David Warsh: RIP: Great Britain, 1688-2016

SOMERVILLE, Mass.

My English friend first noticed the tendency years ago when English football hooligans began wearing the red and white Cross of St. George to matches in preference to the Union Jack. The latter ensign dated from 1606, when James I ordered the blue and white St. Andrew’s cross of the flag of Scotland to be sewn onto the English banner to represent his dual monarchy. For the next hundred years the striking new design was seen mainly on the masts of his British majesty’s ships at sea.

Not until 1688 did the English parliament get into the act, when its members invited the Dutchman William of Orange and his English wife to become King William III and Queen Mary II, fending off the restoration of hierarchical Catholic governance under James II.  Crowned in 1685, James was chased off the throne and out of the country in 1688.

This was the “Glorious Revolution,” long cherished by the English as supposedly peaceful, aristocratic and consensual. It has been persuasively reinterpreted recently as “violent, popular and divisive” by Yale historian Steve Pincus and extensively illuminated by Deidre McCloskey in her Bourgeois Trilogy as the first truly modern revolution, precursor to the American and French experiences.

This was modernization based on a Dutch model, not a French one, writes Pincus. It included a broad array of inventions associated with becoming a nation-state: republican governance; elected representatives of the citizenry; the rule of law; bourgeois values of various sorts, especially the fundamental and widespread curiosity we now describe as “scientific”; and, not incidentally, the strong army and first-rate navy required by a nation bent on global domination. The Union Jack became Britain’s official flag only after both parliaments passed Acts of Union in 1707.

Elizabeth, England’s first Protestant queen, had begun her rule in 1558. For the next 250 years, Britain battled Spain, the Netherlands and France for control of Europe, North America, and the sea, finally emerging  mostly victorious in 1815. Long before, writers including Edward Gibbon and Adam Smith had begun comparing its hegemony to that of the Roman Empire.

The Victorian era, broadly construed, lasted for a century, but as early as 1890 it was becoming clear that the empire had become overextended.  In The Weary Titan: Britain and the Experience of Relative Decline 1895-1905 (Princeton, 1977), Princeton historian Aaron Friedberg argued that the Boer War, in South Africa, exhausted Britain’s willingness to tax itself to pay to maintain its status as the world’s dominant power.

Two long and bitter wars with Germany in the 20th Century further sapped Britain’s human, military and financial capacity.  An attempted military intervention, with the aid of France and Israel, against Egypt in Suez in 1956 succeeded militarily but failed utterly politically and diplomatically. Gradually its naval forces were pulled back from Singapore. Hong Kong remained a commercial enclave long after it ceased to be a naval strong point; its sovereignty and governance were handed over to China in 1997.

What remained, until last week, was Britain’s capacity for moral leadership.  Britain had declined to join European Coal and Steel Community in the years after World War II.  French President Charles de Gaulle then fended off its attempt to join the European Economic Community (“the Common Market”) that emerged in the late 1950s. Britain finally entered the EEC in 1973, but opted out of the 1985 Schengen Agreement, which abolished most border controls among member states. The landmark Maastricht Treaty of 1992 created the European Union and the concept of European citizenship, E.U. passports and the free movement of labor among the member nations. Subsequent treaties have extended the principle of central European government from its seat in Brussels, and expanded membership to 28 member states.

What happened last week was not just Britain’s retreat from Europe; it was the abandonment of the project that began in 1688 with the Glorious Revolution of 1688, a dream of empire that turned out be a spectacular success.  Britain now will return to being the island nation celebrated by Shakespeare as “this fortress built by Nature for herself/ against infection and the hand of war.”  None of us who were raised on this story can be less than sad at the news; those who have labored in its service are heartbroken.

What happens now in Britain? Martin Wolf, economics columnist of the Financial Times, put it succinctly: Britain has prospered inside the E.U.  but it will not do as well outside.  It seems doubtful that London can remain the same immensely powerful global financial hub it has become – central banks such as the Bank of England have power only by dint of governments’ authority to tax.

