The Bullion Controversy and the history of political thought: experience, innovation and theory

In 1797 the British government relieved the Bank of England of the obligation to pay specie for its notes upon demand; then, after bitter debate and sustained inflation, it restored this burden in 1821. The episode is studied as the “Bullion Controversy”, and it is commonly assigned high significance in the development of monetary theory. Yet the Bank stood as an old target for so-called “country” thought, which suspected commerce of corroding virtue and undermining the proper functions of Parliament. Both the Bank and the Whig regime that created it in 1694 had withstood such attacks, but in the nineteenth century these critical voices were joined by political economists who reworked the existing lines of attack, above all by presenting themselves not as defenders of an ancient virtue but as the champions of a modern, commercial society that was being endangered by the government's and the Bank's ignorance and self-interest. This paper thus examines the Bullion Controversy in relation to the history of political thought, and reveals how the return to convertibility represented an early victory for political economy's self-styled “theorists” in reforming the state's institutions in the nineteenth century