by Roger Knight
Responsibility for the supply of specie during the period of the greatest shortage fell on the shoulders of the junior secretary at the Treasury, William Huskisson, whose financial grasp was unequalled. However, his reserved and distant manner did not endear him to those responsible for naval or military projects: he would deflect requests for specie by sending the applicant a long, written lecture on economics. Huskisson spent much of 1809 trying to secure Spanish dollars. Through agents he managed to obtain dollars worth £3 million from the Mexican government, and thereafter the total holdings of the Mexican Treasury. A further £6 million came from Mexican merchants, all against ‘Bills on the Treasury of England in favour of the Spanish government’.85 In Whitehall he prevented all other government departments from purchasing specie, since different agents bidding in the market pushed up the price.86 To save the public purse, Huskisson sent as much specie as possible to the Peninsula rather than bills of exchange: dealing in gold was preferable because the rates of exchange had moved against the paper pound by as much as 20 or 25 per cent. The shortage of specie had reached such proportions in the autumn of 1808 that Huskisson told Perceval: ‘I am afraid we can hardly expect that in the next three months our stores of bullion will be sufficient to keep up or replenish to enable us … to continue our present exertions, and much less to increase them. We must therefore be cautious to what we commit ourselves.’87 The cabinet decided that all available specie should be sent to Wellesley, and during the whole of 1808 the army in the Peninsula was sent £2,860,000 in specie, and £196,000 in bills of exchange.88
Pressure to obtain specie proved acute in 1809, given the continuing demand from the Peninsula and the cost of Castlereagh’s planned expedition to Walcheren. Huskisson found Spanish dollars worth £125,000, but it was a struggle to raise even that amount.* He wrote to the commissary-general of the expedition: ‘This sum, their Lordships [of the Treasury] are aware, will not be sufficient for the ordinary and extraordinary expenses of so large an army for any length of time.’ Remarkably, Huskisson ordered the commissary-general to use coercion to obtain supplies from the local population, cutting across the strictly enforced principle that British troops paid for food and supplies, whereas the French Army did not. The army ignored Huskisson’s strictures and bills of exchange were issued in Holland without authorization, at a considerable discount, but by the time that this became evident Huskisson had resigned from Perceval’s administration.89 The Walcheren expedition cost £884,275 in specie; by comparison, the Peninsula army during the whole of 1809 received almost £2,500,000 and it enabled Wellesley to stay in the field.90
The transport of gold and silver was always problematic. Warships were used to transport the major cargoes of specie that came from the port of Vera Cruz, much to the satisfaction of the captains, who would receive ‘freight’ money for their trouble.† Merchant ships under a British licence were the more usual means, but could encounter difficulties from the British Navy. Often these ships were carrying other cargo not covered by the licences and were taken to a prize court on that account. Nor did the difficulties finish once a consignment of specie had reached England, for the army had to provide an escort overland. The usual Portsmouth-to-London route could be subject to delay. By 1812 the Treasury was sending specie in consignments up to the value of £100,000 by mail and stage coaches.91
Another drain on gold came through the Channel smugglers, who were encouraged by the French government to trade in illicit bullion. From 1810 to the end of the war, gold was transported across the Channel from Britain to France with French government approval and support. The gold reserves held by the Bank of England, which stood at £7.9 million in February 1808, declined over the next three years to £3.6 million.92 By this time the gold came exclusively through Gravelines. Dunkirk and Wimereux had been the favoured ports in 1810, but, as some armament production was located near Dunkirk, this was seen as a security weakness. By an imperial decree of 30 November 1811, Gravelines was pronounced the only permitted port for English smugglers, and remained so until the end of the war. The movements of the smugglers were highly controlled by the French authorities, with the involvement of six ministries: interior, war, navy, finance, police and manufactures. Rules, restrictions and paperwork abounded, and the smugglers were confined to a guarded enclosure; security passes were issued to any Frenchmen entering the English quarter.93 On the return journey the smugglers carried significant quantities of lace, silk shawls, bonnets, ribbons, leather gloves, brandy and Dutch gin.94 All these elaborate measures assisted the French in their goal of disrupting the British economy. Smuggling was a sophisticated business, involving bankers on both sides of the Channel. From 1811 the Rothschild family were among them, operating on a large scale: in April 1812 Nathan sent six shipments of guineas to his younger brother James amounting to £27,300, in return for bills from several Paris bankers to the face value of £65,798.95
