Edmund Burke is generally regarded as one of the
founders of modern conservative thought. As a defender of tradition,
private property, slow social change, and "muddling through," he was an
opponent of aprioristic thinking, rationalistic blueprints for social
reconstruction, and "metaphysical arithmeticians." He is therefore not
heralded as a master of the subtle skills of economic reasoning.
Nevertheless, Burke's teachings on the relationship between policies of
monetary debasement and social change indicate that he was far more
alert to the dangers of monetary inflation than are recent defenders of
Federal deficits and a system of price-wage controls. When Nation's
Business can survey 450 leading business executives concerning their
opinions on price and wage controls, and find that over 70 per cent of
them favor the controls, with 47 per cent of them favoring an indefinite
extension of such controls, it is not difficult to conclude that Edmund
Burke had a more sophisticated sense of economics than cur modern
professionals.1
In 1790, Burke distinguished himself by writing what
was to become the classic statement of conservative social theory,
Reflections on the Revolution in France. Though its focus is social and
political, the book contains several penetrating sections dealing with
two crucial economic issues: wealth redistribution and monetary
debasement. His presuppositions are not those of classical liberalism,
given his commitment to landed property as distinguished from commercial
("monied") property, but his conclusions are quite close to
nineteenth-century liberal monetary theories.
Burke's defense of private property in land as a form
of ownership superior to stocks, bonds, and other "paper" investments
harkens back to the famous Putney Debates of Cromwell's Army in 1647.
Burke, like Ireton (Cromwell's son-in-law) before him, viewed the owners
of landed property as men with a greater stake in the preservation of
society than either the propertyless or those owning nonlanded
property.2 Understandably, given this perspective, Burke was
appalled by the advent of money speculators in France, coupled with the
simultaneous confiscation of church and Crown lands. "The monied
interest is in its nature more ready for any adventure," he wrote, "and
its possessors more disposed to new enterprises of any kind. Being of a
recent acquisition, it falls in more naturally with any novelties. It is
therefore the kind of wealth which will be resorted to by all who wish
for change."3 Burke was not opposed to change as such; he
wrote that any state it without the means of some change is without the
means of its conservation."4 But he wanted slow, steady,
familiar, "organic" changes, and not the more rapid changes associated
with modern industrial society. In this sense, he was certainly a
"conservative" rather than a "liberal."
This preference for landed property-which in
eighteenth-century England meant property hedged about by statist
restrictions on ownership, transfer of such ownership, inheritance, and
politically imposed land enclosures5 - over monied property
undoubtedly colored Burke's economic analysis. He resented what he
regarded as land confiscation in France and the sale of this land to
middleclass French businessmen, thereby "carrying on a process of
continual transmutation of paper into land, and land into paper.... By
this means the spirit of money jobbing and speculation goes into the
mass of land itself and incorporates with it."6 Yet he
accepted Parliamentary enclosure bills, and he was personally interested
in agricultural rationalization and improvement for England's
increasingly marketoriented system of farming. Indeed, as Prof. Herbert
Heaton has written, "Burke discussed cabbages and pigs almost as
earnestly as he did the grievances of the American
colonies."7 Thus, he was not fully consistent in his support
of private ownership nor in his attacks on political confiscation.
Immorality and Instability
His real concern was with morality and with serf-feudal
concepts like honor and loyalty. These concepts were being undermined in
France by revolutionary politics and monetary debasement on the part of
the French government. Instability - Burke's greatest fear -was becoming
the order of the day in France. Most serious, this instability was
undermining the French family, that most fundamental of all institutions
in conservative social analysis.
Nothing stable in the modes of holding property or
exercising function could form a solid ground on which any parent could
speculate in the education of his offspring or in a choice for their
future establishment in the world. No principles would be early worked
into the habits.... Who would insure a tender and delicate sense of
honor to beat almost with the first pulses of the heart when no man
could know what would be the test of honor in a nation continually
varying the standard of its coin?8
The result of such an unsettled commonwealth, Burke
predicted, would be barbarism. What was to take place in France over the
decade following the publication of the Reflections convinced many of
his contemporaries of the accuracy of his prediction.
