Those few of you who are regular readers will know that I am several joyous months into my task of listening to the entire Librivox recording of Macaulay’s five volume History of England from the Accession of James the First, supplemented by reference to my lovely ex –W.H. Thompson calf bound edition. Thus my historical creed is becoming steadily transformed into that of an undiluted Victorian Whig. Let me tell you it is a wonderful place to be. I realise at some point, for the sake of my quasi-academic soul I will have to raise myself above the glow of comforting certainty and gorgeous prose for the sake of more modern analysis by less elegant writers, but for now, let me bathe in Macaulay’s light.
I don’t want to give the impression, however, that Macaulay is all about prose and no substance. His analysis is extensive and, although guided by prejudices which are sometimes no longer ours, his conclusions are often surprisingly modern.
In 1693, Macaulay tells us, William and Mary are now reasonably secure on the throne, William has drawn Britain into his European coalition against France. Warfare, by the close of the Seventeenth Century (or the beginning of the Long 18th, if you prefer) has increased in scale and expense, both military and naval. Meanwhile the developing economy is starting to generate more and more private wealth. England follows other Europeans in giving a stable investment for this money whilst financing William’s war by instigating the National Debt.
Writing, remember, from his perspective of a mid-Victorian Britain nearing the zenith of her Imperial and Military power, Macaulay says:
Such was the origin of that debt which has since become the greatest prodigy and confounded the pride of statesmen and philosophers. At every stage in the growth of that debt the nation has set up the same cry of anguish and despair. At every stage in the growth of that debt it has been seriously asserted by wise men that bankruptcy and ruin were at hand. Yet still the debt went on growing; and still bankruptcy and ruin were as remote as ever.
To Macaulay, the reason for this happy circumstance is that (although he doesn’t use this exact phase) Economic Growth will always out-pace a reasonable growth in the National Debt.
The power of a society to pay its debts is proportional to the progress which that society has made in industry, in commerce, and in all the arts and sciences which flourish under the benignant influence of freedom and equality under law
Almost the creed of the Victorian Whig! We are all now, of course, asking the seemingly obvious question, “but what if the growth stops?”. Macaulay’s supposition cannot be dismissed however as Victorian quaintness- it was a policy assumption of the last Labour government, and indeed most ostensively creditworthy governments until quite recently.
Macaulay, though, saw public borrowing as an expedient for exceptional circumstances, to be incurred to finance necessary wars, great public need, such as the re-coinage of 1696 or other public works- reminiscent of Gordon Brown’s laudable (especially with hindsight) but briefly enforced “Golden Rule” from the early days of his chancellorship. Generally however, modern governments have seen this presumption of growth as a justification to outspend their income.
Macaulay, champion of the debt did, in fact look to the future:
Long experience justifies us in believing that England may, in the 20th century, be better able to bear a debt of sixteen hundred millions than she is at the present time to bear her present load.
Even he might have been shocked that, at the close of the 20th Century Britain’s debt would be £350 Billion, twenty odd times his £1.6 Billion estimate.
My point is not however, to debate modern fiscal policy. What do I know after all? What interests me that Macaulay’s perceptive statement that for the previous 160 years, the debt had been repeatedly pronounced as unsustainable, when faced with circumstances which must have appeared dire to those experiencing them. He warns us against making similar prognoses and he has been proved right for 150 years after his death. Whether this is the occasion when this breaks down, only time will tell, but our Victorian sage even from beyond the grave advises that history strongly suggests otherwise.
Another ubiquitous theme of the commentary on the post-Lehmann’s Brothers financial world has been condemnation of the recklessness of bankers. Until the end of the 20th Century, the new wisdom holds, bankers were the models of not only respectability but probity and caution- a kind of Captain Mainwaring writ large. Yet Macaulay writes of the public attitudes towards the embryonic bankers of the later Seventeenth Century
these userers, it was said, played at hazard with what had been earned by the industry and hoarded by the thrift of other men. If the dice turned up well, the knave who kept the cash became an alderman: if it turned up ill , the dupe who furnished the cash became a bankrupt.
Although far more pithily put that any modern commentator would even attempt, this echoes the sentiments voiced by demagogues, politicians, pundits and and the public over the last few years. I am not attempting to defend modern bankers (besides such defence being a lynching offence, at least some of the criticism seems entirely justified) but it is intriguing to see such sentiments voiced, once again by a man 150 years ago about the attitudes a century and a half before his time.
And just to show that Macaulay is not the oldest text with wisdom for us. Although I make no claim to the creed, I give you Ecclesiastes 1 (King James Bible)
The thing that has been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.
Is there any thing of which it may be said, See, this is new? it has been already of old time, which was before us.
There is no remembrance of former things; neither shall there be any remembrance of things that are to come with those that shall come after.
For those of you with an interest in the post Glorious Revolution origins of National debt and late Seventeenth Century Economics, my friend D’Maris Coffman has just published Excise Taxation and the Origins of Public Debt. I can’t claim to have read it yet, but knowing Maris’ acute insight into both history and economics, I don’t doubt it will be worth it.