Excerpts from Moss biography
Chapter 3: Great Expectations
The coming of peace in 1814 presaged an end to the war-induced boom in Birmingham as it did for the rest of the country. The speed of the collapse came as a particular shock, shattering a widely held conviction of the buoyancy of the town’s industries. This conviction stemmed from the belief that the end of the flow of government money for the armaments industry would be more than compensated by the opening of previously closed markets . . .
Trade did recover in the summer of 1815 as a speculative foreign trade was developed, not for the first or the last time, to replace those industries which had been geared to the war effort. Goods were shipped to Europe but it was soon discovered that the war-ravaged continent was unable to buy. A second and precipitous decline followed. In twelve months the business of Attwoods & Spooner was halved . . . [52
The most serious blow to the economy, however, was the decision by government and the Bank of England to honour their pledge of 1811 by returning to the gold standard. [53
The remedy lay not in politics but in economics . . .
Attwood’s first step in the accomplishment of what he thought would be a simple task was a letter to Lord Liverpool advocating an immediate issue of Bank of England notes or exchequer bills as the “most immediate palliative to the country’s suffering.” Such an issue had been made in 1793, a year, in Attwood’s opinion, which bore striking similarities to 1816 and had “acted like a charm.” His letter was ignored. Exasperated he concluded that “honest advice” had been countered by the same kind of ill-natured arguments which had enveloped London in a cocoon of self-interest in 1812.
Angrily, he abandoned private exhortation and sought public notice by writing letters to the editors of London newspapers which occasionally aired the theories of other economists. Again he was disappointed. This left only one option, private publication. Late in 1816 a small printing house in the town produced a short pamphlet for him, The Remedy; or, Thoughts on the Present Distress.
A venture into the public realm with one’s own view of economic theory had become common. Political economy, as it was labelled, had become a popular pastime and there seemed to be few qualifications necessary for the adoption of the title economist. Attwood was, in fact, not without credentials. Practical experience as a banker and entrepreneur in one of the leading centres of industry in the country was an obvious advantage. He was also extremely well read. His interest in the academic aspects of financial policy had first been aroused by the Commons’ debate on the Bullion Committee’s report in 1810. The report had demanded an immediate return to the gold standard which had been abandoned in 1797. It was argued that inflation could not be contained without such a regulator. Attwood disagreed. In later life he was to claim that it had been the lack of expertise demonstrated by self-proclaimed scholars which had encouraged him to think independently and had led him to use his knowledge of country banking as a standard against which their speculations could be tested.
He had been fortunate in having relatives and friends who found the subject equally fascinating. Many a weary day spent in fruitless argument with smug parliamentarians in London in 1812 and 1813 had been redeemed by energetic discussions with his brother Matthias. At home Richard Spooner had been a most welcome visitor, always ready to examine evidence of interest rate variation or the efficiency of note redemption practices . . . [54
When Britain slipped into economic crisis in l815 and the number of explanations was legion, he was ready with a coherent thesis of his own. The management of the economy was the responsibility of Parliament. The Bank of England was merely its handmaiden. In his first pamphlet therefore, and in seven others published by 1819 he blamed cabinet decisions for all ills. The depression had been created by “cessation of government demand, the failure to spend most of the funds saved by those whose tax burdens had been lightened and the consequent collapse of prices.” While not interested in debts and the difficulties of wealth transfer, he offered the important insight that a reduction in taxes could be and was, in 1816, deflationary in the short term. Where government expenditure had been a major contributor to total economic output a fall in tax revenue would cause a decline in business activity. The economy was not so flexible that, without help, the private sector could immediately find the resources to reemploy those dismissed from the government’s war-related industries. His remedy was to maintain or even to raise the level of prices by further cabinet action, “to legislate for the benefit of the quick, and not solely for the relatively dead.” By so doing the productive elements in the community might be given the incentive to use their reduced taxation burden for the benefit of the nation as a whole.