France, it should not be forgotten, was probably the
wealthiest nation on earth in the final quarter of the eighteenth
century, although the English were rapidly overtaking their French
neighbors, and by 1800 had probably succeeded in becoming the world's
richest citizens. Burke understood the position of the French better
than the French revolutionaries did; he praised France's cities, the
transportation system, French agriculture, manufacturing, charitable
foundations, and scholars.9 But the French state was also in
debt - so heavily in debt that half of ah the King's revenues went in
interest payments on the debt. (England was in a similar situation, and
Burke may have been hinting at this fact in the
Reflections.10)
Nations are wading deeper and deeper into an ocean of
boundless debt. Public debts, which at first were a security to
governments by interesting many in the public tranquility [a variation
of an argument used by Alexander Hamilton in 1790 in his Report on
Public Credit1l] are likely in their excess to become the
means of their subversion. If governments provide for these debts by
heavy impositions, they perish by becoming odious to the
people.12
Burke, like Hamilton, failed to see that a "little"
governmental indebtedness is comparable to a little unwanted pregnancy,
but he did grasp the politically unsettling reality of heavy state debt.
Such conditions lead to revolution. (The French Estates General were
summoned in order to approve tax increases necessary to finance the
French debt; this was the first great event in the French Revolution.)
Burke feared this repercussion of state debt because, he said,
revolutions "are favorable to confiscation; and it is impossible to know
under what obnoxious names the next confiscations will be
authorized."13
Monetization of Debt
Like so many politicians before and since, the French
revolutionaries decided that the best possible way of getting out of
debt was to go deeper into debt. The Anglo-American version of this
system is through the monetization of debt, through the mechanism of a
central bank and fractional reserve commercial banks.14 The
French leaders adopted a somewhat different system. They first
confiscated the lands of the church and Crown. Then they issued paper
debt certificates, called assignats, that could be used in the purchase
of these lands. These certificates bore 5 per cent interest at first,
lowered to 3 per cent a few months after the initial offering in 1789.
The decree of April 17, 1790, made these legal tender. These were
"given" to-forced upon-those holding other forms of state debt
certificates.15 In the words of Prof. Bosher, who is not
hostile to these administrative reforms, "Any of the alternative methods
put forward would have perpetuated the old private enterprise
system."16
The value of these fiat notes fell almost immediately.
The "temporary" expedient of inflation and legal tender laws became a
permanent phenomenon. The 400 million of them issued in 1789 became a
roaring flood of 40 billion within four years. Again, quoting Bosher: "A
decree of 8 April 1793 ordered all government purchases and payments to
soldiers to be in assignats. Three days later, the Convention prohibited
circulation, sale or purchase of gold and silver coin. All transactions
were henceforth to be in assignats, now the principal legal
currency."17 The penalty (not mentioned by Bosher) :
imprisonment for six years.18 Andrew Dickson White's Fiat
Money Inflation in France continues the analysis:
Later, on September 8, 1793, the penalty for such
offenses was made death, with confiscation of the criminal's property,
and a reward was offered to any person informing the authorities
regarding any such criminal transaction. To reach the climax of
ferocity, the Convention decreed, in May 1794, that the death penalty
should be inflicted on any person convicted of "having asked, before a
bargain was concluded, in what money payment was to be
made."19
It is not surprising that an increase of circulation
from 400 million to 40 billion in a span of four years would have
produced price inflation. What is surprising is that a book seriously
advertising itself as "conservative economics" could argue, as one
widely read study does, that "The fact that they were destroyed as money
by the gigantic counterfeiting operations of the money creators later,
does not detract from their validity."20 Burke, almost two
centuries ago, knew better than that!
Price and Wage Controls
On September 29, 1793, the "Law of the Maximum" was
declared, setting forth a system of price and wage controls. But, as
White says, it "could not be made to work well -even by the shrewdest
devices. In the greater part of France it could not be
enforeed."21 It was abolished in the latter months of 1794, a
total disaster. It was as unworkable as the early attempts to control
prices and wages had been in New England, and it was as disastrous as
the controls had been in the American Revolution.22
Burke had foreseen these events in 1790. The politics
of mass inflation, he warned, would create a gambler mentality in the
minds of French citizens, a mad rush to stay ahead of rising prices. He
warned the citizens of France or at least those who might be reading his
book - of this fact:
Your legislators, in everything new, are the very first
who have founded a commonwealth on naming, and infused this spirit into
it as its vital breath. The great object of these politics is to
metamorphose France from a great kingdom into one great play table; to
turn its inhabitants into a nation of gamesters; . . . With you a man
can neither earn nor buy his dinner without a speculation. What he
receives in the morning will not have the same value at night.. . .
