Thornton’s Anti-Bullionism
When the suspension of payments occurred, the prevailing knowledge about money and banking was that developed by Adam Smith. Smith was in favour of the Bank of England, whose stability “is equal to that of the British government” (Smith 1776 [1981]: 320), and he emphasized its contribution to the reduction of interest rates through the circulation of Exchequer bills.
At the same time, he developed the real bills theory, rejected the quantity theory and expounded an analysis of international precious metal flows that did not rely on any price mechanism. Following Smith’s doctrine, public opinion did not adhere to the bullionist thesis. However, Smith was a theorist of the gold standard, and he did not anticipate either the central bank function of the Bank of England or the phenomenon of the high price of bullion. During the bullionist controversy, most of his followers, Bosanquet among them, did not consider that the situation might render some Smithian recommendations obsolete. Thus they could not understand that Smith’s real bills theory, whereby the banking system responds to the needs of circulation and cannot over-issue banknotes, was a fallacy in the context of inconvertibility. Thomas Tooke explained this later, during the Banking versus Currency Schools controversy. So in 1810-11, Smithian anti-bullionism was at the same time politically strong but analytically weak.Thornton’s position was distinct. He supported neither the bullionism of the Whigs nor the anti-bullionism of the Bank of England directors. His 1802 work An Enquiry into the Nature and Effects of the Paper Credit of Great Britain criticized Smith’s real bills theory and issuing rules; he introduced original developments in quantity theory but rejected Boyd’s bullionism; he expounded the gold points mechanism which explains how a high price of bullion may occur irrespective of any fall in the value of money. In his most influential pamphlet, The high price of bullion, proof of the depreciation of banknotes, Ricardo (1810 [1962), who would subsequently embody bullionism, concentrated his criticism on Thornton. Thornton did not respond to Ricardo, but Malthus did. Although Thornton participated in the drafting of the Bullion Report and voted in favour of it, his analytical disagreement with bullionists about the main subject under discussion - that is, the mechanism that creates the high price of bullion - leads us to place him among the anti-bullionists. We do not share the tradition introduced by Viner (1937) of considering Thornton as a moderate bullionist.