An Essay Upon Projects

by Daniel Defoe

  One office for loan of money for customs of goods, which by a plain

  method might be so ordered that the merchant might with ease pay the

  highest customs down, and so, by allowing the bank 4 per cent.

  advance, be first sure to secure the 10 pounds per cent. which the

  king allows for prompt payment at the Custom House, and be also

  freed from the troublesome work of finding bondsmen and securities

  for the money--which has exposed many a man to the tyranny of

  extents, either for himself or his friend, to his utter ruin, who

  under a more moderate prosecution had been able to pay all his

  debts, and by this method has been torn to pieces and disabled from

  making any tolerable proposal to his creditors. This is a scene of

  large business, and would, in proportion, employ a large cash, and

  it is the easiest thing in the world to make the bank the paymaster

  of all the large customs, and yet the merchant have so honourable a

  possession of his goods, as may be neither any diminution to his

  reputation or any hindrance to their sale.

  As, for example, suppose I have 100 hogsheads of tobacco to import,

  whose customs by several duties come to 1,000 pounds, and want cash

  to clear them. I go with my bill of loading to the bank, who

  appoint their officer to enter the goods and pay the duties, which

  goods, so entered by the bank, shall give them title enough to any

  part, or the whole, without the trouble of bills of sale, or

  conveyances, defeasances, and the like. The goods are carried to a

  warehouse at the waterside, where the merchant has a free and public

  access to them, as if in his own warehouse and an honourable liberty

  to sell and deliver either the whole (paying their disburse) or a

  part without it, leaving but sufficient for the payment, and out of

  that part delivered, either by notes under the hand of the

  purchaser, or any other way, he may clear the same, without any

  exactions, but of 4 pounds per cent., and the rest are his own.

  The ease this would bring to trade, the deliverance it would bring

  to the merchants from the insults of goldsmiths, &c,, and the honour

  it would give to our management of public imposts, with the

  advantages to the Custom House itself, and the utter destruction of

  extortion, would be such as would give a due value to the bank, and

  make all mankind acknowledge it to be a public good. The grievance

  of exactions upon merchants in this case is very great, and when I

  lay the blame on the goldsmiths, because they are the principal

  people made use of in such occasions, I include a great many other

  sorts of brokers and money-jobbing artists, who all get a snip out

  of the merchant. I myself have known a goldsmith in Lombard Street

  lend a man 700 pounds to pay the customs of a hundred pipes of

  Spanish wines; the wines were made over to him for security by bill

  of sale, and put into a cellar, of which the goldsmith kept the key;

  the merchant was to pay 6 pounds per cent. interest on the bond, and

  to allow 10 pounds percent. premium for advancing the money. When

  he had the wines in possession the owner could not send his cooper

  to look after them, but the goldsmith's man must attend all the

  while, for which he would be paid 5s. a day. If he brought a

  customer to see them, the goldsmith's man must show them. The money

  was lent for two months. He could not be admitted to sell or

  deliver a pipe of wine out single, or two or three at a time, as he

  might have sold them; but on a word or two spoken amiss to the

  goldsmith (or which he was pleased to take so), he would have none

  sold but the whole parcel together. By this usage the goods lay on

  hand, and every month the money remained the goldsmith demanded a

  guinea per cent. forbearance, besides the interest, till at last by

  leakage, decay, and other accidents, the wines began to lessen.

  Then the goldsmith begins to tell the merchant he is afraid the

  wines are not worth the money he has lent, and demands further

  security, and in a little while, growing higher and rougher, he

  tells him he must have his money. The merchant--too much at his

  mercy, because he cannot provide the money--is forced to consent to

  the sale; and the goods, being reduced to seventy pipes sound--wine

  and four unsound (the rest being sunk for filling up), were sold for

  13 pounds per pipe the sound, and 3 pounds the unsound, which

  amounted to 922 pounds together.

  Pounds s. d

  The cooper's bill came to . . . . . . . . . 30 0 0

  The cellarage a year and a half to . . . . 18 0 0

  Interests on the bond to . . . . . . . . . 63 0 0

  The goldsmith's men for attendance . . . . . 8 0 0

  Allowance for advance of the money and

  forbearance . . . . . . . . . . . . 74 0 0

  ======

  193 0 0

  Principal money borrowed . . . . 700 0 0

  =======

  893 0 0

  Due to the merchant . . . . . . . . . . 29 0 0

  =======

  922 0 0

  By the moderatest computation that can be, these wines cost the

  merchant as follows:-

  First Cost with Charges on Board. Pounds s. d

  In Lisbon 15 mille reis per pipe is

  1,500 mille reis; exchange,

  at 6s. 4d. per mille rei . . . . . 475 0 0

  Freight to London, then at 3 pounds per

  ton . . . . . . . . . . . . . . . . 150 0 0

  Assurance on 500 pounds at 2 per cent. . . 10 0 0

  Petty charges . . . . . . . . . . . . . 5 0 0

  =======

  640 0 0

  So that it is manifest by the extortion of this banker, the poor man

  lost the whole capital with freight and charges, and made but 29

  pounds produce of a hundred pipes of wine.

