Saturday, November 17, 2012

Bills of exchange & British imperial power

Consider this problem. You are running a global trading empire. It is long before the days of telegraph or telephone. You have ships, naval and merchant, dotted across the globe. You have colonies and trading posts across the globe, including a recently established penal colony at Port Jackson.

The ships and isolated outposts have to be re-supplied. Ships have to be fixed, lost mariners returned to home ports. In a dispersed global operation, you can't control everything from Whitehall. You can't just send money. Enter the bill of exchange, a central weapon of imperial power.

British officials around the world including consuls, ship's captains and governors in remote NSW had delegated power to issue bills on the home government. These pieces issued by one person to a second person stated that a third person, the Government in London, would pay the second person so much money. A simple idea originally invented in China that greased the wheels of empire.

You are a ship's captain or governor needing supplies. You buy them by issuing a bill that the supplier can present to officials in London and get paid. These bills are accepted because they were paid.

Today we would shudder at the risks involved. Risks to those accepting, more risks to the government. How do you budget, how do you prevent fraud, corruption, when thousands of officials and military officials spread across the globe have the individual authority on their own account to issue what we can think of as official cheques (a cheque is a bill of exchange) on the public purse? How do you audit? Surely you must need tens of thousands of officials checking and auditing?

Well, no. It was a different world. There were systems in place that allowed transactions to be checked. However, the divide between public and private was more elastic then. A certain amount of what today we would call corruption was allowed. The division between private and public was more elastic, there was more gray space.

The key thing is that the system worked. In practical terms, it kept the empire going. Taken to excess, corruption could have destroyed the empire or reduced its efficiency. That didn't happen in the case of the British Empire. Part of the reason for this lies in values, part administrative checks that did take place, part the commercial nature of that empire that made for a practical approach.

The bill system was central to the evolution of the early colony in NSW. As we say today, follow the money!    


Anonymous said...

Hi Jim

As so often with your posts, I went wandering off; ended up searching for frauds connected with "Bill of Exchange" and hence to this fascinating site:

- which I've deliberately pointed to 'Punishments', just for extra added interest; see 'Transportation' for instance.

But click back to Old Bailey Home, and you can see (by searching) that "bill of exchange" was a most fruitful area for criminal enterprise, either by theft or forgery.

Your comment to the effect that this method of 'promissory payment' was basic to those times, and was successful because it was largely honoured, was what started me down this particular rabbit burrow. I have no doubt you are basically right, but the 'wrongs' have provided me with much more colourful interest!


Lorenzo said...

I would also mention the somewhat minimalist approach to regulation. From the mid C18th to the mid C19th, a lot of privileges, monopolies, licenses etc were abolished. Less role for official discretion, less likelihood of corruption.

The contrast with the Spanish/Portugese approach was manifest.

Anonymous said...

Jim, regarding Lorenzo's comment, and harking back to your earlier mention of the current NSW enquiry, Lorenzo did a great post about the connect between official 'discretion' and malfeasance a little while ago.

Well maybe that's not what he was after, but that's what I took out of it. Seems to me that point is highly relevant to the current corruption enquiry.

Well worth a read, I think.


Jim Belshaw said...

Hi kvd. I can't remember which of Lorenzo's posts you are referring too. Liked the link to the Old Bailey.

Interesting comment, Lorenzo. I'm not sure about your point, but need to think it through. Intuitively, you are mixing different things together.

Anonymous said...

Jim, the link:

- particularly the subheading 'The market for official discretion'

... was what I was thinking about when I read your 'Rum, Money & Power' post.


Jim Belshaw said...

Thanks, kvd. I had forgotten that post even though it's a recent one, and it is relevant.

The thing that was creating confusion in my mind in responding to Lorenzo is that in NSW it was the exercise of official discretion by the military-official complex that largely created property rights. Bligh was overthrown in part because he threatened those property rights.

That said, Lorenzo is right in a general sense, although other threads are also very important: the development of an efficient system of government cf the Navy; the rule of law; and reducing restrictions on competition all come to mind.

Anonymous said...

Jim, not to impose on your flow of continuing 'India posts' but I just wanted to report a most pleasurable several hours' worth of browsing now on the subject of the East India Company, and with a specific observation:

I guess over the past 50 or so years I have read or studied the early history of the colony of New South Wales many times, to the point where you'd think I might have exhausted the topic. Yet here I am again, reading a fascinating short article on the development of horse breeding in the colony:

My point is, the term 'history' is a question of endlessly varying perspectives, rather than some sort of linear description of events. Probably old news to you, but not something I had much appreciated myself ;)


Jim Belshaw said...

That's interesting, David. You are dead right.

Just from a writing/learning viewpoint, since I started blogging on history topics, I have been constantly fascinated by the shifting perspectives one gets from looking at apparently well worn paths in new ways.