Elites are fuming; they can hardly believe their comfortable way of life has been put at risk; so are the young, who voted overwhelmingly (75 percent of 18-24-year olds, 56 percent of 25-50 year olds) to remain.  

Can the vote be reversed?   British law may offer some exits.

My English friend first noticed the tendency years ago when English football hooligans began wearing the red and white Cross of St. George to matches in preference to the Union Jack. The latter ensign dated from 1606, when James I ordered the blue and white St. Andrew’s cross of the flag of Scotland to be sewn onto the English banner to represent his dual monarchy. For the next hundred years the striking new design was seen mainly on the masts of his British majesty’s ships at sea.

Not until 1688 did the English parliament get into the act, when its members invited the Dutchman William of Orange and his English wife to become King William III and Queen Mary II, fending off the restoration of hierarchical Catholic governance under James II.  Crowned in 1685, James was chased off the throne and out of the country in 1688.

This was the “Glorious Revolution,” long cherished by the English as supposedly peaceful, aristocratic and consensual. It has been persuasively reinterpreted recently as “violent, popular and divisive” by Yale historian Steve Pincus and extensively illuminated by Deidre McCloskey in her Bourgeois Trilogy as the first truly modern revolution, precursor to the American and French experiences.

This was modernization based on a Dutch model, not a French one, writes Pincus. It included a broad array of inventions associated with becoming a nation-state: republican governance; elected representatives of the citizenry; the rule of law; bourgeois values of various sorts, especially the fundamental and widespread curiosity we now describe as “scientific”; and, not incidentally, the strong army and first-rate navy required by a nation bent on global domination. The Union Jack became Britain’s official flag only after both parliaments passed Acts of Union in 1707.

Elizabeth, England’s first Protestant queen, had begun her rule in 1558. For the next 250 years, Britain battled Spain, the Netherlands and France for control of Europe, North America, and the sea, finally emerging  mostly victorious in 1815. Long before, writers including Edward Gibbon and Adam Smith had begun comparing its hegemony to that of the Roman Empire.

The Victorian era, broadly construed, lasted for a century, but as early as 1890 it was becoming clear that the empire had become overextended.  In The Weary Titan: Britain and the Experience of Relative Decline 1895-1905 (Princeton, 1977), Princeton historian Aaron Friedberg argued that the Boer War, in South Africa, exhausted Britain’s willingness to tax itself to pay to maintain its status as the world’s dominant power.

Two long and bitter wars with Germany in the 20th Century further sapped Britain’s human, military and financial capacity.  An attempted military intervention, with the aid of France and Israel, against Egypt in Suez in 1956 succeeded militarily but failed utterly politically and diplomatically. Gradually its naval forces were pulled back from Singapore. Hong Kong remained a commercial enclave long after it ceased to be a naval strong point; its sovereignty and governance were handed over to China in 1997.

What remained, until last week, was Britain’s capacity for moral leadership.  Britain had declined to join European Coal and Steel Community in the years after World War II.  French President Charles de Gaulle then fended off its attempt to join the European Economic Community (“the Common Market”) that emerged in the late 1950s. Britain finally entered the EEC in 1973, but opted out of the 1985 Schengen Agreement, which abolished most border controls among member states. The landmark Maastricht Treaty of 1992 created the European Union and the concept of European citizenship, E.U. passports and the free movement of labor among the member nations. Subsequent treaties have extended the principle of central European government from its seat in Brussels, and expanded membership to 28 member states.

What happened last week was not just Britain’s retreat from Europe; it was the abandonment of the project that began in 1688 with the Glorious Revolution of 1688, a dream of empire that turned out be a spectacular success.  Britain now will return to being the island nation celebrated by Shakespeare as “this fortress built by Nature for herself/ against infection and the hand of war.”  None of us who were raised on this story can be less than sad at the news; those who have labored in its service are heartbroken.

What happens now in Britain? Martin Wolf, economics columnist of the Financial Times, put it succinctly: Britain has prospered inside the E.U.  but it will not do as well outside.  It seems doubtful that London can remain the same immensely powerful global financial hub it has become – central banks such as the Bank of England have power only by dint of governments’ authority to tax.

