Lombard Street | Page 7

and partly from others, there are whole
districts in England which cannot and do not employ their own money.
No purely agricultural county does so. The savings of a county with
good land but no manufactures and no trade much exceed what can be
safely lent in the county. These savings are first lodged in the local
banks, are by them sent to London, and are deposited with London
bankers, or with the bill brokers. In either case the result is the same.
The money thus sent up from the accumulating districts is employed in
discounting the bills of the industrial districts. Deposits are made with
the bankers and bill brokers in Lombard Street by the bankers of such
counties as Somersetshire and Hampshire, and those bill brokers and
bankers employ them in the discount of bills from Yorkshire and
Lancashire. Lombard Street is thus a perpetual agent between the two
great divisions of England, between the rapidly-growing districts,
where almost any amount of money can be well and easily employed,
and the stationary and the declining districts, where there is more
money than can be used.
This organisation is so useful because it is so easily adjusted. Political
economists say that capital sets towards the most profitable trades, and
that it rapidly leaves the less profitable and non-paying trades. But in
ordinary countries this is a slow process, and some persons who want
to have ocular demonstration of abstract truths have been inclined to
doubt it because they could not see it. In England, however, the process
would be visible enough if you could only see the books of the bill
brokers and the bankers. Their bill cases as a rule are full of the bills
drawn in the most profitable trades, and caeteris paribus and in
comparison empty of those drawn in the less profitable. If the iron trade
ceases to be as profitable as usual, less iron is sold; the fewer the sales

the fewer the bills; and in consequence the number of iron bills in
Lombard street is diminished. On the other hand, if in consequence of a
bad harvest the corn trade becomes on a sudden profitable, immediately
'corn bills' are created in great numbers, and if good are discounted in
Lombard Street. Thus English capital runs as surely and instantly
where it is most wanted, and where there is most to be made of it, as
water runs to find its level.
This efficient and instantly-ready organisation gives us an enormous
advantage in competition with less advanced countries--less advanced,
that is, in this particular respect of credit. In a new trade English capital
is instantly at the disposal of persons capable of understanding the new
opportunities and of making good use of them. In countries where there
is little money to lend, and where that little is lent tardily and
reluctantly, enterprising traders are long kept back, because they cannot
at once borrow the capital, without which skill and knowledge are
useless. All sudden trades come to England, and in so doing often
disappoint both rational probability and the predictions of philosophers.
The Suez Canal is a curious case of this. All predicted that the canal
would undo what the discovery of the passage to India round the Cape
effected. Before that all Oriental trade went to ports in the South of
Europe, and was thence diffused through Europe. That London and
Liverpool should be centres of East Indian commerce is a geographical
anomaly, which the Suez Canal, it was said, would rectify. 'The
Greeks,' said M. de Tocqueville, 'the Styrians, the Italians, the
Dalmatians, and the Sicilians, are the people who will use the Canal if
any use it.' But, on the contrary, the main use of the Canal has been by
the English. None of the nations named by Tocqueville had the capital,
or a tithe of it, ready to build the large screw steamers which alone can
use the Canal profitably. Ultimately these plausible predictions may or
may not be right, but as yet they have been quite wrong, not because
England has rich people--there are wealthy people in all countries--but
because she possesses an unequalled fund of floating money, which
will help in a moment any merchant who sees a great prospect of new
profit.
And not only does this unconscious 'organisation of capital,' to use a
continental phrase, make the English specially quick in comparison
with their neighbours on the continent at seizing on novel mercantile

opportunities, but it makes them likely also to retain any trade on which
they have once regularly fastened. Mr. Macculloch, following Ricardo,
used to teach that all old nations had a special aptitude for trades in
which much capital is required. The interest of capital having been
reduced in such countries, he argued, by the