The Continental System: An Economic Interpretation

PART IV, CHAPTER IV.

EFFECTS ON THE UNITED KINGDOM

LIMITATIONS OF OBSTACLES TO EXPORTS

In order to be able to judge this matter aright, we must realize clearly the serious weakness that existed in Napoleon’s position from the standpoint of the Continental System, a weakness that lay in the fact that the very most that he could be expected to attain by his own resources was the closing of the mainland of Europe. The importance of this for his object of smothering the exports of Great Britain probably appears with sufficient exactitude if we reduce the value figures corresponding to her exports to percentages and then divide them into three groups according to countries of destination. The position is then revealed as follows:
*32

This summary shows, to judge by the position immediately before the organization of the Continental System, that at the very highest about one-third of the exports of domestic goods could be affected by the self-blockade of the Continent, although, it is true, there must be added to this three-fourths of the re-exports. It was, therefore, a factor of fundamental importance for Napoleon’s success that the United States should also be driven to the establishment of a self-blockade, inasmuch as that would put an end to another third of the exports of British goods. It is impossible to deny that in this matter he received excellent help from the British government itself, when it allowed things to come to an almost unbroken series of conflicts with America, mainly because of the Orders in Council, which as a matter of fact were never more than quite a secondary weapon in the great struggle. This meant that, strictly speaking, everything had been done which was really possible in the direction of preventing British exports; and so far Napoleon had achieved even more than he could have achieved with the resources of his own empire alone.

But precisely the development thereby created, as it is illustrated in the above figures, shows a limitation in the range even in a course of action which was so surprisingly successful, namely, that it always left trade with the rest of the world undisturbed. We see from the third column of the table how the share of this department of exports with regard to British goods increases in relative importance under the Continental System in comparison with the preceding years; and this tendency will be clear whether the situation is regarded from an English or from a continental point of view. British industry would
seek transmarine markets as substitutes for lost European ones; and it would likewise find them, as the increased selfsufficiency of the European Continent would make the rest of the world more dependent upon British supply than before. Of interest in this connexion is the fact that the Continental System gave the impulse for British transmarine exports of calicoes and prints, which had been unheard of before.
*33 And in this respect Napoleon was almost hopelessly impotent, for it must have been inconceivable to prevent for any long time the power that commanded all the seas of the world from exporting goods to other continents. Even if the self-blockade of the Continent of Europe had been complete, which was, of course, far from the case, the immediate effect would probably have been to hasten the economic orientation of Great Britain both from Europe and also, to a large extent, from the United States, to the rest of the world; and this orientation, as a matter of fact, has taken place gradually during the last hundred years and has formed one of the most significant changes in the position of Great Britain in the economy of the world. In one of his famous and most overweening utterances (1826), Canning justified British co-operation in the liberation of the South American colonies on the ground that ‘he called the New World into existence to redress the balance of the Old’. In the sphere of economics this British tendency already had century-old roots, and indeed it was precisely what was attempted under the Continental System by the speculative exports to Brazil. When one follows the later development of transmarine exports, one scarcely doubts that this speculative touch would soon have vanished if the blockade of the Continent had become permanently effective. How important the change has been since the time immediately before the Continental System is shown by the following comparison with the situation immediately before the outbreak of the World War.
*34

Unfortunately it must be regarded as impossible, in the main, to separate these effects in any kind of inductive way from the general tangle of economic development. Not even in the peculiar department of war measures does the Continental System stand in isolation; that is to say, the effects of the war and the effects of the Continental System do not coincide. Here the self-blockade of the Continent has by its
side the Orders in Council and the many other subjects of dispute with the United States, which brought about the closing of that great market to British exports; and they were accompanied also by the burdens peculiar to the war itself, which could not possibly have been without importance even if there had been a complete lack of measures and countermeasures in the sphere of commercial policy. But in addition to all this there was the circumstance that not even this complex of factors could take effect as a whole in anything which could be called, even approximately, a community in a state of economic equilibrium. On the contrary, the economic life of Great Britain would have been in a state of violent transformation quite irrespective of the Napoleonic wars, owing to all the different movements included in the industrial revolution, the effects of which were made still worse by a poor law system which was entirely devoid of guiding principles and was therefore extremely pauperizing. Finally, moreover, the confusion of the British currency caused dislocations which must be referred to yet a third cause, which was in the main independent of the others. It is manifestly impossible, under such circumstances, to arrive at more than rather general conclusions as to the effect of the Continental System on the economic life of Great Britain as a whole.

RATE OF INDUSTRIAL DEVELOPMENT

The question is not easy to answer, as the period was so short and so full of ups and downs. But one starting-point might possibly be obtained in the figures for the supply of coal, if such were available; for during the age of coal, coal has usually formed the best common standard of industrial development. As it is, however, we have no figures for the
total amount of coal produced, but only for the quantities of coal shipped from Newcastle and Sunderland; while probably the greater part, and the part that underwent the greatest increase, was consumed within the huge cotton, wool, and iron areas that lay on or behind the coal-fields. But in any case the figures (yearly averages) are of interest.
*35

These figures do not in the least degree indicate that the rate of industrial development was retarded under the Continental System, but, on the contrary, they show that the growth was not greater even during the first years of peace; and the figures for the particular years give the same impression. For the cotton industry by itself we have no figures to go by save those referring to the imports of raw cotton; and as appears from the tables given in a preceding chapter,
*36 the fluctuations here were very great from year to year. But a summary of the figures for net imports, on the same method as before, gives the following result:

Here too, therefore, we are confronted with an increase which is even several times greater than in the former case, although it falls far short of the increase during the following peace period, which, of course, is only natural.

Nor does the rest of the somewhat scattered material that is available show any visible signs that the uniquely rapid industrial development which is characteristic of this period
was retarded by the Continental System. The population of Great Britain and Ireland increased 13 per cent. between the years 1801 and 1811, as compared with 15&frac;14 per cent. during the following decade; and naturally it was considerably greater for the industrial districts. Calico-printing works quadrupled their production between 1800-14, and the exports of iron increased. Nor did the years of the Continental System form an exception to the general transition to new technical methods which constituted the
primus motor of the industrial revolution. Thus Cort’s son stated in a petition to the House of Commons in 1812 that even at that date 250,000 tons of malleable iron were annually produced by puddling and that Cort’s processes had obtained practically general acceptance.
*37 The power-loom likewise made progress, though at a considerably slower pace. A great new revolution took place in calico-printing with the year 1808, in that the pattern was transferred to the cylinders from a little steel cylinder instead of being engraved direct; and the lace machine came into existence in 1809, &c.

