by Uglow, Jenny
With the king committed to their interests, merchants could dream of great fortunes. The conditions for creating individual wealth were all there: the common law sanctioned property rights and the making and enforcing of contracts; the networks of the companies and guilds ensured a good exchange of information; manufacturers were improving techniques, and boat-builders designing better cargo ships – although in this they lagged behind the Dutch. What they needed most, however, was cheap money to invest, and here the English faced problems.
In the past, people had financed new ventures in a haphazard way by borrowing from relatives or rich connections, setting loans against the securities of bonds and mortgages. In the late middle ages, London was home to foreign bankers who lent money on a large scale to the crown, first the Italians (who gave their name to Lombard Street) and then the Germans, and bankers from Genoa and Venice and Amsterdam. But now the bankers were home-grown. In these Restoration years, powerful money-men who had risen under Cromwell strode down the Privy Gallery at Whitehall, or received harassed Treasury officials and navy clerks in their panelled offices around Cheapside. This was yet another example, like the work of the Royal Society and the boom in the book trade, where Charles’s regime built on the flurry of ideas and innovation during the Interregnum.
Some of the new bankers were former scriveners, notaries who negotiated loans and then began lending their own capital. But by far the most influential were the London goldsmiths. For a century or more, the goldsmiths had sold fine silver and gold plate to the nobility and gentry, agreeing to take it back as security against loans when times were hard. From pawn-broking they moved to full-scale banking. People deposited cash with them, receiving a low rate of interest, and the goldsmiths lent it out again at a higher rate, set by law at six per cent. The rate had fallen sharply since the start of the century, but, to the chagrin of English investors, interest rates still remained higher than in Holland, where merchants or builders or farmers could borrow at four per cent. Risk also played its part then, as now, in establishing the rate: London’s stayed high partly because financiers had lent to the crown, which often defaulted on its debts. The merchants now argued loudly that they needed cheap money, to invest at low cost in order to bring substantial profits home. In 1668, the ruthless entrepreneur Josiah Child firmly declared that ‘all countries at this day are richer and poorer in exact proportion to what they pay, or have usually paid, for the Interest of Money’.7
Child and others complained that London had no financial quarter to rival Amsterdam, where the financiers clustered together, exchanging information and arranging spectacular deals in goods and currency. (Their journal, the Price Courant, even published exchange rates twice weekly.) But the London goldsmiths were catching up. They not only gave interest on deposits, but also discounted bills of exchange, accepted the new-fangled cheques, first issued in 1659, and issued ‘goldsmiths notes’, promissory notes that could change hands and circulate freely, creating a fluid movement of capital.8 They also lent to each other, helping each other out when exceptionally large sums were needed or when the cash-flow failed, and they kept careful tallies so that they knew how exposed they were every week, every day and even, in some crises, every hour.
The goldsmiths had made overtures to Charles as soon as Monck reached London in January 1660, and at the Restoration he was extremely careful to bind them to his side. The most senior was the grey-haired Thomas Vyner, whose shop had provided the gold cup for Charles’s own baptism in 1630. He did not look, however, like a natural ally. In 1649, as Sheriff of London, he had attended the execution of Charles I; later he carried the sword of state when Cromwell rode through the city.9 In the first Interregnum he made a fortune through East Indian investments, handled the money from confiscated Irish estates and became Lord Mayor. Yet in 1660 all his Cromwellian past was politely brushed aside. Almost as soon as he landed, Charles made Vyner a baronet, and he also smiled on his nephew Robert, who had just become a full member of the family firm at the Vine in Lombard Street.
