Tooke Versus Ricardo On The Resumption Of Convertibility In 1819-1821

The relationship between Tooke and Ricardo on money is not obvious. The comfortable intuition is that, since Tooke opposed the Currency School, and since the Currency School assumed Ricardo's heritage, Tooke was anti-Ricardian. However, there are at least two reasons not to follow this intuition. One is that the continuity between Ricardo's monetary theory and the Currency School may be seriously questioned. The second reason is that Tooke as the main figure of the Banking School in the 1840s was substantially different from the early Tooke who wrote in the 1820s. To avoid misapprehension of the relationship between Tooke and Ricardo on money, it may thus be useful to compare their respective positions on a subject on which both of them spoke and wrote: the suspension and the resumption of convertibility. After having been suspended since 1797, the convertibility of the Bank of England note was resumed on 1st February 1820, following Peel's Bill adopted the preceding year. A major change was introduced by comparison with the pre-1797 system: convertibility was to be into bullion and not into coin. In his 1816 pamphlet Proposals for an Economical and Secure Currency this scheme had been advocated by Ricardo as a permanent device, which amounted to eliminate metallic currency. By contrast, Peel's Bill made it temporary, for a period of three years. In the end, this experiment was discontinued after a little more than one year: on 1st May 1821 the old system of cash payments was resumed. Tooke had been examined on 22nd March 1819 by the Lords' Committee on Resumption. He supported then Ricardo's plan but only as a temporary measure, until it would be possible to return to cash payments. In 1826 he published a pamphlet which contained a whole section devoted to a critique of convertibility into bullion as a permanent system, and in 1829 he published another pamphlet in which he showed that Peel's Bill had had no effect on the deflation and the stagnation of trade which had occurred in the subsequent years – a view consistent with Ricardo's one – and that the Bank of England could not either be considered as responsible for this situation – contrary to what Ricardo contended. It thus makes sense to reconstruct a post mortem dialogue between Ricardo (who had died in 1823) and Tooke on the effects of the suspension and the resumption of convertibility.