Dan Snow's History Hit - The Great Famine

Episode Date: September 25, 2020

Charles Read joined me on the podcast to discuss the economic and political causes of the Great Famine. We discuss the British government’s economic policies that transferred responsibility onto Irish taxpayers. Within four years, 25% of Irish people died or emigrated.Subscribe to History Hit and you'll get access to hundreds of history documentaries, as well as every single episode of this podcast from the beginning (400 extra episodes). We're running live podcasts on Zoom, we've got weekly quizzes where you can win prizes, and exclusive subscriber only articles. It's the ultimate history package. Just go to historyhit.tv to subscribe. Use code 'pod1' at checkout for your first month free and the following month for just £/€/$1.

Hello everybody, welcome to Dan Snow's History Hit. 175 years ago this month a terrible potato blight was detected. It's astonishing to think but within four years a quarter of the Irish population had died or emigrated. And in numbers terms the Irish population has never recovered from this catastrophe. This is a podcast all about the Great Famine, the Potato Famine, and how initially the government in Westminster ordered an unprecedented relief effort, but then transferred the burden onto Irish taxpayers themselves. This meant a staggering jump in taxation in one area, for example, from a couple of shillings in the pound to over 34 shillings in the pound.

And that was calculated on the value of your land from before the famine had destroyed any income coming from that land. So many people were now paying the exchequer, paying the British government to own land because they were paying out more than they were taking in rent. Why was this? Was this deliberate genocide? Was this racism? Was it astonishing incompetence? Charles Reid is an economic historian and he writes extensively about the great financial crises

of the 19th century British Isles. He has written about the causes, the consequences of famine in this period and this is a challenging thought-provoking new explanation of the famine and its catastrophic consequences if you'll listen to other episodes of this podcast please go to history hit tv thousands and thousands of people are watching tens of thousands of hours of programming every month on that channel it's very exciting you can sign up because you're a podcast listener with a special introductory rate. If you use the code POD1, P-O-D-1, you get a month for free.

And then your second month is one pound, euro or dollar. But in the meantime, everyone, here is Charles Reid. Charles, thank you very much for joining me on this podcast. Thank you very much. It's a pleasure to be here and thank you for having me. First of all, do you start looking into the history of the Great Famine with a certain amount of trepidation? It feels like a topic that is still the third rail of Anglo-Irish history. Well, this is a very emotive period of Irish history, partly because it changed the history of Ireland so much. So 175 years ago this month, the potato blight was first detected in Ireland. Within five years, a quarter of Ireland's population had either unexpectedly died or

emigrated. There are fewer events which are more severe in terms of their humanitarian and economic impact in the history of the modern United Kingdom. You'll probably have to go back to the Black Death in the 14th century to find an event which is more severe in its impact. And it permanently changes the course of Irish history and indeed British history as well. So Ireland is one of the few country areas in Europe which has a smaller population today than it did in 1845. Ireland is a country whose population never fully recovered from this disaster. And also it fuelled Irish nationalism and increased support for Irish separatism, which eventually led to an independent Irish state gaining independence from the rest of the United Kingdom in 1922.

This is a very big event in Irish history. It's a very big event in British history. And the reason why it's so controversial is that suddenly, in the middle of this crisis, after the British government spends a lot of money on a very big relief effort, one of the biggest relief efforts ever mounted by a government in the world, suddenly at the worst part of the crisis, it decides to cut central government spending on this crisis. And this has led to accusations that the British government response was inadequate, that the Irish were left to die, that the British didn't care at all about what was going on in Ireland. And this has fuelled an Irish nationalist interpretation of events, and it has always proved a thorny issue in Anglo-Irish relations ever since, and this continues to this present day. And your work is so fascinating on the nature of this

change in direction by the British government. Was it fuelled by ethno-almost genocidal urge on behalf of Whitehall or not? So we will explore this in this podcast. But let's talk about the less contested bit. In fact, as you say, the bit in which the British government won enormous credit, even from many in Ireland. So the potato blight is identified 135 years ago this month. There are widespread crop failures. Two years, the harvest fails consistently, doesn't it? It fails consistently. And the point is that most harvest failures in history only happen for a year or two,