Industry must wither away. Economy must be driven from your country.
Careful provision will have no existence.23
It is not simply that industry will decline or that
people will have to become speculators. The real curse of mass inflation
is that it harms the ignorant, the unprotected, the citizen who is not
aware of the nature of the new, inflationary game. In the name of
democracy, the French revolutionaries had constructed a system that
favors the elite - an elite made up of the least honorable, least
productive men in the community.
The truly melancholy part of the policy of
systematically making a nation of gamesters is this, that though all are
forced to play, few can understand the game; and fewer still are in a
condition to avail themselves of the knowledge. The many must be the
dupes of the few who conduct the machine of these speculations. What
effect it must have on the country people is visible. The townsmen can
calculate from day to day, not so the inhabitant of the country. When
the peasant first brings his corn to market, the magistrate in the towns
obliges him to take the assignat at par; when he goes to the shop with
the money, he finds it seven per cent worse for crossing the way. This
market he will not readily resort to again. The townspeople will be
inflamed; they will force the country people to bring their
corn.24
The nation will be torn with social conflict. This, in
turn, will create disruptions, further instability, and the destruction
of law and order. His warnings were in vain, and his prophecies came
true.
Convertibility Makes a Difference
There is a difference, he said, between the paper money
of England and that of France, contrary to certain French writers. "They
forget that, in England, not one shilling of paper money of any
description is received but of choice; and that it is convertible at
pleasure, in an instant and without the smallest loss, into cash
[specie] again."25 The Napoleonic Wars were to bring an end
to convertibility in England for temporary periods, but Burke's
polemical point was grounded in fact: the presence of the threat of
specie demands by the public acted as a restraint on the process of
fractional reserve banking, thus reducing the extent of monetary
inflation. But French leaders have gone mad, he said:
The only difference among their financial factions is
on the greater or the lesser quantity of assignats to be imposed on the
public sufferance. They are all professors of assignats. Even those
whose natural good sense and knowledge of commerce, not obliterated by
philosophy [by which Burke meant the a priori theories of Enlightenment
theorists], furnish decisive arguments against this delusion conclude
their arguments by proposing the emission of assignats. I suppose they
must talk of assignats, as no other language would be understood. All
experience of their inefficiency does not in the least discourage them.
Are the old assignats depreciated at market?-What is the remedy? Issue
new assignats.26
Burke's jibes at the self -deceived and self-assured
manipulators could (and perhaps someday will) be lodged against our
contemporary "metaphysical arithmeticians," the inflation-minded
econometricians:
In all this procedure I can see neither the solid sense
of plain dealing nor the subtle dexterity of ingenious fraud. The
objections within the Assembly to pulling up the floodgates for this
innundation of fraud are unanswered, but they are thoroughly refuted by
a hundred thousand financiers in the street. These are the numbers by
which the metaphysic arithmeticians compute. These are the grand
calculations on which a philosophical public credit is founded in
France. They cannot raise supplies, but they can raise
mobs.27
The people of France ought to see where a philosophy of
state theft is leading them:
I see the confiscators begin with bishops and chapters,
and monasteries, but I do not see them end there.... Flushed with the
insolence of their first inglorious victories, and pressed by the
distresses caused by their lust of unhallowed lucre, disappointed but
not discouraged, they have at length ventured completely to subvert all
property of all descriptions throughout the extent of a great kingdom.
They have compelled all men, in all transactions of commerce, in the
disposal of lands, in civil dealing, and through the whole communion of
life, to accept as perfect payment and good and lawful tender the
symbols of their speculations on a projected sale of their plunder. What
vestiges of liberty or property have they left?28
Once begun, this madness will be compounded. "If
possible, the next Assembly must be worse than the present. The present,
by destroying and altering everything, will leave to their successors
apparently nothing popular to do. They will be roused by emulation and
example to enterprises the boldest and the most absurd."29
This, of course, is precisely what was to take place in France. "So
violent an outrage upon credit, property, and liberty as this compulsory
paper currency has seldom been exhibited by the alliance of bankruptcy
and tyranny, at any time or in any nation."30 Yet it got much
worse in the next five years.
