Chapter III · (continued 3)

"Though unable to recommend the adoption of what is commonly known as bimetallism, we desire it to be understood that we are quite alive to the imperfections of standards of value, which not only fluctuate but fluctuate independently of each other, and we do not shut our eyes to the possibility of future arrangements between nations which may reduce these fluctuations. One uniform standard of value for all commercial nations would, no doubt, be a great advantage. But we think that any premature and doubtful step might, in addition to its other dangers and inconveniences, prejudice and retard progress to this end.

"We think also that many of the evils and dangers which arise from the present condition of the currencies of different nations have been exaggerated, and that some of the expectations of benefit to be derived from the changes which have been proposed would, if such changes were adopted, be doomed to disappointment.

"Under these circumstances we have felt that the wiser course is to abstain from recommending any fundamental change in the system of currency under which the commerce of Great Britain has attained its present development."

From these opinions dissent was directly expressed in Part III. of the report by the remaining members—Sir Louis Malet, A.J. Balfour, Henry Chaplin, Sir D. Barbour, Sir W.H. Houldsworth, and Sir Samuel Montague.

DISSENT FROM REPORT OF COMMISSION

"We cannot doubt that if the system which prevailed before 1873 were replaced in its integrity most of the evils which we have above described would be removed; and the remedy which we have to suggest is simply the reversion to a system which existed before the changes above referred to were brought about—a system, namely, under which both metals were freely coined into legal tender money at a fixed ratio over a sufficiently large area.

"The remedy which we suggest is essentially international in its character, and its details must be settled in concert with the other powers concerned.

"It will be sufficient for us to indicate the essential features of the agreement to be arrived at, viz.:—

"1. Free coinage of both metals into legal tender money.

"2. The fixing of a ratio at which the coins of either metal shall be available for the payment of all debts at the option of the debtor.

"We submit, therefore, that the chief commercial nations of the world, such as the United States, Germany, and the states forming the Latin Union, should, in the first place, be consulted as to their readiness to join with the United Kingdom in a conference, at which India and any of the British colonies which may desire to attend shall be represented, with a view to arrive, if possible, at a common agreement on the basis above indicated."

Such a report was claimed as a victory for either side, but its doubtful tenor only confirmed the rooted suspicion of the English administration as regards any change of the currency system. And when, on the occasion of the Paris Exhibition in 1889, a free International Monetary Congress was held, as one of the numerous special congresses connected with the celebration, Great Britain was not represented among the 194 members who attended on the invitation of the organising committee. M. Magnin, governor of the Bank of France, presided at the sittings, which covered from the 11th to the 15th September. Like its predecessor, the international conference, this congress closed without direct or practical resolution. Putting out of view this congress as of a more informal nature, a period of eleven years elapsed between the still only prorogued conference of Paris of 1881 and the conference of Brussels in 1893. This—as yet the last—conference was summoned on the initiative of the United States, but from the commencement a distinct difference of tone and method made itself felt; the Government of the United States recognising that some European countries might not be willing to adopt the remedy which they would prefer, namely, "the establishment of some fixity of value between gold and silver, and the free use of silver as a coin metal, upon a ratio to gold to be fixed by an agreement between the great commercial peoples of the world." The invitation to and purpose of the conference were conveyed in quite general terms, namely thus, "For the purpose of considering what measures, if any, could be taken to increase the use of silver in the currency systems of nations."

THE BRUSSELS CONFERENCE

The invitation was accepted by all the most important states, and at the first meeting, on 26th November 1892, the delegates of twenty Governments were present, namely, Austria, Hungary, Belgium, Denmark, France, Germany, Great Britain, British India, Greece, Italy, Mexico, The Netherlands, Norway, Portugal, Roumania, Russia, Spain, Sweden, Switzerland, Turkey, and the United States.

The proceedings were opened by M. Beernaert, President of the Council and Finance Minister of Belgium. M. Montefiore Levi, senator, and delegate of Belgium, was chosen as president, and his Excellency, M. Edwin H. Terrell, Minister of the United States at Brussels, and one of the delegates of the United States, was chosen vice-president.