Equally swiftly, Charles enlisted the help of Vyner’s former apprentice Edward Backwell, who had been Cromwell’s Treasurer of Dunkirk from 1658. Charles kept Backwell in this role and used him to handle the sale of Dunkirk in 1662, collecting and disbursing the great chests of silver shipped over from France. Backwell’s heavy ledgers, the first run of banking accounts in Britain, with neat lists of incoming sums on the left-hand page and payments on the right, show the Dunkirk money flowing out in rivers and streams, the greatest sum to Carteret for the navy, the second largest to Stephen Fox for the king.10 Backwell also handled the farming of the London Excise and the revenue from the Hearth Tax, as well as gifts to ambassadors and the distribution of prize money from captured ships. Every name one can think of in public life appears in his accounts, from Lord Mayors and ministers to courtiers and poets: Albemarle and Ashley, Bennet, Buckingham, Buckhurst, Dryden, Downing, Lauderdale, Pepys, Ormond and Orrery and on to the end of the alphabet.
The same names appear in the customer books of Sir Francis Child the elder, another goldsmith turned banker (no relation to Josiah Child). In his ledgers everything is recorded from the purchase of silver buckles and gold toothpicks, to huge loans to aristocratic estates.11 The Vyners, Backwell, Child and others like them had all worked their way up through apprenticeships to become freemen of the Goldsmith’s Company. Backwell’s forebears were Bedfordshire yeomen; Child was the son of a West Country clothier; the Vyners came from a ‘middling’ Warwickshire family; Francis Meynell, whom Pepys called ‘the great money-man’, began as a fresh-faced apprentice from Derbyshire. Such men represented a new power in the land, one that would force the court more and more into partnership with the City. Decisions of state began to hang on the views expressed in the counting houses and coffee-houses of the Square Mile. The Vyners, for example, advanced over a million pounds to Ormond in his first years as Lord Lieutenant of Ireland, and he fumed over their high ‘Irish rates’ of ten per cent. Robert Vyner also lent a fortune to the king, beginning with £30,000 for the coronation regalia. In 1662, with Meynell and Backwell, he collected the same sum to repay the Russian loan that the Muscovy ambassadors came to collect. In 1665, he would stump up £330,000 for the navy, household and guards. He was not doing this out of a sense of national duty: his rates were a standard ten per cent on outstanding government debts, sometimes reaching fifteen or even twenty per cent. By the end of the decade the loans ran into millions and the interest payments were, theoretically, vast. He took risks, and there were unseen rapids ahead, but for now at least, the securities seemed safe.
When the French ambassador Cominges was insulted that the ministers did not leap to their feet to greet him on his arrival at the Lord Mayor’s banquet, he did not realise that the aldermen and traders they were talking to were just as vital to the King of England as an envoy of the King of France. Although Charles kept them at a slight distance, the money-men and the merchants were as crucial to him as his great nobles, bishops and MPs. He needed their help, their influence in the city, their taxes and their loans. And beyond all this, for a king who loved ships, he was spellbound by the promise that his country would become – in a phrase used increasingly often as the decade passed – the undisputed ‘master of the seas’.
The bankers’ books also reflected this sea-going power. One set of figures related to loans to merchants, noted down as ‘Adventures of the East India Company’, ‘Adventures of the Royal Africa Country’ or, more vaguely, ‘Adventures to Severall Places’. Cromwell had boosted England’s trade and Charles was determined to match him. In 1661 parliament quickly confirmed and extended Cromwell’s Navigation Act of 1651, which excluded Dutch traders from the English import trade. The new Navigation Act of 1660 was drawn up by George Downing, who was a member of the Convention Parliament as well as ambassador at the Hague, a difficult man, but a moderniser with an acute grasp of the economic realities of British life. Downing also cleverly tied the colonies
into the act, by decreeing that all trade between Britain and the plantations, and between the colonies themselves, must be in English vessels.12 (The Irish could be carriers, under specific conditions, but the Scottish ports, to their fury, were omitted from the acts, although this did not stop the flamboyant Glasgow ‘tobacco kings’ building up a trade of their own.) A second act in 1663, the Staple Act, stipulated that the colonies must buy all the goods they needed in England, closing a loophole that had let them deal directly with European ports. Downing also argued that British boatbuilders should concentrate on fast, large carriers, and suggested developing London as an entrepôt port to rival Amsterdam.
