But even here, Bagehot found Mill too easily swept along by revolutionary currents. In 1868, the latter responded to the Irish nationalist upsurge of the year before with a proposal that addressed what he considered the root grievances of the Fenians, whom he wished to stamp out: creation of quasi-peasant proprietors, with fixity of tenure, via state guarantee or purchase – as much out of moral obligation for past misrule by England as to maintain that rule, through the imperial Act of Union.163 Scathing in his review of Mill’s pamphlet, Bagehot pointed to the contradictions that undermined the ultimate goal he shared with it. Not only was possession of land in itself unlikely to cure the misery of Irish peasants, given their ingrained habits of idleness, but it handed them a potent new weapon. ‘Suppose that at a moment of political excitement – at such a crisis, say, as this of Fenianism – the whole Irish people do not pay their rent to the English Government. What is to be done? You cannot serve a writ of eviction upon a whole nation.’ In Bagehot, the cause of liberal imperialism had a harsher, but also a more consistent and unfussed champion, who prided himself on this temperamental contrast with the great philosophic radical. On Ireland, Mill had shown himself to be ‘easily excitable and susceptible; the evil that is in his mind at the moment seems to him the greatest evil, – for the time nearly the only evil – the evil which must be cured at all hazards’, wrote Bagehot.164 ‘Mr Mill is, of course’, he could muse in 1871, ‘the standing instance of a philosopher spoilt by sending him into Parliament, and the world.’165
Perhaps the most revealing international comparative insight into the liberalism of the Economist under Bagehot comes from France – only fitting given the coverage devoted to it. ‘The English thinker with whom Tocqueville can be most properly compared is Bagehot’, wrote A. V. Dicey, and the two men are still often classed together on account of an allegedly shared distrust of democracy.166 In fact, they had less in common on democracy than they did in according a central importance to empire in the competitive environment of mid-nineteenth century Europe. Indeed, it was in part his recognition that democratic change could not be halted – in contrast to Bagehot, who bitterly resisted it – that led Tocqueville to advocate the merciless conquest and colonization of Algeria, as a ‘great task’ capable of unifying France in a post-revolutionary and egalitarian age. Elected to the Chamber of Deputies in 1839, Tocqueville applied himself with singular energy to erecting a French empire in North Africa, and fulminated against just the sort of radical critics that Bagehot excoriated in the pages of the Economist – for John Bright, read Amédée Desjobert.167 As foreign minister for the Second Republic, he showed no qualms about using force in Europe either, if the end of national prestige justified it – overseeing the dispatch of troops to revolutionary Rome in 1849 to topple a sister republic on behalf of Pope Pius IX, in violation of the French constitution; in the aftermath, he connived at the illegal prolongation of powers of Louis-Napoléon that ended in his overthrow of the republic in France itself.
In reacting to this coup d’état, however, Tocqueville and Bagehot did hint at ways in which their liberalism differed. In his Recollections Tocqueville offered a vivid account of the revolution of 1848 right up to the moment of the coup in December 1851. In contrast to Bagehot’s sarcasm in the Inquirer, Tocqueville earnestly participated in the February uprising – upbraiding his fellow national guardsman, observing with approbation the handiwork of barricadiers, being lectured at by a working-class man outside the National Assembly (without, however, rendering his speech in cockney), and deploring the pious egotistical ravings of his sister-in-law, ‘concerned only with the good God, her husband, her children and especially her health, with no interest left over for other people’.168 Bagehot’s ode to ‘common comforts’ and ‘stupid lives’ in a national emergency was, for Tocqueville, selfishness. Though he helped pave the way for the coup that displaced the moderate republic he claimed to defend, when it came he denounced Louis-Napoléon in a letter smuggled out of France. ‘If the judgment of the people of England can approve these military saturnalia’, wrote Tocqueville, addressing the same audience of middle-class liberals that Bagehot was also trying to reach, ‘I shall mourn for you and for ourselves, and for the sacred cause of legal liberty throughout the world.’169
For Bagehot, crippling commercial uncertainty awaited societies unable to contain the democratic elements in their constitutions. Tocqueville, more concerned with moral and religious liberties and whether these could survive in democracies, was less intransigent. The spread of democracy to the ‘Christian nations of our day’ might be cause for anxiety, but for the author of Democracy in America it was also inevitable, an edict of providence that might even – provided it did not put equality above liberty, as he accused socialists in France of doing – be beneficent.170 Bagehot read and admired Tocqueville, and met him at least once in 1857. Yet he could not help suspecting that a man who took such a dim view of ‘money-making’, even criticizing the individualism it bred as a threat to the preservation of liberty, ‘might be thought to be the expression, if not of a disappointed man, then of a disappointed literary class’.171 Where was liberalism headed? Tocqueville was an aristocrat with a manor in Normandy, Bagehot a banker, whose favourite pastime was riding to hounds. The coup d’état of 1851 obliged the former to retire from politics, and set the latter on his path to the Economist.
