A Ramble 'Round Old Birmingham

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This
"missing chapter" is excerpted from an early draft of
Professor Selgin’s new book, Good
Money
,
the true and remarkable story of private coinage and banking in
Britain in the early years of the Industrial Revolution (1775–1850).
Making money was a business in demand. The needs of business for
small denominations were changing. Merchants needed small-denomination
coins in copper and silver.

The Royal
Mint couldn’t be bothered. It made coins to serve the elites, not
the new and burgeoning working class. Free enterprise stepped in
with a new industry that truly saved the day – before the Crown
cruelly stamped it out and ended one of the most beautiful experiences
with private money in world history.

It is very
likely you have never heard of this episode. You can read dozens
of histories of the early years of capitalism and know nothing of
this spectacular industry – to say nothing of its lessons for
today.

What is
going on here? George Selgin, professor at West Virginia University,
has discovered the monetary equivalent of the lost city of Atlantis.
He has written a full-scale historical narrative – one that
is deeply interesting and engaging – that has been largely
unknown, even to scholars of the Industrial Revolution.

It is not
only the first full-scale history of this episode ever written.
It is likely to maintain a place as the definitive work for many
decades. It is 400 pages, but always and everywhere very interesting.
It includes 20 pages of color photos. The prose is elegant, and
the method of analysis is thoroughly Rothbardian: this is flesh-and-blood
history of real human beings.

He tells
the stories – of the merchants, the button makers who turned
into coin makers, the way the system worked, its wonderful innovations,
and its evolution – and reveals the cruelty and destructiveness
behind the government’s suppression of the industry.

The small-denomination-coin
industry had developed to the point at which 20 independent mints
were involved in making coins. These private coins served the merchants
and the workers, while the government’s currency served only the
landed rich. The new industry was like capitalism itself: it was
designed for everyone to the benefit of everyone.

The private
coins tended to be better quality than the government’s coins. Why?
Because private merchants could refuse them – and consumers
could too. There was competitive control over them and an inexorable
tendency for currency to improve in every way. That’s why the book
is called Good Money.

And what
of Gresham’s Law, the tendency of "bad money" to drive
out good money? Selgin’s account demonstrates something striking:
it only holds under government systems of money that overvalue bad
money. In a private system, good money – like all good products
and services in a free market – outcompetes the low-quality
money. In a market-based money system, there is an inexorable tendency
for good money to win out.

The story
is riveting in its own right, not only as monetary history but as
business history. Selgin has highlighted a fantastic industry that
has long gone unnoticed. But beyond that, there is a massively important
economic point. What he has done here is help us to understand something
critically important: were it not for the state, a wholly private
money system would emerge from market exchange – that means
private coinage, private weights and measures, market-driven exchange
rates between different kinds of monies, and a fully private banking
system to go along it with it.

In fact,
this is precisely how money originates: from within the market.
Why does the state intervene? The British case is typical. The state
wants to control the economy, tax the economy, and control the people.
If a fully private system comes about, the state finds its job all
but impossible. That is why the state takes over at the expense
of private enterprise.

In other
words, the state is not responding here to a market failure but
to a market success. It is not a "public goods" rationale
that leads to state intervention but old-fashioned jealousy over
power and wealth. Selgin’s book shows this not through polemics
but through a completely new telling of real-life events about which
we’ve previously known next to nothing.

The story
alone is engaging and entertaining. But readers will have to brace
themselves for the conclusion: "The episode compels one to
ask, first of all, whether modern governments should be in the coin-making
business at all." He is right that "economists tend to
take governments’ monetary prerogative for granted." This spectacular
book by Selgin could change that forever.

The impact
of this book – one of the most important historical narratives
ever written by an Austrian economist – will be felt for many
years. He has shown us the real history behind what has been largely
theory in previous works. Think of this as a historical application
of Mises’s Theory
of Money and Credit
or Rothbard’s What
Has Government Done to Our Money?

Selgin was
the first Mises Institute scholarship student, and the publication
of this book by the University of Michigan Press was made possible
in part by the Mises Institute.

One has no
great hopes from Birmingham. I always say there is something direful
in the sound.

The World’s
Toyshop

Birmingham
shown within EnglandBirmingham, Brummagem, Bromwicham, Brymingham,
Bermingeham…. Spell it or say it however you please, there
is something queer about the place. Even before the canal boom,
it managed to become England’s preeminent industrial city, and was
well on its way to becoming the "the workshop of the world."
Yet it was located far from sources of the principal raw materials
– especially copper and zinc – that most of its manufacturers
relied upon; and transport was a problem, since it was also a good
distance from any port or navigable river. The place didn’t even
have all that many streams capable of being reliable sources of
power for its hammers and rolling mills.

How, under
the circumstances, did Birmingham manage to attract and to breed
such a disproportionate share of Great Britain’s outstanding entrepreneurs,
inventors, and skilled artisans? Why, in particular, did it –
and not London or Bristol or Sheffield – become Great Britain’s
leading center for all kinds of metal work, including commercial
coinage? Although numismatists have had plenty to say about the
tokens and other numismatic products made there, they’ve had relatively
little to say about the town itself, and the mints it nurtured.

Soho, of course,
has gotten plenty of attention from numismatists. Yet the Soho mint
was the only important commercial mint that wasn’t located in Birmingham
(though it was just a stone’s throw away). In other respects also
the Soho mint was hardly representative of commercial mints generally.
It has come to overshadow the rest not because its commercial coins
were distinctly superior, or because there were more of them, but
because of its association with Great Britain’s most famous steam-engine
manufactory, its participation in regal coinage, and its role as
the prototype for the Tower Hill Mint. The Birmingham Reference
Library’s huge stash of archival materials from Soho has also allowed
scholars to document Soho’s undertakings, including its coining
activities, in what is often extraordinary detail.

Read
the rest of the article

October
25, 2008

George Selgin,
professor at West Virginia University, has discovered the monetary
equivalent of the lost city of Atlantis. He has written a full-scale
historical narrative
– one that is deeply interesting and
engaging – that has been largely unknown, even to scholars
of the Industrial Revolution.

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