John Michael Wright’s painting of The Family of Sir Robert Vyner, 1673, suggests the pride and status of the new bankers.
Under the new acts the western ports and the Atlantic trade in particular enjoyed a boom.13 Ships set out from Bristol, Plymouth, Liverpool and Whitehaven in increasing numbers. For speculators, investing in ships and cargoes was attractive since an investment could be spread over several vessels and the cargoes were usually owned by a syndicate of four, eight or sixteen partners, sharing the danger of loss between them. And those dangers were certainly great. Storms and shipwreck, disease and pirates took a heavy toll. Sometimes a ship simply vanished, and no cause was ever found.
The two great British companies, the Levant and the East India Company, took different routes to offset risk. The Levant, like most companies at the times, was ‘regulated’, with each merchant trading independently on his own capital. The company was having a hard time in these years. Algerian pirates raided its ships, its agent in Constantinople struggled with demanding Grand Viziers, its deals were undercut by subsidised French rivals, and its price-fixing of imports and exports was attacked by independent merchants. Yet the company had a lasting allure and always attracted new apprentices, from the gentry as well as the city. Land and trade were not as antipathetic as Restoration comedies might make us believe. Many country gentry had been merchant adventurers under the Tudors, and trade, at least in the big city companies, attracted younger sons with no clear career. At the end of the decade Dudley North would write that the army, law and medicine were suitable but ‘neither is merchandise to be condemned, whereunto in foreign lands persons of the most honourable condition do apply themselves’.14
Jack Verney was one young man who persuaded his reluctant father to buy him an apprenticeship.15 In 1662, aged twenty-one, Jack set sail for ‘Scanderoon’, the English name for Iskenderun on the far eastern Mediterranean coast of Turkey, where English merchants landed bales of fine cloth, dyed in bright colours for the eastern market, and ‘money goods’ – pepper, cochineal, sugar and tin. These were carried inland and traded for silk and mohair and spices at Aleppo, the great trading post on the Turkish–Syrian border. At the other major depot at Smyrna, modern Izmir, seventy British factors and apprentices sweated in the Turkish heat, setting aside the local robes that their predecessors had adopted, in favour of black suits, silk stockings, white gloves and wigs.
Charles supported the Levant Company, appointing one of their men to check all lading bills, so that they could catch outsiders trading in their territory. But he knew well that the most crucial company, in terms of royal profit, was the East India Company. In contrast to the Levant, this was a joint-stock venture (copying the Dutch East India Company).16 It raised money by issuing permanent dividend-paying shares, and each costly voyage was financed by selling up to five hundred shares at around £100 each. When the boats returned, the goods were stored and auctioned off gradually in a succession of sales, to avoid any sudden glut that might lower prices. As the cargo was sold, so the shareholders were paid. The risk, and the return, were thus widely spread.
In April 1661 Charles confirmed the East India Company’s charter, an action sweetened by presents of plate worth £3,000 for himself and £1,500 for James. Both brothers were among the company’s five hundred investors, and Charles was always careful to consider its interests. Forty years before, the Dutch had seized the East Indian island of Pulo Run, one of the Banda islands to the west of Papua New Guinea, which was the company’s base in Indonesia, and burned its spice trees, thus depriving the company of a vital supply of cloves, cinnamon and nutmeg. Not only did Charles and his envoys press the Dutch hard to return the island, according to an agreement with Cromwell, but in 1662, when two of his most prominent courtiers, Henry Bennet and John Grenville, petitioned to import spices from Germany, Charles made sure that he consulted the company before granting their request.17 As a compromise, he allowed free trade in the spices, but only until the company could set up a new base.