This call for intervention in the market place by the creation of “money” through the sale of exchequer bills was in direct opposition to the doctrine of David Ricardo and those to whom the appellation “Classical Economists” is applied. Their desire to see gold reinstated as the bedrock of economic policy had been strengthened by their evaluation of the course taken by the economy since the Bullion Committee’s report. They distrusted the Bank of England and the private banks with or without an elected master at Westminster. Both Attwood and Ricardo endorsed Adam Smith’s conception of “free trade” but the Birmingham banker considered the necessary functions of government in support of that freedom overrode any “mythical” standard against which the market-place could be tried . . . [55
Attwood’s argument contained two elements. His main concern was analysis and economic prescription: the practical question about which most debate on the economy revolved. But unlike Ricardo, who thought that the economic system and its interdependence had been adequately summarized by Smith, Attwood added a philosophical element. He sought to provide a vision of society in an industrial setting. He understood the advantages to be gained from increased productivity. Generalizations and principles were taken from his experience of banking and economic life in Birmingham. Attwood understood the weaknesses as well as the strengths of the fledgling structure but predicated his nostrum for national solvency on the belief that what he saw pointed the way forward . . .
A sense of truth could not on its own have sustained a campaign for action leading in directions which were often against his better judgment. Family loyalty coupled with a distaste for government could easily have provoked an early withdrawal as it had in 18l3. He continued because he had a dream, an ideal for which to strive. His utopia had, he believed, flickered into life in the last years of the war in Birmingham. Never had the people been so wedded to the nation as at that time. Science, art and enterprise had flourished and everyone had been happily engaged in productive endeavour. It was his determination to reproduce that spirit. Attwood wrote about it in mystical terms, envisaging a collective social character in which patriotism and individual altruism were combined.
The sense of community that he had glimpsed had been broken by the depression. The problem, as he saw it, was to repair the damage and reestablish prosperity. Mass demobilization and discipline by poverty had served only to antagonize an “affectionate” people.  The government had turned the natural obstacles which attended a shift from war to peace into virtually insurmountable barriers, because of the failure to understand the principles upon which an industrial nation functioned. Correction would only come if it listened to those with practical experience and stopped attempting to impose solutions distilled from academic theory. Important decisions must not be left to the whims of courtiers, “living far removed from those elements [business practices] and looking down upon them through the mists and prejudices which distance involves them.”
In each of his exhortations to government and public Attwood presented his optimistic evaluation of the nations’ potential. His arguments usually began with a restatement of Adam Smith’s maxim that labour was the foundation of all wealth. The value of an article was “the aggregate of the labour and good things in life consumed in producing it.” . . .
Experience in Birmingham had also taught that the social classes had to act together if prosperity was to be the “natural” condition. The rich had as many responsibilities for the poor as the poor had obligations to fulfil . . . [57
Attwood argued that rival economists completely misunderstood the role of money. Too often they discussed bank notes and bullion of common exchange as “real agents” not realizing that they formed but a small (though admittedly important) proportion of the money of the country. The instruments of credit to which the bullionists had devoted so much time in l810 were only the material objects upon which the money or “ideal exchange medium” of the country rested. These material objects had no value in themselves; they were not real in the sense of commodities to be bought and sold. His list of agents used as money is quite remarkable in that it included elements rarely appreciated by other economists of this date: “bills of exchange, transfers, book debts, hank notes, gold and silver and indeed of everything that passes for money in any shape or way.” They were creations of mind, “created by confidence, supported by confidence, and discharged by confidence.” The less obvious instruments contrived “twenty times the exchanges that are effected by bullion or bank notes. [58
The crucial role to be played by bank notes rested not in their ability to make exchanges but “in giving a spirit, a confidence, to the whole.” Money, therefore, needed no separate existence based upon value. In his opinion, arguments for and against a particular standard, whether gold, silver, or some other object, were irrelevant. Only the nature of the continuing national debate on the resumption question persuaded Attwood to discuss it . . .
Directly contradicting Ricardo’s contention that an addition to the currency circulation would have no impact on economic growth,  Attwood claimed that bank notes were “alive”; they could break open the “prison doors” that bound society. They acted constantly upon property, creating markets by influencing both supply and demand. Simply stated, he believed that markets depended upon the natural desires and needs of the populace. If the supply of objects which would satisfy those needs was facilitated, a market was consequently created and production stimulated . . .