and then things go back to normal. The thing about the Irish potato blight is it's persistent. So you see years and years of catastrophic, almost a decade of catastrophic harvest failures of potatoes. In the first year, probably a third of the potato crop rotted away. The second year, it was probably over 95%. And this continues into the 1850s. Even decades later, you see in some years the potato crop completely rotting away. And indeed, this disease has not gone away. Scientists have discovered chemicals which can be used, copper sulfate solutions,

which can be used to fight this disease. The reason why you see organic potatoes so rarely is that you can't really fight this disease without modern chemicals. So this is a disease which has appeared and it's never fully gone away around the world. And the British government, as you point out in your paper, is at the same time the most advanced state in the world. We need to define that slightly. But also by the modern world standards, it's fairly primitive in the levers it's able to pull when confronted with a giant humanitarian crisis. So what does the government do initially? Initially, the Irish local administration reports this to the Prime Minister in October 1845, saying there's been a massive harvest failure,

we need some help as quickly as possible. And so the British government starts to import food supplies into Ireland. It also sets up a public's work scheme to provide alternative sources of employment. So the point is, is that this is sorting out the food availability problem, as well as making sure that people have enough money to buy the food. That's the first year of the famine. The second year of the famine, the government is replaced by Lord John Russell, which then increases the scale of these policies. By early 1847, late 1846, early 1847, some 700,000 people are employed on public works programmes in Ireland. And by the middle of 1847, some 700,000 people are employed on public works programmes in Ireland. And by the middle of 1847, when a set of soup kitchens are introduced in addition, some 3 million people

are being fed free food by the British government. So the initial response over the first two years was extraordinarily big. And particularly in the first year of the famine it was particularly successful in reducing mortality levels. What is the driving force here? There are obviously Irish MPs, this is post the Act of Union 1801, so there are Irish MPs. Is this an electoral calculation? Is this just high-minded new ideas about state intervention looking after the people and its subject? I think this was motivated by Peel and if you look back at Peel's speeches over the long term, what he is interested in, what drives his politics is, is this good or bad for the labouring poor, in that he basically says, you know, every move of economic policy needs to be examined within,

is this a good thing or a bad thing for the neighbouring poor and in some ways this is driven by his moral compass this is driven by his religious leanings and in some ways Peel was an Anglican but he was heavily influenced by the Wesleyan Methodists who emphasised that social economic policy should be in the favour of the poor, not for simple electoral calculation reasons, because the poor didn't vote, but as a result of, you know, this is the morally right thing to do. However, his government repeals the Corn Laws, which is taxes on the imports of food, because he believed you can't spend taxpayers' money on buying Irish food for the Irish, while at the same time, you know, artificially raising the prices with import taxes. So he gets rid of these. But in the Irish, while at the same time, you know, artificially raising the prices with

import taxes. So he gets rid of these. But in the process, he splits his party, the Conservatives split in two, and his government collapses because it doesn't have enough support in Parliament. So his government ends after the first year. You've got a situation where the British government, the parallels today, of course, very striking British government undertaking this gigantic intervention in the economy. Interestingly, Peel is a sort of liberal conservative who undertakes that. Why does the British government end that generosity? A popular interpretation is that there's suddenly an increase in the influence of laissez-faire ideas.

This is the idea that if you leave everything to the market, everything will be well. You'll get the best solution. Now, this is a slightly ridiculous explanation of this change, because you go from in the first two years of the famine having the biggest relief effort of any country in the world to the last year of the famine, where the relief effort is put on local Irish taxpayers. But this is hardly leaving the market alone. In one place, Ballinrobe, the rates are raised to 34 shillings through and a half p in the pound. Now that's basically a tax of 170% on the imputed rental income from property. So raising tax rates

over 100% again in the later years of a famine is hardly leaving the market to itself. And that's to pay for Irish famine relief. Instead, what's the clearer and better explanation of this change in policy is that there's a change in the government's fiscal circumstances, and an attempt to raise loans to continue to pay for Peel's generous policies in 1847 basically triggers a massive financial crisis. So during the first two years of the famine, they had the money to pay for these generous relief policies. The government by 1845 had a very large government surplus. In the first few years, it was basically spending money out of that surplus. But by the start of 1847, that surplus had disappeared. Tax revenues were falling because of an economic

recession triggered partly by the potato blight itself, but also by the collapse of the railway boom, while spending was increasing in Ireland because Ireland's needs were going up. And so the government announced in February 1847 that in order to continue to fund these policies, it was going to raise an Irish loan worth £8 million. Now that's equivalent to 10% of Ireland's GDP before the crisis, and probably one eighth of it during the crisis. So this is a large amount of money, and they were planning to follow that up by another loan of £6 million later in the year.

