Christopher Hollis
Two Nations

Chapter XIV — Disraeli's Rule

In 1874 there came to Disraeli his true opportunity of power. Perhaps, when history has had time to settle her final verdict, she will decide that his chief contribution to British life was the renewed prestige which he gave to the monarchy. In our day even the strongest enemies of the established order, such as Sir Stafford Cripps and Mr. Lansbury, have, in defiance of consistent principles, to go out of their way to express their esteem for the institution of monarchy. And those who are not read in the journalism of the time can hardly form a picture of the disrepute into which the monarchy had fallen in the early years of the 1870's, owing to Victoria's prolonged seclusion after the death of the Prince Consort. As Lord Morley truly records, "A deep and universal feeling of discontent at the Queen's seclusion found voice in the journals of the country."(142) An offensive pamphlet, entitled What Does She Do With It? criticized the alleged vastness of her fortune. The creed of republicanism was growing rapidly.

Disraeli truly saw that the monarchy was the one institution in England which transcended the barriers of class and that the revival of its popularity was necessary to break down the division of the Two Nations. In this, as in so much else that he did, it is difficult to assign the exact proportion in his motive between cynicism and conviction. Certainly he was shrewd enough to see that it was a practical advantage to have cordial personal relations with the occupant of the throne, and such relations, he is alleged to have confessed in a moment of unusual frankness, were more easily established if one "laid on flattery with a trowel." At the same time, while it would perhaps be an exaggeration to say that the monarchy in the last fifty years has had a predominating influence over the life of England, it would certainly be true to say that our life has been predominatingly influenced by the fact that England is a monarchical country. Of the importance in the history of India of the proclamation of the Queen as Empress of India the present writer is hardly qualified to speak; of its importance in the history of England there can be no question.

But the largest immediate contribution of Disraeli to English life was the contribution of the new gospel of Imperialism. As was said in a previous chapter, Gladstone had attempted to pursue Palmerston's methods of foreign lending while abandoning Palmerston's methods of debt-collection and the result had been catastrophe. Disraeli had succeeded to power to find the foreign investment market in ruins. The average annual export of British capital, which from 1870 to 1874 was £61 million a year, from 1875 to 1879 was £1.7 million a year.(143) It was calculated in 1878 that of the British loans to foreign governments, which amounted to £613,988,000, £332,160,000, or 54 per cent, were in default.(144) The proportion of private loans in default was far higher.

Disraeli had a choice of alternatives. The Cobdenite dream of free trade and peace lay irretrievably in ruins. The first alternative was to follow a pacific policy and to refuse to allow British arms to be used for what was in effect the forcing of loans down the throats of unwilling borrowers, to follow a policy which would result in the export of capital, if it should be exported at all, only to such countries as the United States, who genuinely desired it and who would honour their obligations not because they were compelled to do so by the big stick, but because they appreciated the importance of good credit in order to enable them to borrow again in the future. The second alternative was to encourage the forcing of loans on the low-wage countries by making it clear that the British army and navy would always be available as debt-collectors and debt-protectors.

It is hard not to believe that in Disraeli's preference of the second to the first of these alternatives there was more than a touch of cynicism. There had been no trace of Imperialism in the old Disraeli of the repeal days. He had voted in the majority with Cobden and Gladstone to defeat Palmerston over his bullying of the Chinese in 1857. He had protested against the severity with which the Indian mutiny had been suppressed. There had been no Conservative tradition of Imperialism. On the other hand he was shrewd enough to see that, unless a policy was adopted which gave a promise of further loans in the future, it would not be possible to induce the present debtors to pay their dividends on the past loans. True enough, to the eyes of an ultimate observer this policy of lending more in order that you can pretend to yourself that you have been paid past debts was a fool's policy, inevitably destined for eventual catastrophe. But Disraeli in 1874 was not an ultimate observer. He was a tired old man, anxious to cut a splash before he died. His eyes were set, as he himself had said of Peel thirty years before, "not on posterity but on the coming quarter-day."(145)