In addition to the export of specie and credit notes, military stores were also sent to Continental partners in enormous quantities. As we saw in the previous chapter, gunpowder and arms, primarily muskets, were shipped to Russia, Sweden, Prussia and Austria. It led to risky undertakings, such as the request conveyed by a London banker during the winter of 1810/11, Samuel Thornton, to the foreign secretary, Lord Wellesley, for the Russians, still formally allied to Napoleon, to be supplied with gunpowder and lead, a transaction that the prime minister approved. In July 1811 four merchant ships carrying 500 tons of gunpowder and 1,000 tons of lead, escorted by an 18-gun sloop, sailed to St Petersburg. The cargoes were consigned to Thornton’s agent, who was instructed to exchange the cargo for 2,500 tons of hemp. When the ships arrived off St Petersburg, the Russians did not allow the cargoes ashore, and the goods probably found their way into Prussian warehouses.96 By 1812, however, systematic shipments of field guns, muskets and gunpowder from Britain sailed north to Sweden and Russia. When the rising against Napoleon in eastern Europe took hold in 1813, the flow of arms and munitions to the Allies became a continuous stream. In November of that year Castlereagh announced in the House of Commons that 900,000 muskets had been sent to the Continent in that year alone, ‘an exertion which reflected the greatest credit on the head and all the members of that department of the public service by which it was effected’.97
Yet, even as the French stranglehold showed signs of loosening, Britain encountered its worst economic crisis from the last months of 1810 to the autumn of 1812. Both imports and exports declined. Many merchant houses were broken by speculation. Government stocks went down. The value of 3 per cent Consols fell from 70 in 1810 to 65 in 1811 and to 56 in 1812. By 1812 the charges for government loans stood at £7.2s.0d. per £100, the worse terms, as William Huskisson pointed out in the House of Commons, since 1798.98 The banking houses of Goldsmid and Baring had lent the government over £13 million. Confidence in the City was shaken when, in September 1810, old Sir Francis Baring died and two weeks later Abraham Goldsmid committed suicide and his bank failed.99 Bankruptcies in the country nearly doubled, from just over 1,000 in 1809 to 2,000 in 1811.100 Food shortages compounded Britain’s problems. Yields from the harvest of 1811 were low, and 1812, when the weather was unsettled, proved no better. Large stocks of grain had to be imported and food prices spiralled. War expenditure increased and so did taxes; but government expenditure exceeded its income by nearly £16 million in 1810, as we have seen, by over £19 million in 1811 and by £27 million in 1812. To add to the gloom, on 18 June 1812 the United States declared war on Great Britain.
Unemployment in the Midlands and the north of England was accompanied by outbreaks of violence. The number of unemployed was remarkable, considering how many soldiers and seamen were needed to fight the war. In Liverpool some 16,000 were kept alive by charity during the winter of 1811/12, 17 per cent of the town’s total population of 94,000.101 In the industrial areas distress was translated into widespread unrest by Luddite protests against the introduction of the power loom, which had led to th
e discharge of skilled weavers. Disturbances broke out in many towns in the Midlands and Nottinghamshire.* The government passed an Act declaring that the destruction of the looms by rioters was a capital offence and moved the militia quickly to the centres of protest, taking the precaution of sending the Leicestershire, Rutland, Nottinghamshire, Northamptonshire and Warwickshire regiments to Ireland, in case they developed sympathies with the rioters. Thus early in 1812 the first battalion of the West Essex Militia Regiment, guarding prisoners of war at Norman Cross near Peterborough, was urgently ordered to Nottingham, travelling quickly by wagon and then by forced march. In May the troops went on to Newark on Trent, back to Nottingham and in early June to Mansfield, where they remained in quarters. In October the battalion marched to Leicester, where two companies were detached to Hinkley and two to Ashby de la Zouche.102 The regiment was still in the Midlands in the middle of the following year, at Leicester and Derby, and later further north at Sheffield and Huddersfield. The disturbances were stopped by the end of 1813, but not before ringleaders had either been executed in York or condemned to transportation.