The acceptance of these ideas raised the question of control. The exact total of the note issues in the country was still difficult to establish . . . (Attwood believed “that an efficient control system could be constructed to remove many of the features of note issue which were open to abuse.”) He postulated two distinct actions upon currency that could reduce circulation generally. The Bank of England, through its discount policies and its preeminent position in banking controlled the first of these. It could cut total circulation by reducing or rationing discounts and accommodation as it had in 1796-7, prior to restriction. Second, a diminished demand for discounts, occasioned by low property prices that decreased the number of exchange bills for which property was sold, would have a similar effect. In each case, a reduction in notes would cause a proportional fall in the number of transactions completed . . .
An additional note issue designed to increase circulation through an easing of discount and accommodation policies, or to keep pace with rising prosperity, would have the opposite effect. [60
Currency depreciation should be steady and gradual, promoting “healthy activity in the different channels of commercial and agricultural interest” . . .
A further objection was raised to the notion of a controlled depreciation – the threat to overseas trade . . . since British goods would be too expensive to sell abroad. Attwood rejoined that the high prices would be only notional. Bills drawn and received would be unchanged in real terms. In any event foreign trade was incidental to the nation’s wealth. The vision of English prosperity deriving its life force from “sucking, as it were, the blood and strength of other nations” was offensive . . . [64
In 1816, in the second edition of The Remedy, Attwood proposed again that a new issue of £20 million be made to meet the country’s needs . . . in the form of national paper rather than Bank of England notes . . .
(T)he danger of an all-powerful Bank of England was too widely apprehended to be ignored, Cries of “vested interest” would certainly be made if the control and issue of currency were entrusted to that institution. He recognized that the Bank already possessed greater power that any which had hitherto been vested in a national body. He therefore reiterated in the strongest terms his confidence in an independent group of commissioners appointed to oversee the project, trusting in their sense of national as opposed to private interest . . . [65
Even carefully regulated participation by the Bank of England in credit management had become increasingly unattractive to the businessmen and farmers whom Attwood hoped to convince. He turned, therefore, to the obvious corollary of the control mechanism envisaged in The Remedy. The new instrument would be clothed with the trappings of bank notes and would work with the common currency tokens then in use. To administer the paper, lords of the treasury or, alternatively, the commissioners of the Sinking Fund were proposed. Twenty million pounds, issued in notes of all sizes from £1 to £1000, continued to be the sum deemed adequate for the task he had in mind. An act of Parliament to authorize the purchase of an equivalent portion of National Debt would add tradition and the debt itself would provide stability. The money so created would be liberated by direct loans to merchants and manufacturers, thus transforming money into productive capital. The loans, initially tendered for three rears, would be reinvested in the National Debt upon repayment . . .
The establishment of this system, he believed, would free the economy from the casual and uncertain dangers inherent in discount and accommodation policies. As the Bank of England and other capitalists withdrew or expanded their contributions of money to the circulating media, the national paper would respond proportionately. Thus the power of the Bank of England would to some extent be checked while its profits and general usefulness would be secured. The problems and perversions to which the Bank was peculiarly exposed, and which rendered it suspect in the eyes of most economic critics, would be countered. Unscheduled “actions upon currency” could largely be avoided and property injured only by accidental scarcity or famine. This condition would be furthered by minor adjustments to the total issue which might even smooth the more violent fluctuations of these latter “actions.” [66
Attwood never argued that his “remedy” was a complete reform package. His aim, always, was to cast doubt upon the contemporary preoccupation with gold and the “unbusinesslike” analysis of past experience. He was well aware that his ideas needed further elaboration; they were designed to make people think . . .
The general scheme to incorporate national paper in the currency medium of the country was revolutionary and Attwood was conscious of that fact. National paper sounded suspiciously like the despised French Assignat which had led to rampant inflation in France in the early eighteenth century . . . To forestall critical disparagement of his recommended agent he sought to make what he hoped were distinctions of pedigree and class. [67
“Assignats have been generally issued, not for the purpose of circulating medium but for the sole purpose of enabling tyrannical governments to get possession of the property of their subjects, without an equivalent for the purpose of the circulating medium, and for the promotion of national interests . . . (National paper) would also be sanctioned by the British Parliament, which is, in fact, the British nation, and would be issued under equivalent purchases of capital invested in the national debt.” The certificates would fluctuate in quantity, according to the “par”assigned to that purpose, with withdrawal as swift as issue. [68
Bank notes were to be made legal tender with all agents save the Bank of England; the national paper would be reducible to no other medium save itself. Country notes, of which Attwood was allegedly the champion, were to disappear completely.