There was certainly no pause in the industrial revolution, nor any tendency to a backward development of the industrial life of Great Britain toward increased self-sufficiency, such as, in accordance with our previous findings, would have been the consequence of complete success for the Continental System. But, of course, it was not in that way that Napoleon himself thought of the matter; his hopes were limited to dislocations in the system.

EFFECTS OF DISLOCATION OF EXPORTS

It appears from the account in part III that these hopes were not frustrated, but, on the contrary, were very nearly fulfilled through the British crisis of 1810-11. Also it appears equally clear that this crisis cannot be regarded wholly, or even mainly (though certainly in part), as a fruit of the blows of the Continental System against Great Britain; nor was the extent of its effects at all what Napoleon had imagined.

This, then, holds good of the purely economic effects of the dislocation; with regard to its social and political effects the matter assumes quite a different aspect. Here the political economist can really neither contest nor confirm the process of thought, for the result depends almost exclusively on the character of the people in question. An impulsive race, which has also become accustomed to receiving help from the state in all things great and small, may be led by a mere trifle to overthrow a government, a constitution, perhaps a whole order of society, while another people, which is more phlegmatic and less trained to rely on the state, may leave the conduct of the state entirely undisturbed even in times of serious distress and great difficulties. It is quite obvious that Englishmen, especially during the time of the Napoleonic wars, belonged to the latter category; and as Miss Cunningham has justly observed, the rage of the unemployed was directed in the “Luddite riots” against the new machinery (frame-breaking), but not really against the government.
*38 One can easily imagine that Napoleon, with his experience of the continual
coups d’état during the French Revolution, could not see this; but this makes no difference with respect to the fact that he made a thorough miscalculation.

But to all this must be added the fact—and this is a very
important fact—that the particular kind of dislocation in Great Britain due to the Continental System which was most favourable to Napoleon, was necessarily of a comparatively superficial nature, just because it was a dislocation caused by obstacles in the way of exports and not of obstacles in the way of imports. A failure of exports can always be alleviated by production with a view to accumulating stocks—supported, if necessary, by public funds; but that is not the case with the failure of imports, for if irreplaceable commodities are irretrievably left outside no measures can be of any avail.
*39

Napoleon’s thoughts certainly did not run in that direction, and the explanation lies in an attitude we have already learned to know, and which he shared not only with all his countrymen, but also, probably, with the majority of Englishmen. But even with due allowance for this, the position he took up was very peculiar; for what England would have needed to do was pretty much what he himself did at that very time. His own remedy for unemployment, in fact, was state support in different forms, in order to enable manufacturers to continue operations; and there is no reason to suppose that he ever ceased to believe in the efficacy of this remedy. In that case it would not have been a great flight of imagination to expect the same capacity on the part of his adversaries, whose fertility of resource and endurance he was not wont to deny.

In reality, it is true, these remedies were employed in Great Britain only to a very limited extent, owing to the fact that the principle of
laissez-faire had already obtained a great influence over the classes that held political power in England. But we may certainly assume that Napoleon was not so familiar with his enemies or their economic views that he took such a factor into account. The British measures were limited to an issue of treasury bills for £6,000,000 for the support of embarrassed business men, chiefly manufacturers, the intention being to tide them over the time of waiting until the assets locked up in South America or elsewhere could be released.
The proposal on this subject, based on a precedent of 1793, had been brought forward by a committee of the House of Commons in March 1811, but was not very enthusiastically received in any quarter. None the less the plan was carried out, because no one really wished to be responsible for throwing obstacles in the way of anything that might possibly be helpful in an unusually ticklish situation.
*40

The arguments brought against the plan, especially by the economic authorities of the opposition, such as Huskisson, were especially that the crisis had been brought on by an excess of credit, which in its turn was connected with the excessive issue of notes by the Bank of England, and that these new loans would merely augment the speculation, the issue of notes and the rise of prices. To what extent this diagnosis was correct is a question that does not pertain to our present subject. We need only observe that if obstacles in the way of sale arise that are really caused by blockade and not by excessive speculation, then the transition to that form of production which in such a situation would be the right one can be rendered easier by a granting of credit that permits of a limited production for stock during the period of transition. Further, if this granting of credit is effected by
genuine saving, that is to say, by a diminution of the demand for credit for other purposes—a thing which the banks can bring about by raising the rate of discount—then there do not arise the consequences alleged by Huskisson and by those who shared his views. This implies that the dislocation at which Napoleon aimed by placing obstacles in the way of British exports could have been overcome without insuperable difficulties. As things were, one may say that, on the whole, the dislocation was overcome by itself, without any measure at all worth mentioning; and it is not impossible that this was the best way out of the difficulty.

The impenetrable conviction as to the harm of all kinds of state interference found unmixed expression when it was a question of the sufferings of the workmen. With reference
to petitions from the cotton operatives in Lancashire and Scotland, the House of Commons appointed, at the beginning of June 1811, a committee, which made its report after eight days. In that report it was stated, in the first place, ‘that no interference of the legislature with the freedom of trade or with the perfect liberty of every individual to dispose of his time and of his labour, in the way and on the terms which he may judge most conducive to his own interest, can take place without violating general principles of the first importance to the prosperity and happiness of the community’—this as a reply to the petitions of the workmen for a regulation of the actual conditions of labour. In the second place, it was laid down that help in the form of money ‘would be utterly inefficacious as to every good purpose, and most objectionable in all points of view’, and after this there was no alternative left. Nevertheless, it would be a misjudgment of the leading men of the time if we should choose to see in their position mainly indifference as to the welfare of the workers, who, on the contrary, had indisputably sincere spokesmen in both the House of Commons and in the committee in question, especially the great cotton manufacturer, Sir Robert Peel, the father of the statesman. The fact of the matter is, as far as one can judge, that they sincerely regarded any kind of relief to the workers as harmful—although, in striking contrast, relief in the form of loans was finally granted to the manufacturers—because it was calculated to raise hopes which could not be fulfilled and to bind the workers firmly to an industry which could not give them employment. One speaker in the House of Commons particularly emphasized the necessity of the transfer of labour to agriculture, with the object of making the country independent of the import of foodstuffs. This was precisely a demand for the reorganization of economic life with a view to increased self-sufficiency. But the very fact that the working classes of Great Britain acquiesced with comparative patience in their tremendously heavy sufferings, even in the presence of so uncompromising a rejection, shows how limited the possibilities in reality were of putting an end to British
power of resistance by any social movements caused by economic dislocations. This will be particularly clear if we compare the attitude of the holders of political power at that time with the concessions that had to be made to the demands of the workmen during the recent war in order not to endanger their good-will toward a continuance of the struggle.

