THE TWO NATIONS THE TWO NATIONS A FINANCIAL STUDY OF ENGLISH HISTORY By CHRISTOPHER HOLLIS Author of " The Bl'eakdown of Money", etc. I LONDON GEORGE ROUTLEDGE AND SONS, LTD. BROADWAY HOUSE: 68-74 CARTER LANE, E.C. 1937 First Published 1935 1937 Made and Primed in Great Britain by PERCY LUND. HUMPHRIES f!:1 co. LTD. U BetQord Square, Landon. W.e.I and at Braqford THE TWO NATIONS " Say what you like, our Queen reigns over the greatest nation that ever existed." "Which nation? " asked the young stranger, "for she reigns over two ... two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other's habits, thoughts and feelings, as if they were dwellers in different zones, or inhabitants of different planets; who are formed by a different breeding, are fed by a different food, are ordered by different manners and are not governed by the same laws." " You speak of-" said Egremont hesitatingly. "THE RICH AND THl': POOR." Disraeli's Sybil, Book ii, Chapter 5. v TO R. McNAIR WILSON My dear Wilson, Our minds move so much along the same paths, so large is the debt that I owe to you for having brought me to those paths that it is but fitting that I should offer you the dedication of this work. The footnotes give the authorities for the statistics and for the quotations which appear in the text. From the text, too, it will, I think, be sufficiently clear who are the writers of the past by whose teaching I have been led to my conclusions. Among living writers in this, as in all that I have ever written, I gratefully recognize the debt which I owe to Mr. G. K. Chesterton-a debt so large that, in accordance with the best traditions of international finance, I intend never to repay it. This is a very different book from any book that Mr. Chesterton would himself write. But it will not have been without its value if it serves to show-what Mr. Chesterton's own brilliance and wit have sometimes concealed-that the dullest and driest of statistics are often clamorous upon his side. It is worth while being dull if by doing so one can prove to the British public that Mr. Chesterton, when he is brilliant, is also right. I am under obligation, too, to many others-to some who had no notion that, when they were talking to me, they were helping me to write a book. But in particular I should like to mention, and to recommend to those who have not come across it, A Main Cause of Unemployment, by Mr. P. C. Loftus, M.P. When I consulted Mr. Loftus on a point, his modesty caused him to say that he owed his own theories to Holsinger's Mystery of the Trade De­ pression, but, if it was so, I can only reply as Voltaire replied to the quip that Homer wrote Virgil. If Holsinger wrote Loftus, it was his best work. Finally I should like to thank Lord Oxford and Mr. Douglas Woodruff for revising the proofs and my wife for performing the thankless task of making an index. CHRISTOPHER HOLLIS. vii CONTENTS CHAPTER PAGE I. THE MEDIEVAL MANAGED CURRENCY AND ITS CoLLAPSE I II. THE FAILURE OF THE STUARTS • 12 Ill. THE ORANGE 28 IV. THE ORIGIN OF THE PROGRESSIVE LEGEND 35 V. BISHOP BERKELEY 53 VI. THE AMERICANS AND THE WHIGS 65 VII. THE FIRST BREAKDOWN 74 VIII. UNNECESSARY POVERTY 85 IX. CHEQUES AND NOTES 103 X. THE REPEAL OF THE CORN LAWS II3 XI. THE FIRST REVOLTS 125 XII. THE TURN OF THE TIDE . 141 XIII. THE EXCEPTIONAL AUXILIARY 154 XIV. DISRAELI'S RULE 165 XV. IRELAND. 179 XVI. MACHINE RUNNING DOWN 186 X VII. AMERICA 200 XVIII. THE 1920'S 221 XIX. CRISIS AND THE COUNTER ATTACK 234 EPILOGUE 250 INDEX 255 Ut THE TWO NATIONS CHAPTER I THE MEDIEVAL MANAGED CURRENCY AND ITS COLLAPSE There is one central truth running through all history. It is that a steeply falling price-level inflicts such wide­ spread suffering that no attempt drastically to reduce a price-level has ever been permanently successful. Once prices have been allowed to rise, whether by dishonesty, by wise policy, or by miscalculation, experience has invariably proved that there has been no alternative but to accept the new price-level as a fait accompli. A falling price-level inflicts great hardship and injustice-­ on producers and debtors. A rising price-level also, it may be argued, inflicts hardship and injustice-on creditors and those who live on fixed incomes. The rise may be as unjust as the fall, but those who suffer from the rise are in no position to hit back at the society which has robbed them. Those who suffer from the fall-the producers -can always compel society to suffer with them by refusing to produce if