At the end of the seventeenth century, England and France were at war. In fact, the period between 1689 and 1819 marked a series of skirmishes between these rivals that is sometimes referred to as the Second Hundred Years War. While Spain, Austria, and the Dutch Republic played important roles in alliances and battles, this period was ultimately a contest twixt France and England.

In 1700, the population of France was over 19 million, while that of England was less than 7 million. With little more than a third of France’s population, England enjoyed nearly 70% as much foreign trade. This imbalance of per-capita foreign trade was not lost on Louis XIV, who had declared war against England as early as 1666. Ostensibly in support of the Dutch, who were at war with England over maritime trade, Louis’ true aspirations were on a far grander scale.

In The Rise and Fall of the British Empire, Lawrence James states:

Historians frequently focus on the brilliant military strategies and decisive battles of this era. But, as one historian has stated, it was becoming obvious by this time that wars were won with gold, rather than with iron.

Britain’s capacity for outspending France on warfare during the eighteenth century was partially due to the relatively early introduction of Dutch-style modern finance. The English monarchy had witnessed the power of modern finance as early as the reign of young King Edward VI, when Thomas Gresham, acting on behalf of the crown, applied his skills on the Antwerp currency exchange to reverse the downward spiral of a devalued English pound. In a strategy that might be considered illegal currency manipulation today, Gresham convinced King Edward to fund the systematic purchase of substantial sums of English currency at the Antwerp exchange, even as the pound was decreasing in value. Gresham knew that such purchases would stabilize the pound, and attract other speculators. As the value of the pound rebounded, Gresham continued to buy until the pound had nearly recovered all its losses. According to John Francis (History of the Bank of England, London, 1847):

Gresham was quick to take credit for the restoration of the pound. Even if his role was less than history records, it is clear that his mastery of finance was highly advanced, and that his experience with commerce and foreign exchange was substantial. He used his wealth and influence to convince Queen Elizabeth to grant him the right to build (at his own expense) a London Exchange, modeled after the Antwerp Bourse in precise detail, with the addition of several large Gresham Grasshoppers.

Gresham’s Exchange was destroyed by the Great Fire of London in 1666. According to Samuel Pepys, the only artifact that survived was a “picture” of Sir Thomas Gresham. His diary entry on 5 September includes, “The Exchange, a sad sight, [with] nothing standing there of all the statues and pillars, but Sir Thomas Gresham’s picture in the corner.” It is likely that Pepys was referring to a figure of Gresham, which Burgon describes as “a statue of Sir Thomas Gresham near the north end of the western piazza... that when, in the great fire of 1666, the Exchange was consumed, and the statues of kings displaced by the violence of the conflagration, that of Sir Thomas Gresham, the founder, alone retained its station uninjured.”

Shortly thereafter, the Exchange resumed operations at Gresham College, which was founded by an endowment in Gresham’s will. Meanwhile, a new and expanded Exchange was to be erected at the site of the original. The contract for the design and construction of the new Exchange was awarded to Edward Jerman, the architect responsible for rebuilding some of the most prestigious buildings after the Great Fire. Upon Jerman’s untimely death in 1668, the project was continued by Thomas Cartwright. By September 1669 the Exchange was open for limited use, and construction was finished in 1671.

One of the most readable accounts of the Great Fire, and the subsequent rebuilding of London, is Adrian Tinniswood’s By Permission of Heaven. To quote Tinniswood:

Before the end of the century, the war with France would create a fiscal crisis. According to Mayhue, “the outbreak of war with France in 1689 stretched William III’s resources to the limit. By 1694 he was spending £2.5 million per year on the army alone. Three years later the national debt exceeded £15 million.” As yet, the source of “huge amounts of money” that could be raised without “resort to additional taxes” (to which Lawrence James referred) had not been established.

Besides tax revenue, the English government had traditionally secured loans from goldsmiths and wealthy lords for unusual expenses, such as war funding. But wars were becoming more expensive and more expansive. Servicing the war debt would require a formal banking system that consolidated the wealth of the country, making it available to the government for “loans” as required.

Dozens of banking concepts were discussed and rejected. A wealthy Scotsman by the name of William Patterson finally submitted the winning proposal. Patterson’s bank would be formed as a corporation, with funding provided by shareholders who would enjoy the dividends earned through interest paid on the loans.

A valuable reference on the history of the Bank of England is Andraé Andréadès’ History of the Bank of England 1640-1903. The work was first published in 1901 as Adréadès’ thesis (for which he earned his degree in Political and Economic Sciences from La Sorbonne.) It is now available as a digital reprint.

As a Greek who was educated in Paris, Andréadès presents the Bank’s history with brilliant candor and lucidity. In his introduction, Andréadès states:

The stage was set for Great Britain to assume her role as leading Western European superpower. The Dutch Golden Age was ending, and France would be harnessed by excessive debt, the service of which would be borne largely by the poor. Growing frustration and disenfranchisement of the proletariat would culminate in the French Revolution.

Britain, too, was neither free from internal strife, nor altercation between classes. However, for the next two centuries more vectors would be aligned toward order than toward chaos. The guilt that many Britons felt over the execution of Charles I possibly made perseverance seem preferable to revolution. Perhaps the tragedy of the Great Fire lent a spirit of unity to the nation. In the end, it was the combination of political reforms and economic stability that allowed the true potential of Britain to be realized.

In 1669 the East India Company imported 143½ pounds of tea. Imports increased slowly, up to 120,000 pounds in 1701. Just twenty years later imports would exceed one million pounds. By this time, the real race was on, and Great Britain would achieve astonishing success.

Our series on Reversals of Fortune in the Tea Industry will continue in the next issue of the Upton Tea Quarterly.