Elites are fuming; they can hardly believe their comfortable way of life has been put at risk; so are the young, who voted overwhelmingly (75 percent of 18-24-year olds, 56 percent of 25-50 year olds) to remain.  

Can the vote be reversed?  Apparently just possibly.  Hit this link.

There is a distinct possibility that Scotland will choose to remain in the European Union. In that case the Union Jack may actually come apart. Those ancient flags will reappear:  the azure Saltire, worn by Scottish soldiers fighting in France in the 14th Century; the red-on-white St. George’s cross, brought back in the 12th  from Malta after the Second Crusade.

Meanwhile, what about the rest of the world?  That is a much more complicated story. You can expect to hear plenty more about it in the coming months, beginning with the other huge multi-national organization based in Brussels — the sprawling military-industrial complex known as the North Atlantic Treaty Organization.

David Warsh, a longtime economic historian and financial columnist, is proprietor of economicprincipals.com.

There is a distinct possibility that Scotland will choose to remain in the European Union. In that case the Union Jack may actually come apart. Those ancient flags will reappear:  the azure Saltire, worn by Scottish soldiers fighting in France in the 14th Century; the red-on-white St. George’s cross, brought back in the 12th  from Malta after the Second Crusade.

Meanwhile, what about the rest of the world?  That is a much more complicated story. You can expect to hear plenty more about it in the coming months, beginning with the other huge multi-national organization based in Brussels — the sprawling military-industrial complex known as the North Atlantic Treaty Organization.

David Warsh, a longtime economic historian and financial columnist, is proprietor of economicprincipals.com.

Jarrod Hazelton: Brexit a triumph of ignorance

Brexit is perhaps most appropriately summed up in the words of Mr. Donald Trump: 

“Just arrived in Scotland. Place is going wild over the vote. They took their country back, just like we will take America back. No games!” 

A Tweet heard (naturally) ‘round the world, whose expression of ignorance wa signored by his supporters  even as it was rightfully lampooned by everybody else.   Scotland and Northern Ireland voted strongly for the United Kingdom to stay in the European Union; England and Wales voted to leave.

Support for Brexit worldwide is a veritable Who’s Who of international Nuevo-fascism: Trump, Zhirinovsky, Putin, Marine le Pen. It is also the direct result of unabashed ignorance.  Take, for example, the recent remarks by U.K. Independence Party leader Nigel Farage.

One of the central tenets of the Leave campaign was that £350 million per week in payments to the European Union would be diverted to the British National Health Service after Brexit. This incredible incentive is certainly something to consider, but for the fact that it was a total fabrication. Rather than admit this, Farage has instead made the preposterous assertion that he never said such a thing, regardless of the Leave campaign tour bus being emblazoned with the £350 million figure as it traversed the English countryside. Perhaps one of his handlers forgot to mention the design change. Additionally,  a Tory member of the European Parliament,  David Hannan, back-pedaled on immigration, claiming less than 24 hours after the Brexit vote that immigration levels  from the E.U. into Britain might remain unchanged after Brexit goes into full effect. Who knew that the UK had just voted in favor of a group of BRINOs (Brexitors In Name Only)?

Lying in politics is certainly not new but the  size of such preposterous claims in recent history is impressive. Trump is a virtual cacophony of spewing, festering untruths, and yet his followers  go along with his claims regardless of veracity. Instead, he maintains a stronghold on their collective frustration at  being excluded from a system that has long since left them behind.

What Brexitors and Trump supporters have in common may be less xenophobia, bigotry, racism and a longing to take back “again” whatever it is they feel is no longer theirs than ignorance. In America, Trumpists, are nostalgic for a country that once afforded them labor protections, defined-benefit pensions, generous employer-subsidized healthcare, affordable education and other things that have been stripped from them, albeit with scraps still trickling down to them from the rich interests so powerful in Washington, D.C. 