He knew that the money power had been caught napping by the collapse of 1873 and it needed the revived confidence in foreign lending which Imperialism would give in order to unload its holdings. Eventual catastrophe was indeed highly probable, but the system would last his life-time and a little longer. There were "ancestral voices prophesying war," but only war in the time of his grandchildren. If he worked within the system, he might achieve something before he died. If he challenged it, it would break him and he would go down to history a failure. If he worked within it, he would perhaps leave behind him a record of solid achievement and at last cause society to pay back to the poor a little bit of that gigantic debt which it owed to them. If he challenged it, he would accomplish nothing and leave the world a lonely voice. Would any other that came after him do for the poor even what he could do for them? And, as for the distant catastrophe, who could tell what the shape of the future would be? Let the teeth that are set on edge themselves invent a way of sweetening the grapes!

As a political tactician, he was quick to see that Gladstone's repudiation of Palmerston's jingoism gave to an astute Conservative an opportunity to take advantage of a mood which Liberals had aroused but were no longer willing to satisfy. As early as 1866 he had laid down the doctrine that Great Britain had "outgrown the European Continent.... Her position," he said,(146) "is no longer that of a mere European power. England is the metropolis of a great maritime Empire, extending to the boundaries of the furthest ocean.... She is as ready, and as willing even, to interfere as in the old days, when the necessity of her position requires it. There is no power indeed which interferes more than England. She interferes in Asia because she is really more of an Asiatic than a European power." And it was, it seems, after the defeat of the Conservative Government, which had just passed the Reform Bill of the previous year, in the general election of 1868 that he took a deliberate and a somewhat cynical decision. There was perhaps a certain cynicism in his opposition to a Reform Bill when proposed by the Liberal party; there was no cynicism in his carrying a Reform Bill himself. To a Tennysonian Liberal a second Reform Bill was to be supported on the somewhat muzzy grounds, that, with freedom slowly broadening down, Reform Bills were the kind of things that ought to get passed from time to time. But to a Disraelian Conservative a second Reform Bill was to be supported not to complement but to counteract the first Reform Bill. To Disraeli the first Reform Bill had not been merely a vaguely progressive measure; it had been the definitive establishment in power of a particular class — the plutocracy — whose influence over the state he thought pernicious. To him it was wise statesmanship to call in democracy to redress the balance of plutocracy.

And it was precisely because he did pass the second Reform Bill in that spirit that it was a grave disappointment to him, when he found that the democracy, so far from sharing his ambition for its emancipation, on the contrary voted sheepishly liberal, for the continuance of that very system from which he offered to emancipate it. It was then, I think, that he decided, as Townshend had decided a hundred and fifty years before, that it was not possible to capture the British public except by offering them some sort of "bunk" or other. He therefore wrote the preposterous Lothair, which must be judged as an electioneering dodge rather than as a literary production — as a kind of pledge that he would never again show himself so lacking in good taste as to talk sense about religion — and gave himself to the trumpeting of the most convenient "bunk," which was that of Imperialism.

Therefore he inaugurated the policy of vigorous adventure — the Suez Canal shares, "peace with honour" in Berlin, war without it in Zululand and Afghanistan. There was a Turkish public debt, owed mainly to London investors, and, when in April, 1876, the British Government joined with the other powers in urging on the Sultan reform in the Government of his Christian subjects, the Sultan replied by withholding the current dividend. It was the beginning of the troubles which led to the murder of Sultan Abdul Aziz and the substitution for him of his brother, Abdul Hamid, pledged to punctual payment, who, presuming on the support which that pledge would win for him, proceeded to insult the Russians and to goad them into war.(147)

