Credit and Corruption

Already in the early seventeenth-century, London had a reputation as a city driven, to an unhealthy degree, by the pursuit of economic gain. Critics accused it of engrossing the nation's trade at the expense of other ports and concentrating wealth within its boundaries to an extent that drained the provinces of economic vitality.  A common stereotype represented London's residents as shrewd traders and confidence tricksters adept at exploiting the gullibility of naive provincials, while London moneylenders were accused of encouraging gentlemen to run up debts by borrowing on the security of their lands, in hopes of eventually acquiring an estate through foreclosure. City comedies juxtaposed the intrigues of young gentlemen seeking to seduce citizens' wives and daughters to the plots of citizens trying to cheat gentlemen out of their property.

There was a kernel of truth to these stereotypes: London did harbor a few confidence tricksters, while a few peers and gentry ran up ruinous debts in the City.  But London tradesmen and retailers also suffered from extending credit to insolvent gentlemen and the King, whose leisurely ways of repaying debts must have caused considerable inconvenience to many of those who supplied the court's insatiable demand for luxury products.  Complaints about charlatanism and sharp practice mainly reflected the bewilderment of people accustomed to life in smaller, face-to-face agricultural communities when confronted with London's wealth and dynamism.  These complaints also drew upon a long literary tradition describing the victimization of simple rustics by urban charlatans, stretching back to ancient Rome.  

Suspicion of London's monied economy reached new levels after the Glorious Revolution, in reaction to the ways in which large investors profited from their role in financing the Crown's wars.  Both William III and Anne authorized the sale of stock by the Bank of England and East India Company in return for substantial loans, on which the Crown paid interest at rates at rates varying from 5% to as high as 14%.  Since the interest payments derived from from tax revenues the burden ultimately fell on landowners, who paid a land tax of up to 20% on their rents, and consumers who had to pay excises on products like beer.  As loans accumulated they guaranteed that the burdens of war on the taxpayer, and the profits of war finance for monied investors, would continue far into the future, long after the conclusion of peace.   These conditions fed perceptions -- nurtured and exploited by opposition politicians and the writers they patronized -- that a "monied interest" of City merchants, stock brokers and foreign investors was manipulating the political system, to appropriate the wealth of the "country," in other words everyone else.   

The concept of a fundamental conflict between land and money became a staple of partisan political tracts during the intense competitition between Whigs and Tories in the early eighteenth century. Partisans of the landed interest -- mainly although not entirely Tories -- denounced the corrupting influence of urban luxury, while extolling the simplicity and moral purity of a self-sustaining agricultural society. Above all they denounced the growing importance of credit, an insubstantial entity, based on opinion and subject to manipulation by false rumor, unlike the tangible goods produced from the land. Stockbrokers, who made money simply by anticipating shifts in the market, rather than by producing anything or real use, came in for particular abuse.  

On the other hand defenders of the new system argued that the prosperity of the nation's trade rested on a system of credit. They pointed out that the value of agriculture itself depended on commerce, since without trade food and land itself would have little value.  As John Locke pointed out, an estate of several thousand fertile acres in the middle of the Ohio Valley would scarcely be worth the effort needed to farm it, since there would be no market for whatever it produced.  Some writers argued in addition that commerce contributed to civility and the spread of polite manners, which were more evident in the town than the country.  But trade required credit, both in the narrow sense of borrowing and the extended meaning of public faith in the soundness of the Bank and other financial institutions and the Crown's commitment to paying interest on its debts.  Anything that jeapordized credit threatened to ruin the nation.

The debate acquired additional resonances by becoming linked to a parallel argument over the efforts of Crown ministers to win support in Parliament by distributing offices and other forms of patronage to their supporters. Both parties engaged in this practice and relied on placeholders, as men holding court offices were called, to sustain their majorities while in power.  But this looked very much like a form of corruption, through which Parliament became less representative of the true interest of the nation and more inclined to support the factious interests of the ministry and its allies in the London financial community. The fact that a few financial tycoons bought their way into Parliament by spending lavishly on elections in small boroughs, sometimes displacing nearby gentry as they did so, added fuel to the fire.  Acute suspicion of the financial community and its ties to Whig politicians therefore already existed when the South Sea Bubble, the greatest stock market scandal of the eighteenth century, broke.  Sir Robert Walpole rose to dominance as the first unofficial Prime Minister by managing the parliamentary investigation of this incident, to protect his Whig colleagues and members of the royal court.  He then further perfected the use of royal patronage as a way of building parliamentary support for his policies.  But he was unable to suppress the opposition out-of-doors that skewered him as the alleged master of a system of corruption.  Pamphlets, caricatures, novels and entertainments like John Gay's Beggar's Opera conveyed and embroidered this message.



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