Ironically, market forces that have assaulted Brexitors and Trump and Sanders supporters who will refuse to vote for Hillary Clinton may ultimately solve their problems for them. Sovereign wealth funds lost over 30 percent of their interests in the U.K. overnight as  the pound crashed with the Brexit news, and won’t stand for  this to go on. Businesses in Britain will realize the vast expense of hiring and retraining based on citizenry regulations to be too egregious. And Brexit Remorse may lead to a second referendum, and/or negotiations to leave the E.U may result in a realm of clauses and capitulations that would truly make a Brexit In Name Only.

The prevailing ignorance, xenophobia, bigotry and socio-economic factors behind market forces may solve themselves for a time, but in so doing no lessons will be learned.

Jarrod Hazelton, who holds a master’s degree in public policy from the University of Chicago, is a financial analyst.

Chris Powell: Leaving E.U. essential to protecting British sovereignty, democracy, culture

Recognizing that the objective of the European project, ever-closer political and economic union, meant the destruction of democracy, sovereignty and the country’s very culture, Britain has voted in a great referendum to withdraw from the European Union.

The majority arose from a remarkable combination of the free-market, limited-government political right, the core of the Conservative Party, with the working-class political left, the core of the Labor Party, both party cores repudiating their leaderships as well as the national elites.

The result has enormous implications for the United Kingdom, starting with whether it can remain united, since Scotland -- formerly the most industrious and inventive province in the world, now perhaps the most welfare-addled -- probably will make a second attempt to secede, figuring that free stuff is more likely to flow through continued association with the E.U. than with England, which is growing resentful of the freeloaders up north.

But there are enormous implications for the world as well. The E.U. project has  never won forthright ratification by the people of its member states and indeed has sometimes refused to accept rejection by them. Indeed, the whole E.U. government is largely unaccountable. So the British vote quickly prompted demands for similar referendums in France and the Netherlands, where conservative populist movements have been gaining strength.

The politically correct elites are portraying the British vote as a "xenophobic" response to free movement of labor across the E.U. and particularly as opposition to the vast recent immigration into Europe from the Middle East and Africa. This immigration is widely misunderstood as being mainly a matter of refugees from civil war. In fact this immigration has been mainly economic and it has driven wages down in less-skilled jobs while increasing welfare costs throughout Europe, which explains the British Laborite support for leaving the E.U.

But it is not "xenophobic" to oppose the uncontrolled and indeed anarchic immigration that the European Union has countenanced. For any nation that cannot control immigration isn’t a nation at all or won’t be one for long. Since most immigration into Europe lately has come from a medieval and essentially fascist culture and involves people who have little interest in assimilating into a democratic and secular society, this immigration has threatened to destroy Europe as it has understood itself. Britain has been lucky to be at the far end of this immigration, but voters there saw the mess that it has been making on the other side of the Channel. They wisely opted to reassert control of their borders.

Their example should be appreciated in the United States, which for decades has failed to enforce its own immigration law and as a result hosts more than 10 million people living in the country illegally and unscreened. Fortunately few of this country’s illegal immigrants come from a culture that believes in murdering homosexuals, oppressing women and monopolizing religion. But the negative economic and social effects here are similar to those in Europe and properly have become political issues.

The main lesson of Britain’s decision may be an old one -- that nations have to develop organically, arising from the consent of the governed and a common culture, and that they can’t be manufactured by elites. Having defended its sovereignty and indeed liberty itself against Napoleon and Hitler, Britain now has set out to defend them again. So rule, Britannia -- Britannia, rule thyself.

From “Rule Britannia’’:

The nations not so blest as thee

Must in their turn to tyrants fall,

While thou shalt flourish great and free,

The dread and envy of them all.

Chris Powell is a political writer and also the managing editor of the Journal Inquirer, in Manchester, Conn.