This eBook is licensed to Karim Mamdani, [email protected] on 12/02/2019
3
Edward Johnstone and the
Aristocracy of Finance
Karl Marx read the Economist, starting at least as early as the summer of 1850, when he acquired a pass to the reading room of the British Museum.1 The revolutionary surge of two years earlier, the ‘springtime of the peoples’, had fizzled, and to the author of the Communist Manifesto the back issues of the fiercely free trade Economist suggested why: after two years in which poor harvests and high grain prices, a downturn in trade and a credit crisis had fuelled popular and middle class discontent, the business climate began to improve in mid-1848, strengthening conservatism and dampening protests against it all over Europe. Yet Marx took more than raw economic data from the Economist. In it he identified a sector of liberal opinion with a distinct worldview and cosmopolitan wealth, so fearful of further popular upheaval that by 1851 it was ready to welcome an illiberal but orderly dictatorship in the revolutionary capital of the nineteenth century, France.
‘The position of the aristocracy of finance is most strikingly depicted in a passage from its European organ, the London Economist’, Marx wrote of events leading up to the coup d’état in the Eighteenth Brumaire of Louis Bonaparte in 1852. On 1 February 1851, the paper’s Paris correspondent had noted ‘the sensitiveness of the public funds at the least prospect of disturbance, and their firmness the instant the executive is victorious’. ‘In its issue of 29 November’, he continued, ‘The Economist declares in its own name: “The President is the guardian of order, and is now recognized as such on every Stock Exchange of Europe”.’2 If its perspective – that of ‘the loan promoters and the speculators in public funds’ and ‘the whole of the banking business’ – was far from new, the scale of the invested capital was: ‘If in every epoch the stability of the state power signified Moses and the prophets to the entire money market, why not all the more so today, when every deluge threatens to sweep away the old states, and the old state debts with them?’3
Marx was, in short, in perfect agreement with Bagehot, the future editor then writing his letters from Paris, in claiming that market uncertainty was leading ‘even the most ordinary liberalism’ to be denounced as socialism by middle-class Frenchmen.4 In another sense, Marx was ahead of the curve, for it was not until Bagehot took the helm that the Economist truly articulated the political wisdom of the ‘financial aristocracy’ as such. The turbulent years that followed Bagehot’s death in 1877 saw an amplification of the dynamic that Marx had registered. Indeed, the advice Bagehot left behind, scrupulously adher
ed to by trustees and editors alike, was to focus on the frothy money markets of the City of London – and what seemed their most important new lines: settling ‘international bargains’ and floating foreign loans, with Britain (‘the country of banks’) pressing the latter upon ‘civilised’ and ‘half-finished’ nations much like ‘London money dealers’ on ‘students at Oxford and Cambridge’.5
The next two editors built on this blueprint. But their joint appointment, which was intended to re-create the twin talents of Bagehot, was troubled and brief. Daniel Conner Lathbury, graduate of Brasenose, Oxford, a trained barrister turned journalist, was tasked with writing political leaders. His liberalism pivoted on the politics of the Anglican High Church, however – and in contrast to Bagehot, who took an impish, intellectual interest in religious subjects, Lathbury was drawn deep into earnest debates on the Catholic revivalism of the Oxford movement.6 He was dismissed in 1881. Robert Harry Inglis Palgrave handled the money market and trade statistics, staying on two years after his ex-co-editor. Palgrave seemed exactly what Bagehot had in mind: his family were bankers from Great Yarmouth, who financed their four sons’ forays into poetry, history, imperial diplomacy, economics, and politics.7 The only son to go into the family business instead of to university after Charterhouse, a minor public school, Palgrave even sounded like Bagehot – at least when contemplating ‘the union of pecuniary sagacity and educated refinement’ that fell to the country banker, whose work left him free to contemplate Elizabethan sonnets on ‘the long winter evenings, the half hour in the shady garden in summer, the quiet times on the deck of the yacht’, or on the way to the office.8
