The Prospects for an International Monetary System

Abstract

It is particularly appropriate that the lecture I am giving this evening is in honour of Henry Thornton. There are many useful perspectives from which to observe and analyse international monetary affairs and Henry Thornton can be said to have personified many of them. He was an economist whose major work on monetary theory, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain, went deeply into problems relating to foreign exchange. It was described at the time by Jeremy Bentham as ‘a book of real merit [and] ... instruction ’; by John Stuart Mill half a century later as ‘the clearest exposition ... in the English language of the modes in which credit is given and taken in a mercantile community ’; and, after many decades of neglect, Professor Hayek drew our attention to Thornton ’s work as ‘the beginning of a new epoch in the development of monetary theory’ (quoted in Hayek, pp. 50, 57–58, 36). But Henry Thornton was not only a theoretician. He, more than most, was able to bring to bear upon his understanding of the political economy his own personal experience of the worlds of politics — as MP and close friend of Pitt; of social needs ’ as Evangelical and friend of Wilberforce; of commercial banking — as a banker of whom Clapham writes that there was ‘perhaps not one so able’ (Clapham, p. 166); and more indirectly of central banking — several of his relatives were Directors and his brother Samuel a Governor of the Bank of England. I cannot hope to combine all these attributes and distinctions. My main aim tonight in providing some reflections on the world’s monetary problems and prospects will be to draw upon my own experience as a practising central banker. I venture to hope that my approach will be consonant with the spirit of Henry Thornton’s life and works.