The Politics of the Bullion Report

Abstract

The Bullion Report of 1810 is important to economists not because of the originality of its thought or the subtlety of its analysis, but because of its place in the history of monetary controversy. It is a symbol of a group of loosely associated ideas that might be described in general terms as the tenets of pre-1914 monetary orthodoxy. The core of these ideas was that the credit policy of a central bank is the major influence on a country's prices and exchange rates, and that the central bank's discretion in credit policy is limited by the overriding importance of maintaining a fixed price of gold. Succeeding generations of economists have given different interpretations to the analysis of the Bullion Report, and to the motives of its authors and supporters. In the late nineteenth and early twentieth century the Report was generally praised as inspired wisdom of original and powerful analysts and far-sighted economic statesmen, but in the 1920's it came to be pictured as special pleading by Ricardo, as a financial manipulator, and by political obstructionists, who would have sacrificed the financial greatness and national safety of England to their economic and partisan interests. Both extremes of interpretation reflect to a large degree the prevailing economic philosophy and the international economic situation of the period when they had their greatest vogue; both are coloured by a common error of attributing to Ricardo a role, either for good or for evil, much more important than he played in producing the Bullion Report; and both to a large degree are made without due regard to the complex of forces that led to the Report, and that supported or opposed it after its publication. In the controversy of 1810 and 1811 the principal theoretical analysis of the Report, that monetary policy could control exchange rates, was repudiated by Parliament, and the recommendation for a resumption of specie payments in two years was rejected. With the return to peace the analysis and recommendation of the Report were accepted in the Resumption Act of 1819, and in the formal recognition by the Bank of England in 1827 of its power to control exchange rates.2 The result was that for the better part of a century after the 1820's the analysis and policy conclusions of the Bullion Report were in the