The East India Company had twenty-eight of the finest ships, sending half out each year. Instead of building their own vessels, the traders hired them, which cut their overheads (and led, incidentally, to the start of an insurance and shipping business in the City). Each long journey was arranged around the seasonal winds, with the ships stopping for provisions at the new South Atlantic settlement on St Helena. Some sailed as far as China, but the main destination was India, especially the great Mughal port of Surat, which traded in saltpetre, indigo and cotton from the interior. The presidency of the company was based here, protected by the local Mughal viceroy. Many English soldiers and company men now lived permanently in India, becoming part of an intricate two-way exchange of cultures. The exotic fusion is strangely illustrated in a Deccani painting where an Indian prince is entertained by a courtesan, gorgeously dressed in silk knickerbockers, with a cavalier’s plumed hat on her head and a small King Charles spaniel at her feet.18
The fort and harbour of Surat in the seventeenth century
Charles had his own foothold in India, just down the coast from Surat, in Bombay, with its seven islands, which had been included in Catherine’s dowry. But to begin with Bombay was a burden rather than a boon. Five ships sailed from England in March 1662, under the command of the Earl of Marlborough, expecting to take possession of all Bombay’s dependencies. When they arrived, however, they found the Portuguese adamant that only the islands were included in the treaty. The deadlock took time to solve, and while Marlborough sailed home, the troops, already sick after weeks at sea, were left stranded on the small, uninhabited island of Anjediva near Goa. Hundreds died there of disease, and in 1665 only ninety-seven private soldiers marched into Bombay, out of the four hundred who had embarked. But when Surat was raided by a neighbouring Indian force, and the merchants needed to find a new deep-water port, Bombay, with its superb harbour, was the obvious choice. In 1668 Charles leased it to the company for a nominal annual rent of £10 in gold and Sir George Oxenden, president of the Surat factory, became its first governor.
The East India Company wooed Charles with presents, silks and jewels, rare birds and animals, and gave generous gifts to the favourite or mistress of the day.19 The company showed off their treasures at East India House, which had a menagerie of exotic creatures from India and Virginia and a collection of rarities ‘to gratify the curiosity of the public’.20 Secure in the royal favour, the directors purred over their books, priding themselves on their meticulous record-keeping. They had reason to be pleased. In 1663 profits reached around £130,000, and the return on investment rose from twenty to forty per cent. The return for the crown was handsome too: between 1664 and 1667 the East India Company would lend the king almost a quarter of a million pounds.
Like the natural philosophers, the money-men were developing a new intellectual approach, questioning, observing, collecting data and building theories on how trade grew and money circulated. They argued about money supply, interest rates and the best structure for trade to flourish, and pondered for the first time about the ‘balance of trade’. Since the early years of the century one group of thinkers had worried that the import of goods meant loss of physical bullion – gold and silver – to overseas. In opposition, another group asserted that ‘value’ lay not in intrinsic things like bullion but in the act of exchange itself
– in the great circulation of trade, money returned amplified to its source. England’s Treasure by Fforaign Trade, by Thomas Mun, written in 1622 but published in 1664 (pointedly dedicated to the Lord Treasurer, Southampton), put it succinctly: ‘Money begets trade and trade begets money’.21 But while some writers held that the market was infinitely flexible and elastic and therefore backed freedom of trade and competition, as Samuel Fortrey did in England’s Interest and Improvement in 1663, others, like John Bland in Trade Revived (1659) saw demand as finite, and therefore recommended monopolies and protection.
The language of trade, of contract, obligation and ‘equity’ provided a model of relationships, which, as Charles and others around him slowly saw, could be applied to government as well as trade. This way of thinking brought a new respect for mediation in disputes, social as well as mercantile, and the idea of ‘coming to an agreement’, without invoking aristocratic codes of honour.22 The strength of the great companies also influenced the argument for religious toleration since the directors of the Levant Company and the East India Company included many nonconformists who could not be dislodged, however hard Sheldon and his allies tried, and it was important for the crown to keep them sweet.