And this was to continue the rate of spending on Irish family relief, which was happening before. So the British government discovers that even the British government in the 19th century does not have the ability to borrow unending amounts of cash. So it can't. And the reason why it couldn't is that there's two reasons. The first reason is because Britain is on something called the gold standard, where banknotes are essentially worth a certain amount of gold, and you can go to the Bank of England with your banknote and exchange it for a certain amount of gold. And also something called the Bank Charter Act. So this is the fundamental legislation introduced by Peel in 1844 under which the Bank

of England was regulated and parts of it still enforced today. This is the foundation charter of the Bank of England in some way or the charter in force. So the point is that the reasons why markets panicked when the government announced it was going to borrow £8 million is that the markets and small investors thought the British government was going to borrow £8 million in banknotes and then convert those banknotes to gold to buy food for America for the Irish family relief effort. Now the issue is that Britain didn't have a very large amount of gold reserves in this period. It only had a few million more than this amount. And so people thought, well, the government, there's a trade deficit anyway.

The Bank of England is leaking money anyway. Well, if this £8 million is taken, is borrowed and then converted into gold, there's going to be only a very low amount of reserves left. So people started running on the Bank of England. They were saying, well, I'm going to convert my banknotes today while they're still worth something and while I can get my gold rather than waiting in a few months time when the Bank of England might have to suspend convertibility. One problem is that you have people running on the Bank of England trying to convert their banknotes into gold. At the same time, the Bank Charter Act insists that

the amount of banknotes in issue has to be related. The Bank of England above a certain level has to have a certain amount of gold in its vaults in order for it to issue a banknote. So it means that if the gold reserves start falling, the Bank of England starts having to take banknotes out of circulation. And its cushion, which it could help credit markets when there was a lack of credit, massively fell. This meant when the government tried to borrow £8 million in the market, the Bank of England was having to reduce the amount of credit available. And this caused a credit crunch, which started to cause banks to collapse until the

autumn of 1847. And the point is, this first panic of 1847 was only calmed when the British government announced several things. Firstly, that the British government would only borrow the loan and only spend the loan and only spend the loan very gradually, so in smaller installments over a longer period of time. So rather than its original intention, which was to borrow this money and spend it quite quickly, it was limited in how much it could borrow and how much it could spend. This reduced the worries that Bank of England was going to run out of gold. The second thing it did, which calmed the crisis almost to the day, and caused some of the gold to return to the Bank of England, was it announced that rather than

half the relief effort being paid back by local Irish taxpayers and half the spending being paid for by central government, that the entire burden relief effort would be put on local Irish taxpayers. And the markets thought that that would mean that spending would be more careful in the future, that if local Irish taxpayers who were administering the relief effort knew that they're going to have to pay this back in the future, that they would be more likely to be careful with taxpayers' money, basically. The loan repayments for the Napoleonic Wars were an insane proportion of government spending. And this crisis that we're in at the moment, even with the money we're borrowing, we're still projecting less than 1%, or you tell me,

but we're dealing with the repayment on the loans at the moment aren't that scary. Whereas the British government in the mid-19th century was looking at gigantic debt repayments from the cost of servicing the loans to Napoleonic wars were extraordinary. Exactly. So now we're in a situation where we don't have a currency which is linked to gold, that if necessary, the Bank of England can print more money for the government to spend. And this is exactly what happened at the depth of the pandemic in March and April, when the Bank of England started what's known as deficit financing. Essentially, the Bank of England was printing money to give to the government. In addition to that, interest rates are very low because there are few other very safe assets in a world where the pandemic has

destroyed the businesses, many other business investments. There's very few other places where investors can put their money. Britain in the 1840s is in a different world. Firstly, the amount of debt interest payments is absolutely huge. So today, the British government only spends a very small percentage of government spending on servicing its debts. The British government in the 1840s was spending well over half on servicing British government debt each year. So thanks to the money that was spent in the long 18th century winning this kind of hegemonic battle against the French for global supremacy, the British government was spending more than 50% of its revenue on servicing that debt. That's extraordinary. Exactly. So the British

