Economics and the British Empire
by Richard Newbury
French School history text books teach that while the French Empire had “une mission civilatrice” the British Empire was merely “commercial”. The British whom Napoleon denominated “a nation of shopkeepers” see nothing derogatory in this since for them commerce brings with it “civilisation”. For Prime Minister Palmerston empire meant “that commerce may go freely forth, leading civilisation with one hand, and peace with the other, to render mankind happier, wiser, better. It is the business of government to open and secure the roads for the merchant.”
“This empire was ever entire unto itself” declared the 1534 Act of Supremacy by which Henry VIII’s Parliament separated itself from the Catholic Continent and this 180 degree turn was to be sealed when Elizabeth I and her courtiers invested in Francis Drake’s 1570 circumnavigation of the globe from which he returned with just one of his five ships but with a 4700% profit! From now on England ignored “abroad” [the Continent] for “overseas” [the World].
For John Maynard Keynes, Drake’s profit not only paid for the ships that defeated the Spanish Armada but also provided the seed capital for the Levant Company which developed into the East India Company. If the Pope had divided the world between Spain and Portugal it was the duty and economic advantage of her Protestant Majesty’s Ships to challenge them – but also to provide them with slaves gained by helping West African kings winning their wars and so continuing on the triangle Bristol, Africa, Caribbean [sugar]/ North America [tobacco] Bristol.
The Industrial Revolution and the British Empire were the fruit of what has always been England’s core industry: those Financial Services which still represent 10% of GDP in now post industrial, post-imperial Britain. The 1688 Glorious Revolution saw a merger of two Protestant imperial trading rivals. The Dutch provided superior banking expertise, which saw the creation of the Bank of England in 1694, the Stock Exchange and Lloyds Insurance, while Sir Isaac Newton as Master of the Mint reformed the currency. The English provided greater capital and more populous markets. The Dutch concentrated on the East Indian spice trade and the English on Indian textiles. Home Secretary John Locke’s 1689 Bill of Rights created a “capitalist, imperial” constitution mirroring a Joint Stock company like the East India Company or the Hudson Bay Company. The monarch was Chairman, the Prime Minister the Managing Director, the Cabinet the Board and the MPs the stock brokers representing the shareholders/electorate – all institutionally ready to administer, and profit from, expanding global “branches” [filiale] and markets; and all largely at the relevant Company’s cost. In 1790 the British had an army of just 2000 men, but the East India Company had one of 100,000. However the Royal Navy had 155 ships to France’s 70.
Profits from the new middle class drugs of sugar from Jamaica, nicotine from North Americaand caffeine from Africapaid for cash purchases of the import of Indian fabric in a global market with 12,000 mile round trips.
In the long second 100 Years War [1690-1815] with a France three times its size and population, Britain won because of Isaac Newton’s invention of “Gilts” – Government Securities guaranteed by Parliament [Bot]. GB plc [GB Pil] paid 4% guaranteed, Francepaid 20+% because the Bourbons personally defaulted 5 times for “L’Etat c’est moi”. Fiscally Francewent serially bankrupt; not least in their support for the American Revolution. As the government economist Daniel Defoe wrote: Credit is more justly called the sinews of war than the money itself. Credit makes the soldier fight without pay, the armies march without provisions. It is an impregnable fortification. It makes paper pass for money and fills the Exchequer and the banks with as many millions as it pleases upon demand.
British credit paid for all their allies fighting both Napoleon and the Kaiser; each time taking a century to repay the bonds.
England began the 17th century with an American Empire, which was a loss-making branch after the national debt incurred in saving it from the French in the 1756-63 Seven Year’s War, while Jamaican sugar alone made 500% more for Britain than all the 13 American colonies! Yet Britainended the century with a highly profitable Empire in the East administered by the East India Company. It was also spurred to begin the development of Australiaafter 1788, while accepting Adam Smith’s view that both mercantilism should be abandoned for free trade and that a British/American divorce would benefit both Anglo-Saxon parties.
In 1837 Parliament took the decision not to sell Canadato the US, but to “educate to self-government” “and the experiment of keeping colonies and governing them well ought to at least have a trial”. This was to be the guiding principle under which by the end of Victoria’s reign in 1901 a quarter of the world [9,500,000 sq miles and 441,000,000 subjects] was ruled from London and even more- such as South America and China- was within the Sterling Area.
1850-1914 saw for Keynes “a virtuous circle” whereby profits returned to Londonwhere the Bank of England guaranteed Bonds of say a railway in Argentina or a dam in Rhodesia at say 9% interest against 3% interest for London Underground. Consequently Imperial capital naturally flowed back to develop new global markets to mutual advantage. Post 1918 the Empire made a loss and immediately 1919 saw the India Act which initiated the process of Indian Independence. India had become another loss making branch like 13 American Colonies had previously been. Similarly India and the UK have both benefited from the divorce. The only 20th imperial expansion has been in the strategically oil rich Middle East; hence the war-winning/losing battles of Stalingrad and El Alemein, which halted the Axis advance on Iran and Iraq and the continuing British interest in the sands of Libya.