POSSIBILITY OF PREVENTING IMPORTS

All that has just been said, however, applies only to obstacles in the way of exports, with their obviously limited possibilities of causing ruin in the economic life of a country. As the economic function of exports is absolutely limited to providing payment for imports, it is quite meaningless when there are no imports. Imports, on the other hand, are ends in themselves, because they satisfy the wants of the people directly, which is the final function of all economic activity. Consequently, we cannot possibly turn our backs on the question as to what chances Napoleon would have had for gaining his object if he had directed the point of his blockade against the imports of Great Britain instead of against her exports. It is indeed true that this was quite incompatible with the economic views that he shared with the majority of persons of political consequence, as has been shown throughout our previous account. But it does not necessarily follow from this that he could not have made his object the cutting-off both of imports and of exports, as, on the whole, took place during the recent war; in any case the problem is so important that it cannot be ignored. What especially necessitates an investigation of the whole thing, including Napoleon’s policy in the matter, is that the view which has been pretty generally accepted during the last decade happens to have been determined by a popular article by Dr. J. H. Rose, which was hastily drafted for a purely practical purpose and which scarcely gives sufficient, or even correct, guidance in the question.
*41

BRITISH IMPORTS OF FOODSTUFFS

The importance of Great Britain’s imports of foodstuffs, which can practically be regarded as identical with her imports of wheat, is anything but clear, it is true, as we have no information at all as to the agricultural production of the country itself.
*42 Nevertheless, there can be no doubt that the previously
existing surplus available for export had been replaced, within the twenty years before the outbreak of the revolutionary wars at the latest, by a normal excess of imports, and that the self-sufficiency of the country had thus ceased to exist. In absolute figures the excess imports of wheat quite naturally varied much from year to year, according to the harvest. The British imports during the Napoleonic wars—always including what came from Ireland—attained their maximum in 1810 with 336,400 tons, while one solitary year (1808) even showed an insignificant excess of exports. The average figure during the period of the Continental System (1807-12) was an import excess of 104,000 tons. The absolute significance of this figure will be made clearer if in connexion with it we mention the fact that the wheat imports of a country such as Sweden, for instance, during the period immediately before the outbreak of the World War in 1914, was about 200,000 tons, and its combined imports of wheat and rye were about 300,000 tons, that is to say, two or three times as much, respectively. Thus there can be no doubt that the quantities in themselves were small according to our notions. It is more important, however, to form a clear notion of the relative importance of such imports for the total British consumption of wheat; but unfortunately this is impossible, as we do not know the amount of the harvests. The majority of estimates, both contemporary and later, however, are based on a consumption per inhabitant in Great Britain, that is to say, excluding Ireland, of one quarter or about 225 kgs. per annum, not counting seed-wheat. This undeniably strikes one as a very high figure, as, for instance, the Swedish consumption of wheat and rye together before the outbreak of the World War, that is to say, a hundred years later, was only about 180 kgs. However, if we take British calculations as to consumption as our basis, we find that, according to the average population of Great Britain during the decade 1801-10 (about 11¾ millions) the total consumption of wheat would have been 2,655,000 tons, of which the average import excess during that decennial period (132,600 tons) formed just 5 per cent., or one-twentieth. This very modest
amount would thus have been the normal import demand; but if instead of this we wish to investigate the relative magnitude of the greatest shortage during the period, that for the year 1810, we find that not even that, in relation to the then greater population, rises to more than about 12 per cent. However, there also occurs a lower calculation of the consumption than one quarter (eight bushels) per inhabitant, namely, six bushels, which falls slightly short of the Swedish consumption of rye and wheat a hundred years later. As the home supply in Great Britain can only be obtained from a figure based on consumption, this gives a smaller amount for the harvest, and consequently a greater share for imports. On such a supposition, that share forms 6½ per cent., or somewhat over one-sixteenth, on an average, for the decennial period of 1801-10, and a good 16 per cent., or scarcely one-sixth, for the year of maximum imports, 1810.

Even if the imports of wheat had been totally cut off, therefore, the deficiency, even in years of bad harvest and on the most unfavourable estimate, would have been a mere trifle in comparison with what we had to accustom ourselves to during the recent war. For Sweden the average imports during the quinquennial period before the outbreak of that war formed a good fourth of the total requirements of wheat and rye, while the total supply of cereals in Sweden during the bad year 1917-18 was probably less than half of the normal. This shows to what extent normal food requirements have been curtailed, even in neutral countries in our own day, and the shortage a hundred years ago consequently dwindles into comparative insignificance. In spite of this, the blockade during the revolutionary and Napoleonic wars was sufficiently effective both to stimulate the cultivation of corn in Great Britain,
*43 and also to bring about a severely felt shortage of food, which was especially marked in the years 1795, 1800, and 1812, and which gave rise to constant apprehensions. A large number of the measures adopted during the recent war were
also employed a hundred years ago, though not the most effective and far-reaching among them, and especially not rationing. These measures included a suspension of the corn duties, the prohibition of the distillation of spirits and the manufacture of starch, the postponement of the sale of bread until twenty-four hours after baking, incessant exhortations in royal proclamations and also organized agreements to reduce the consumption of bread by a third, as well as a prohibition against baking bread of unmixed fine bolted wheat flour, which is known as the Brown Bread Act of 1800. But the population found it much more difficult to put up with these interferences with their food habits than with other privations which, to our way of thinking, were considerably greater. It proved impossible to enforce the Brown Bread Act, so that it had to be repealed immediately; and serious food disturbances occurred both in 1800 and in 1812. So far, therefore, it is fairly evident that the placing of obstacles in the way of importing corn would have had far greater prospects of affecting public opinion and tranquillity in Great Britain than the barring of exports, in which Napoleon placed his confidence. On the other hand, the assumption that even the barring of imports would have forced the conclusion of peace, or overthrown the British government, is one which is more or less refuted by experience. During the year 1812, when the prices of wheat reached a record height and remained there until the last weeks of the old harvest year, there prevailed just that position which would have been the consequence of a blockade as complete as one can reasonably imagine to have been enforced. For owing to the bad harvest, which was general in Europe, as well as to immense purchases made by Napoleon as a preparation for the Russian campaign, the rise in prices in Great Britain did not cause any imports worth mentioning; for the whole year there entered the country only 55,000 tons, which is little more than half of the average figure for the sexennial period of the Continental System, and considerably less than half of the average figure for the preceding decennial period. Thus the fact that, despite all this, difficulties could be overcome
indicates more or less plainly that not even a complete barring of imports would have attained its object, even apart from the fact that an effective blockade would probably have been able, after some time, to pave the way for some of the effective measures with which a much greater scarcity of food was met during the recent war.