government needed to keep interest rates low, because if interest rates rose, that meant that the amount it was going to have to spend on interest debt repayment went up, that would raise the interest rate the government was paying further, which would, again, increase the deficit and you get this negative debt interest spiral going. So keeping interest rates low was a key priority of the government to maintain financial stability. But you might go, well, yes, this is a problem. But even if the government needed to balance its books, there are alternative policies which could be followed. One of which is cut spending on other things. Well, you can't cut debt interest spending until you balance your books,

so you can't cut that. The government had already laid up a third of the Royal Navy, so the military and naval expenditure had already been cut to the bone by Peel before 1845. And the west of it, a fifth of government spending was actually on island during this period. So it was the thing which in an emergency situation, which could be cut faster and quicker. So the government can't borrow any money. It can't make deeper cuts. What about raising taxes? It can't make deeper cuts. What about raising taxes?

So the government did try to increase income taxes and basically failed during the Irish famine to make up the money which they failed to raise through issuing loans. But the problem that they faced was that from 1846 onwards, this was not a majority government. Whigs did not have a majority in Parliament. a majority government. The Whigs did not have a majority in Parliament. And rather like Theresa May and the last Parliament where Brexit ended up in parliamentary deadlock because the government had no majority in Parliament, something very similar happened to the Whig government. It needed the votes of the followers of Sir Robert Peel, the Peelites, the Liberal Conservatives, or the Irish Nationalists under Daniel O'Connell to get legislation through.

And income tax is one of, or the issue of raising income tax, was one of the issues which reached deadlock in this Parliament. So the reason why is that Ireland had an exemption from the income tax. So people, residents in Ireland, did not have to pay from the income tax. So people resident in Ireland did not have to pay the British income tax. And the point is, is that the British MPs said that, well, if we're going to raise income tax on British taxpayers, it's unfair that the Irish aristocracy whose peasantry are starving on their estates, shouldn't have to contribute something as well. That if they're going to raise

the income tax by a certain number of pence to the pound, this has to be increased on both British taxpayers and Irish taxpayers. The thing is that Irish MPs, on the other hand, refuse to allow this to happen, because only the rich could vote in this period, and only the rich paid income tax in this period, or would be eligible under the changes for to pay income tax. Raising income tax was political suicide for any Irish MP to vote for. And so the British MPs refused to raise British income tax to pay for Irish family relief without getting rid of the Irish income tax exemption. And the Irish MPs refused, were happy to vote for income tax to go up in Britain, but refused the Irish income tax

exemption. The result was gridlock. And the Chancellor actually took several budgets to Parliament in 1848 and couldn't get them passed. And he ended up having to write several different budgets until he got one which passed, but unfortunately did not include an increase in income tax. So that was one alternative policy. Another was alter or amend the Bank Charter Act. So the problem is the Bank Charter Act is restricting amount of credit. And if those restrictions are loosened, the British government might have been able to raise the loans it needed to pay for famine relief. The problem is, is that this piece of legislation was very much Peel's political legacy. He saw it as one of his main achievements as Prime Minister,

and he made it clear to the Whigs that the Peelites would not vote to alter or change this legislation, and therefore it wasn't changed. Very interestingly, there was a member of the cabinet who did suggest changing this piece of legislation. This was Earl Grey, who was actually the colonial secretary at the time. Yet he was outmanoeuvred in the cabinet because Ireland did not fall under responsibilities of the colonial office. It was run by the, well, the answer here is to change this legislation and enable these loans to be raised. And there was another part of the British Empire which faced a famine as big as Ireland, and this was Mauritius, that the sugar crop failed

and sugar prices collapsed in 1847 in Mauritius, and it couldn't import the food it needed. And the colonial office actually changed the legislation, changed the banking and currency legislation there, in order so the government could raise more loans to spend on relief. So this was an alternative suggestion, but it could not be implemented in the United Kingdom because there was not a majority in Parliament.