The immediate advantage of a revival of foreign lending would have been, of course, that it would have caused a diminution of unemployment. But owing to the rumours of war with which his policy was attended Disraeli was unable to secure such a revival. Investors like to know that the overwhelming force of the British navy will be used to coerce recalcitrant and helpless "natives," but they do not like rumours of wars with Great Powers on both sides. It is therefore the paradox of Disraeli's policy that during all the nineteenth century there was in no period so little foreign lending as in that of his Premiership. As a result unemployment did not decrease; it steadily increased. Its percentages were 1.7 in 1874, 2.4 in 1875, 3.7 in 1876, 4.7 in 1877, 6.8 in 1878, and 11.4 in 1879.(148)

But, on the other hand, it can fairly be claimed for Disraeli's policy that it did show to the would-be borrowers that London was unwilling to lend, not from any radical change of policy but because of their own disturbed conditions. Hoping therefore for favours to come, they were willing to discharge fairly satisfactorily their obligations on past loans. As a result, while exports remained steady, imports greatly increased. Exports from 1870 to 1874 averaged £234.8 million a year and from 1875 to 1879 £201.5 million — which was not a diminution at all if we remember that prices fell during that period from 130 to 98. On the other hand imports rose from an average of £290.6 million in 1870-4 to £319.5 million in 1875-9 — a very considerable rise on a falling price-level.

Disraeli was far too intelligent a man to think it important to have a favourable balance of trade. All that was important was to pretend that you were going to have a favourable balance one day — to pretend that one day you would start lending again. For the moment an unfavourable balance was an advantage, because it meant that there were more goods to be distributed. How were those goods distributed under Disraeli's rule? The common opinion was that the years were years of distress, but common opinion is sometimes more apt to notice its grievances than its windfalls. It grumbles at a fall in wages and does not notice a fall in prices; it grumbles at a rise in prices and does not notice a rise in wages. Thus there is no doubt that wages did fall during Disraeli's rule. They fell from 78 in 1874 to 73 in 1879. On the other hand, prices fell a great deal more steeply. General wholesale prices fell from 130 in 1874 to 98 in 1879; the price of the 4 lb. loaf had already fallen, before Disraeli's accession, from 9.8d. in 1872 to 8.9d. in 1873, and 7.3d. in 1874. By 1879 it had fallen further to 7.1d. Therefore, though Gladstone's era was one of rising nominal wages and Disraeli's one of falling nominal wages, the workmen in employment gained a much more substantial advance in real wages during Disraeli's period than during that of Gladstone. On top of that it must be remembered that Disraeli's rule saw the beginning of a vigorous policy of social reform. The provision of services to the poor, though indeed an inadequate, and even a dangerous, substitute for the provision of decent wages, sufficient to enable them to buy the necessities of life for themselves, is at any rate better than a policy which provides for them neither the wages nor the services. Whatever may be said against Disraeli, there is this to be said for him. His cynicism never went so far as to teach him either that poverty was irremediable or that it ought to be called so for the sake of political advantage.

Another reason for the continuance of unemployment, besides that of the absence of foreign investments, was the falling price-level. For with a falling price-level it is no advantage to the manufacturer to produce, even though all the markets of the world be offered to him for his goods. For he must sell at a loss, and therefore to increase his sales is but to increase his losses. But why, it will be asked, was there a falling price-level? Obviously, with imports increasing, there were more goods in the country. More money was required if the price-level was to be kept stable. But in fact there was less money, since the financiers could not put out new money by lending to foreign borrowers and would not put it out by lending to domestic borrowers, having become accustomed through their experience of foreign lending to a swollen notion of what was a proper rate of interest and being unable to get such a rate from the domestic borrower. It is true that the deflation itself caused a shrinkage of the production of manufactured goods but the primary producer is not able quickly to adjust his supply to effective demand and has therefore to suffer in a fall of his prices.