David Warsh: Adam Smith trumps his rival

Douglas, Heron and Co., popularly known as the Ayr Bank, had closed its doors amidst a run in June 1772.  A handful of local noblemen and gentry, mostly large landowners, had founded it a few years before to fund improvements in southwest Scotland’s booming linen industry and tobacco trade. But they had been foolish in their lending. News that the bank’s London agent had been caught short speculating in East India Company shares and had fled to Europe now started a run that had turned into a nationwide panic.

The failure of the Ayr Bank was threatening to drag down not only the Scottish banking system but much of the best part of the economy of Scotland as well, including the great Carron Iron Works. English banks, too, were shutting up. Even the Bank of England was thought to be in danger of running out of gold.

Barely  60 years had passed since the parliaments of England and Scotland had agreed in 1707 to form the United Kingdom of Great Britain, under the Stuart monarchy. To that point Scotland had tended to send its most ambitious bankers abroad – John Law to Paris, where he started the Mississippi Company; William Patterson to London, where in the 1690s he worked out plans for the Bank of England and became an organizer of the Darien scheme, a disastrous attempt to found a Scottish colony in a swamp on the Isthmus of Panama.

Thanks to the Darien fiasco, Scottish bankers avoided the even greater losses that London suffered in the South Sea Bubble of 1720. Now bankers had good reason to stay home, for Scotland’s entry into the English trading system meant prosperity after many years of want.

A great boom had begun in western Scotland after “the Forty Five” – the last attempt to restore the Catholic Stuart monarchy, deposed in 1688. It ended when Bonnie Prince Charlie abandoned his march on London in Derby and, eventually, after a great battle at Culloden, in northwest Scotland, was put to flight. Glasgow’s trade with North America expanded rapidly, especially its linen export and tobacco import trade.  Slave-trade profits were pouring in to Britain. New ideas were in the air — canals, roads and. harbors.  Edinburgh joined Amsterdam, Antwerp, Hamburg, Stockholm and London itself as a center of finance.  By mid-century Scottish banks were probably the most innovative in the world.

The first Scottish bank outside of Edinburgh opened in Aberdeen, in 1749; in Glasgow, the Ship Bank opened the next year. Soon new banks were starting up in provincial towns — six in Perth alone, in 1763. In Glasgow, the Ship, the Arms and the Thistle Banks, were making use of  the “optional clause,” meaning they could suspend payment in gold or silver when they wanted, which made for  much easier credit. The two public banks, the Bank of Scotland and the Royal Bank of Scotland,  urged London to clamp down, either to give them a monopoly or require the private banks to keep reserves.

The government replied with a ringing declaration of the doctrine of free banking,  based on the conviction that banking was a business like any other:  “The right of banking is not a matter of Publick Favour but of Right to every subject in Common.”  (Smith, a boyhood friend of the royal commissioner, may have been consulted in the matter, as he was in London at the time.)  The backers of the Ayr Bank drew up their plans.

From the day it opened its doors, in 1769, however, the Ayr Bank’s lending was too easy. So great was the enthusiasm for new ventures that its own officers were taking out loans, even before they had paid in the capital they promised. The two great national banks cut lending back sharply rather than compete with the free-wheeling upstart. Within a couple of years, Ayr’s notes, its promises to pay, were said to be two-thirds of the currency of the country. The upstart was thoroughly disliked by the establishment.

In the spring of 1772, the 25-year boom was coming to an end. Business conditions were uncertain. Noteholders wanted sterling for their paper. Word was out that Ayr was paying 8 percent in interest and commissions to cart silver up from London to meet the claims against it. In May a London bank which had extensive dealing with Ayr failed; its proprietor fled to Europe. When word reached Edinburgh, the Ayr Bank, too, closed its doors. Soon most of the rest of Scotland’s private banking system was shutting down too.

The panic reached the London banks; most of them held at least some Ayr paper. Even the Bank of England was feared threatened in some degree. David Hume wrote to his friend Adam Smith about the crisis at the time:

      the continual bankruptcies, universal Loss of Credit, and endless Suspicion…. Even the Bank of England is not entirely free from Suspicion. Those of Newcastle, Norwich, and Bristol are said to be stopp’d;  the Thistle Bank has been reported to be in the same Condition; the Carron Company is reeling, which is one of the greatest Calamities of the whole; as they gave Employment to near 10,000 people.  Do these Events in any-wise affect your theories?

