George Eliot and the precious mettle of trust. (Essays).

Trust is the root of all money. The soundness of any currency--whether comprised of metal disks, paper rectangles, or some other medium of exchange--depends on the extent to which each of its users trusts that others will view it as valuable. For most people, however, to acknowledge that something as precious as one's money depends on something as untrustworthy as other people is unthinkable. Far safer to trust in God, as American currency proclaims. Safer still to trust, in addition to God, gold.

The Victorians found the international gold standard trustworthy because it was, at least in theory, an expression of the free market rather than the meddlings of government. At the same time, however, Victorian trust in gold remained troubled by gold's age-old rival--paper money--itself increasingly backed not by gold but by a paper bureaucracy. Indeed, as the convenience of paper money caused it to proliferate, it called into question the very sanctity of trust in gold. Should one trust only the "natural" form of money (gold and, arguably, paper receipts for gold known as bank notes), or should one also trust paper instruments of credit such as checks and bills of exchange?

As J. G. A. Pocock and others have documented, Victorians were not the first to worry about the relationship between gold and paper. Two factors, however, made the Victorian anxiety exceptional. First, Victorian England helped pioneer the modern regulatory state, what Jeremy Bentham termed "bureaucracy." Not surprisingly, one of the chief functions of Victorian bureaucrats was to manage and regulate Victorian money. As described in Walter Bagehot's Lombard Street: A Description of the Money Market (1873), it was during the Victorian period that the Bank of England, although nominally a private institution, became a de facto arm of government whose bureaucrats were charged with regulating the supply and general soundness of English currency. With the Bank of England assuming a quasi-public status, Victorians confronted the possibility that bureaucratic regulation of money might be more trustworthy than the unregulated vagaries of the international bullion market. From this possibility, it was but a short step to trust a central bank not only to regulate money, but to create it: indeed, to replace gold and gold-backed paper with what the twentieth century would call "fiat money."

Against this emergent trust in government lay another possibility, which also had a Victorian twist. Famously understood as the Age of Contract, the Victorian age found the most common manifestation of that contract in paper money. Under a gold standard, paper money, however defined, is promissory. A bank note, for instance, is a paper instrument containing a binding, express promise by a bank to pay to the bearer on demand a definite sum of money (that is, a certain weight of gold). (1) It is also an implicit promise by the issuing bank that it has enough gold on deposit to redeem any note presented to it by a bearer (provided there is not a rush). A bill of exchange is an order by one party (the drawer) that directs a specified second party (the drawee) to pay, upon demand, the holder of the bill (the payee) the amount of money indicated on the bill. It is also an implicit promise by the drawer that the drawee can be counted on to pay as directed, typically because the drawee both owes the drawer money and is known by the drawer to be financially sound. (2) A check is likewise both a written order directing a bank to pay a specified amount of money to a specified person, and an implicit promise by the drawer of the check that he or she has enough money on deposit at the bank to cover the amount specified on the check.

Appropriately, it is Henry Maine, the great Victorian apostle of contract, who sheds light on the relation between contract and trust. Maine is best known, of course, for proclaiming in Ancient Law (1861) that "the movement of the progressive societies has hitherto been a movement from Status to Contract" (100). He is less known for his proviso that further progress toward contract depends on a continuing development of "morality": a movement from the "loyalty of the antique world" to the "good faith and trust" that tends to characterize "contemporary manners" (180). Maine's "good faith and trust" suggests that contracts (including paper money) must be backed not by trust in express bureaucratic regulation, but rather by trust in an implicit shared morality of conscientious subjects: a Burkean or Arnoldian tacit culture of trust or "faith" instead of a more Hobbesian confidence in the sovereign's express dictates. (3)

Taken together, the twin rise of the regulatory state and of the contractual subject suggests that monetary trust must be both express and tacit, bureaucratic and interpersonal. Yet the coherence of these two kinds of trust remained suspect throughout the Victorian period, for the English (unlike Americans) had great difficulty constructing the cultural "middle" that would allow such coherence. Express trust flourishes most readily among bureaucrats and lawyers, individuals who trust the rule and rules of law. Tacit trust flourishes most readily among friends, lovers, and family members, individuals whom long intimacy has shown can be trusted implicitly. Both kinds of trust are needed in the modern state. However, as Matthew Arnold recognized, and as Francis Fukuyama has recently explained, it is only by developing a middle realm of culture--between family and government--that the middle class can enjoy a stable ethos of trust, or what Fukuyama and other social scientists now term "social capital." (4) As Ale xis de Tocqueville observed in America, this middle realm most readily flourishes when citizens voluntarily form and interact within myriad associations. The problem for Victorian England was that its class divisions impeded such associations from developing to the same extent as in America.

The Arnoldian answer, of course, was not just "culture," but a predominantly literary culture: the hope that literature and criticism could create a more stable and elevated culture of trust than could the messy associations of lowbrow America. If trust thus became a literary virtue for Victorians (tellingly, Arnold mentions "trust" or "entrusted" five times in his two-paragraph Introduction to Culture and Anarchy [1869]), it was the duty of the literate--and especially of the Victorian sage--to foster it: to cause a trust-fostering literature to circulate throughout the land, and thereby create what George Eliot termed a "moral currency" (Impressions 76) to underwrite the nation's monetary currency.