There was a further reason for deflation. The country was on gold. For more money more gold was required. But there was not more gold but less. On the one hand, the supplies from the new Californian and Australian mines were beginning to dry up. In 1875 production for the first time for twenty-five years fell below £20 million. On the other hand, the sudden adoption of the gold standard by Germany, France, and the United States, the three most important industrial countries in the world after Great Britain, diverted the flow of new gold from London. After the Franco-Prussian War the new German Empire found that Holland and the Scandinavian countries, alone in Europe, were their companions in the maintenance of a purely silver monetary standard. The rest of Eastern Europe had gone on to inconvertible paper. Such a standard therefore imposed on Germany all the disadvantages of the double-money system without giving her even the advantage of stable exchange rates with the most important countries of the world. She therefore determined to transfer herself to a gold standard in order to obtain the advantage of a stable exchange with England. The gold received from France in payment of the indemnity for the War of 1870 provided her with a stock sufficient to encourage her to the experiment of a withdrawal of silver money and an issue of gold in its place. Yet, in order to effect the exchange, it was necessary for her to buy — that is to say, to exchange for silver — £50,000,000 more of gold — an exchange which she made during the years 1872-4. The total world's stock of monetary gold was at that date only about £500,000,000.(149)

Now the effect of Germany selling silver and buying gold on this scale was, of course, to make silver enormously more common and gold enormously more scarce in every other country of Europe. The countries of the Latin Union — France, Italy, Belgium, and Switzerland — had up till then been on a bimetallic standard, under which gold was valued as 15½ times more valuable than silver. The effect of the German policy was to make silver in France less valuable in terms of gold. Therefore, naturally enough, it was no longer to anyone's interest to bring in any gold to be coined, for, by turning his gold into coin, he would be robbing himself, for, as coin, he only got 15½ times its weight in silver. If he sold it by weight he could get about 25 times. Therefore, with the relative values of the two metals shifting so rapidly, bimetallism was impossible and the Latin countries, if they were to stick to metallic money, had to choose between a gold standard and a silver standard. A gold standard gave stable exchange-rates with Great Britain. It meant deflation and favoured the creditor; a silver standard meant inflation and favoured the debtor. The creditor won and the Latin countries, too, went on to the gold standard. So, too, did Holland and the Scandinavian countries, countries hitherto on silver but unwilling now to face the large inflation which German policy would impose upon them. Each of these actions contributed to send up the price of gold. Yet in Great Britain, so long as she adhered to the gold standard, the price of gold in terms of money could not go up. Therefore the price of money in terms of goods had to go up. Or, in other words, prices came down.

At the same time the United States, in order to fight the Civil War, had had to resort to an inconvertible paper currency. But so weak was the credit of the Northern Government that it had only been able to borrow its War loans from its own citizens on the promise that it would repay in gold. Therefore after the war it had not the normal debtor's interest in preventing deflation. On the contrary, if it had to pay in gold anyway, it was to its advantage to get the country back to gold. But it was also to its advantage to get or keep as much gold as possible, in order to make the price of gold in terms of goods as small as possible. Therefore, while the German Government was collecting gold for one reason, the French for a second, the American was collecting it for a third. There was little left to come to England. It was impossible to cure the slump — not because there was not the productive capacity to produce more goods, but because there was not sufficient gold at the apex of the inverted pyramid of credit to finance the increased productivity. Whether the Germans, the French, and the Americans were wise or unwise, it is beyond our thesis to inquire. But what a system — a system that punished with atrophy the whole productive life of England because of other policies that were no more connected with that life than were the activities of the man in the moon!

Disraeli's years brought up a further problem. Our debtors, we have said, were anxious to fulfil their obligations; they therefore sent us goods. Imports increased. So they did. But imports of what? In what goods could they pay? They could only pay in food. Therefore British agriculture must be destroyed. When the payment of dividends is at stake, then, as Byron truly put it,

"corn, like every mortal thing, must fall,
Kings, conquerors, and markets most of all."