So that conditions among the business community should not be neglected, he added an index, the velocity of circulation, measured by periodic assessments of the disposition among businessmen to hoard or spend – a pointer whose value seems to have been recognized by modern economists. In no sense was this or any of the other plans submitted by Attwood intended to be accepted unreservedly. They were discussion papers which offered a fresh perspective and an appeal to reconsider decisions that owed more to past complacency than current reality.
At the end, conscious of the antipathy his proposals had already engendered, Attwood abandoned his original rather extreme position on currency augmentation in favour of a simple indication of commitment to peace and prosperity. The government only had to take the “simple” step of throwing the circulation open, so as to permit free exchange by whatever means it deemed reasonable, and he would be content. He had faith in the common sense of the people to use that exchange sensibly and to the maximum benefit. On one point only was he adamant. There could be no greater error of government than “to take into its own hands the creation at a circulating medium, without taking care that those creations are always of ample amount.” [70
On 10 December a run on the country banks began. Cobbett crowed his exhortation “Get Gold” to add to the confusion and one week later the run extended to the London banks. Almost seventy banks failed and it became virtually impossible to discount bills . . .
Birmingham had been one of the last towns to feel the sharp reduction in the volume of Bank of England discounts. Industrial production through 1825 lagged behind the order books; when the crisis did finally overtake the town the consequent depression was to be exceptionally severe and recovery slow. In early December the conservative Birmingham Journal was still praising the prime minister as “the soundest financier of the age.” On the eve of the run on the country banks the editor optimistically called on his readers to place their trust in the Bank of England and Lord Liverpool. The Birmingham Chronicle was a little more critical of the Bank but expressed no concern over local conditions. It was not until the failure of Gibbons, Smith & Goode on 17 December that Birmingham was shocked into consideration of its own plight.
Attwood had been much more alive to the approaching crisis and had resumed his agitation for public pressure on the government and the Bank of England in September … (His) initial concern grew into outright alarm in November. He knew that the state of the exchanges and the operation of Peel’s Act would force the Bank at some point to contract. As a well-informed country banker he recognized the potentially dangerous consequences of credit restriction upon a banking system whose position was dangerously illiquid. Further contraction had to be avoided lest the external drain be exacerbated by an internal one as confidence declined. On 22 November Attwood wrote to Lord Liverpool directly, urging a new issue of £1 notes.  In a panic bankers would be faced with demands for gold and they would withdraw their own small notes leaving none for ordinary business, the payment of wages or the buying of provisions. The subsequent distress would have to be relieved by the Bank of England. Had the Bank prepared for such an eventuality? If not it should do so at once:
It will require two hundred Bank clerks for six weeks merely to sign the necessary quantity . . . Ought not the Bank of England to take the precaution of providing itself with ten or twelve millions of one pound notes to be issued instanter at such a crisis, in exchange for larger notes.
Naturally, if such an issue were to be made it must be accompanied by a Restriction Act so that the paper would be accepted. At a stroke public confidence would return and private strain would be eased. The prime minister did not bother to reply for he continued to believe that the circulating medium was “overcrammed” and that contraction was needed . . .
By the first week of December it was clear to Attwood that Britain was about to experience a severe financial crash. Desperately Attwood appealed to his old friend and supporter Sir Robert Peel for a letter of introduction to the home secretary, Peel’s son. Attwood knew that without such an entree past antagonisms would destroy any hope of a hearing. The old man complied and wrote an enthusiastic letter in which he detailed Attwood’s trusty remedy: loans in the form of exchequer bills, a liberal discounting policy on promissory notes and bills of exchange, finally an issue of £1 notes . . . [119
Two days later Pole & Thornton of London closed and brought down forty-three allied country banks. Panic-stricken, the Bank’s governor and deputy governor and the cabinet held angry and recriminatory discussions. Cornelius Buller of the Bank, anxious about his reserves, demanded a promise of suspension if the pressure became too great. The ministers refused. On 16 December Attwood arrived in London and, upon presenting his letters, was taken to Peel to see the prime minister. Remarkably, Attwood’s views, with the exception of the argument in favour of restriction, corresponded exactly with those of the government which needed every supporting voice it could find in the assault on the Bank. Peel was particularly pleased to obtain Attwood’s view of the danger of collapse in the midlands, a subject to which his father had alluded in his letter.