And this is because the Peelites refused to vote for it because this was seen as the great achievement of peel's time in office land a viking longship on island shores scramble over the dunes of ancient egypt and avoid the poisoner's cup in renaissance florence each week on echoes of history we uncover the epic stories that inspire assassin's creed we're stepping into feudal japan in our special series chasing shadows where samurai warlords and shinobi spies teach us the tactics and skills needed not only to survive but to conquer whether you're preparing for assassin's cre Shadows or fascinated by history and great stories, listen to Echoes of History,

a Ubisoft podcast brought to you by History Hits. There are new episodes every week. It's a sense in which Ireland had the worst of both worlds because it was part of the UK, but it was a part of the UK that was very distant from the locus of political power. And do you think this would have been different if this had been massive crop failures in East Anglia or in Kent? Well, it's worth remembering that there were massive crop failures in Great Britain as well. There was a severe potato famine in Cornwall,

there was a severe one in the Scottish Highlands, and that Britain's trade deficit increased because Britain itself was also having to import large amounts of food for itself as well as Ireland. The issue is, you know, essentially that you would have reached a financial crisis if Britain was hit as badly as Ireland was by the blight, it would have reached a financial crisis much earlier. Would this have forced them to change the legislation? Well, I think you can easily underestimate how attached Peel was to his banking and currency policies, but he fervently believed that these policies were the best thing for the poor around the entire United Kingdom, including Ireland. And the thing was, is that this is not really a case of, you

know, intention, that he intended that he thought his policies were the best ones to save as many lives as possible. It was simply that this was an economic policy mistake, that he didn't realise quite how the economy worked. It took until the 1960s and 1970s for economists really to work out how international macroeconomics worked. And so he believed that these policies were good, even if the outcome wasn't so good. We have got a loan now. The British government have raised a loan for Ireland.

The problem is its repayment is falling on the shoulders of the Irish gentry, the Irish taxpayer, that drives this kind of essential, economically powerful, politically powerful class into the arms of nationalists, because they see they've been lumped with this problem, right? Exactly. So, I mean, it's difficult to underestimate the scale of the taxpayers and pushed on Irish taxpayers in this period. In 62 poor law unions, the rates rose above 10 shillings in the pound. In Ballinrobe, it increased to over 34 shillings, three and a half p in the pound, that's 170%. And many Irish gentry, many of the wealthier people in Ireland felt the only thing they could do to escape from this is to, you know, essentially

take their money abroad and emigrate. And this is what occurs. After 1847, there's a big increase in emigration of wealthier people from Ireland, the gentry, the rural middle classes. And they left and they took a lot of financial capital with them. So this is a disaster for Ireland in terms of reduction in the amount of human capital it had, the reduction in the amount of financial capital that they had. And many of these wealthier people fled to America because you could be chased for payment within the British Empire, but you couldn't be chased for payment within the United States because it was a foreign jurisdiction.

And this is one of the origins of this very anti-British, pro-nationalist interpretation of the famine from Irish Americans, in that basically for reasons which are not really understood by British politicians nor them themselves, they've been lumped with pain, this crisis, and they can't really understand why or what's happened, what went wrong, and they're very resentful of it. And you can clearly see in many Irish nationalist ballads in this period that they feel that they've been exiled from Ireland because of these huge tax burdens imposed by the imposed by the British state. So the typical emigrant from Ireland during the famine was not a starving labourer whose potato crop had collapsed but a member of the rural middle class was like, screw this, there's a disastrous famine on and now the rapacious government in distant London is asking me to

pay for it myself whilst not reaching into their own pockets. I think that it's a bit more complex than that. There are two different types of emigrants. Now, the first wave of emigration is actually the Irish poor. And the evidence is substantially that they mostly came to Britain. It was very cheap to come to Britain. If not, you could often get free passage. Land a Viking longship on island shores, scramble over the dunes of ancient Egypt, and avoid the Poisoner's Cup in Renaissance Florence. Each week on Echoes of History, we uncover the epic stories that inspire Assassin's Creed. We're stepping into feudal Japan in our special series, Chasing Shadows, where samurai warlords and shinobi spies teach us the