The cheap corn began to pour in from America. English plough land went out of cultivation; the agricultural labourers drifted off into the towns. For five years — from 1874 to 1879 — the strength of habit was sufficient to keep up rents. Then with the disastrous harvest of that latter year they, too, collapsed. Agriculturalists, remembering Disraeli's protectionist past, appealed to him for reciprocity, or fair trade, as protection was then called. But he answered them with a snub. "The fact is," he said,(150) "speaking generally, that reciprocity, whatever its merits, is dead," and declined to argue the point. The fact also was that the towns now returned more members to Parliament than the country and that the landed classes were but tepid in their demand for a remedy. For the movement of which Disraeli had shrewdly noted the beginnings thirty years before in Sybil had now developed and the landed classes had themselves for the most part gone over to usury. Dependent now upon their foreign investments for their living, they had come to look on farming as the background rather than the business of life. It is true that they resisted the reduction of rents as long as possible. Yet, when reduction came, they almost prided themselves on losing money out of their lands. It gave them an amateur status. Their minds closed to reality by the educational system, they did not see how on every article they bought they paid a tribute to the inventors of money nor did they understand that what the credit system did with its bank-loans and their investments was secretly to rob them of sixpence and then to give them back twopence with a great palaver of publicity. Disraeli took advantage of their stupidity.

The other sufferers from Disraeli's policy were the Trades Unions, as always the sufferers from unemployment and even the appearance of falling wages. Under his rule the Trades Unions gained in privileges but they lost in numbers. At the time of his accession to power they had raised themselves to a strength wholly unprecedented. In 1872 they had a membership of 1,191,822. By 1880 they had sunk to 494,222.

It was the breaking of English agriculture that really for the first time showed the necessary consequences of Imperialism and foreign lending. That such a policy is in a purely arithmetical sense immediately a loss to the mother country hardly admits of dispute, as the quotation from Professor Pigou(151) on a previous page has shown. That is to say, in its first years the mother country will have to send out to the colony more £'s worth of goods than it will receive in return. Suppose, however, that the colony possesses some raw material, necessary for the mother country's manufactures and unobtainable elsewhere; it may be wise for the mother country to submit to this arithmetical loss. Thus, even though it should prove impossible to repatriate some of the money invested in it, it has probably been a wise policy of ours to develop jute-growing in India. So, too, with the previously uninhabited countries of the Empire which are suitable for colonization. Once we understand that the productive capacity even of the old European world was quite sufficient to make it a world of abundance, it is clearly folly to treat the problem of the development of the new world merely as an economic one. It is most arguable that the unhappiness that has been caused by emigration has been so great as not to justify its increase of productivity. But there can be no question that the development of the new lands has increased the productivity of the world and that that development would not have been possible had not the old lands in the early years given the new lands the goods with which to start their lives.

If then we had decided in favour of spreading out our English population through the countries of the Empire, it was necessary that we should export to those countries a quantity of capital goods in return for which we could immediately receive no equivalent import. But was it wise to make a loan of those goods? Where there was no prospect of a liquidation of the debt within a few years, would it not have been better to have sent them frankly as gifts? Immediately, it makes no difference whether you give away £1 or lend it, nor, if it is not possible properly to be repaid the loan, does it make any difference even in the long run. And, as has been already argued, on balance we have not been repaid our loans by Dominion borrowers and it is hardly conceivable that we ever shall be repaid. On the other hand, the necessity of keeping up an illusion of repayment in order to persuade new lenders to lend the money to pay the dividends to old lenders has had a most disastrous effect on the freedom of our own productive life. If we had sent out to Canada with our early emigrants a free gift of the capital necessary to set the country going, we could then to-day decide on the merits of the question whether we preferred to grow our own corn or to import Canadian corn in exchange for our manufactured goods. As long as international trade is a goods trade, we do not export unless we want to import. But, when it is a loan trade, our conduct is dictated by no such balance of reason; it is irresponsible. The capitalists make their investments in Canada or the Argentine with little consideration whether in twenty years' time those countries will be producing any goods that we require or not. And therefore, when the time for dividends comes, we have to take Canadian corn or Argentinian beef, whether we want it or not.

