________________________________________________________________________________________
FROM A DOUBLE STANDARD TO A SILVER STANDARD
Trade is an important apparatus in a society,
based on private property and pursuit of individual gain ;
without it, it would be difficult for its members to distribute the specialised products
of their labour. Surely a lottery or an administrative
device would be incompatible with its nature. Indeed, if it is to preserve its character,
the only mode for the necessary distribution of the products of separate industry is that
of private trading. But a trading society is unavoidably a pecuniary society, a society
which of necessity carries on its transactions in terms of money. In fact, the
distribution is not primarily an exchange of products against products, but products
against money. In such a society, money therefore necessarily becomes the pivot on which
everything revolves. With money as the focusing-point of all
human efforts, interests, desires and ambitions, a trading society is bound to function in
a regime of price, where successes and failures are results of nice calculations of
price-outlay as against price-product.
Economists have no doubt
insisted that "there cannot... be intrinsically a more significant thing than
money," which at best is only " a great wheel by
means of which every individual in society has his subsistence, conveniences and
amusements regularly distributed to him in their proper proportions." Whether or not
money values are the definitive terms of economic endeavour may well be open to discussion.[f1] But this much is certain,
that without the use of money this "distribution of subsistence, conveniences and
amusements," far from being a matter of course, will be distressingly hampered, if not altogether suspended. How can this trading of
products take place without money ? The difficulties of
barter have ever formed an unfailing theme with all economists, including those who have
insisted that money is only a cloak. Money is not only necessary to facilitate trade by obviating the difficulties of barter, but is
also necessary to sustain production by permitting specialisation. For, who would care to
specialise if he could not trade his products for those of others which he wanted ? Trade is the handmaid of
production, and where the former cannot flourish the latter must languish.
It is therefore evident that if a trading society is not to be out of gear and is not to
forego the measureless advantages of its automatic adjustments in the great give-and-take of specialised industry, it must provide itself with a sound system of money.[f2]
At the close of the Moghul
Empire, India, judged by the standards of the time, was economically an advanced country.
Her trade was large, her banking institutions were well developed, and credit played an
appreciable part in her transactions. But a medium of exchange and a common standard of
value were among others the most supreme desiderata in the economy of the Indian people
when they came, in the middle of the eighteenth century, under the sway of the British.
Before the occurrence of this event, the money of India consisted of both gold and silver.
Under the Hindu emperors the emphasis was laid on gold, while under the Mussalmans silver formed a large part of the circulating medium.[f3] Since
the time of Akbar, the founder of the economic system of the
Moghul Empire in India, the units of currency had been the gold mohur and the silver rupee. Both coins, the mohur and the rupee, were
identical in weight, i.e., 175 grs. Troy[f4] and were "supposed to have been coined without any
alloy, or at least intended to be so."§[f5] But whether they constituted a single standard of value or
not is a matter of some doubt. It is believed that the mohur
and the rupee, which at the time were the common measure of value, circulated without any
fixed ratio of exchange between them. The standard, therefore, was more of the nature of
what Jevons called a parallel standard[f6] than a double standard[f7] That this want of ratio could not have worked
without some detriment in practice is obvious. But it must be noted that there existed an
alleviating circumstance in the curious contrivance by which
the mohur and the rupee, though unrelated to each other,
bore a fixed ratio to the dam, the copper coin
of the Empire.[f8] So that it is permissible to hold that, as a
consequence of being fixed to the same thing, the two, the mohur and the rupee, circulated
at a fixed ratio.
In Southern India, to which part the influence
of the Moghuls had not extended, silver
as a part of the currency system was quite unknown. The pagoda, the gold coin of the
ancient Hindu kings, was the standard of value and also the medium of exchange, and
continued to be so till the time of the East India Company.