They did indeed – enough to delay by some months the publication of An Inquiry into the Nature and Causes of the Wealth of Nations. Adam Smith’s protégé, the young Duke of Buccleuch, was among the founders of the Ayr Bank. Indeed, Smith himself may have been consulted when Parliament overruled the objections of the publicly-chartered national banks to authorize the free entry of private banks into the business of lending. Buccleuch and Smith had spent two years traveling around France and Switzerland. They returned in 1766. Now the youth whom Smith had been hired to tutor was at serious risk of losing most or even all of his titled lands. And the Scottish economy was suffering the effects of a major crash.

Over the next few months Smith added several paragraphs to the extensive discussion of money, banking and credit he had tucked away in Book Two of The Wealth of Nations. It was true, Smith admitted, that the Ayr Bank had been more liberal than any other Scottish bank ever had been. “The design was generous, but the execution was imprudent, and the causes of the distress which it was meant to relieve were not, perhaps, well understood.”  Ayr’s abandon had enabled the big national banks to exit the “fatal circle” of speculation, he implied, that the big banks initiated.

At least Ayr had been making good loans; had it been operated by politicians, the results would have been worse. It was a generous benediction.  Sydney Checkland, of the University of Glasgow, many years later would describe the episode as  one of “naiveté bordering on knavery.” The panic it engendered had been successfully swept under the rug.

Behind the scenes, Smith was helping to arrange a government rescue of his patron and the other shareholders, who were left owing awesome sums. Buccleuch and his friend the Duke of Queensbury alone had been sued by the Bank of England for 300,000 pounds, a staggering sum.  Smith wrote an old friend in Parliament who, like Hume, had inquired about the crisis: “Tho I have no interest myself in the Public calamities, some of the friends for whom I interest myself the most have been deeply concerned in them; and my attention has been a good deal occupied about the most proper method of extricating them.”

The only way they could hope to pay their debts without selling most of their lands was to borrow long-term through the sale of annuities. It would be expensive, but in due course Parliament authorized the measure and guaranteed the debt. Thus Adam Smith was the author of a historic bank bailout. Once that arrangement was in place, the young Duke was installed as governor of the Royal Bank of Scotland, in 1774, despite having blown up the Scottish economy a couple of years before. Not until 1832 were the Ayr bankers’ obligations fully discharged.

Smith’s disdain for a rival may have colored his views. Sir James Steuart is little remembered now, but in Smith’s day he was a well-known and controversial figure, secretary to Prince Charles, the pretender to the throne who led the insurrection in 1745. Steuart had spent 20 years afterwards traveling the financial capitals of Europe; he had a good feel for recent experiences of rapidly growing economies over a broad area of Britain and Europe. In 1767, Steuart had published an ambitious treatise, An Inquiry into the Principles of Political Oeconomy, to an indifferent reception.

Steuart was not what Smith would have called a mercantilist. He was too canny a Scot to believe that the government should direct trade.  He was, however, a close observer of market conditions, especially on the Continent. At heart, he was what today we would call a reformer, an advocate of governmental interventions of various kinds, including employment policy, infant-industry protection, and, of course, bank supervision.  His book included, as a cautionary tale, a detailed and generally sympathetic account of the meteoric rise and disastrous collapse of John Law’s bank in the famous “Mississippi bubble” of 1719.

In Steuart’s view, a “statesman,” meaning a regulator, would be required to oversee the banking industry, to superintend its structure and deal with the occasional panics that inevitably arose since bankers regularly became carried away.

To which Hume privately remarked to Smith: “The superiority which England has at present over all the world, is owing to her excluding statesmen from the executive part of all commercial concerns.” Smith himself wrote a friend:   “I have the same opinion of James Steuart’s book that you have. Without once mentioning it, I flatter myself, that every false principle in it, will meet a clear and distinct confutation in mine.”  Smith’s view has become known as free banking — banks free to issue their own paper currency, requiring no more regulation than any other business, with no state bank to serve as lender of last resort.

