Charles Bosanquet - Life

Life

Between 1806 and 1807 Bosanquet produced three short works on commercial themes:

1. Letter on the Proposition submitted to the Government for taking the Duty on Muscavado Sugar ad valorem (1806?).
2. A Letter to W. Manning, Esq., M.P., on the Depreciation of the West India Property (1807?). In this work Bosanquet blamed the depreciation on ill-considered taxes and other restrictions placed on the colony. He proposed that British breweries should use colonial sugar and that the British navy should use colonial rum.
3. Thoughts on the Value to Great Britain of Commerce in general, and of the Colonial Trade in particular (1807?), in which he pointed out the benefits yielded by the West India trade.

In 1810 Bosanquet published his most important work: Practical Observations on the Report of the Bullion-Committee. In this work he criticized the Report as being “altogether at variance with (the opinions) of the persons selected for examination,” of relying on propositions that “are not generally true, and do not therefore form a solid foundation for the abstract reasoning of the Report,” and of relying upon facts that “are erroneously stated; and, when corrected, lead to opposite conclusions.”

Inflationary pressure in early 1809 had prompted David Ricardo to write three letters to the Morning Chronicle, the first of which appeared on 29 August (Ricardo’s first published work on economics). The public attention aroused by these letters and subsequent pamphlets led Parliament to appoint a select Committee to “Inquire into the cause of the high price of bullion, and to take into consideration the state of the circulating medium, and of the exchanges between Great Britain and foreign parts.”

The Committee, along with Ricardo, took the ‘Bullionist’ position. It stated that inflation had resulted from over-issue of currency, primarily by the Bank of England but also by country banks; and that as a means of preventing over-issue, the Bank of England should resume convertibility of the pound into gold.

Bosanquet held to the ‘Anti-Bullionist’ (or ‘real bills’) position, which was that over-issue would be avoided if banks issued paper money only in exchange for “solid paper, given, as far as we can judge, for real transactions.” Any over-issue of paper money, in the words of the Bank directors, “would revert to us by a diminished application for discounts and advances on government securities.” This latter principle became known as the ‘Law of the Reflux’. David Ricardo had likened the issues of the Bank of England to a gold mine, insofar as an increased issue of paper money would have the same effect on prices as increased production of gold. Bosanquet countered that the Bank of England issued paper money only on loan, and that since loans must ultimately be repaid, the newly-issued paper money would not cause inflation. Newly-mined gold, in contrast, did not have to be repaid, and therefore would cause inflation. On these grounds Bosanquet denied the analogy between gold and paper money. Ricardo’s Reply to Mr. Bosanquet (1811) has been described by McCulloch (1845) as “perhaps the best controversial essay that has ever appeared on any disputed question of Political Economy.” In response to Bosanquet’s statement that the supply of currency was adequately limited by the Bank’s policy of making loans only for ‘solid paper’, Ricardo answered that as long as the Bank is willing to lend, borrowers will always exist, so that there is no practical limit to the over-issue of money, unless the Bank either maintains convertibility, or otherwise acts to maintain the quantity of money within reasonable bounds. Ricardo argued that the simple fact of the pound’s depreciation was proof of its over-issue—a circular argument that nevertheless carried the day.

Bosanquet never published a reply to Ricardo, and he has consequently been much abused by historians of economic thought. J.K. Horsefield (1941) wrote of “the lamentable decline from the counsels of Samuel Bosanquet in 1783 to the apologia of Charles Bosanquet in 1810,” while R.S. Sayers (1952) observed that “poor Bosanquet is left cutting a very sorry figure.” Ricardo’s victory over Bosanquet was in fact far from complete. His arguments concerning money issued on loan were resurrected intact during the Currency School/Banking School debates of the 1840s. The issue has remained unsettled ever since, and featured prominently in the Monetarist/Keynesian debates of the 1960s and 1970s. Beginning in the 1980s, the real-bills viewpoint has seen a small revival of interest (e.g., Sargent (1982), Sproul (1998)). It appears that Bosanquet’s writings, like the man himself, are entitled to more respect than they have received.