tactics and skills needed not only to survive, but to conquer. Whether you're preparing for Assassin's Creed Shadows or fascinated by history and great stories, listen to Echoes of History, a Ubisoft podcast brought to you by History Hits. There are new episodes every week. And so this is the primary reason why, actually. In one recent study found that 22% of the DNA of people who live in Britain today comes from Ireland. So there was that initial first wave of the Irish poor, their pervasive crops had failed, and they immediately went to Britain to try to find work in Britain's manufacturing towns. The second wave of emigration was much later, after the burden had been placed on Irish taxpayers. And this tended to be the wealthier sort, the Irish gentry, the rural middle classes, who tended to go to America to escape the high taxes. And often they

sold everything they had and would escape in the middle of the night and leaving lots of unpaid bills behind. So you get these two waves. And in the second wave, you get this interesting pattern of the Irish gentry and the well-to-do leave, and many of the remaining Irish poor move into the houses which have been left abandoned in the towns. So you do get these two different waves of Irish emigrations, and they have two very different effects. Was there an element of politicians in distant London taking this less seriously because it was happening to Irish people? If you look to the extent to which the British government went to try to find money to pay for

Irish family relief, in fact it shows that they were taking it very seriously. That Peel was willing to destroy his own party and destroy his government to repeal the Corn Laws to help Ireland in 1846. In 1847, the next government took the British government to the brink of bankruptcy, probably the closest moment the British government ever in history has got to bankruptcy, in order to raise the money to fund Ireland. They couldn't get income tax raised, they couldn't get support in Parliament to change the Bank Charter Act. And so instead, they tried to find the money elsewhere by raising taxes to levels beyond anything which has been seen ever in Irish history, or indeed the history of the United Kingdom. there was a huge unprecedented level of intervention going on in Britain and Ireland. And the point is that this didn't work, but it wasn't a shortfall of good intention which caused this. This was a misunderstanding of parliament for the government after 1846 these were the

causes of the disaster in Ireland or why so many people died and indeed people you know more recent famine economists argue this as well that actually what determines in many places you know famines which kill and famines which don't kill is what is the fiscal capacity of the state? Is the government able to pay for it? And also to what extent is there political certainty? Is there a strong government with majority which can implement its famine relief policies or is the government very weak and unable to implement what it wants to do? And the British government during the Irish famine is an archetype of a weak government unable to push its relief policies through Parliament. Is this also a very well attested and obvious example of an early modern state attempting to

use quite primitive instruments to overcome a massive natural pandemic, the type of which are not uncommon? I mean, we see them, of course, throughout history. They're a constant in our human story. Exactly. So in some ways, both Britain and Ireland were the first industrialised states. They were the first states to emerge from the poverty that all countries in the world had until the 18th century. But this meant that there was just no precedent. There was just no economic thinking that they could, or economic practice in other countries, that they could use and implement to deal with the crisis of this scale. It wasn't clear what policies were appropriate for a modern industrial state in terms of fiscal policies, monetary policies, banking regulation, currency, that in some ways they were basically

having to make it up as they went along. And other countries later on learnt from Britain's experience and Ireland's experience. But you have to remember, policymakers at the time didn't have this corpus of expertise that later governments had. As one of said corpus, if that is the word, you are the expert on this. Can you try and tell the story about what's going on today? We are facing a pandemic, this time not of potatoes, but of humans, a pulmonary pandemic. Just in very simple terms, it turns out that Peel was wrong. There is a magic money tree. As long as the government with a good track record of fiscal responsibility behaves itself, we can borrow any amount of money to overcome this, can we? Is that what's happening? But the issue is, is that yes, the British government has that

track record today in that the British government is probably the only government which hasn't defaulted for several centuries. Britain's never had a particularly high inflation rate in the, you know, okay, Britain had an inflation rate of 25% in one year in the 70s. But this is not high compared to many other countries in the world, which have suffered bouts of hyperinflation. We now know this today, but investors did not know this in the 1840s. And the British government had borrowed huge amounts of money in the 18th century to pay for the expansion of the British Empire, to pay for Napoleonic Wars. Britain didn't quite have the same track record. And in summary, one of the lessons learnt

by Treasury officials from the Irish famine, that it was that it needed to build up this track record. And in summary, one of the lessons learnt by Treasury officials from the Irish famine, that it was that it needed to build up this track record, in that Gladstone founded the Post Office Savings Bank, which is now National Savings Investment, because he wanted a way of borrowing from the public, which didn't involve having to go cap in hand to the Bank of England. And he explicitly went to his officials when he became Chancellor in the 1850s, we have to do this because we can't end up in the same situation as 1847. And you see this continuously throughout the end of the 19th century, that the Treasury view comes from this crisis of 1847, that Britain needs to build up its reputation for fiscal stability in order so that when real crises do hit, it can borrow the money that the British state needs. And so in some ways,

that was a lesson taken on board by Treasury officials at the time, that they needed to build up Britain's track record. But I think the big difference between now and then is that the world now has fiat currencies. So we've gone away from this early modern view, which ultimately comes from an 18th century and before ideology called mercantilism, that you have to ping the value of paper money to gold or some precious metal, which John Maynard Keynes in the 20th century called absolutely barbaric. And instead, the world now has fiat money. So if you try to go to the Bank of England and ask to change your £10 note into £10 of gold, they'll tell you to go away. But paper money is not linked to the value of precious metals anymore.

And this means the government can print more money when it needs to, such as during the worst part of the pandemic. And we've now learnt that, but that wasn't known in the 1840s. And you get the question of whether, you know, is the answer to this is to, you know, get rid of convertibility? Should Britain go off goal completely in the 1840s? And the person who, ironically, who vetoes this is Prince Albert, who was doing the head of state's letters for her while she was having a baby. And he said this idea of ceasing convertibility won't work because people in Germany won't accept British banknotes anymore if they're not linked to gold. That there was this fear that people abroad would not accept British banknotes if

they departed from a very strict gold standard. I think we've now learned that that is unnecessary. But the point is, is that policymakers did not know this at the time in the 1840s. During the peak of the pandemic, there was some suggestions, I think by Deutsche Bank, they need to look out for that there might be for the first time in hundreds of years, a British either hyperinflation or sovereign debt problem. But it doesn't look like that's happened, right? So why don't we just borrow even more money and like fix global warming while we're at it? Has this not taught us that the ability of modern states to both borrow money and to have their money accepted around the world by people making things is infinite. Well, I think it's very large. It's

not quite infinite. And the reason why this has occurred, why do certain advanced countries, why are they able to borrow very, very large amounts of money? This is essentially because interest rates have fallen on safe assets, in that there's a recent paper by a researcher affiliated with the Bank of England who said actually the feature of capitalism over the last seven centuries since the 14th century is actually interest rates have gradually been falling. So borrowing was very expensive in the 14th, 15th, 16th century even if you were a relatively fiscally responsible government. So this piece of research took all the evidence there is about rates and loan rates to governments over this period and found that actually secular stagnation has been occurring over the last

seven centuries and the interest rates have been getting lower and lower and lower so today you know borrowing is almost free if you're the british government if you're the american government but it wasn't if you were the british government in the middle of the 19th century in that while this is true today interest rates were much higher, market interest rates were much higher around the world in the middle of the 19th century. And partly this is because arguably institutions, both economic, legal and political institutions are stronger

in that the mechanisms to get people to repay their money are stronger. Because if you had lent money to a Plantagenet king, if you were a money to a Plantagenet king, if you were a money, a Dutch money lender, how would you try to get your money back if they decided not to pay? I mean, I think there was a case of a Scottish king who murdered a aristocrat who had lent him £80,000, I believe, and he announced after that the aristocrat had died that he wasn't going to pay it back. You can't get away with that in the modern world, let's put it like that. But it takes time for investors to trust institutions that they will get repaid.

And Britain was only partway down that pathway by this period. And I think that's the biggest difference between today and 175 years ago is that investors trust governments far more now than they did back then. Well, thank you for talking to us on this important anniversary. That's just a fascinating podcast. We will tweet out the paper that you've written. Thank you very much for coming on. Thank you very much for the invite. hi everyone it's me Dan Snow just a quick request it's so annoying and I hate it when other podcasts do this but now I'm doing it I hate myself please please go on to iTunes wherever you get your podcasts and give us a five-star rating and a review it really helps basically boosts up the chart which is good and then more people listen which is nice so if you could do that I'd be very

grateful I understand if you don't subscribe to my TV channel. I understand if you don't buy my calendar, but this is free. Come on, do me a favour. Thanks. you