Spencer Perceval was determined not to give up office unless he was defeated in parliament in a vote of no confidence. His government suffered several defeats in the Commons, but he pushed ahead nonetheless, managing to deal with the finance for the Peninsular War, hostilities with America, economic turmoil and severe domestic disorder. This underrated prime minister, to his great credit, held his political and financial nerve. Together with the specie crisis of 1809, during which Perceval took the greatest political load, 1811 and the first half of 1812 were years of grave danger for the British state.
Only the decimation of Napoleon’s army in Russia at the end of 1812 turned the tables. The dramatic weakening of the emperor’s power changed the political situation in countries across the North Sea. Open revolt was unleashed against French domination in north Germany and Holland – encouraged, too, by the approach of the Russian Army, which pursued the remnants of Napoleon’s army across Europe. In February 1813, in Hamburg, tax collectors and customs agents were attacked by a crowd while smugglers were being arrested: the population had little to lose after years of impoverishment.103 From that point the Continental System steadily unravelled. In April 1813, merchants in Heligoland smuggled an unprecedented amount of British goods into north Germany, in one month shipping 594 tons of sugar, 529 tons of coffee, 29 tons of tobacco, 7 tons of cocoa, 3.5 tons of tea and nearly 8,000 gallons of rum, besides manufactured goods worth nearly £30,000.104
With improving British fortunes, government confidence grew. The most immediate task was to ensure the payment of Wellington’s army in Spain, which by the beginning of 1813 was desperately short of cash.105 At this point the young banker Nathan Meyer Rothschild, who only four years earlier had been a textiles merchant in Manchester, came to the aid of the government. Through his father’s influence in Frankfurt he came to manage a substantial amount of capital owned by the Landgrave of Hesse, now dispossessed by Napoleon, which Rothschild used to build up his own capital through commissions and manipulations of the exchange rates between the various European currencies. He was also lucky because in 1813 rival City bankers, for personal or financial reasons, were not in a position to help the government. Rothschild had the powerful advantage of an efficient family network of bankers throughout the capitals of Europe, but it was his ambition, his shrewdness, his cultivation of politicians, his nerve with fluctuating markets and exchange rates, and the security and speed of his communications across Europe that all contributed to his extraordinary rise to wealth and power.106
On 11 January 1814 the government officially charged Nathan Rothschild with the task of organizing the finance for Wellington’s advance through France. He was to buy French gold in Germany, France and Holland, and transfer it to British vessels in the Dutch port of Hellevoetsluis, from where it would be taken to St Jean de Luz, on the French coast south of Biarritz. The enterprise was at Rothschild’s risk, the commission 2 per cent of the sum delivered and was successful. This was the first of many of Rothschild’s projects. By May 1814 the government owed Rothschild well over a million pounds; he was to earn much more on subsidies despatched to the Allies, business that Rothschild took over from other banking houses such as Barings. In 1815 the prime minister, Lord Liverpool, remarked of him to Castlereagh: ‘I do not know what we should have done without him last year.’107 Here was the highest degree of trust between government and the City. The relationship that most contributed to it was that between the banker and the British Treasury official, now the commissary-in-chief, John Charles Herries, who had the job of supplying Wellington’s army. By March 1814 Rothschild was ‘almost continually’ in Herries’s office in the Commissariat.
