upon terms hereafter to be settled, numbers of annuitants deposited their securities at the South Sea House, without knowing the terms! About June, when the first half-yearly dividend was becoming due, the frenzy rose to such a pitch, that the stock was sold at eight hundred and ninety per cent. This extravagance, however, made so many sellers, that the price suddenly fell, and uneasiness began to be manifested; when the Directors had the inconceivable audacity to propose to create new stock at one thousand per cent, to be paid in ten instalments of one hundred pounds each. Strange to relate, this desperate villany turned the tide again, and, to use the words of Anderson, 'in a few days the hundred pound instalment was worth four hundred!'"

We invariably find that the success, whether real or pretended, of any one scheme, gives rise to a host of imitations. If any new company, whatever be its object, is started, and the shares are selling at a premium, we may look with perfect confidence for the announcement of six or seven others before as many days have elapsed. This is, of course, partly owing to the cupidity of the public; but that cupidity could not manifest itself so soon in a tangible form, but for the machinations of certain parties, who see their way to a profit whatever may be the result of the speculation. Amidst the ruin and desolation which invariably follow those seasons of infuriated and infatuated gambling, to which we are now almost habituated, such men preserve a tranquil and a calm demeanour. And no wonder: they have reaped the harvest which the folly of others has sown. At the hottest and most exciting period of the game, they have their senses as completely under control as the sharper who has deliberately dined on chicken and lemonade, with the prospect of encountering afterwards an inebriated victim at Crockford's. They may play largely, but they only do so while their hand is safe; the moment luck changes, they sell out, and leave the whole loss to be borne by the unfortunate dupes, who, believing in their deliberate falsehoods, still continue to hold on, trusting to the advent of those fabulous better times which, in their case, never can arrive. It has been so in our own times, and it was so when the South Sea bubble was expanding on its visionary basis. Multitudes of minor schemes were projected, subscribed for, and driven up to an exorbitant premium. The shares of really solid companies participated in the rise, and mounted correspondingly in the market. The nominal value of all the sorts of stock then afloat was computed at no less than five hundred millions; being exactly double the estimated value of the whole lands, houses, and real property in the kingdom!

The collapse came, and brought ruin to thousands who thought that they held fortune within their grasp. The history of the downfall is not less suggestive than that of the rapid rise. It has had its parallel in our days, when the most rotten and unsubstantial of companies have brazened out their frauds to the last, doctored accounts, declared fictitious dividends, and threatened with legal prosecution those who had the courage and the honesty to expose them.

"The minor bubbles burst first, when the South Sea schemers were foolish enough to apply for a scire facias against their projectors, on the ground that their schemes injured the credit of the grand scheme. This turned quondam allies into furious enemies. The scire facias was issued on 13th August 1720, when the downfall began; and Mr Hutchison saw his predictions completely fulfilled. The South Sea villains, in sheer desperation, declared a half-yearly dividend of thirty per cent due at Christmas, and offered to guarantee fifty per cent per annum for twelve years! They might as well have declared it for the thirtieth of February. Everything was done to prop the reputation of the directors, but all was in vain; and when the stock fell at last to one hundred and seventy-five, a panic ensued, and all went to the ground together, totally ruining thousands, and nearly dragging the Bank and East India Company along with it."

Mr Francis gives us some interesting anecdotes of the casualties arising from this gigantic scheme of imposture. Gay, the author of the Beggar's Opera, was a holder of stock, and at one time might have sold out with a profit of twenty thousand pounds – an opportunity very rarely vouchsafed to a poet. In spite of shrewd advice, he neglected his chance, and lost every penny. One Hudson, a native of Yorkshire, who had succeeded to a large fortune, went deeply into the scheme. From a millionnaire he became a beggar and insane, and wandered through the streets of London a pitiable object of charity. But it would be work, of supererogation to multiply instances of similar calamity. They are reproduced over and over again at the conclusion of every fit of wild and reckless speculation; and yet the warning, terrible as it is, seems to have no effect in restraining the morbid appetite.

It would, we apprehend, be impossible to find any one who will advocate gambling upon principle; though a multitude of excellent persons, who would shrink with horror were the odious epithet applied to them, are, nevertheless, as much gamblers as if they were staking their money at rouge-et-noir or roulette. The man who buys into a public stock with the intention of selling in a week or a fortnight, in the expectation of doing so at an advanced price, or the other who sells shares which he does not possess, in the confident belief of a speedy fall, is, in everything save decency of appearance, on a par with the haunter of the casino. He may, if he so pleases, designate himself an investor, but, in reality, he is a common gamester. This may be a hard truth, but it is a wholesome one, and it cannot be too often repeated, at a time when general usage, and yielding to temptation, have perverted words from their ordinary significance, and led many of us to justify transactions which, when tried by the standard of morality, and stripped of their disguise, ought to be unhesitatingly condemned. "He that loveth gold shall not be justified," said the son of Sirach. "Many have sinned for a small matter; and he that seeketh for abundance will turn his eyes away. As a nail sticketh fast between the joinings of the stones, so doth sin stick close between buying and selling." This spirit, when it becomes general in the nation, cannot be otherwise than most hurtful to its welfare, since it diverts the thoughts of many from those industrial pursuits which are profitable to themselves and others, and leads them astray from that honourable and upright course which is the sure and only road to wealth, happiness, and esteem. This has been, to a certain extent, acknowledged by government, even within our own time. The pernicious effect of the lotteries, originally, a state device, upon the morals and condition of the lower classes, as testified by the vast increase of crime, became at length so glaring, that these detestable engines of fraud were suppressed by act of parliament. They still linger on the Continent, as most of us have reason to know from the annual receipt of documents, copiously circulated by the Jews of Hamburg and Frankfort, offering us, in exchange for a few florins, the chance of becoming proprietors of several chateaux on the Rhine, with boar-forests, mineral springs, vineyards, and other appurtenances. We presume, from the continuity of the circulars, that Israel still finds its dupes; but we never happened, save in one of Charles Lever's novels, to hear of any person lucky enough to stumble on the ticket which secured the right to Henkersberg, Bettlersbad, or Narrenstein. The extent to which lottery gambling was carried in this country seems to us absolutely incredible. Derby sweeps were nothing to it.