At the second meeting the American delegates submitted a scheme for international bimetallism, but, in conformity with the terms of the invitation, at the same time expressed a hope that the powers represented would consider and submit other plans for the enlarged use of silver. Two such proposals they themselves suggested for discussion—(1) the plan of M. Moritz Levy, proposed at the conference of 1881, and (2) the plan proposed by the late Dr. A. Soetbeer. The main design of both these proposals was to increase the use of silver, by substituting silver coins or notes based on silver, for such small gold coins and small notes based on gold as are at present in circulation.

At the same session the delegates of Germany, Austria, and Russia explained that they were instructed not to express an opinion or to vote upon any resolution. Roumania, Portugal, Turkey, and Greece not having special instructions, felt themselves compelled to take up a similar attitude. Finding that France and the States of the Latin Union were apparently more disposed to criticism of, rather than to cordial co-operation with, the objects of the conference, the delegates of the United States did not press for a resolution on the wider question of bimetallism, and the attention of the conference was accordingly fixed on the subsidiary suggestions. To these latter, as above, was added on the same day a third, made by Mr. Alfred de Rothschild, to the effect that on condition of the United States continuing her purchases of 54 million oz. of silver yearly the different European powers should combine to make certain yearly purchases, say to the extent of £5,000,000 yearly; these purchases to be continued over a period of five years, at a price not exceeding 43 pence per oz. On a rise of silver above that price the purchases for the time being to be immediately suspended.

In committee this latter proposal was thus modified—

1. The European states which agree, upon the basis of this proposal, will buy in each year 30 million oz. of silver, on condition that the United States agree to continue their present purchases, and that unlimited free coinage be maintained in British India and Mexico.

2. The proportion of the purchases to be made by each country will be determined by agreement.

3. The purchases will be made at the discretion of and in the manner preferred by each Government.

4. These amounts of silver will be devoted in each country to the monetary uses authorised by the legislation of that state, and the silver will be either coined or made the guarantee for an issue of ordinary or special notes, as Government may think fit.

5. The arrangement will be made for five years. The obligatory purchase of silver will be suspended should the metal reach in the London market a price determined by agreement between the Governments. The purchases may be renewed, if the delegates of the different countries interested should agree upon the fixing of a new limit of price. They should be renewed in any case if the price falls below the original limit.

With regard to the Soetbeer plan it was abandoned in committee, while the Levy plan was drawn up in the following terms:—

"1. The withdrawal from circulation within a period of ... of gold coins containing a weight of less than 5.806 grms. of fine gold (20-franc pieces).

"2. The withdrawal of notes of a less value than the coin of 20 francs or its equivalent, an exception being made of notes representing a deposit of silver."

The manner of adopting and recommending these schemes to the conference from the committee was peculiar. The British delegate, Sir C. Fremantle, declared that he could not entertain the "Levy" except in conjunction with the "Rothschild" scheme, and while recommending the latter to the conference for discussion, the states of the Latin Union declared that even if passed, they could not recommend the plan to their Governments.

At the fourth session M. Boissevain declared that there were insurmountable obstacles to its adoption by the Government of the Netherlands. General Strachey said that unless it received more favour than was indicated by the report, he would be unable to support it. Mr. Allard, one of the Belgian delegates, declared that it was insufficient, and Sir Rivers Wilson declared, on behalf of himself and Sir Charles Fremantle, that recognising that this want of support would prevent them from recommending the plan to their Government, they would refrain from taking part in a detailed discussion of it, although they did not consider it inconsistent with the monometallist opinions which they held. Mr. M'Creary (delegate for the United States), then stated that he did not consider M. de Rothschild's proposal, as it stood, equitable to the United States, and therefore that he would be unable to support it.

CLOSE OF THE BRUSSELS CONFERENCE

In view of the various declarations, M. de Rothschild withdrew his plan, and there was left before the conference only the Levy plan. This latter was favourably regarded, but was radically insufficient for the situation, and not considered important enough to receive really vigorous support.