The New Financial Press
Neither Lathbury nor Palgrave, alone or together, could achieve the lively synthesis of politics and finance the trustees wanted. There was a profit to be made reporting on the money market, and the paper was now attracting stiff competition. In 1859 a weekly Money Market Review began to appear; ten years on, in response to a rush of listings fuelled by the Companies Act, its owners started the daily Financier, and a monthly Bondholders Register. The rival Bullionist launched in 1866. The Daily News and the Times devoted increasing if not always disinterested space to the City of London.9 But the fiercest challenger arose from within: Robert Giffen, Bagehot’s assistant from 1868 to 1876, declined to succeed him, and instead founded the Statist, which fought the Economist for writers, advertisers, and statistical scoops until 1967.10 One difference between the Economist and these newcomers is hinted at by its address for most of this period: not Fleet Street, the traditional home of London’s newspapers, nor the bankers’ Square Mile, but the Strand, sandwiched between a cigar importer and a wine merchant, near music halls and literary magazines, in the bustling heart of London.
It took six years for the Economist trustees to agree on a new model, during which time Wilson’s brother George, sons-in-law Greg, Shipley and Barrington, and daughter Eliza played leading roles. At various points they consulted the economist Stanley Jevons, and contemplated offering the post to John Morley, then editor of the Pall Mall Gazette.11 But in 1883 it was Edward Johnstone, veteran City hand for the Scotsman, and financial stringer for Bagehot, Palgrave, and Morley, who got the job – at first with the future Liberal prime minister Herbert Henry Asquith as his political editor – and held it, for a record twenty-four years.
Johnstone came to London in 1874. His university studies in Edinburgh had focused on political economy, and though he also qualified as an actuary, he seems not to have practised this trade.12 At thirty, he was a ‘comely, fresh-faced young Southern Scot’, according to a Times editor who read his letter of introduction and sent him along to the manager of the Economist. There are few other remembrances. John St Loe Strachey – a cousin of the Bloosmbury biographer Lytton Strachey – described Johnstone as an editor ‘who told you exactly what he wanted’ and ‘made it so very clear that one was expressing not one’s own views, but the views of the Economist’ and that ‘whether they were in fact right or wrong they certainly deserved full consideration’. He remembered just one alteration Johnstone made to his writing in nine years: in a review of Bagehot’s collected works, Strachey compared Bagehot’s ‘perfection of style’ to Robert Louis Stevenson, ‘who at the time was held to be our greatest master of words’; Johnstone removed the passage, not for going too far, but because ‘he feared Mr Bagehot’s family might think that the writer was not properly appreciative of Bagehot’s work if he compared it to that of Stevenson!’ Though a great journalist – Strachey reported with mild understatement – Johnstone was ‘not a man who had paid any attention to literature’.13
Instead his focus was on the Economist, which also provides our main clues about Johnstone. Its obituary to him makes this seem almost intentional, noting his ‘direct, forcible, and unassuming’ prose and ‘retiring disposition’, roused by hatred of ‘tautology’, ‘hyperbole’, and those he suspected of ‘writing for lineage’. His ‘fidelity to the high traditions which he had received from Wilson and Bagehot’ kept the Economist distinct in an era of intense competition – where ‘there was a danger that the English press might become shallow and subservient’, a ‘mouthpiece of financiers and share-pushers, the enemy instead of the friend of the investing classes’.14 Johnstone sought not to make ‘readers fortunes’, but to recall ‘governing principles’ and ‘guide them clear of blunders’. As the Financial News and Financial Times, founded in 1884 and 1888 respectively, battled over which ‘puffed’ shares harder (both took their rough-and-tumble tactics from the Wall Street press), the Economist was coolly ‘devoted to the higher interests of finance’.15