Napoleon’s chances of striking at British food supplies were evidently limited to what had to be taken from the mainland of Europe, or, in the case most favourable to him, from there and from the United States. In sources accessible to me there do not exist figures relating to all the countries of origin of the wheat imported into Great Britain during this period. But the American wheat went mainly to South Europe, especially to the Iberian peninsula during the tremendous struggles there, while all our information points to the idea that the Baltic lands formed the main source of supply of corn for Great Britain, with Danzig as the centre. From the very full statistics on the Baltic seaports printed in Oddy’s work, it appears that in the year 1800, when British imports of wheat were great, 47 per cent. came from the three ports, Königsberg, Elbing, and Danzig, 34 per cent. from Danzig alone.
*44 And besides these, other Baltic ports were of importance also. Consequently, so far as Napoleon could make his will prevail, not only on the North Sea coast of Germany, but also upon the south and, to some extent, the east coast of the Baltic, he did not lack the possibility of hampering the food supply of Great Britain. Accordingly, the question is, How did he really regard such a task and what steps did he take to accomplish it?

FOOD POLICY OF NAPOLEON AND HIS OPPONENT

It is on this point that the accepted views have been determined by the conclusions of Dr. Rose in the article referred to above. They come to this, that Napoleon not only did nothing to hinder British imports of foodstuffs, but actually sought to encourage the exports of corn to that country with the object of ruining the enemy through the unfavourable
trade balance which would be the consequence thereof. But this account gives a misleading impression both of the measures and of the motives of Napoleon, and it is not borne out by the letters cited by Dr. Rose in its support.

The fundamental object of Napoleon’s food policy was, as has just been mentioned, to secure supplies within the country; and this not only from the same motives that actuated his Bourbon predecessors, but also because of his desire to prevent labour disturbances. Consequently, he is always reminding his French helpers of the danger of being insufficiently provided with foodstuffs, urging them to remember what it had cost him in the Year X (1801-2) to procure a few thousand
quintaux of corn, and insisting that it would involve the greatest danger if they had not a ‘double supply’. ‘You have not sufficient experience in this matter,’ he wrote in 1810 to Eugene, the viceroy of Italy. ‘The corn question is for sovereigns the most important and the most delicate of all…. The first duty of the prince in this question is to hold to the people, without listening to the sophisms of the landowners.’ During the difficulties of the winter of 1812 he strove, by the distribution
of bread and soup, ‘to make the most needy part of the multitude independent’ of food difficulties. Just as before, therefore, he forbade the export of corn when scarcity was apprehended, or even, as in 1810, while awaiting the results of the harvest. And although on August 6, 1810, he had authorized Eugene to permit the exportation of corn from Italy, he wrote to him three weeks later (August 31): ‘It is said that the Italian harvest is bad. Take care that not too much corn is exported and that we do not get into difficulties.’ For this reason, too, he authorized his Italian minister of finance in 1813 to permit the export of French and Italian products with the exception of corn and rice, regarding which he wished to have a report first—a policy that marks the special position of food exports—and, in full analogy with this, Napoleon, in January 1812, expressed the opinion that licences for the importation of foodstuffs should be granted without conditions; that is to say, he waived the customary obligation of exporting goods to the corresponding value.

The same point of view determined the whole series of measures that the Emperor took in the winter and spring of 1811-12, when, according to his own declaration, there was a real scarcity of corn in Paris. At the same time he deemed it necessary to take more pains than usual to secure quiet in Paris during his absence on the Russian campaign. His feverish zeal to intervene and regulate drove his helpers, especially Pasquier, the eminent prefect of police in Paris, to despair, and afterwards led Chaptal to make the biting remark that Napoleon took every measure that was calculated to further the rise in prices and the shortage of foodstuffs. These measures included the buying up and seizure of corn in the departments adjoining Paris, the taking over of the mills, secret sales by the agents of the government in order to force down prices when they rose in consequence of the previous measures—the only consequence of which was to raise them still farther, and the final result, as the culmination of the abortive ‘policy of plenty’, was the establishment of maximum prices. It should be obvious, on the face of it, that the whole of this series of
measures was totally incompatible with the notion that it would injure an enemy to provide him with food.
*45

On the other hand, it certainly did not follow from such a point of view that the export of foodstuffs would be considered inexpedient or even looked at askance, under all circumstances. As soon as the supply of food within the country was considered safeguarded, the general interest for exports showed itself at once; and the ruler of such countries as North Germany, Italy, and France, which were distinctively countries that exported foods and stimulants, could hardly be imagined as adopting any other standpoint, when in other respects he favoured the mercantilist or ‘bullionist’ policy. It was only natural, therefore, that Napoleon, in a letter of 1810 to Gaudin, his minister of finance, which has already been cited once or twice, spoke of his object of favouring, by means of smuggling, the export of French foodstuffs and the import of precious metals; and that in the same year he caused Champagny to inform the French ambassador at St. Petersburg—evidently with reference to complaints on the part of Russia—that he granted licences for the exportation of wine and corn as beneficial to his territories, without inquiring too closely as to how the English afterwards treated the vessels provided with licences. Similarly, in a letter of July 28, 1809 (cited by Dr. Rose), to the acting home secretary, Fouché, he bitterly denounced the allegation that he discountenanced export in itself, which he, on the contrary, regarded as being hindered by the British and not by him. ‘Exports occur,’ he said, ‘as soon as there is a possibility of sale.’ Not one of these letters, or any other letter known to the writer, contains even a hint of an intention to injure England by the exports of foodstuffs, but, on the other hand, an evident intention to benefit France thereby. The real
motive stands out distinctly in the most celebrated cases when extensive exports of corn from France, Holland, and Flanders to Great Britain took place in the years 1809 and 1810. During 1809 it is stated that about 90,000 tons of wheat, besides other grain, came from those countries; and of the unprecedented imports in the following year—which, without deducting exports, amounted to 353,500 tons of wheat and 135,400 tons of other grain and represented a total value of more than £7,000,000—one-third of the wheat (evidently unground) and half of the flour were said to have come from Napoleon’s empire, all by means of mutual licences. The remarkable thing in this connexion is that not only Napoleon but also many Englishmen considered these large imports from France, under the existing conditions, to be extremely advantageous for the French, and consequently open to grave objection from a British point of view. This was partly because it provided means of disposing of surplus products, and partly because it was an important source of income to Napoleon owing to the huge licensing fees, which, together with freight and insurance, were alleged to raise the price by 30-50
s. per quarter, or from £6 15
s. to £11 per ton. This mode of thought, which is just as much French as British, was given characteristic expression in a speech in the House of Commons (February 13, 1810) by the politician Marryat, the father of the famous novelist, from which we cite the following:

The benefit which the enemy derived from the present system of licensing the importation of his grain was much more than many gentlemen imagined. It was a fact that in July last the farmers of France were so distressed by the low price of grain, that they could not pay their taxes. The price was then so low as 27
s. the sack, whilst it was known that the French farmer calculated upon a price of 36
s. as a fair return for his expences. Buonaparté, being apprized of these circumstances, had no hesitation, of course [
sic], in granting licences for the exportation of that grain, which our government readily granted licences to import; the consequence of which was the raising of the price of that article in France, by the last accounts, above 50 per cent. beyond the rate in July last. Thus were the French corn growers benefited, while Buonoparté’s treasury derived at the rate of 18s. a quarter from the same means. He would then submit it to the serious consideration of
the House whether some measures ought not to be immediately taken to put an end to a practice which so materially served the resources of the enemy.

Since that was the case, however, the question arises whether the Emperor had no thought of giving a new turn to his policy and making a direct effort to starve out England. Thus far we have had no knowledge of this matter; but some contributions toward an answer to the question have become available through the publication, in 1913, of the first part of the work of the Russian historian, Tarle, entitled
Kontinental’naja blokada. Thus in a report dated July 17, 1810, Montalivet, the home secretary, wrote to Napoleon as follows: ‘If our rival is eventually threatened with famine, it would seem to be
quite natural to close all ports to him. It would be beneficial to the common cause if all the peoples of the North Sea and the Baltic united to deprive Great Britain of her means of existence.’ But Tarle’s supposition that Napoleon really entertained any serious plans in that direction at the time seems to be refuted by the fact that his licences for the export of corn were being issued in torrents just then; and in any case he adhered to exactly the opposite view in the following year, as appears from a particularly illuminative imperial dictated utterance of June 24, 1811, which Tarle has also brought to light. The situation then was stated to be such that there was a scarcity of corn in Great Britain at the same time as there was a surplus thereof in Germany and Poland, which naturally caused the British to import the commodity by sea. The question, therefore, was whether this should be prevented. Napoleon’s answer to this question was in the negative, for three reasons: In the first place, he regarded it as useless because the English would procure the corn from America if they could not get it from the Baltic. Thus it was the limitations to his power over the supplies that here blocked the way. In the second place, it was, according to Napoleon’s declaration, impossible, even with all watchfulness, to prevent Prussia and Poland from exporting. This is undeniably a surprising utterance on the part of a man who was not wont to acknowledge economic impossibilities; but an explanation of it may possibly be found in his conception that exports are always more natural, and consequently more difficult to prevent, than imports. Finally, in the third place, fiscalism stuck up its head as usual, in that the Emperor debated the question of moving the exports to the Hanse Towns, which were at that time incorporated in his empire, in order thereby to give the French treasury the benefit of the export dues. It is obvious that these reasons do not bear witness to any special zeal to prevent the importation of foodstuffs into Great Britain; but, like everything else, they show that Napoleon did not overlook the utility to England of those imports, but rejected measures against them owing to their futility. The remarkable thing is that he recognized the
unfeasibility of the thing only in this case, while the argument might seem to apply with at least equally great strength to that kind of blockade which he tried to enforce.
*46

GREAT BRITAIN AND NORWAY

In the first years after the bombardment of Copenhagen, (1807-9) Great Britain maintained a rigorous blockade, but apparently with no object other than that of bringing about a relaxation of the rigours of embargo prevailing on the other side, and especially of securing a supply of Norwegian timber. When the needs of Norway prevailed over the somewhat quixotic loyalty of Frederick VI to the Continental System, the importation of food, as well as trade in general, was allowed to continue unhampered, upon the usual system of British licences, to such a degree that the situation was said to border on commercial relations in times of profound peace. So far British policy was apparently guided by the same principles which had dictated her earlier measures,
e.g., the prohibitions on the exports of raw cotton and ‘Jesuit’s bark’. But in the last years of the struggle (1812-13) these methods were again reversed, and a food blockade was brought to bear on Norway—
so far as is known, the only serious instance of such a measure in the course of the revolutionary and Napoleonic wars. The blockade could be made exceptionally binding and effective, especially after Sweden and Russia had joined the anti-Napoleonic alliance. A contributory cause undoubtedly was that the need for Norwegian timber, as well as for exports to Norwegian markets, had lost their importance to Great Britain. In other words, the policy which made exports of vital interest had lost a great deal of its force since the palpable breakdown of the Continental System. But even if these conjectures prove to be correct, the incident shows that Great Britain was already at that time more willing than her adversary to use a food blockade as a weapon of war.

The result was that Norway came nearer to starvation than any other country during this period, so that her pitiful situation was alleged by Frederick VI as a reason for renouncing his rights to the country in the peace of Kiel in January, 1814. Had it not been possible for spirited Norwegians and Danes to break through the blockade with their small corn vessels, the situation would have appeared all but hopeless in the eyes of contemporaries.
*47

BRITISH SUPPORT OF THE CONTINENT

We may now return to the economic life of Great Britain herself. It has been shown that the more fundamental effects of the Continental System on her organism did not play a decisive part in the issue of the struggle. But as the reader may
remember from part 1, chapter IV, it was assumed in French circles that there was a more immediate connexion between the self-blockade of the Continent and the political elimination of Great Britain than that which was provided by its general economic ruin. It was thought, in fact, that, owing to the inability to export, Great Britain would be prevented from supporting the Continent either by means of subsidies or by the maintenance of troops. Miss Cunningham, in the little study that has often been cited in this work, has not only successfully elucidated these ideas and their bearing on the policy of Napoleon but has also, with less success, so far as I can judge, sought to show the validity of that train of thought to such an extent as to prove the correctness of Napoleon’s (falsely assumed) object of ruining Great Britain by supplying her with foodstuffs. Miss Cunningham’s thesis, indeed, is that the excess of imports gave rise to an export of gold which came near to exhausting the metal reserve of the Bank of England and thus shaking ‘the real foundation of the credit system’.
*48 This contention does not appear to give due weight to the real significance of international exchange as that was brought out, not only by Adam Smith, but more particularly by the leading economists, in the great currency debate which went on during the actual period of the Continental System. To begin with, we must see whether that French line of thought was correct which made British exports the antecedent condition for the making of payments on the Continent; and in so doing we must connect the matter with the discussion in our first part to which reference has just been made.