The course of the conference thereupon returned to the general discussion of the bimetallic proposal of the United States. In this discussion the attitude of reserve which the French delegates had maintained was abandoned, and M. Tirard declared with the greatest clearness that he could not advise his Government to open the French Mints to the free coinage of silver, unless there was a general agreement on the part of other nations to open their Mints also. Until, therefore, there should be a decided change of opinion on the part of Great Britain, Germany, Austria, the Scandinavian States, and other monometallic states, the question of returning to the free coinage of silver must be looked upon as settled.

In view of such declarations the delegates of the United States declared that they would not press for a vote upon the question of bimetallism. And the conference closed with a formal adjournment, should the Governments approve, to the 30th May 1893.

The close of the conference was a heavy blow to the bimetallic cause, as illustrating so fully the impossibility of any arrangement. Germany, Denmark, Sweden, and Norway, declared clearly that no change would be made on the gold basis of their currency. The delegate of Austria Hungary was equally explicit in his statement that his Government had every intention of abiding by the gold standard they were in the course of adopting.

The decided lead of France was followed punctually by Switzerland, Italy, Belgium, and Greece. The Netherlands were prepared to join a bimetallic union, provided that Great Britain formed a part of it; and Spain and Mexico were willing to adopt bimetallism, or other measures which would have the effect of raising the price of silver. No declaration was made on the behalf of Russia, though one of the delegates, speaking personally, was an active supporter of the gold standard. The Roumanian Government did not consider bimetallism a practical possibility, and Turkey and Portugal expressed no opinion.

Practically, the United States stood alone in advocacy of bimetallism. In addition to this fact, the situation was rendered much more trying for her delegates by the fact that since their appointment the presidential election had placed the Democratic party in power, and great uncertainty prevailed as to the attitude and intentions of a new President and Congress. "In these circumstances it soon became evident that the delegates were anxious for an adjournment of the question to give the new Government the opportunity of expressing their views, and that the conference would adjourn without any practical result. But, nevertheless, some very important statements and declarations were elicited in the course of the debates. In the first place, in addition to the distinct declarations on the part of some of the most important European powers that they would not entertain bimetallism, the representatives of the United States announced in very clear language that at any moment their Government might be disinclined to continue their purchases of silver, and that they were determined to protect their stock of gold. The Indian delegates alluded to the possibility of their Government finding itself under the necessity of closing its Mint to the free coinage of silver."

GOLD STANDARD FOR INDIA

Already, before the calling of the Brussels Conference, it had been recognised that, in case of failure to arrive at a bimetallic agreement, it would be essential thus far to close the Indian Mint, and to attempt the establishment of a gold standard in India. This impression, together with a draft scheme for a gold currency, was conveyed in a minute of Sir David Barbour's, addressed to the Secretary of State, 21st June 1892. As the result of correspondence between the Secretary of State for India in Council and the Government of India the British Government, on the 21st October 1892, i.e. a month before the meeting of the Brussels Conference, nominated a committee to consider the proposals submitted by the Indian Government for stopping the free coinage of silver in India, with a view to the introduction of a gold standard.

The committee consisted of—The Lord High Chancellor; The Right Hon. Leonard H. Courtney, M.P.; Sir Thomas Henry Farrer, Bart.; Sir Reginald Earle Welby, G.C.B.; Arthur Godley, Esq., C.B.; Lieutenant-General Richard Strachey, C.S.I.; Bertram Wodehouse Currie, Esq.

A hope was at first expressed that the committee would be able to make its report before the meeting of the conference at Brussels. But it was not actually made until the 31st May 1893.

India.

The part which India has played in the currency history of the world has been characteristic and uniform from the first. India is, and has been, from the birth of international commerce, the receptacle or sink for the precious metals of the civilised Western world. The fact that in so being she has constituted herself the safety-valve of the world's currencies is not confined to the present day merely. It is peculiarly applicable to the present day, with our organisation of banking and credit, which has concentrated the metallic reserves in certain burning central spots, and built thereon a superstructure of credit transactions so vast and in so delicately poised a manner that any undue addition to the metallic reserve sends a shudder of excitement and speculation through the whole, inducing over-trading and over-funding, and in the end a crisis. Such is the structure of the world's commerce that India provides an outlet or drain for any sudden crisis-bringing inflow of precious metal, and preserves the equilibrium of our system. The fact is patent to-day, because the nature of our credit and banking system is understood. But in reality this function India has performed through ages.

