In 2000, Kwasi Kwarteng submitted his PhD thesis, ‘The political thought of the recoinage crisis 1695-7’, for examination by the University of Cambridge. His supervisor was István Hont, historian of political and economic thought, but his inspiration was another intellectual historian in the ‘Cambridge School’, a method of contextual reading of historical political arguments dating to pub drinks between Quentin Skinner and John Dunn in the 1960s. This historian was J. G. A. Pocock, whose Machiavellian Moment is widely seen as the defining substantive text in the Cambridge School of intellectual history. It frames eighteenth-century political and economic thought as ‘neo-Machiavellian’, taking after Niccolò Machiavelli’s writings on power and violence in the early sixteenth century. But it also frames these debates as ‘neo-Harringtonian’, taking after James Harrington’s introduction of Machiavelli into the English language and arguments against the absolutist state of Thomas Hobbes’ Leviathan. In The Commonwealth of Oceana, Harrington argues for a republic rather than a monarchy, and positions economic property as the foundation of the allocation of political power in the state. What does this mean for the recoinage crisis, which took place less than two decades after Harrington’s passing, and for political economy more generally — in days gone by and today? To answer this question, let me dive straight into some details from the thesis, which I’ve been reading in its original format from the turn of the millennium, courtesy of Cambridge University Library (whose copyright stipulations prevent me from quoting any passage at length — so I ask you, dear reader, to take my word for it!).
The PhD is, as Kwarteng states at the outset, a ‘novel’ contribution to scholarship on the currency crisis of 1690s Britain. Traditional accounts, Kwarteng notes, focus on the economic or social dimensions of the crisis, but not the connection between intellectual thought at the time and the crisis as a whole. Kwarteng explores that connection and how it supervenes on some of the fundamental contradictions of the recoinage crisis.
In the blue corner, physicist Isaac Newton backed recoinage in order to tame wild inflation arising from the continental influx of gold and silver, putting downward pressure on average silver content of coins and thus on the value of the currency. Fear of devaluation motivated many ‘country’ writers to back a restoration of the value of the guinea and a raise in the silver content of coins. By eliminating low-silver coins from circulation and fixing the value of the guinea, the Chancellor of the Exchequer and Parliament effected this change in 1696. Recoinage was born, and hyperinflation was averted.
But in the red corner, political and theological writer John Locke feared putting the balance of power before the balance of trade. Recoinage was designed in part to boost the value of the currency to service Britain’s war debts in the fight against French ‘Sun King’ Louis XIV. Recoinage also weakened export competitiveness and risked doing long-term economic damage in service of averting short-term instability. And although Locke did not live to see it, the twentieth century has shown how hyperinflation can eliminate public and private debts, as if washed away by a great deluge, as occurred in Germany in the early 1920s — with the exception of the Versailles reparations accords which other states imposed on Germany, catalysing the Second World War when the Great Depression hit and American credit dried up. In that recession, unemployment was the greatest issue, and yet elites feared dropping the gold standard and the inflation this might unleash.
Fears of inflation, in other words, tend to be overblown. Inflation is half as bad, if that, as recession. Unemployment is much worse than inflation, which causes chaos but does not necessarily destroy jobs or whole sectors of the real economy. Recession hits the top and bottom of society. Inflation squeezes the pensions and investments of the petit bourgeoisie, the middle classes who depend on stable capital markets for their savings to grow. The real capitalists thrive off inflationary bubbles and their wicked dynamism. And it is primarily for the middle class that the government tames inflation. Capital couldn’t really care less — it will run from country to country looking for stable conditions, but this is not usually a permanent thing: if capital runs away, what’s to stop it running back?
Alas, the middle classes are far from ‘anti-fragile’, to use Nassim Nicholas Taleb’s apt term for resilience in a chaotic world. They are pro-fragile, and pro-cyclical. They cannot resist the flow of time; they merely go with it. They seem strong but they are weak. They do what they can when they can; but in the end, they suffer what they must (to echo Thucydides’ Melian Dialogue). They almost have a Catholic/Puritanical fetish for suffering, as was shown very clearly in the deepest paranoia of the coronavirus crisis. Far from Aristotle’s dream of a virtue-loving middle protecting the poor from the rich and vice versa, today’s professional-managerial class makes a virtue of vice and a vice of virtue. They are the lords of ‘rhetorical redefinition’, to use a term from Cambridge School historian Quentin Skinner, and the art of changing the meaning of words as fast as capital moves money across borders. They are the bulwark of the cathedral of capital and its neomedieval ideology of mobility (encapsulated neatly in the European Single Market’s ‘free movement of goods, labour, and capital’ — as if all these entities were tradable commodities for profit, rather than the good of all people, in all places).
Kwasi Kwarteng is middle class, but not in the ordinary sense. His particular educational trajectory has led him to yearn for a different, wiser professional elite, to stand between the rich and the poor, and bring virtue to the whole of society. His PhD thesis takes the views of Newton and Locke on recoinage and synthesises them. His recommendation is to be more open-minded about the class conflict behind monetary policy than intellectual historians outside of the Marxist tradition tend to be. He takes as his cue the intellectual legacy of James Harrington, theorist of the economy as the foundation of politics in the mid-seventeenth century. Kwarteng wants conservatism that learns from Marxism and liberalism alike. He wants, above all, to be realistic, but also to be unafraid to take a stand, echoing the utopian realism of James Harrington.
Alas, the 2020s are less open-minded than the 1690s. Neomedieval decay in late-capitalist conditions has set in, and the first sign of extraordinary policy decisions leads markets and Twitter to panic. Bowing to the dictatorship of pollsters — even after their clear errors in recent years — Liz Truss sacked Kwasi Kwarteng and reversed their accelerationist policy of pursuing growth in a time of inflation with tax cuts. The government has reverted to its more basic function, as outlined by economist Charles Kindleberger, of counter-cyclical policy responses. But I think Kindleberger, like Kwarteng, would be more concerned with the deleterious effects of unemployment on the poorest than of the effects of inflation on the middle classes. After all, the rich win either way.