The right of coinage, which the Moghuls always held as Inter jura Majestatis[f9] be it said to their credit, was exercised with due sense of responsibility. Never did the Moghul Emperors stoop to debase their coinage. Making allowance for the imperfect technology of coinage, the coins issued from the various Mints, situated even in the most distant parts of their Empire[f10], did not materially deviate from the standard. The table below of the assays of the Moghul rupees shows how the coinage throughout the period of the Empire adhered to the standard weight of 175 grs. pure.*[f11]
Name of the Rupee |
Weight in pure Grs. |
Name of the Rupee |
Weight in pure Grs. |
Akbari
of Lahore |
175.0 |
Delhi Sonat |
175.0 |
174.0 |
Delhi Alamgir |
175.0 |
|
Jehangiri
of Agra |
174.6 |
Old
Surat |
174.0 |
Jehangiri
of Allahabad |
173.6 |
175.9 |
|
Jehangiri of Kandhar |
173.9 |
Persian Rupee of 1745 |
174.5 |
Shehajehani
of Agra |
175.0 |
Old Dacca |
173.3 |
174.2 |
170.0 |
||
Shehajehani of Delhi |
174.2 |
172.8 |
|
Shehajehani of Delhi |
175.0 |
175.8 |
|
Shehajehani of Lahore |
174.0 |
|
|
So long as the Empire
retained unabated sway, there was advantage rather than danger in the plurality of Mints, for they were so many branches of a single
department governed by a single authority. But with the disruption of the Moghul Empire
into separate kingdoms these branches of the Imperial Mint located at different centres
became independent factories for purposes of coinage. In the general scramble for independence which followed the fall of the Empire, the
right to coinage, as one of the most unmistakable insignia of sovereignty, became the
right most cherished by the political adventurers of the
time. It was also the last privilege to which the falling
dynasties clung, and was also the first to which the adventurers rising to power aspired.
The result was that the right, which was at one time so religiously exercised, came to be
most wantonly abused. Everywhere the Mints were kept in full
swing, and soon the country was filled with diverse coins
which, while they proclaimed the incessant rise and fall of
dynasties, also presented bewildering media of exchange. If
these money-mongering sovereigns had kept up their issues to the original standard of the Moghul Emperors, the
multiplicity of coins of the same denomination would not have been a matter of much
concern. But they seemed to have held that as the money used
by their subjects was made by them, they could do what they liked with their own, and
proceeded to debase their coinage to the extent each chose without altering the
denominations. Given the different degrees of debasement, the currency necessarily lost
its primary quality of general and ready acceptability.
The evils consequent upon such a situation may
well be imagined. When the contents of the coins belied the value indicated by their
denomination they became mere merchandise, and there was no more a currency by tale to act
as a ready means of exchange. The bullion value of each coin had to be ascertained before
it could be accepted as a final discharge of obligations.[f12] The opportunity for defrauding the poor and
the ignorant thus provided could not have been less[f13] than that known to have obtained in England
before the great re-coinage of 1696. This constant weighing, valuing, and assaying the
bullion contents of coins was, however, only one aspect in which the evils of the
situation made themselves felt. They also presented another formidable aspect. With the
vanishing of the Empire there ceased to be such a thing as an Imperial legal tender
current all through India. In its place there grew up local tenders current only within
the different principalities into which the Empire was broken up. Under such circumstances
exchange was not liquidated by obtaining in return for wares the requisite bullion value from the coins tendered in payment. Traders had to
be certain that the coins were also legal tender of their domicile. The Preamble to the
Bengal Currency Regulation XXXV, of 1793, is illuminating on this point. It says :—
"The principal districts in Bengal, Bihar and Orissa, have each a
distinct silver currency.................. which are the
standard measure of value in all transactions in the districts in which they respectively
circulate.
" In consequence of the Ryots being
required to pay their rent in a particular sort of rupee
they of course demanded it from manufacturers in payment of their grain, or raw materials,
whilst the manufacturers, actuated by similar principles with the Ryots, required the same
species of rupee from the traders who came to purchase their cloth or their commodities.