In April 1814 Herries left London for Paris to oversee a complex financial operation, in which strict confidentiality was of the utmost importance. Britain was still paying subsidies to the Allies, without which the European governments could not have kept their armies in the field and themselves solvent. These huge transfers from London had adversely affected the rate of exchange between Britain and Europe. Now that credit was officially available to Britain on the Continent, the government established a subsidy office in Paris, to be managed by Herries, from which transactions could be made to supplement those from London. Payments made in London and Paris could be balanced to ensure that speculators did not profit.108
A month after Waterloo, Herries returned to Paris to resume supervision of the payments of subsidies and British military expenses, and to clear up the complexities of the subsidies rapidly agreed during the urgency of the 1815 campaign. The Treasury arranged to finance the war effort by offering £30 million in 3 per cent bonds. The loan was allocated to Baring Brothers & Smith, and Payne & Smith, which put up a large part of the issue in Hamburg, Amsterdam, Vienna, Basle, Frankfurt and St Petersburg. Herries was able to use the proceeds of the sale of bonds for the payment of subsidies.109 Only £1 million had to be sent from England to pay the subsidies.*
These immense financial responsibilities rested upon very young shoulders: in 1815, with their wartime achievements behind them, Nathan Meyer Rothschild was thirty-eight and John Charles Herries was thirty-seven.110
Part Four
THE TABLES TURNED
14
Russia and the Peninsula 1812–1813
With respect to the language of people with regard to Lord Wellington, it is infamous & one cannot but deplore to what a length the liberty of the Press has arrived. People now are not satisfied because Lord Wellington has not utterly destroyed Massena and his army, and nothing will satisfy them but a great battle being fought. Yet these people some months ago declared that nothing was equal to the rashness of Lord W. even to attempt to resist Massena and his army …
– Lieutenant-Colonel Sir Alexander Gordon from Portugal, to his brother Lord Aberdeen, 22 December 18101
A British Army on short commons is no easy thing to govern; already discontent and murmurs appear, transports are the cry. This is alas! the nature of our soldiers – heroic in action, full of spirits in advance and when he is well fed, but in retreat where subsistence is short, he becomes cross, unmanageable and too much disposed to give the thing up.
– Brigadier-General Charles Stewart, adjutant-general in Spain, to his stepbrother Lord Castlereagh, 6 August 18092
Military events in 1812 in Portugal and Spain, 1,000 miles to the south of London, and in Russia, 1,400 miles to the east, sharply improved Britain’s fortunes in the war against Napoleon. During 1810 and 1811 France had imposed peace on the rest of Europe, and the majority of new French troops had been sent to the Peninsula, with the result that the British Army had been pinned down behind the Lines of Torres Vedras, which protected Lisbon, and the Spanish were besieged in Cádiz. On 5 March 1811 they had begun to withdraw–and, when they did, Napoleon lost his great opportunity to crush the British Army.3 The emperor now had other plans for his troops. On 29 Decemb
er 1811 Wellington’s Anglo-Portuguese army of 78,000 men advanced in severe wintry conditions from Torres Vedras. Wellington, despite the criticisms, had maintained his army behind the lines for two years, while Marshal Masséna’s army had wasted away through hunger, sickness and desertion to only 40,000 effective troops.
Throughout 1811 Wellington had received accurate local intelligence that veteran French troops were being marched north for the projected invasion of Russia.* By January 1812 he had besieged and taken Ciudad Rodrigo, and Badajoz fell in early April, both key fortified towns in central Spain. The movement of French troops northwards accelerated: in March and April 1812 alone nearly 35,000 troops had been withdrawn.4 In July, Wellington won a spectacular victory at Salamanca, and by August he had occupied Madrid. Although his army retreated just behind the Portuguese border for the winter, and the enemy was able to re-enter the Spanish capital, French power in Spain had been profoundly shaken. In the south the siege of Cádiz had been raised, and the French had abandoned Andalusia. Joseph Bonaparte’s regime as king of Spain never recovered from these setbacks.5
Of even greater importance in the grand scheme of things were events in Russia, where armies three times the size of those in Spain were beginning the endgame of the Napoleonic War. On 24 June 1812 Napoleon crossed the border into Russia with his army of 220,000 soldiers.6 He was opposed by three Russian armies totalling 241,000. The Russians retreated, bringing Napoleon to battle at Borodino on 7 September, an immense but inconclusive struggle. The French had 587 guns, the Russians 624. The Russians suffered between 45,000 and 50,000 casualties, the French 35,000. After much debate, the Russian generals decided not to defend the capital and retreated. On 15 September, Napoleon entered Moscow and set up his headquarters in the Kremlin. Fires then were set all over Moscow, lasting for six days, some of them destroying vital clothing and equipment that would have been useful to the French. Exactly who started these fires has never been established, but significantly Moscow’s 2,000-strong fire brigade had been evacuated. Critically, the Russian people perceived that the invaders were responsible for the destruction of the capital.7