The kernel of the question, then, is the point that Adam Smith maintained, namely, that both war and other functions are in reality paid for by goods and human efforts (services), and not by money or precious metals. The subsidies that Great Britain had to pay on the Continent were intended to procure necessaries for her allies, and the same were required for the maintenance of the British troops after Great Britain had begun operations by land. Consequently, the business in
hand was either to provide the necessaries direct or else to provide the means with which they might be purchased.

If, then, the situation was such that British goods could be imported into the Continent, the simplest arrangement of the matter was that described by Adam Smith, namely, an export of goods from Great Britain without corresponding imports. It was of no consequence whether the British goods were or were not precisely of the kind required by the troops or by the continental governments. Their sale on the Continent created in the latter case British assets which could be used to pay for the domestic goods needed by the troops or by the allies; that is to say, the purchasers of the British goods in reality paid their debt, not to the British, but to the sellers of the domestic goods that were used by the British troops or by the governments supported by Great Britain. But the fact that the matter was simplified by the possibility of exporting British goods to the Continent by no means implies that the support of the continental governments would have been impossible without the realization of such a condition. If, for instance, we suppose, instead, that no British, but, only transmarine goods, could get into the Continent, the system only needed to be supplemented by the participation of a third country, for instance, the United States, in the operation. At times this was undoubtedly the case with the payments on the Iberian peninsula, where American corn went in great quantities. The assets that Great Britain acquired by her exports in transmarine countries went, under this supposition, to the European mainland in payment for continental imports of colonial goods, that is to say, British exports for the non-European countries paid for British support to the Continent of Europe. In the one case as in the other it was a question of the exchange of commodities, and not of any need of payment in money or in gold and silver. When, therefore, it came about that Wellington wished to make cash payment during his campaigns in Spain and Portugal, this by no means meant that he had to have the requisite amount sent to him in precious metal. The only thing necessary was that the British government should have assets on the Iberian
peninsula, for instance, in the form of bills of exchange or claims on business establishments there, to an amount corresponding to the requirements of the British army, so far as those requirements could not be satisfied by the supply of goods on British account.

The next question, then, is whether even a diminution of British exports would not have been able to place obstacles in the way of supporting the Continent, inasmuch as the assets held by Great Britain to pay for the support might in that case be expected to be smaller. But even this idea is incorrect, because the decisive thing is not the absolute amount of exports but the amount in relation to imports,
i.e., the excess of exports. If only imports were diminished to the same extent as exports, the possibility of giving support would be in no wise altered. It is in the nature of things that the support must be paid for by limitation of domestic consumption when a country cannot count upon borrowing abroad, a thing which was not to be thought of for Great Britain during the period of the Continental System. The general conclusion thus remains simply this, that exports (including carrying profits and other foreign trade profits) must exceed imports by the amount of the support given to foreign countries. It is true that British
commercial statistics for this period are altogether too uncertain to admit of any positive arithmetical proof in such a question; but it may be mentioned that the British customs statistics for the years 1805-9 show an excess in the trade balance itself (that is to say, apart from freights, &c.) varying between 5,900,000 and 14,900,000 pounds sterling, or, as an average for those five years, amounting to almost precisely £10,000,000.
*49

However, still another possibility may be conceived, namely, that the European Continent might take no necessaries at all, either British or continental, or might take only money or precious metals. This was undoubtedly what Napoleon aimed at, although he never even approximately reached his goal. So far as Great Britain succeeded in carrying on military operations on the Continent, however, even this possibility was quite out of the question; for where troops could be landed, it is evident that goods could be landed with still greater ease. And as regards the allies, the matter would have been of importance only in the highly curious situation that the countries in question applied the Continental System strictly and received British subsidies at the same time. For the sake of completeness, however, this line of thought may be followed out. Here, too, the same thing holds good; the idea to which Adam Smith had given expression, namely, that the precious metals in this connexion were commodities like others and would have had to be purchased by means of British exports. The only difference in the situation from a British point of view would have lain in the fact that precious metals might prove difficult to obtain, as indeed was probably often the case. From the point of view of the Continent, on the other hand, such a form of payment meant that in reality nothing was imported that could serve military purpose; and consequently the thing could have been of importance only in case one or more of the individual continental states could thereby acquire necessary goods from other continental countries.

If we pause to consider the actual circumstances in greater
detail, we are immediately impressed by the fact that it was precisely the flourishing period of the Continental System that was marked by quite insignificant subsidies to the continental states; and the reason for this is closely connected with the fact just mentioned that efficacy of the self-blockade ceased as soon as Great Britain gained the support of allies on the Continent. For the whole of the sexennial period 1807-12, the sum total of the cash subsidies subsequently reported to Parliament was £14,722,000; and it is in the very nature of things that most of this amount fell to countries with which Great Britain had unimpeded intercourse,
e.g. (in round numbers), Portugal (1809-12) nearly £6,000,000; Spain (1808-12) £3,660,000; Sicily (1808-12) £1,700,000; Sweden (1808-9 and 1812) £1,660,000; and Russia (1807, before the Peace of Tilsit) £600,000. Altogether these came to £13,580,000, or more than nine-tenths of the total amount. There is no material available for estimating the total amount spent on British military operations on the Continent; but in 1808-10 the total payments of the British government abroad ran to something over £32,000,000.
*50 As has been observed above, however, the military expenses must always have been among those where the normal system of international payments could be employed.

As a matter of fact, however, we have the seemingly incompatible facts that, on the one hand, Great Britain had great difficulties with her payments on the Continent, and, on the other hand, was exposed to an outflow of precious metals, which constantly threatened the bank reserve and was usually connected with the heavy decline in the rates of exchange on England. It might thus seem as if Napoleon was right after all in trying to read the success of his war against the credit of England in the decline of the exchanges and in the difficulties of payment. But the true connexion was quite different.