After a briefing session with Lord Liverpool, Attwood was quickly taken to meet the chancellor of the exchequer and then to meet with a committee of directors from the Bank of England itself. At each stop Attwood outlined the measures he considered necessary for the relief of Birmingham and district and, to the directors, pressed for loans to the country bankers. As might be expected, the latter tossed out that idea without a moment’s hesitation, “alleging that it is too great a variation from their usual rules.” But they did agree to pass these remarks on to the full court of directors on 17 December and allow him to argue his case – a remarkable concession which reflected the extent of their panic . . . [120
Peel had troops ready to defend Threadneedle Street from the riots that might occur if such a step was taken . . . the Bank had, at considerable risk, accepted Attwood’s and the cabinet’s more moderate proposal. It agreed to buy exchequer bills, to issue £5 million in small notes, and to extend its discounts. On the night of 16 December, Rothschilds secured £300,000 gold for the Bank and, seventy-two hours later, £400,000 was sent from Paris. The crisis as far as the Bank was concerned – the threat to its reserves – then faded away. [121
(Attwood was a leader of the Chartist movement, withdrawing only when violent tactics were being planned. At a meeting in New Street Birmingham in 1829, the Political Union for the Protection of Public Rights was formed by Attwood and fifteen other Birmingham men. It canvassed vigorously for parliamentary reform, the aims of the campaign being partly achieved in the Reform Act of 1831. “The alliance of all classes against the rotten boroughs . . . was ably led by Thomas Attwood.”1 There were violent reactions to the Lords’ rejection of the Bill, “controlled by the Political Unions that had sprung up all over the country in imitation of Birmingham.”2)
Attwood stood as a Parliamentary candidate in 1832 and became Birmingham’s first MP. Masters, workers and the unemployed paraded to voice their support for both the man and currency reform. The Bromsgrove address named him as “the liberator of the people” and calls for a permanent memorial in his honour were regularly printed. [236
A Stranger in the House
Early in March they gave the movement a focus by organizing the “Currency Club” and actively solicited membership in the provinces as well as in London. There were 100 participants: Tories, Radicals, Whigs and Conservatives. The tactic was designed to replicate the close-knit group which had spearheaded Attwood’s drive to leadership in Birmingham. [239
On other points in the Factory Bill he joined with his brother Matthias in utterly condemning a strict interpretation of the principles of political economy in their application to the labour market. As Matthias Attwood eloquently argued, “The question was not a mere question of the feelings of Englishmen, but a question of the feelings of humanity – a question of the grossest injustice -of utter destruction, inflicted upon the feeble and the unprotected. It was not a question of pounds, shillings, and pence; it was not a matter to be settled on the grounds of mercantile advantage.” Thomas Attwood voted consistently to have the ten-hour regulation (older children were then expected to work eleven and a half hours a day) extended to the age of eighteen, but the amendment was deleted.
Conversely he opposed the growing mood of centralism at Westminster Although the steadying hand of the government was necessary in dealing with the welfare of the poor, control should remain in the grasp of those closest to the problem. Birmingham was quite capable of managing its own affairs without the help of appointed commissioners from London or parliamentary committees. The administration of government needed a thorough overhaul. Sinecures should be abolished and without a doubt the tax system required amendment. [252
* * *
Disillusioned with Parliament and in declining health, Attwood decided not to stand for re-election in 1839 and his health steadily declined. He died in 1856 after suffering many years from Parkinson’s Disease.
1. Illustrated History of England: G.M. Trevelyan, Longman’s, Green and Company, 1926, 633
2. ibid., 635