nearly non-existent in 1843, was to blame. But he had changed his mind. ‘I believe it to have been owing to the dull state of the money market which was so motionless for nearly four years that there was nothing to tell the public about it.’ When trading volumes picked up again the Economist ‘recovered its position’, while the ‘other papers made nothing of their chance at all’. This he attributed to the fact that, as a member of Stuckey’s, ‘which always has large sums in London, I have better means of knowing than a mere writer what is happening and what is likely to happen.’33 Insider knowledge and a reputation for honesty (‘a reason why its management must never be left to a salaried Editor’, who might be bought off) set the Economist apart in the now crowded field of business journalism.
As for coverage, political analyses of the sort businessmen ‘would care to read’ were ‘a material support to the paper and strengthen its circulation’. ‘Indeed if politics were abandoned there wd. be a universal impression that the paper had changed its character and was going down.’ So far as profits were concerned, however, all subjects must be viewed in relation to changes in the money market, ‘because they affect all men of business, and all are anxious to see what will be their course’. What free trade and commercial legislation had been under Wilson, the money market would be for the era and editors that followed Bagehot.
The most remarkable change was not so much the sharper focus on finance, however, as the way this transformed the laissez-faire worldview of the Economist. Bagehot disliked the doctrinaire fanaticism he had found in the Economist in his youth, and as its editor showed a readiness to bend when it came to the basic principles of political economy. In 1871 he took stock of scientific developments since his youth – remembering Nassau Senior, and the school of political economy he represented, in a review of his journals. ‘I was myself examined by him years ago, at the time of the strict school, at the London University’, he wrote. ‘If it could have been revealed to him that persons of authority would dare to teach that profit had no tendency to become equal in different trades, – that the Ricardo theory of rent was a blunder and a misconception, – that it was unnecessary for bankers to keep a stock of gold or silver to meet their liabilities, but that they should buy gold in the market when they wanted it, I think Mr. Senior would have been aghast. Yet such is the present state of the science, and naturally the rise of the heresiarchs has diminished the dignity of the orthodox heads.’34
Up to a point, innovation was welcome. As an undergraduate Bagehot had registered his own doubts about the strict school, which included Wilson. Laissez-faire was ‘useful and healthy when confined to its legitimate function – watching the government does not assume to know what will bring a trader in money better than he knows it himself,’ he argued in ‘The Currency Monopoly’ in the Prospective Review in 1848. He continued:
but it is a sentiment very susceptible of hurtful exaggeration: in the minds of many at this day it stands opposed to the enforcement of moral law throughout the whole sphere of human acts: to the legislative promotion of those industrial habits which conduce to the attainment of national morality or national happiness at a sacrifice of national wealth: to efforts at a national education, or a compulsory sanitary reform: to all national aid from England towards the starving peasantry of Ireland: to every measure for improving the condition of that peasantry which would not be the spontaneous choice of the profit-hunting capitalist. Whoever speaks against these extreme opinions is sure to be sneered at as a ‘benevolent sentimentalist’: and economists are perpetually assuming that the notion of government interference is agreeable only to those whose hearts are more developed than their brains: who are too fond of poetic dreams to endure the stern realities of science.35
Wilson’s Economist was not only guilty of overstating the free trade case, it crudely caricatured any who asked ‘if there be no exception to it within the limits of political economy itself’. At twenty-two Bagehot thought he had uncovered such a case: government, not private entities, should enjoy a monopoly on coining precious metals and printing paper money – absent which, financial crises like the one just past in 1847 would be more frequent and severe.36 ‘It is a duty of a wise state to secure the mass of the nation against evils produced by the selfishness of individuals so far as it is possible: to bring within government control even the most limited causes of commercial convulsion.’37
Once editor, he nudged the Economist in the same direction. In 1861 the paper came out in favour of a permanent, graduated income tax, on the grounds that in its form at the time the tax failed to distinguish between different kinds of wealth: a barrister who earned £1000 annually was not as well off as a landowner or fund holder who earned that amount. ‘People with secure incomes are richer than people with only precarious ones.’ Fairness was an issue: ‘People think that the more rich should be taxed more than the less rich.’38 In 1864 the Economist reversed its earlier insistence under Wilson that all factory legislation, even to protect children from overwork or injury, amounted to an assault on free trade.39 The next year it endorsed state ownership of railways, comparing the plan to the penny-post reform, which ensured a cheap, efficient, national parcel network.40 Trade unions did restrain trade, but they were ‘real forces of the industrial world which the law did not make, and which it cannot unmake’; better to recognize them, with special laws to punish intimidation and sabotage by their members.41 Even women, after hesitations and qualifications, got some sort of break – though Bagehot’s admirers are stretching the truth when they call him an advocate of female suffrage. Votes for women on any wide basis was an absurdity that only John Stuart Mill took seriously, he wrote in 1865. Five years later, Bagehot was ready to concede only ‘a certain legal plausibility in the claim’ that unmarried female property owners might obtain the vote on the same grounds as men – even if he thought very little of the ‘political intelligence’ of the ‘spinsters’, ‘widows’ and other ‘lonely women’ that would exercise it.42
For all this Bagehot did not count himself among the ‘heresiarchs’: by showing greater flexibility he hoped to update laissez-faire at the Economist, not overturn it. In the part of Economic Studies he had completed by 1876, he celebrated the ‘wonderful effect’ of ‘English political economy’ since the publication of Adam Smith’s Wealth of Nations a hundred years before. ‘The life of almost everyone in England – perhaps of everyone – is different and better in consequence of it. The whole commercial policy of the country is not so much founded on it as instinct with it.’ Indeed, ‘no other form of political philosophy has ever had one thousandth part the influence on us,’ he went on, ‘its teachings have settled down into the common sense of the nation, and have become irreversible’.43 Bagehot criticized newer rivals to this ‘English-school’ of political economy: on the one hand, the ‘enumerative’ or ‘all case method’ of the German Historical School; on the other, the neo-classical or marginal revolution that was just starting to take off. ‘Mr Jevons of Manchester, and M. Walras of Lausanne, without communication, and almost simultaneously, have worked out a “mathematical” theory of political economy’, Bagehot wrote of the latter school; ‘and anyone who thinks what is ordinarily taught in England objectionable, because it is too little concrete in its method, and looks too unlike life and business, had better try the new doctrine, which he will find to be much worse on these points than the old.’44
Bagehot’s mission as Economist editor was to teach a common sense science of political economy, ‘the science of business’, whose chief merit was its ability to adapt to changing circumstances – in his era, the increasing weight of global finance in Victorian capitalism. Export of capital on a large scale was a new phenomenon in Britain, coinciding with Bagehot’s career: from low levels of 1 to 1.5 per cent of gross national product in the forty years prior to 1850, average net foreign investment leapt to 2.1 per cent in the 1850s and to 2.8 per cent in the 1860s; and as Bagehot foresaw, it kept rising, averaging 4.3 per cent between 1870 and 1913, at which point net overseas assets accounted for 32 per cent of national wealth – a larger share than for any country before or since. If the surpluses for this