First, as regards the difficulty of financing the military operations on the Continent, we may say that that difficulty was mainly due to bad financial organization, and also to an
apparently ineradicable notion of the unimportance of the war in the Iberian peninsula. Wellington had many occasions to complain of the inadequacy of pecuniary support and the shortage of the most necessary things, while at the same time huge sums were dissipated in far less important ways, even on the Continent, such as for the notorious and thoroughly abortive expedition to the island of Walcheren, off the coast of Holland, in 1809. As regards the
modus operandi, Wellington had to obtain funds by drawing bills on the British treasury and selling them on the spot, that is to say, without there being any available British assets; and as there was an entire lack of organization, this could not take place without a heavy decline in their value. Nathan Mayer Rothschild, the greatest financial genius of the house of Rothschild and its true founder, who at this time had already moved from Frankfurt to London, mentioned to Sir Thomas Fowell Buxton, in the course of a conversation many years afterwards, that once during this period he set about buying up, on the one hand, a great number of Wellington’s bills on the British government, which were under par, and, on the other hand, gold, which was sold by the East India Company; and by so doing he declared that he compelled the government to come to an agreement with him, on the one hand, to prolong the bills which it had no means to pay, and, on the other hand, to pass over the gold, for which Wellington was very hard pressed. ‘When the Government had got the money,’ he said, with well-founded contempt, ‘they did not know how to get it to Portugal. I undertook all that, and I sent it through France. It was the best business I ever did.’

Apart from this scanty and late item, which is as meagre as most of the contributions to the history of the house of Rothschild, we seem to know hardly anything about the actual manner in which the Continent was financed by the British government under the Continental System. On the other hand, we have a somewhat fuller knowledge of the circumstances during the next period, that of the Wars of Liberation and of the Hundred Days in 1813-15, owing to the materials collected in a biography of the politician J. C. Herries, the commissary
in chief in the British financial administration of that time (1811-16), on which the German economic historian, Professor Richard Ehrenberg, has based that part of his study of the house of Rothschild. Even at that time, with the greatly multiplied continental expenses for both subsidies and military requirements, the financing was at first managed partly by very cumbrous movements of silver from England, and partly, and more particularly, by bills drawn from the Continent on the British treasury in London. These last the continental governments and generals afterwards had the greatest difficulty in selling, and therefore they declined heavily in value. But now there was gradually carried out, through N. M. Rothschild, a change of system by which bills and coins were privately bought up on the Continent, with the result that difficulties of placing bills and the consequent dislocations in the exchanges almost ceased. Thus Herries states in his official report that during 1813 bills on Holland and Frankfurt for £700,000 were bought up without depressing the exchange, while a payment of £100,000 on the old methods would, in his opinion, have had ten times as great an effect upon the exchanges.
*51

The whole of this account shows clearly enough that the difficulties lay in the matter of technical organization and were not due to any profound economic obstacles in the way of payments on the Continent; for it is manifest that such obstacles, had they existed, would no less fully have lain in the way of Rothschild’s purchases of commercial paper on the Continent, that is to say, his acquisition of continental assets on British account. What the change of system implied, therefore, was to organize the support in the main on the lines of international payments in general.

But it was recently mentioned that in the earlier stage Rothschild sent gold to Wellington on the account of the British government, and that the later payments on the Continent were partly effected by sending silver. One thus
gets the impression, in spite of all that has been said, that precious metals were necessary, at least at times, in order to support the Continent. This evidently needs explanation; and the explanation mainly lies in the state of British currency during the Napoleonic wars.

BRITISH CURRENCY

As has been mentioned in part I, Great Britain had had an irredeemable paper currency ever since 1797; but before 1808 this currency had only in particular years shown any great deviations from its par value. The quotations for gold do not appear to have been very reliable at the time, but the rates of exchange on Hamburg and Paris, both of which, characteristically enough, were quoted in London without intermission during the whole course of the last Napoleonic war, make the matter sufficiently clear. In 1808, however, a great change set in. Especially from 1809 the exchanges began to show a very remarkable fall,
i.e., the amount of foreign money to be obtained for £1 sterling declined heavily. The average depreciation for 1809 is given by Mr. Hawtrey as 21 and 23.3 per cent. as compared with Hamburg and Paris, respectively. This gave rise to a great controversy—which offers a number of points of contact with the discussion during the recent war—concerning the connexion between the changes in the value of gold and the rates of exchange, on the one hand, and the decline in the value of the British paper currency, on the other hand, and also concerning the true cause of the latter phenomenon. The first important contributions to this controversy were made by Ricardo in the late summer and autumn of 1809 in the form of three articles published in the
Morning Chronicle, which were followed up in December by a celebrated pamphlet, the title of which,
The High Price of Bullion a Proof of the Depreciation of Bank Notes, sufficiently expresses his point of view. In this pamphlet, Ricardo, who at that time was known only as a successful and highly respected broker on the Stock Exchange, laid down what is called the quantity theory of money and laid the foundation of his still unpresaged
fame as the most acute of economic theorists. In order to test the question, the House of Commons in February 1810 appointed a committee, known as the Bullion Committee, whose report, framed entirely in the spirit of Ricardo, was announced in June but did not come before Parliament until the following spring. The discussion was carried on with great zeal outside Parliament as well, simultaneously with an almost continuous rise in the price of gold. According to the computations of Mr. Hawtrey, that rise was 36.4 per cent. in 1813 (that of silver being 36.7 per cent.), while the fall in the exchanges had already culminated in 1811 with 39.1 per cent. and 44 per cent. on Paris and Hamburg, respectively. During these long discussions there also arose the question of the cause of the export of gold and its connexion with payments on the Continent; and it may be said that in the course of this discussion the connexion was made clear in all essentials, especially by Ricardo.
*52

As a starting-point in this discussion Ricardo took the case where a country, owing to failure of the harvest, has to embark upon unusually large imports of corn; but he maintained that the payment of subsidies to a foreign power formed a still more marked instance of the same thing. Now, if the country in question, that is to say, Great Britain, had a metallic system of money and no ‘redundant currency’, that is, not a greater quantity of money in relation to the quantity of commodities than other countries, there was, in his opinion, no occasion for the export of precious metals. In that case, corn, like the subsidies, would be paid for by exports of commodities in the usual way, as has been explained at length above. If, on the
other hand, there prevailed a ‘superabundant circulation’, that is, a greater quantity of money in the subsidy-paying country than in the country to which the subsidies were paid, it meant that the value of money was lower or the price-level of commodities higher in the former place than in the latter, in which case the precious metals flowed to the place where their value was highest; in other words, an export of gold took place. Or, as also explained by him, if money or gold was exported instead of commodities, this was due to the fact that the transaction could be settled more cheaply in this way. In that case gold or money was what stood relatively lowest in value in the paying country (Great Britain), as compared with its value in the other country, and consequently people fulfilled their obligations at a smaller sacrifice if they paid with money or gold than if they paid with commodities. Otherwise, if the value of money was the same in both countries, the export of gold would never be worth while, but the payment must take the form of commodities. Ricardo did not dispute absolutely, it is true, that the transmission of gold could take place in all events; he considered it highly improbable, however, because in that case the gold would have gone to a country where its purchasing power was less, or at least not greater, than in the country from which it came. But both he and his opponents were agreed that in that case the gold must soon flow back to the former country; and even if this factor played a larger part than Ricardo supposed, it could never explain that one-sided movement of precious metal from Great Britain to the Continent that exhausted the gold reserves of the Bank of England and therefore gave rise to such great anxiety.