"In 1772," says Mr Francis, "lottery magazine proprietors, lottery tailors, lottery staymakers, lottery glovers, lottery hatmakers, lottery tea merchants, lottery barbers – where a man, for being shaved and paying threepence, stood a chance of receiving £10; lottery shoeblacks, lottery eating-houses – where, for sixpence, a plate of meat and the chance of 60 guineas were given; lottery oyster-stalls – where threepence gave a supply of oysters, and a remote chance of five guineas, were plentiful; and, to complete a catalogue which speaks volumes, at a sausage-stall, in a narrow alley, was the important intimation written up, that, for one farthing's worth of sausages, the fortunate purchaser might realise a capital of five shillings. Quack doctors, a class which formed so peculiar a feature in village life of old, sold medicine at a high price, giving those who purchased it tickets in a lottery purporting to contain silver and other valuable prizes."

A new discovery was presently made, which had a serious effect upon trade. Money-prizes were discontinued, and shopkeepers, parcelling out their goods, disposed of them by lottery. As a matter of course, this business, commenced by disreputable adventurers, proved most injurious to the regular dealer. People refused to buy an article at the regular price, when it might be obtained for next to nothing. They were, however, utterly wrong, for the staple of the prize goods, when inspected, proved to be of the most flimsy description. Tickets in the state lotteries became the subject of pawn, and were so received by the brokers, and even by the bankers. Suicide was rife; forgery grew common; theft increased enormously. Husbands and fathers saw their wives and children reduced to absolute starvation, and weeping bitterly for bread, and yet pawned their last articles of household furniture for one more desperate chance in the lottery. Wives betrayed their husbands, and plundered them, for the same purpose. Servants robbed their masters; commissions and offices were sold. Insurance was resorted to, to accommodate all classes. Those who had not money to pay for tickets might insure a certain number for a small sum, and thus obtain a prize; and so lottery grew upon lottery, and the sphere was indefinitely extended. It was not until 1826 that this abominable system, was finally crushed. The image of the vans, placards, and handbills of Bish is still fresh in our memory; and we pray devoutly that succeeding generations may never behold a similar spectacle.

It would be in vain for us, within the limits of an article, to attempt even the faintest sketch of the speculative manias which, from time to time, have affected the prosperity of Great Britain. Some of these have been quite, as baseless as the South Sea bubble, and may be directly traced to the agency and instigation of the Stock Exchange. Others were founded upon schemes of manifest advantage to the public, and even to the proprietary, if cautiously and wisely carried out; but here again the passion for gambling has been insanely developed, and encouraged by those who sought to make fortunes at the expense of their dupes. There is at all times, in this country, a vast deal of unemployed capital, which, in the cant phrase, "is waiting for investment," and which cannot well be invested in any of the ordinary channels of business. The fact is, that within the area of Britain, it has been long difficult for a capitalist to select a proper field of operation; and the tendency of recent legislation has materially increased the difficulty. The country, in fact, may be considered as entirely made. Agricultural improvement, on a large scale, which implied the possession of a tract of unprofitable country, was considered, even before the repeal of the corn laws, as no hopeful speculation. Since that disastrous event, the chances have naturally diminished; and we suspect that, by this time, very few people have any faith in Sir Robert Peel's proposal for establishing new colonies in Connaught. When we find the Whig Lord Monteagle denouncing free trade as the bane of Ireland, we may be sure that few capitalists will sink their funds in the western bogs, hoping that they may appear again in the shape of golden grain which may defy the competition of the fertile valleys of America. We have quite enough of factories for all the demand which is likely to come for years: instead of building new ones, it is always easy, if any one has a fancy for it, to purchase abandoned mills at a very considerable discount; but we do not find such stock eagerly demanded in the market. Foreign competition has extinguished several branches of industry to which capital might be profitably applied, and materially injured others; so that moneyed men really are at a loss for eligible investment. This want has been felt for a long time; and the uncertain policy of our ministers, with regard to colonial affairs, has undoubtedly had an injurious effect upon the prosperity of these dependencies. We have annihilated much of the capital invested in the West Indies, and have withdrawn a great deal more. It is long since Adam Smith urged the propriety and the policy of identifying some of our more important colonies with Great Britain, by the simple process of incorporation, thus extending materially the field of the capitalist upon security equal to that which he can always command at home. Such an opportunity is at this moment afforded by Canada; but it seems that we will rather run the risk of seeing Canada merge in the United States than make any sacrifice of our pride, even where our interest is concerned. A considerable deal of capital has gone to Australia; but we suspect, from late events, that the future supply will be limited.