" The
various sorts of old rupees, accordingly, soon became the established currency of
particular districts, and as a necessary consequence the value of each rupee was enhanced
in the district in which it was current, for being in demand for all transactions. As a
further consequence, every sort of rupee brought into the district was rejected from being
a different measure of value from that by which the inhabitants had become accustomed to
estimate their property, or, if it was received, a discount was exacted upon it, equal to
what the receiver would have been obliged to pay upon exchanging it at the house of a
shroff for the rupee current in the district, or to allow
discount upon passing it in payment to any other individual.
" From this
rejection of the coin current in one district when tendered in payment in another, the
merchants and traders and the proprietors and cultivators of land in different parts of
the country, are subjected in their commercial dealings with each other to the same losses
by exchange, and all other inconveniences that would necessarily result were the several
districts under separate and independent governments, each having a different coin."
Here was a situation where trade was reduced to
barter, whether one looks upon barter as characterised by
the absence of a common medium of exchange or by the presence of a plurality of the media
of exchange ; for in any case, it is obvious that the want of a
"double coincidence " must have been felt by people engaged in trade.
One is likely to think that such could not have been the case as the medium was composed
of metallic counters. But it
is to be remembered that the circulating coins on India, by reason of the circumstance
attendant upon the diversity in their fineness and legal tender, formed so many different
species that an exchange against a particular species did not necessarily close the
transaction; the coin must, in certain circumstances, have
been only an intermediate to be further bartered against another, and so on till the one
of the requisite species was obtained. This is sufficient indication that society had sunk
into a state of barter. If this alone was the flaw in the situation, it would have been
only as bad as that of international trade under diversity of coinages. But it was further
complicated by the fact that although the denomination of the coins was the same, their
metallic contents differed considerably. Owing to this, one coin bore a discount or a
premium in relation to another of the same name. In the absence of knowledge as to the
amount of premium or discount, every one cared to receive a coin of the species known to
him and current in his territory. On the whole, the obstacles to commerce arising from
such a situation could not have been less than those emanating from the mandate of Lycurgus, who compelled the Lacedaemonians to use iron money in
order that its weight might prevent them from overmuch trading. The situation, besides
being irritating, was aggravated by the presence of an element of gall in it. Capital
invested in providing a currency is a tax upon the productive resources of the community.
Nevertheless, wrote James Wilson [f14]no one would question "that the time and
labour which are saved by the interposition of coin, as compared with a system of barter,
form an ample remuneration for the portion of capital withdrawn from productive sources,
to act as a single circulator of commodities, by rendering the remainder of the capital of
the country so much the more productive." What is, then, to be said of a monetary
system which did not obviate the evil consequences of barter, although enormous capital
was withdrawn from productive sources, to act as a single circulator of commodities ? Diseased money is worse than want of money. The latter at
least saves the cost. But society must have money, and it must be good money, too. The
task, therefore, of evolving good money out of bad money fell upon the shoulders, of the
English East India Company, who had in the meanwhile succeeded to the Empire of the Moghuls in India.
The lines of reform were
first laid down by the Directors of the Company in their famous Dispatch, dated April 25,
1806,[f15] to the authorities administering their territories in India. In this
historic document they observed :—
"17. It is an opinion supported by the
best authorities, and proved by experience, that coins of gold and silver cannot circulate
as legal tenders of payment at fixed relative values......
without loss; this loss is occasioned by the fluctuating value of the metals of which the
coins are formed. A proportion between the gold and silver coin is fixed by law, according
to the value of the metals, and it may be on the justest
principles, but owing to the change of circumstances gold may become of greater value in
relation to silver than at the time the proportion was fixed, it therefore becomes
profitable to exchange silver or gold, so the coin of that metal is withdrawn from
circulation; and if silver should increase in its value in
relation to gold, the same circumstances would tend to reduce the quantity of silver coin
in circulation. As it is impossible to prevent the fluctuation in the value of the metals,
so it is also equally impracticable to prevent the consequences thereof on the coins made
from these metals....... To adjust the relative values of
gold and silver coin according to the fluctuations in the values of the metals would
create continual difficulties, and the establishment of such a principle would of itself
tend to perpetuate inconvenience and loss."