The influence she now exerts through impact with a highly delicate credit system, she formerly exerted on a less uniform and delicate system by the rougher influence of prices generally. The gain attending the Eastern trade in the sixteenth and seventeenth centuries was not measured by modern conceptions of dividends or trading margins. To the European trader the intercourse was attended with a double gain, commercial and financial—the latter really bimetallic in nature from the higher ratio then prevailing between silver and gold in India.

To India it meant a perpetual balance of trade in her favour, if such a phrase can be used of such a situation,—a continual inflow of precious metal. Her capacity of absorption of metal seems as large and unsatisfied as ever, and, on the assumption of an unaltered situation in Europe and America, her function in the world's currency system still remains—feasible and beneficent. It is the most difficult question attending the modern currency crisis, whether such assumption of an unaltered situation is permissible.

Further than this, as a simple matter of fact, the currency difficulty with India at the present moment is purely governmental and commercial. The Indian Government has yearly to remit a very large sum to this country in discharge of its gold obligations. In 1873-74, before the great fall in silver commenced, the amount remitted was £13,285,678, which, at the rate of exchange of 1 rupee = 1s. 10.35d., meant 142,657,000 rupees. During the year 1892-3 the amount remitted was £16,532,215, which, at the average rate of exchange in that year, 1s. 2.985d., required a payment of 264,784,150 rupees. If this could have been remitted at the exchange of 1873-74, it would only have needed 177,519,200 rupees, making a difference of 87,274,950 rupees. The result of this is to turn what would be a surplus of revenue into a large deficit. At an estimated exchange of 1s. 4d. per rupee for the past year, a surplus of revenue over expenditure was shown of 1,466,000 rupees. The exchange having fallen to an average of rather less than 1s. 3d., this surplus has been converted into an estimated deficit of 10,819,000 rupees. Notwithstanding the improvement of the revenue by 16,533,000 rupees over the budget estimate, the situation at the close of 1892 was fraught with a double danger to the Indian Government. The fall of silver—which had been such that during the year exchange could scarcely be maintained at 1s. 2 5⁄8d. for the rupee by the refusal to sell bills in India below that rate—might still proceed. And, secondly, in case of failure attending the Brussels Conference, the United States would be inevitably driven to abandon her single-handed attempt to keep up the price of silver by her silver purchases. In that case an unexampled fall of silver might be expected. The only practical solution of the difficulty was the adoption of a gold standard for India, and in order to do so at a workable rate for the rupee it would be necessary to anticipate such further fall.

So much, in very brief, for the Government situation. For the commercial,—the harassment of trade by fluctuations of exchange, the check to investments, the handicapping of the Lancashire manufactures, and so on,—all this ground is still strewn with the débris of debate and difference. As far as the currency question, pure and simple, is concerned—such, that is, as is conceived of throughout this book, viz. metallic—it is almost incapable of presentation or realisation. Through the extraordinary preference of the Indian for the precious metals as metals or as a commodity, quite apart from currency use, the ordinary action of such monetary laws as have been at work in Europe for centuries is nullified—to how great an extent it is quite impossible to estimate. The minting of silver has been such as might be expected under the conditions of free minting of a cheapening metal—i.e. it has risen on an average to the full amount of the net imports of silver. But, conversely, there has been no such reactionary influence of such mintings on the gold store of the country as would have taken place in Europe. The importations of silver have gone hand in hand with a net importation, not exportation, of gold, with no traceable evidence of bimetallic action.

The establishment of the gold standard for India is, therefore, primarily and in greatest part a governmental measure. As far as relates to such purely scientific phenomena and considerations, as have governed the European currencies for centuries, India still presents field for little or for very questionable observation.[22]

TABLE OF THE SURPLUS OR NET IMPORTS OF THE PRECIOUS METALS INTO INDIA

Year. Gold. Silver. Council Bills.