Theft is an insidious philosophy, whether public or
private in scope. Short-run benefits of the confiscation of another's
property tempt men to expand their activities and bring on personal and
national disaster. Burke's warnings went unheeded by the French
government in 1790. Today's metaphysical arithmeticians consider such
opinions as Burke's utterly narrow, dogmatic, and unenlightened by the
principles of modern thought. The results of today's confiscators will
be comparable to the results of the French Revolution, since the
principles are similar. If not mass inflation, then it will be some
Napoleon of the mass media. Perhaps it may be both.
At the time of the original publication, Dr. North was
economist of the Pacific Coast Coin Exchange, also lectured at
seminars of The Foundation for Economic Education.
1 Nation's Business (July, 1972), pp. 28 ff.
2 See Ireton's remarks in A. S. P. Woodhouse (ed.),
Puritanism and Liberty (London: Dent, 1938), pp. 52 ff., 64 ff. On the
setting of the Putney Debates, see Robert S. Paul, The Lord Protector:
Religion and Politics in the Life of Oliver Cromwell (Grand Rapids:
Eerdmans, 1955), Chap. 7.
3 Burke, Reflections on the Revolution in France,
edited by Thomas H. D. Mahoney (Indianapolis: Bobbs-Merrill, Liberal
Arts Press, 1955), p. 126.
4 Ibid., p. 24.
5 Cf. Christopher Hill, Reformation to Industrial
Revolution (Baltimore: Penguin, 1969), p. 270; Herbert Heaton, Economic
History of Europe (rev. ed.; New York: Harper & Row, 1948), pp.
413-14, 419; Shepard B. Clough, The Economic Development of Western
Civilization (New York: McGraw-Hill, 1959), pp. 296-97.
6 Reflections, p. 224.
7 Heaton, p. 410.
8 Reflections, p. 108.
9Ibid., p. 151.
10 J. F. Bosher. French Finances, 17701795 (New York:
Cambridge University Press, 1970), p. 24,
11 Hamilton wrote in his First Report on Public Credit
(1790): "If all the public creditors receive their dues from one source,
distributed with an equal hand, their interest will be the same. And,
having the same interests, they will unite in the support of the fiscal
arrangements of the Government …. Robert Birley (ed.), Speeches and
Documents in American History (New York: Oxford University Press, 1951),
Vol. 1, P. 159. Yet, as Prof. John C. Miller notes, "The national debt,
instead of cementing the nation politic-ally, acted as a divisive force
. . . ... Alexander Hamilton and the Growth of the New Nation (New York:
Harper Torchbook, 1964), p. 255.
12 Reflections, pp. 178-79.
13 Ibid.
14 Charles Holt Carroll, writing for Hunt's Merchants'
Magazine in the 1850's and 1860's, produced some excellent analyses of
the process of the monetization of debt: Organization of Debt Into
Currency and Other Papers (New York: Arno Press, 1971). This was the
essence of Hamilton's "sinking fund": Miller, p. 257. It is also the
essence of the Open Market Committee of the Federal Reserve System:
Herbert V. Prochnow (ed.), The Federal Reserve System (New York: Harper
& Bros., 1961), Chap. 7.
15, Bosher, pp. 273-74.
16 Ibid., p. 273.
17 Ibid., p, 274.
18 Andrew Dickson White, Fiat Money Inflation in France
(Foundation for Economic Education, [191211959), pp. 78-79.
19 Ibid., p. 79.
20 Gertrude Coogan, Money Creators (Hawthorne, Calif.:
Omni Books, F19351 1963), p. 320. For a critical analysis of the
writings of Miss Coogan, see my essay, "Gertrude Coogan and the Myth of
Social Credit," An Introduction to Christian Economics (Nutley, N. J.:
Craig Press, 1973).
21 White, p. 77.
22 On Puritan economic controls, see Richard B. Morris,
Government and Labor in Early America (New York: Columbia University
Press, 1946), pp. 56 ff, These tended to die out after 1675. On the
controls during the American Revolution, see Percy Greaves, "From Price
Control to Valley Forge," THE FREEMAN (Feb., 1972).
23 Reflections, pp. 226-27.
24 Ibid., p. 227.
25 Ibid., p. 273. When Burke speaks of "cash" he means
"specie": p. 283.
26 Ibid., p. 276.
27 Ibid., p. 281.
28 Ibid., pp. 174-75,
29 Ibid.. p. 232.
30 Ibid., P. 141.
Reprinted with permission from The Freeman, a publication
from The Foundation for Economic Education, Inc., February 1973,
Vol.23, No.2
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