For we must, even at the expense, if necessary, of our own industry and agriculture, bring it about that there is some article which we import in large quantities from each of our creditors. Or at least we must see to it that we have large imports and each of our debtors large exports. Theoretically, it is true, the dividends could have been paid through trade with a third country. But practically there was no solution that way. For our debtors only exported food, and all the countries which imported any other sorts of goods into Great Britain were themselves almost self-supporting in food.

When we reflect on the top of that on the complications which the problems of debts have imported into every international question, of the delays which they have caused in the settlement of every difficulty, of the enormous share of the struggle for markets in the responsibility for the wars of the world, of the swollen armaments which it has been necessary to maintain for the support of the foreign investor in every quarter of the globe, when we reflect how small is the proportion of those debts that has ever been, or will ever be, repaid, can we hesitate in assenting to the apparent paradox that the world would have been the happier and we would have been the richer, had every penny which we exported on loan from Great Britain in the nineteenth century been exported frankly as a gift? As even Sir George Paish, one of the strongest defenders of international lending, admits,(152) "Were every possible assistance and facility given to the debtor nations, to whom so much credit has been granted or upon whom has been placed the duty of making reparations to perform their tasks, the difficulty of meeting their obligations would still be exceedingly great." "Under conditions now imposed," he continues, "these tasks are quite impossible of performance."

In 1880 Disraeli's rule came to an end. He lingered on for a year, but then died in 1881. The sober pages of Monypenny and Buckle record all that is known, and indeed all that is probable of the stories of his death-bed. Yet it is a proof of the strange power which this man of mystery exercised over the imaginations of Englishmen that there still linger upon the lips of gossips two striking stories, which bear witness not perhaps how he died but at least how men thought such an artist should have died.

According to the one story there came to his death-bed a priest of the Catholic Church, and he was there received a member of that enduring Body to which in his lifetime he had paid every tribute except that of submission — in Sybil the tributes of honour and understanding and respect, in Lothair the tributes of anger and misrepresentation. According to the other — artistically perhaps the more probable — the watchers bent low over the dying man. They heard strange murmuring in an unknown tongue. It was the ancient Hebrew "Shaman Israel Israel Adonai Ehod," "Hear, Israel, God, your God, is one God" — the oldest of all the professions of his race.(153) God was gracious for at last to him it had been granted to bring the day of recompense. He, a member of the despised and Chosen Race, had imposed himself as the ruler of the navies of the proudest of Christian Empires, the creator of a Christian Empress, the friend of a Christian Queen, the mocker of Christian things, and the teacher of them to a proud and ignorant generation. He had made himself the first figure of that which in Tancred he had called with a splendid insolence "the intellectual colony of Arabia, once called Christendom."

In the Recollections of Princess Radziwill there is a story in which we come perhaps as near to a vision of that enigmatic soul as it is possible to get. At the height of the triumph of Berlin there was a party one evening. The statesmen and the diplomats of Europe were present at it. Lord Beaconsfield came in a little late, and, as his name was announced, the buzz of every conversation ceased and all Christian eyes were turned upon him. He stood near the door, looking round on the company with lazy pride. "What are you thinking of? "the Princess whispered to him. "I am not thinking at all," he answered. "I am enjoying myself."(154)



proceed !


142. Gladstone, Morley, ii, 425.

143. Europe, the World's Banker, Feis, p. 11.

144. Short History of Investments, Ripley, p. 102.

145. Disraeli, the Alien Patriot, Raymond, p. 136.

146. Speech at Aylesbury, 13th July, 1866.

147. Political History of England, Low and Sanders, p. 181.

148. Introduction to the Study of Prices, W. T. Layton.

149. The Gold Standard in Theory and Practice, R. G. Hawtrey, p. 75.

150. House of Lords, 29th April, 1879.

151. See chapter viii, p. 96. [page 33 in this version]

152. Lloyd's Bank Monthly Review (December, 1930).

153. For this story I am indebted to Mr. G. K. Chesterton.

154. English ed., 1900, p. 149.