1835-6 £329,918 £1,611,896 £2,045,254

1836-7 419,724 1,338,882 2,042,232

1837-8 430,870 1,966,944 1,706,184

1838-9 258,925 2,645,130 2,346,592

1839-40 226,643 1,650,471 1,439,525

1840-1 137,312 1,401,670 1,174,450

1841-2 165,623 1,283,228 2,589,283

1842-3 211,161 2,952,445 1,197,438

1843-4 406,523 3,695,442 2,801,731

1844-5 710,100 1,988,561 2,516,951

1845-6 544,476 932,490 3,065,709

1846-7 846,949 1,378,249 3,097,042

1847-8 1,039,116 (-491,191) 1,541,804

1848-9 1,348,918 313,904 1,889,195

1849-50 1,116,993 1,273,607 2,935,118

1850-1 1,153,294 2,117,225 3,236,458

1851-2 1,267,613 2,865,357 2,777,523

1852-3 1,172,301 4,605,024 3,317,122

1853-4 1,061,443 2,305,744 3,850,565

1854-5 731,290 29,600 3,669,678

1855-6 2,506,245 8,194,375 1,484,040

1856-7 2,091,214 11,073,247 2,819,711

1857-8 2,783,073 12,218,948 628,499

1858-9 4,426,453 7,728,342 25,901

1859-60 4,284,234 11,147,563 4,694

1860-1 4,232,569 5,328,009 797

1861-2 5,184,425 9,086,456 1,193,729

1862-3 6,848,159 12,550,155 6,641,576

1863-4 8,898,306 12,796,719 8,979,521

1864-5 9,839,964 10,078,798 6,789,473

1865-6 5,724,476 18,668,673 6,998,899

1866-7 3,842,328 6,963,074 5,613,746

1867-8 4,609,467 5,593,961 4,137,285

1868-9 5,159,352 8,601,022 3,705,741

1869-70 5,592,117 7,320,337 6,980,122

1870-1 2,282,121 941,937 8,443,509

1871-2 3,565,344 6,512,827 10,310,339

1872-3 2,543,362 704,644 13,939,095

1873-4 1,382,638 2,451,383 13,285,678

1874-5 1,873,535 4,642,202 10,841,615

NET IMPORT OF SILVER AND MINTING OF NEW SILVER, 1870-92

Year. Net Imports (Rupees). New Coinage (Rupees).

1870-1 9,419,240 17,181,970

1871-2 65,203,160 16,903,940

1872-3 7,151,440 39,809,270

1873-4 24,958,240 23,700,070

1874-5 46,422,020 48,968,840

1875-6 15,553,550 25,502,180

1876-7 71,988,720 62,711,220

1877-8 146,763,350 161,803,260

1878-9 39,706,940 72,107,700

1879-80 78,697,420 102,569,680

1880-1 38,925,740 42,496,750

1881-2 53,790,500 21,862,740

1882-3 74,802,270 65,084,570

1883-4 64,051,510 36,634,000

1884-5 72,456,310 57,942,320

1885-6 116,066,290 102,855,660

1886-7 71,557,380 46,165,370

1887-8 92,287,500 107,884,250

1888-9 92,466,790 73,122,550

1889-90 109,378,760 85,511,580

1890-1 141,751,360 131,634,740

1891-2 90,221,840 55,539,700

1892-3 128,635,690 127,052,100

Total of 23 years 1,652,256,020 1,525,044,460

NET IMPORT AND MINTING OF GOLD

Year. Rupees. Rupees.

1875-6 15,451,310 171,500

1876-7 2,073,490 Nil

1877-8 4,681,290 156,360

1878-9 (Export of 8,961,730) 850

1879-80 17,505,040 147,300

1880-1 36,551,990 133,550

1881-2 48,439,840 339,700

1882-3 49,308,710 174,950

1883-4 54,625,050 Nil

1884-5 46,719,360 129,650

1885-6 27,629,350 225,850

1886-7 21,770,650 Nil

1887-8 29,924,810 Nil

1888-9 28,139,340 226,090

1889-90 46,153,030 230,500

1890-1 56,361,720 Nil

1891-2 24,137,920 248,010

1892-3 (Export of 28,126,830) ...

FOOTNOTES: