Vol. 6 · pages 371–375

356 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES each nation,* to protect their silver currency and particularly the small change, should disrupt the monetary harmony prevailing among them all, they were compelled to meet in a convention, dated November 20, 1865, which required the parties, since collectively called the Latin Union, to lower, in the order to maintain them in circulation, the silver pieces of 2 francs, 1 franc, 50 centimes, and 20 centimes from a standard of 9001000 fine to 8351000 and to make them subsidiary coins.† It is true that the Government of India also came in for trouble as a result of this disturbance in the relative value of gold and silver, but that trouble was due to its own silly act.‡ The currency law of 1835 had not closed the Mints to the free coinage of gold, probably because the seignorage on the coinage of gold was a source of revenue which the Government did not like to forego. But as gold was not legal tender, no gold was brought to the Mint for coinage, and the Government revenue from seignorage fell off. To avoid this loss of revenue, the Government began to take steps to encourage the coinage of gold. In the first place, it reduced the seignorage§ in 1837 from 2 per cent, to 1 per cent. But even this measure was not sufficient to induce people to bring gold to the Mint, and consequently the revenue from seignorage failed to increase. As a further step in the same direction, the Government issued a Proclamation on January 13, 1841, authorizing the officers in charge of public treasuries to receive the gold coins at the rate of 1 gold mohur equal to 15 silver rupees. For some time no gold was received, as at the rate prescribed by the Proclamation gold was undervalued.¶ But the Australian and Californian gold discoveries altered the situation entirely. The gold mohur, which was undervalued at * Switzerland was the fifrst to reduce the amount of silver in her small coins in order to keep them in circulation. But these Swiss coins of reduced fineness crossed the national frontier and, as they were legal tender in other countries of Latin origin, began to displace their dearer coins of similar denominations, which contained more silver but which passed current at the same nominal value. This brought forth a decree in France (April 14, 1864) which revoked the legal tender power to a concerted action on the part of all the Latin countries concerned. † For more particulars of the Latin Union, cf. Laughlin, op. cit, pp. 146-9. ‡Cf. H. of C Return, East Indian (Coinage) 254 of 1860. § Ibid. p. 8. ¶ Ibid, p. 10.

357 FROM A DOUBLE STANDARD TO A SILVER STANDARD Rs. 15, became overvalued, and the Government which was at one time eager to receive gold, was alarmed at its influx. By adopting the course it did of declaring gold no longer legal tender, and yet undertaking to receive it in liquidation of Government demands, it laid itself under the disadvantage of being open to be embarrassed with a coin which was of no use and must ordinarily have been paid for above its value. Realizing its position, it left aside all considerations of augmenting revenue by increased coinage, and promptly issued on December 25, 1852, another Proclamation withdrawing that of 1841. Whether it would not have been better to have escaped the embarrassment by making gold general legal tender than depriving it of its partial legal-tender power is another matter. But, in so far as India was saved the trials and tribulations undergone by the bimetallic countries to preserve the silver part of their currency, the abrogation of bimetallism was by no means a small advantage. For, the measure had the virtue of fore-arming the country against changes which, though not seen at the time, soon made themselves felt. The abrogation of bimetallism in India, accomplished by the Act of 1835, cannot therefore be made a ground for censure. But it is open to argument that a condemnation of bimetallism is not per se a justification of silver monometallism. If it was to be monometallism it might well have been gold monomentallism. In fact, the preference for silver monometallism is not a little odd when it is recalled that Lord Liverpool, the advocate of monometallism,* whose doctrines the Court had sought to apply to India, had prescribed gold monometallism for similar currency evils then prevalent in England. That the Court should have deviated from their guide in this particular has naturally excited a great deal of hostile comment as to the propriety of this grave departure.† At the outset any appeal to ulterior motives must be baseless, for Lord Liverpool was not a “gold bug,” nor was the Court composed of “silver men.” As a matter of fact, neither of them at all considered the question from the standpoint as to which was a better standard of value, gold or silver. Indeed, in so far as that was at all a consideration worth attending to, the choice of the Court, according to the opinion of the time, was undoubetdly a better one than that of Lord * The author of A Treatise on the Coinage of the Realm was anticipated by Sir John Shore, the Governor of Bengal, in his Minute, op . cit., par 55. † Cf. H. M. Dunning, Indian Currency, 1898, passim; also S. V. Doraiswami, op. cit., passim.

358 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Liverpool. Not only were all the theorists, such as Locke, Harris, and Petty, in favour of silver as the standard of value, but the practice of the whole world was also in favour of silver. No doubt, England had placed herself on a gold basis in 1816. But that Act, far from closing the English Mint to the free coinage of silver, left it to be opened by a Royal Proclamation.* The Proclamation, it is true, was never issued, but it is not to be supposed that therefore Englishmen of the time had regarded the question of the standard as a settled issue. The crisis of 1825 showed that the gold standard furnished too narrow a basis for the English currency system to work smoothly, and, in the expert opinion of the time,† the gold standard, far from being the cause of England’s commercial superiority, was rather a hindrance to her prosperity, as it cut her off from the rest of the world, which was mostly on a silver basis. Even the British statesmen of the time had no decided preference for the gold standard. In 1826, Huskisson actually proposed that Government should issue silver certificates of full legal tender.‡ Even as late as 1844 the question of the standard was far from being settled, for we find Peel, in his Memorandum§ to the Cabinet, discussing the possibility of abandoning the gold standard in favour of the silver or a bimetallic standard without any compunction or predilection one way or the other. The difficulties of fiscal isolation were evidently not so insuperable as to compel a change of the standard, but they were great enough to force Peel to introduce his famous proviso embodying the Huskisson plan in part in the Bank Charter Act of 1844, permitting the issue of notes against silver to the extent of onefourth of the total issues.¶ Indeed, so great was the universal faith in the stability of silver that Holland changed in 1847 from what was practically a gold monometallism§§ to silver monometallism because her statesmen believed that “it had proved disastrous to the commercial and industrial * Cf. Dana Horton, The Silver Pound, 1887, p. 161. † Cf. the evidence of A. Baring (afterwards Lord Ashuburton) before the Committee for Coin (1828), H. of C. Return 31 of 1830. ‡ See his Memorandum to the Cabinet printed by Gibbs, A Colloquy on Currency (1894), Appendix, p. xlvii. § For which, see Andreades, History of the Bank of England, Supplement I. ¶ For the original purpose of this defunct proviso, see Peel’s Speech on the Bank Charter Act, dated May 20, 1844, Hansard, Vol. LXXIV, pp. 1334-35. §§ In theory Holland had adopted bimetallism in 1816. But the legal ratio of 15.873 to 1 had undervalued silver so much that it had made gold the chief circulating medium of Holland.

359 FROM A DOUBLE STANDARD TO A SILVER STANDARD interests of Holland to have a monetary system identical with that of England, whose financial revulsions, after its adoption of the gold standard, had been more frequent and more severe than in any other country, and whose injurious effects were felt in Holland scarcely less than in England. They maintained that the adoption of the silver standard would prevent England from disturbing the internal trade of Holland by draining off its money during such revulsions, and would secure immunity from evils which did not originate in and for which Holland was not responsible.”* But stability was not the ground on which either the Court or Lord Liverpool made their choice of a standard metal to rest. If that had been the case, both probably would have selected silver. As it was, the difference in the choice of the two parties was only superficial. Indeed, the Court differed from Lord Liverpool, not because of any ulterior motives, but because they were both agreed on a fundamental proposition that not stability but popular preference should be the deciding factor in the choice of a standard metal. Their differences proceeded logically from the agreement. For, on analysing the compositon of the currency it was found that in England it was largely composed of gold and in India it was largely composed of silver. Granting their common premise, it is easy to account why gold was selected for England by Lord Liverpool and silver for India by the Court. Whether the actual composition of the currency is an evidence of popular preference cannot, of course, be so dogmatically asserted as was done by the Court and Lord Liverpool. So far as England is concerned, the interpretation of Lord Liverpool has been questioned by the great economist David Ricardo. In his High Price of Bullion, Ricardo wrote :— “ For many reasons given by Lord Liverpool, it appears proved beyond dispute that gold coin has been for near a century the principal measure of value; but this is, I think, to be attributed to the inaccurate determination of the mint proportions. Gold has been valued too high ; no silver can therefore remain in circulation which is of its standard weight. If a new regulation * Report of the U. S. Silver Commission of 1876, p. 68.

360 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES were to take place, and silver be valued too high …… gold would then disappear, and silver become the standard money.”* And it is possible that mint proportions rather than popular preference† could have equally well accounted for the preponderance of silver in India.‡ Whether any other criterion besides popular; preference could have led the Court to adopt gold monometallism is a moot question. Suffice it to say that the adoption of silver monometallism, though well supported at the time when the Act was passed, soon after proved to be a measure quite inadequate to the needs of the country. It is noteworthy that just about this time great changes were taking place in the economy of the Indian people. Such a one was a change from kind economy to cash economy. Among the chief causes contributory to this transformation the first place must be given to the British system of revenue and finance. Its effects in shifting Indian society on to a cash nexus have not been sufficiently realized,§ although they have been very real. Under the native rulers most payments were in kind. The standing military force kept and regularly paid by the Government was small. The bulk of the troops consisted of a kind of militia furnished by Jageerdars and other landlords, and the troops or retainers of these feudatories were in great measure maintained on the grain, forage, and other supplies furnished by the districts in which they were located. The hereditary revenue and police officers were generally paid by grants of land on tenure of service. Wages of farm servants and labourers were in their turn distributed in grain. Most of its officers being paid in kind, the State collected very little of its taxes in cash. The innnovations made by the British in this rude revenue and fiscal system were * Works, p. 271. † Mr. Dodwell, in his otherwise excellent article, op. cit., seems to convey that silver was substituted for gold in Southern India as a result of the natural preference of the people for the former metal. So eager is he in meeting the contentions of writers like Mr. Doraiswami that he fails to see how his own facts controvert his own thesis. ‡ The total coinage of India from 1800 to 1835 was, according to Mr. F. C. Harrison’s estimate in the Calcutta Review, July, 1892:— Gold ... ... £ 3,845,000 ounces Silver ... ... £ 3,781,250,000 ounces N.B.—In the case of silver, rupees are converted into ounces for comparison. § Cf. the article “ The Silver Question as regards India,” in the Bombay Quarterly Review, April, 1857.