The outflow of gold was thus an evidence that money had a lower value in Great Britain than on the Continent. But if Great Britain, like the Continent, had been on a metallic basis, this dissimilarity would have been removed by the outflow, inasmuch as the quantity of money would have been diminished in the former place and augmented in the latter. As it was, Great Britain had a paper currency which stood far below its nominal value in gold; and in that case the export of gold
could continue for any length of time without restoring equilibrium, because the vacuum was constantly being filled with new notes. Thus it was not the payment of subsidies or any extraordinary export of corn that caused the outflow of gold, but ‘the superabundant circulation’, or, in other words, the lower value of money in Great Britain.

The argument brought forward against all this by Ricardo’s opponents, especially by Malthus in the
Edinburgh Review, in February 1811, was that a great export of corn, or claims to subsidies on the part of the continental states, need not evoke among them a greatly increased demand for ‘muslins, hardware,
and colonial produce’, and that, therefore, it might be necessary for Great Britain to pay instead with money, which was always welcome. Applied to the payment of subsidies, however, this argument was particularly unfortunate, as the function of the subsidies was quite obviously that of procuring goods for the work undertaken by the continental powers, as has been explained at length above; and consequently for our purpose the objection can be dismissed without further ado. For the sake of completeness, however, it may be added that the same conditions prevail in other cases. No country sells corn except to get something else instead; and no country has so much of all commodities that it cannot use more. The origin of these commodities is a matter of no importance, as we have already seen; and the limitation, in Malthus’s instance, to the articles of British trade itself is consequently quite unjustifiable. The only exception, which is scarcely treated by Ricardo, but which is discussed in detail, from a somewhat different standpoint, in the report of the Bullion Committee, would be if a country had some special reason to increase its stock of precious metals,
e.g., to form a war fund or to pass from a paper to a metallic currency. The Bullion Committee here showed the untenability of the supposition that the Continent had any such increased need of gold as could explain the course of development in Great Britain.

The gist of all this is, therefore, that the export of gold from Great Britain can be regarded neither as a necessary condition nor a necessary consequence of the payment of subsidies to the Continent, but had its essential cause in the deterioration of the currency. From this, two conclusions follow. In the first place, the British government could have prevented, not only the export of gold, but also the permanent fall in the rate of exchange (to be carefully distinguished from the temporary dislocation occasioned by especially large payments on the Continent) by raising the value of money. Whether in that case the remedy would have been less harmful than the disease, after the depreciation had gone so far, it is not easy to say; but that matter need not be discussed in this place, as it is at all
events clear that the Continental System, as such, was not the cause of the situation, or at any rate not one of its principal causes.

In the second place, from the standpoint of the payment of subsidies, it cannot even be regarded as having been necessary to let the export of gold or silver continue when the British government had once ceased to keep the currency at par with gold. From a purely formal point of view, it had obtained the possibility of independence in this respect by the Bank Restriction Act, that is to say, by making bank notes irredeemable; nor was there any insuperable obstacle in the way of this expedient in actual fact. Strictly speaking, the Continent needed no importation of either gold or silver; and it is far from the case, of course, that all the payments of the British government on the Continent were effected by the export of precious metal. For the moment it is not possible to state the relation between the total foreign payments and the transference of coin on behalf of the government except for the two years 1808 and 1809; but even the figures for those two years show how casual the proportion was.
*53 In 1808 the foreign payments of the government (here, as elsewhere, the figures refer to all countries outside the British Isles, and not merely the Continent of Europe) amounted to £10,235,000, while the exports of precious metal on public account amounted to at least £3,905,000, or, if we include that sum which was paid for the purchase of silver dollars (without our being able to see whether they were purchased inside or outside the country) to £4,543,000, or over 44 per cent. of the whole. The principal part in this matter was played by over twenty remittances, principally silver, to the Iberian peninsula to a total of more than £2,666,000, and also £855,000 in silver to Gothenburg, sums which the British government could not contrive to provide in a more convenient fashion. In the year 1809, on the other hand, when the total payments abroad were larger than
in the previous year (amounting to £12,372,000), the exports of precious metal on account of the government reached only £1,206,000, according to the lower calculation, and £1,290,000, according to the higher calculation; that is to say, at the most only 12 ¼ per cent. of the total payments. Now if it was regarded as necessary, out of regard for British ‘prestige’ or for any other cause, not to let so much metal go out of the country as actually did, these mere figures make it clear (and the idea is confirmed by the experiences of the recent war) that it would have been quite possible to avoid sending out gold or silver. Even if one had not been able to come to this conclusion by theoretical methods, it follows from the practical experience gained by Rothschild’s rearrangement of the system of foreign payments in 1813, that these payments did not involve any inevitable need for the export of gold or silver; and for other purposes such export was, considering the general position of currency policy, a somewhat purposeless means of limiting the fall in value of British currency to a negligible extent, without restricting the circulation of bank notes.

BRITISH CREDIT SYSTEM

The above largely supplies the answer to the question that still remains, namely, as to the importance of the Continental System in relation to the solidity of the British credit system. If it was considered that the credit of Great Britain stood and fell with the metallic reserves of the Bank of England, neither Napoleon’s measures nor the depreciation of the currency would have prevented the preservation of the gold reserve, as has just been shown. It is true that the very conception of the importance of the metallic reserves for the credit of a country with a paper currency lacks support both in theory and in experience, although popular notions to this effect have been diligently nourished at all times; and it is difficult to see what inconveniences would have followed if the metallic reserves of the Bank of England when it did not redeem its notes, had had to sink to the same level as at the Bank Restriction
of 1797 or even lower. But if it had been desired to avoid that state of things, then, as has been said, there would have been no insuperable difficulties, as is also shown by the experiences of the following years.