The Foreign Investor’s Friend
Johnstone became editor in the midst of the first Great Depression, a worldwide fall in prices and profits, which lasted roughly from 1873 to 1896. The deflationary trend puzzled contemporaries, in part because production, investment and trade continued to grow. Too much of the latter was, in fact, likely to have been responsible for the former, as foreign industrialists began to battle Britain for control of markets, advances in railroad and marine transport opened up farmlands in North America and Russia, lowering food prices, and the gold standard limited the money supply.16 Alongside a class structure that favoured savers over consumers, this malaise may also have spurred further overseas investment – which rushed forward in spurts, towards higher rates of return. British assets abroad grew from £200 million in 1850 to £700 million in 1870, £2 billion in 1900, and £4 billion in 1913. Capital outflow averaged over 4 per cent of national income over this period, at its close generating about £200 million in interest, or 8 per cent of national income.17 Bagehot had wondered how British loans and investments might affect ‘half-finished’ civilisations abroad. In the end, Britain was itself transformed. No other country has ever sent such a large portion of its wealth abroad, or received such a large share of it back.
The Economist had no doubt that it was profitable to invest overseas, and its weekly, monthly, and annual data sets have always been central references for economists and economic historians trying to determine the overall quantity and direction of capital flows to and from late nineteenth-century Britain – not to mention their possible causes and effects.18 Yet few have paid attention to how the Economist itself interpreted the data – a significant oversight, given its instrumental role not just in purveying information, but in constructing knowledge about the world as an interlinked market, which it wished to expand in and beyond the formal empire. The paper circulated, after all, among the most powerful class of Victorian and Edwardian savers, the ‘gentlemanly capitalists’ clustered in south-east England, who made their livings in finance, banking, trade, and shipping, or as politicians, administrators, and landowners, and showed a marked preference for income derived from safe overseas assets like railway and government securities.19 They turned to the Economist not for news in the narrow sense but for political analysis to help them evaluate the risks and rewards of placing capital abroad. What
did they learn?
Revenues and yields were calculated annually, in part to defend ‘liberal imperialism’ against both its critics and those who wanted to pursue it for frivolous ends. Total colonial investments of £620 million yielded an average return of 5 per cent in 1883. Charts abounded, calculating total interest payments by region – Australasia, North America, India, Africa – and type: government loans, railways, provincial cities, harbours and gas, banking, mortgage, agency, and others. Colonial government loans brought in only slightly more than 4 per cent, excusable because low in risk; railway and municipal bonds and stocks were excellent at over 5 per cent; banks and mortgage companies were galloping away at over 6 per cent. ‘Nearly one half of our subscriptions in 1883 were to colonial loans and to colonial enterprise’, it reminded readers, ‘and the growth is so certain to continue, that the whole question cannot be too carefully considered.’20
The lack of movement on the Stock Exchange over the same period gave rise to similar formulas. An encomium to speculative virtues praised the social utility of the risk-taker who ‘will subscribe for new securities – such as the Indian gold mines and electricity companies already mentioned – which without him would certainly never have been subscribed at all’. In the midst of stagnating prices, one was obliged to wait until ‘the savings of the investing classes increase’. A dazzling securitized vista would then open up: ‘New Guinea and the Western Pacific may someday be pictured as teeming with wealth; South America, where we have already sunk over £150,000,000, will offer an indefinite field; so will all our colonies.’ 21
Liberalism at Large Page 14