The Wealth of Nations finally appeared in 1776, to considerable acclaim.  The magnitude of the achievement made it easy to overlook whatever embarrassment that had preceded it.  Smith’s account of the workings of what we now call the price system was routinely compared to that of Newton.  Where Newton was made Master of the Mint, the Duke of Buccleuch now arranged Smith’s appointment as Scotland’s Commissioner of Customs.  He has been remembered ever since as the founder of modern economics. Steuart’s reputation suffered greatly for having been so studiously ignored.  He died in 1780, thoroughly discouraged.

And so the story of the Ayr Bank was forgotten – forgotten, that is, by all but the bankers.  They well understood the damage that the venture had done to their fortunes, to the economy of Scotland, and, a little less clearly, to sound policy itself. The very possibility of central banking had, through a certain sleight of hand (“without once mentioning it…”), been excluded from the purview of political economy at the very beginning. It would work its way back in, soon as practice, gradually as history, and finally as theory. Not until 1962 would central banking enter in the center spotlight of what by then had become known as “macroeconomics.”

The two sly essays from which I cobbled together the main facts of this story — Douglas Vickers’ (“Adam Smith and the Status of the Theory of Money”) and Sydney Checkland’s (“Adam Smith and the Bankers”) — appeared in a volume of essays on the bicentennial of Adam Smith, edited by Andrew Skinner, then a reader in economics at the University of Glasgow. He became its Adam Smith Professor in 1994.

It was Skinner who shepherded into print a six-volume bicentennial edition of Smith’s works. He would have been the last man to divert attention from what, in the 1970s, a time of trial for economics, was essentially the rediscovery of the great economist’s investigations (hard though that that may be to believe today).  But it was Skinner, too,  who, in an interview in New York, in 1976, suggested that I buy the two volumes of Steuart he had edited for the Scottish Economic Society,   published at bargain prices, and even then going out of print.  I did. The handsome volumes sat on my shelf until the 2008 crisis caused me to look back at Smith’s views on banking crises.  It was there that I found the trail to Steuart had left, Skinner and Checkland and Vickers had carefully marked.

In 1982 Skinner wrote up Steuart in the Scottish Journal of Political Economy as “Author of a System,” recommending that he be read along with Smith for the “undiminished relevance in the tensions which emerge from a comparison of two very different ways of looking at the economic process.” (He died, at 76, in 2011.)

The story of the Ayr banks is important in the present day for the light it casts on strategies that economists have followed since in 1776, thanks to the thinking caps furnished by Smith with blinders attached — or so I assert in next week’s episode.  The story of the eclipse of the “very different” views of economic processes of the Catholic Steuart by the Protestant Smith is something else again — as timely as the headline on the front page of the Sunday New York Times last week: “Pope’s Focus on Poor Revives Scorned Theology.”

The good news is that Richard Sylla, the recently retired Henry Kaufman Professor of  the History of Financial Institutions and Markets at New York University, plans to write a book about Steuart. The important differences between Smith and his rival have been overlooked by economists for a very long time.

David Warsh, a longtime economic historian and financial journalist, is proprietor of economicprincipals.com. He is based in Somerville, Mass.

The Scots: Reality or romance?

For Scotland to secede from the United Kingdom would be the triumph of romance over political and economic reality. Scotland is a windy, wet and cold place. The weather will feel a lot worse if they spin themselves off.  They think they'll be able to build a bigger, better welfare state on the proceeds of North Sea oil and gas. But that stuff will run out.

And why stop there? ''Freedom'' for Wales, the Isle of Man and Cornwall! Liberate the  whole Celtic periphery! Detach Brittany from France and Galicia from Spain, too! (The Irish Republic is quite all right.)

Vladimir Putin must be happy at the prospect of these little regions in Western Europe splitting off and thus inevitably weakening the Western Alliance.