  One other office of this bank, and which would take up a

  considerable branch of the stock, is for lending money upon pledges,

  which should have annexed to it a warehouse and factory, where all

  sorts of goods might publicly be sold by the consent of the owners,

  to the great advantage of the owner, the bank receiving 4 pounds per

  cent. interest., and 2 per cent. commission for sale of the goods.

  A third office should be appointed for discounting bills, tallies,

  and notes, by which all tallies of the Exchequer, and any part of

  the revenue, should at stated allowances be ready money to any

  person, to the great advantage of the Government, and ease of all

  such as are any ways concerned in public undertakings.

  A fourth office for lending money upon land securities at 4 per

  cent. interest, by which the cruelty and injustice of mortgagees

  would be wholly restrained, and a register of mortgages might be

  very well kept, to prevent frauds.

  A fifth office for exchanges and foreign correspondences
.

  A sixth for inland exchanges, where a very large field of business

  lies before them.

  Under this head it will not be improper to consider that this method

  will most effectually answer all the notions and proposals of county

  banks; for by this office they would be all rendered useless and

  unprofitable, since one bank of the magnitude I mention, with a

  branch of its office set apart for that business, might with ease

  manage all the inland exchange of the kingdom.

  By which such a correspondence with all the trading towns in England

  might be maintained, as that the whole kingdom should trade with the

  bank. Under the direction of this office a public cashier should be

  appointed in every county, to reside in the capital town as to trade

  (and in some counties more), through whose hands all the cash of the

  revenue of the gentry and of trade should be returned on the bank in

  London, and from the bank again on their cashier in every respective

  county or town, at the small exchange of 0.5 per cent., by which

  means all loss of money carried upon the road, to the encouragement

  of robbers and ruining of the country, who are sued for those

  robberies, would be more effectually prevented than by all the

  statutes against highwaymen that are or can be made.

  As to public advancings of money to the Government, they may be left

  to the directors in a body, as all other disputes and contingent

  cases are; and whoever examines these heads of business apart, and

  has any judgment in the particulars, will, I suppose, allow that a

  stock of ten millions may find employment in them, though it be

  indeed a very great sum.

  I could offer some very good reasons why this way of management by

  particular offices for every particular sort of business is not only

  the easiest, but the safest, way of executing an affair of such

  variety and consequence; also I could state a method for the

  proceedings of those private offices, their conjunction with and

  dependence on the general court of the directors, and how the

  various accounts should centre in one general capital account of

  stock, with regulations and appeals; but I believe them to be

  needless--at least, in this place.

  If it be objected here that it is impossible for one joint-stock to

  go through the whole business of the kingdom, I answer, I believe it

  is not either impossible or impracticable, particularly on this one

  account: that almost all the country business would be managed by

  running bills, and those the longest abroad of any, their distance

  keeping them out, to the increasing the credit, and consequently the

  stock of the bank.

  OF THE MULTIPLICITY OF BANKS.

  What is touched at in the foregoing part of this chapter refers to

  one bank royal to preside, as it were, over the whole cash of the

  kingdom: but because some people do suppose this work fitter for

  many banks than for one, I must a little consider that head. And

  first, allowing those many banks could, without clashing, maintain a

  constant correspondence with one another, in passing each other's

  bills as current from one to another, I know not but it might be

  better performed by many than by one; for as harmony makes music in

  sound, so it produces success in business.

  A civil war among merchants is always the rain of trade: I cannot

  think a multitude of banks could so consist with one another in

  England as to join interests and uphold one another's credit,

  without joining stocks too; I confess, if it could be done, the

  convenience to trade would be visible.

  If I were to propose which way these banks should be established, I

  answer, allowing a due regard to some gentlemen who have had

  thoughts of the same (whose methods I shall not so much as touch

  upon, much less discover; my thoughts run upon quite different

  methods, both for the fund and the establishment).

  Every principal town in England is a corporation, upon which the

  fund may be settled, which will sufficiently answer the difficult

  and chargeable work of suing for a corporation by patent or Act of

  Parliament.

  A general subscription of stock being made, and by deeds of

  settlement placed in the mayor and aldermen of the city or

  corporation for the time being, in trust, to be declared by deeds of

  uses, some of the directors being always made members of the said

  corporation, and joined in the trust; the bank hereby becomes the

  public stock of the town (something like what they call the rentes

  of the town-house in France), and is managed in the name of the said

  corporation, to whom the directors are accountable, and they back

  again to the general court.

  For example: suppose the gentlemen or tradesmen of the county of

  Norfolk, by a subscription of cash, design to establish a bank. The

  subscriptions being made, the stock is paid into the chamber of the

  city of Norwich, and managed by a court of directors, as all banks

  are, and chosen out of the subscribers, the mayor only of the city

  to be always one; to be managed in the name of the corporation of

  the city of Norwich, but for the uses in a deed of trust to be made

  by the subscribers, and mayor and aldermen, at large mentioned. I

  make no question but a bank thus settled would have as firm a

  foundation as any bank need to have, and every way answer the ends

  of a corporation.