it is not made worth their while to do so. Therefore it has happened throughout the course of centuries that prices have sometimes risen but have never sub­ stantially fallen. By consequence they are to-day, in England as in every other country, greater by a very considerable multiple than they were at any date in the distant past. It is also true that, had the country lived under an automatic monetary system, as that phrase is often under­ stood-that is, had the amount of money in the country been dependent merely on the amount of silver or gold in the country and that amount in its turn been dependent [ 2 THE TWO NATIONS on the accidents of commerce and mining-in many periods of history prices must inevitably have fallen. A country's productivity as a rule increases gradually from generation to generation; the proportion of goods produced that are sold for money on a market tends to increase. On the other hand, throughout a large portion of the world's history-from Roman times, for instance, almost until the discovery of America-there has been no important addition to the world's supply of precious metals at all. Had it been merely England that was short of silver in the Middle Ages, the problem would have righted itself without management. The shortage of silver would have caused low prices in England, and the low prices in England would have caused the owner of silver in, say, France to spend his money in England where he could buy more for it. Thus silver would have flowed into England until the price-level was restored. But in the late medieval Europe there was no country that was possessed of this surplus of silver. It is clear then that, had the currency not been managed then, prices must have fallen. In medieval Europe we lived under a managed currency. The way in which it was managed was as follows. From time to time the weight of silver in every coin was reduced. Thus the number of coins that could be coined out of a constant amount of silver was increased, and by this means an increased monetary supply was put out to buy the increased quantity of goods and a fall in prices prevented. If we study a list of medieval prices such as that collected by Thorold Rogers.! we find that, owing to the poverty and slowness of communications, there were considerable local and seasonal variations of price in the different com­ modities. Yet at the same time, for the hundred and fifty years before the Black Death-the high period of the Middle Ages-the general price-level was held absolutely steady. Then, with the Black Death and the consequent sudden decrease of productivity, prices jumped up by about 20 per cent. Edward III had the wisdom to accept the new price-level as a fait accompli and not to attempt to force it down again to the pre-Black Death level. They 1 History of Agriculture and Prices, vol. ii. MEDIEVAL MANAGED CURRENCY 3 remained steady at the new level until the end of the century. Then came the revolution of 1399 against Richard 11, a sort of Catholic dress-rehearsal of 1688, the overthrow of the true English monarchy, and the establishment in its place of the Lancastrian monarchy, which was a cross between a monarchy and a plutocratic republic. For the first time in English history power passed into the hands of men who wished to play tricks with the price-level. As a result it fluctuated about wildly. According to the computation which Mr. Feaveryear 1 has made from Thorold Rogers's figures of a price-index of commodities not dependent on the chance of harvest, if prices were 100 in 1400, by 1402 they had risen to 115'3. Then they fell steadily until by 1446 they were down to 80'4-just about what they had been before the Black Death. Yet to medieval morals such a policy was so intolerably wicked that no regime could long survive which allowed it to be practised. Both the Yorkists and the Lancastrians learnt their lesson, and throughout the second half of the century, whoever was in power, prices remained remarkably stable. By 1500 they were at 76.8 to 1400'S 100 and there they remained until the dissolution of the monasteries and debasement of the coinage by Henry VIII in 1542. Through­ out all those hundred years they never moved more than a trifling number of points either way. With the two excep­ tions of the period of the Black Death and the quite excep­ tional first forty years of the fifteenth century, prices moved far less in a hundred years in the Middle Ages than they have often moved in a single year in our times.