I'm a quarter Scottish ancestry myself (McKay and Simpson among the family names). There were some productive people in the crowd, including the physician James Young Simpson, but also a large quota of  crazies and alcoholics  (or, to be more precise, crazies self-medicating with booze ).

They used to recite Robert Burns ad nauseam, though I always liked his line, translated from the weird Scottish dialect:

"Oh would some power the gift give us, To see ourselves as others see us.''

-- Robert Whitcomb

Et Vive le Quebec libre!

Layers of reminders

 

 "#14 Swimmers'' (painted wood sculpture), by MARK LITTLEHALES, at Ann Coleman Gallery, Wilmington, Vt.

I swim most mornings, usually early, It would seem to be boring going back and forth staring at the lane lines below. But repetitive motion in 84-degree water is remarkably soothing. The paradox of exercise is that up to a point, it gives you more energy than it subtracts. And you get into a kind of Zen state.  I find the idea of sweating in a gym with a lot of other people (with whom you might have to talk) off-putting. Running is better in that you're outside, with plenty to look at, especially the changing seasons, getting vitamin D from the sun and so on. But the knees go. (I was quite a runner in school and so had a head start in the knee-destruction business.)

It's one of those mornings that reminds us of weather's energy in New England. Yesterday it was warm and tropically humid. This morning  snow and ice lay on the ground, and I had to  pour windshield-wiper fluid on  car windows to speed my exit. Here we are, close to the Gulf Stream but wide open to the winds from Hudson's Bay.

But the buds and blossoms are still  swelling, and out of the wind, the sun warms your face.  The flowers seem to be thriving this morning; indeed the thin layer of snow may have protected them from being flash-frozen. And the layer of moisture can only help them once it warms up a bit.

But our little rescue dog from San Antonio,  whose genes probably include those of Brittany spaniels (he has freckles), wanted his  man-made coat back on, as a Manhattan dog would.

Meanwhile, in  eastern Ukraine, the Russians continue their invasion, reminding us that dreams that dictators in Europe would no longer cross borders are dead, as if Putin hadn't already given plenty of warning that he would try to reestablish a variant of the Soviet empire that murdered so many people. But then, he has said the end of that empire was a "catastrophe''. And this former KGB  counter-espionage officer  himself has ensured that political foes' life expectancy is below the average.

Then there's the phenom of countries getting smaller. There's an outside chance that might happen in the United Kingdom. David Speedie, a Scottish native, gave a talk last Thursday at the Providence Committee on Foreign Relations speculating that there's about 45 percent chance that the Scots will vote to split off from  the U.K. in a referendum later this year. He also suggested that Scotland would do very well economically by itself, in part because of North  Sea oil and gas and f its growing tech sector. ("Silicon Glen'').

That seems unlikely to me, given the wealth creation based in the Home Counties around London. That wealth, I'd guess, would be less available to Scotland if it were independent and most Scots know that. Still, the romanticism of the Scots is feeding the independence movement, as is, of course, resentment about English arrogance, real and perceived. Romanticism is something I'm well aware of from my own crazy (and often drunk) Scottish relatives. They read too much Robert Burns and believed in many conspiracies. One curious one was  that the Pope and Stalin were allies.

Still, when you enter Scotland, you pick up their sense of nationhood, which makes the expression "the Scottish nation'' plausible. I remember when there a bit of a sense of that when you'd enter Quebec, back in the '60s. You'd feel more that you were entering Quebec than entering Canada.  Of course in those days it was as easy to drive into Quebec as it was to drive from New Hampshire across a Connecticut River bridge into Vermont.

With all the information technology we have these days, with all the ability to transport ourselves via electrons, in many ways we seem more constrained.  A good side, I supposed, is that we are harshly denounced for engaging in such bad habits as smoking (which seems to be one of the few pleasures left to the unemployed poor, whatever the vast cost of cigarettes), drinking while driving and so on. But travel has gotten tougher and the very same information technology that permits such time wasters as Facebook threatens to eliminate most jobs, and a lot sooner than many might think.