  Of these sorts of banks England might very well establish fifteen,

  at the several towns hereafter mentioned. Some of which, though

  they are not the capital towns of the counties, yet are more the

  centre of trade, which in England runs in veins, like mines of metal

  in the earth:

  Canterbury. Salisbury. Exeter. Bristol. Worcester. Shrewsbury.

  Manchester. Newcastle-upon-Tyne. Leeds, or Halifax, or York.

  Warwick or Birmingham. Oxford or Reading. Bedford. Norwich.

  Colchester.

  Every one of these banks to have a cashier in London, unless they

  could all have a general correspondence and credit with the bank

  royal.

  These banks in their respective counties should be a general staple

  and factory for the manufactures of the said county, where every man

  that had goods made, might have money at a small interest for

  advance, the goods in the meantime being sent forward to market, to

  a warehouse for that purpose erected in London, where they should be

  disposed of to all the advantages the owner could expect, paying

  only 1 per cent. commission. Or if the maker wanted credit in

  London either for Spanish wool, cotton, oil, or any goods, while his

  goods were in the warehouse of the said bank, his bill should be

  paid by the bank to the full value of his goods, or at least within

  a small matter. These banks, either by correspondence with each

  other, or an order to their cashier in London, might with ease so

  pass each other's bills that a man who has cash at Plymouth, and

  wants money at Berwick, may transfer his cash at Plymouth to

  Newcastle in half-an-hour's time, without either hazard,
or charge,

  or time, allowing only 0.5 per cent. exchange; and so of all the

  most distant parts of the kingdom. Or if he wants money at

  Newcastle, and has goods at Worcester or at any other clothing town,

  sending his goods to be sold by the factory of the bank of

  Worcester, he may remit by the bank to Newcastle, or anywhere else,

  as readily as if his goods were sold and paid for and no exactions

  made upon him for the convenience he enjoys.

  This discourse of banks, the reader is to understand, to have no

  relation to the present posture of affairs, with respect to the

  scarcity of current money, which seems to have put a stop to that

  part of a stock we call credit, which always is, and indeed must be,

  the most essential part of a bank, and without which no bank can

  pretend to subsist--at least, to advantage.

  A bank is only a great stock of money put together, to be employed

  by some of the subscribers, in the name of the rest, for the benefit

  of the whole. This stock of money subsists not barely on the

  profits of its own stock (for that would be inconsiderable), but

  upon the contingencies and accidents which multiplicity of business

  occasions. As, for instance, a man that comes for money, and knows

  he may have it to-morrow; perhaps he is in haste, and won't take it

  to-day: only, that he may be sure of it to-morrow, he takes a

  memorandum under the hand of the officer, that he shall have it

  whenever he calls for it, and this memorandum we call a bill. To-

  morrow, when he intended to fetch his money, comes a man to him for

  money, and, to save himself the labour of telling, he gives him the

  memorandum or bill aforesaid for his money; this second man does as

  the first, and a third does as he did, and so the bill runs about a

  mouth, two or three. And this is that we call credit, for by the

  circulation of a quantity of these bills, the bank enjoys the full

  benefit of as much stock in real value as the suppositious value of

  the bills amounts to; and wherever this credit fails, this advantage

  fails; for immediately all men come for their money, and the bank

  must die of itself: for I am sure no bank, by the simple

  improvement of their single stock, can ever make any considerable

  advantage.

  I confess, a bank who can lay a fund for the security of their

  bills, which shall produce first an annual profit to the owner, and

  yet make good the passant bill, may stand, and be advantageous, too,

  because there is a real and a suppositious value both, and the real

  always ready to make good the suppositious: and this I know no way

  to bring to pass but by land, which, at the same time that it lies

  transferred to secure the value of every bill given out, brings in a

  separate profit to the owner; and this way no question but the whole

  kingdom might be a bank to itself, though no ready money were to be

  found in it.

  I had gone on in some sheets with my notion of land being the best

  bottom for public banks, and the easiness of bringing it to answer

  all the ends of money deposited with double advantage, but I find

  myself happily prevented by a gentleman who has published the very

  same, though since this was wrote; and I was always master of so

  much wit as to hold my tongue while they spoke who understood the

  thing better than myself.

  Mr. John Asgill, of Lincoln's Inn, in a small tract entitled,

  "Several Assertions proved, in order to create another Species of

  Money than Gold and Silver," has so distinctly handled this very

  case, with such strength of argument, such clearness of reason, such

  a judgment, and such a style, as all the ingenious part of the world

  must acknowledge themselves extremely obliged to him for that piece.

  At the sight of which book I laid by all that had been written by me

  on that subject, for I had much rather confess myself incapable of

  handling that point like him, than have convinced the world of it by

  my impertinence.

  OF THE HIGHWAYS.