They therefore declared themselves in favour of
monometalism as the ideal for the Indian currency of the
future, and prescribed:—
"21. ......... that silver should be the
universal money of account (in India), and that all ...... accounts should be kept in the
same denominations of rupees, annas and pice.......
The rupee was not, however, to be the same as
that of the Moghul Emperors in weight and fineness The
proposal that
"9. ......the
new rupee ...... be of the gross weight of—
Troy grains
... 180
Deduct one-twelfth alloy ...
15
And contain of fine silver troy grs.
165"
Such were the proposals put forth by the Court
of Directors for the reform of Indian currency.
The choice of a rupee weighing 180 grs. troy and containing 165 grs. pure silver as the unit for
the future currency system of India was a well-reasoned choice.
The primary reason for selecting this
particular weight for the rupee seems to have been the desire to make it as little of a
departure as possible from the existing practice. In their attempts to reduce to some kind
of order the disorderly currencies bequeathed to them by the Moghuls
by placing them on a bimetallic basis, the Governments of the three Presidencies had
already made a great advance by selecting out of the innumerable coins then circulating in
the country a species of gold and silver coin as the exclusive media of exchange for their
respective territories. The weights and fineness of the coins selected as the principal
units of currency, with other particulars, may be noted from the summary table 1. (Page
344)
To reduce these principal units of the
different Presidencies to a single principal unit, the nearest and the least inconvenient
magnitude of weight which would at the same time be an integral number was obviously 180
grs., for in no case did it differ from the weights of any
of the prevailing units in any marked degree. Besides, it was believed that 180, or rather
179.5511, grs. was the standard weight of the rupee coin originally issued from the Moghul Mints, so that the adoption of it was really a
restoration of the old unit and not the introduction of a new one.[f16] Another advantage claimed in favour of a unit
of 180 grs. was that such a unit of currency would again become what it had ceased to be,
the unit of weight also. It was agreed [f17]that the unit of weight in India had at all
times previously been linked up with that of the principal coin, so that the seer and the manual
weights were simply multiples of the rupee, which originally weighed 179.6 grs. troy. Now,
if the weight of the principal coin to be established was to be different from 180 grs.
troy, it was believed there would be an unhappy deviation from the ancient practice which
made the weight of the coin the basis of other weights and measures.
|
|
|
Silver
Coins. |
Gold
Coins. |
||||
Issued by the Government of |
Territory
in which it circulated. |
Name. |
Gross
Weight Troy Grs. |
Pure
Contents Troy Grs. |
Name
|
Gross Weight Troy Grs. |
||
Bombay |
Presidency |
|
Surat
Rupee |
179.0 |
164-740 |
179 |
164.740 |
|
Madras |
,, |
|
176.4 |
166-477 |
Star
Pagoda |
52-40 |
42.55 |
|
|
Bengal,
Bihar and Orissa Cuttock |
Sicca Rupee (19th
Sun) |
179.66 |
175-927 |
Mohur |
190-804 |
189-40 |
|
|
|
|
|
|
|
|
|
|
Bengal
|
Ceded
Provinces Conquered Prov- |
XLV
of 1803 |
Rupee
(Lucknow |
173 |
166.135 |
|
|
|
|
inces |
|
Sicca
of the |
|
|
|
|
|
|
|
|
45th Sun) |
|
|
|
|
|
|
Benares
Provin- |
III
of 1806 |
Benares
Rupee |
175 |
168-875 |
— |
— |
— |
|
ces |
|
|
|
|
|
| |