Indeed, Eliot provides perhaps the most sage-like treatment of Victorian trust, for she not only repeatedly "deal[s] with the politics of trust" (Ermarth 253), but also presages the close connection between modem trust and money that is implicit in the phrase "social capital." In particular, both Eliot's early and late works explore the relation between money--and specifically gold money--and trust. Gold and trust figure prominently in "Brother Jacob" (1860) and Silas Marner (1861), which illustrate the early Eliot struggling with the duality of trust, failing to portray a coherent alloy of its two variants. Whereas "Brother Jacob" celebrates a triumph of an express trust in government, Silas Marner mythicizes a tacit trust that extends beyond the familial to animate the extended and anonymous free market. Years later--in her final and still underappreciated book, Impressions of Theophrastus Such (1879)--Eliot crafts a coherent if ironic "moral currency": a mediating culture of trust that, appropriately, is b oth expressly and tacitly compared to gold.

I. Trust and the Victorian Gold Standard

In 1821, England legislatively adopted a gold standard for its currency, after having "been on a de facto gold standard for many years" (Chown 67). Four years earlier, England had introduced the one-pound gold sovereign as the basis of the currency, replacing the gold guinea, which had been discontinued in 1813. Adopting the gold standard meant that England henceforth had a mixed currency, comprised of gold coins and paper money. Just what counted as paper money, however, remained a hotly debated issue: Was paper money limited only to convertible bank notes, or did it also include paper instruments of credit such as bills of exchange and checks? The controversy was not merely academic, for out of it emerged the landmark Victorian legislation regarding the regulation of money, as well as an enduring ambivalence over the nature of trust in an expanding credit economy. (5)

In the years leading up to the 1844 Bank Charter Act (commonly called "Peel's Act"), two main schools debated its provisions. Reflecting the common view that gold was the natural currency, (6) the Currency School sought to set up a monetary system of "perfect circulation," one in which banknotes functioned as if they were gold. To achieve this result, the Currency School argued that the supply of banknotes should be strictly controlled by legislation that ensured that their circulation would expand and contract in conformity with international bullion movements into and out of reserves held by the Bank of England. By contrast, the Banking School argued in favor of a more laissez-faire monetary system, one that left the various banks free to issue as many convertible banknotes as they saw fit. Arguing that all forms of paper credit--checks, bills of exchange, and banknotes--should be considered "money," the Banking School tended to view gold as a merely conventional medium of exchange: one that "depended on re cognition itself-on the community's acceptance of it as a standard" (Klaver 106). Under this view, which called into question the very idea of a perfect circulation, the Currency School's plan to regulate the money supply--which targeted only banknotes--was doomed to fail. (7)

Beneath these ongoing debates lurked anxiety about the diffuse public trust required in an expanding credit economy. If gold was perfectly trustworthy, it was ironic indeed that adoption of the gold standard occurred at the very time when gold itself was becoming less and less common as a circulating medium of exchange. Since gold was bulky and heavy, it was costlier than paper to carry, transport, and safeguard. It thus made economic sense for day-to-day transactions to be conducted through a cheaper paper medium backed by promises rather than gold content. Yet, as Maine suggested in Ancient Law, this move toward a promissory currency required a moral supplement of trust a diffuse confidence that the promises represented by paper money, upon demand, could be translated into the tangible reality of gold.

Since Victorian England had not evolved a currency comprised entirely of paper, thinkers as diverse as Spencer and John Ruskin interpreted England's mixed currency as signifying the incomplete movement of the English economy from status to contract: from a low-trust (status-based) world of in-kind barter in which the seller parts with his or her goods only for goods of equivalent intrinsic value, to a high-trust (contractual) world in which sales are paid for entirely by paper promises. Spencer succinctly explains the relation between gold and trust in Social Statics (1851):

The monetary arrangements of any community are ultimately dependent, like most of its other arrangements, on the morality of its members. Amongst a people altogether dishonest, every mercantile transaction must be effected in coin or goods; for promises to pay cannot circulate at all, where, by the hypothesis, there is no probability that they will be redeemed. Conversely, amongst perfectly honest people paper alone will form the circulating medium; seeing that as no one of such will give promises to pay more than his assets will cover, there can exist no hesitation to receive promises to pay in all cases; and metallic money will be needless, save in nominal amount to supply a measure of value. Manifestly, therefore, during any intermediate state, in which men are neither altogether dishonest nor altogether honest, a mixed currency will exist; and the ratio of paper to coin will vary with the degree of trust individuals can place in one another. [...] [T]he more generally men find each other trustworthy, the more frequently will they take payment in notes, bills of exchange, and cheques. (396-97)

Ruskin more pungently makes a similar argument in Munera Pulveris (1872):

The use of substances of intrinsic value as the materials of a currency, is a barbarism;--a remnant of the conditions of barter, which alone render commerce possible among savage nations. It is, however, still necessary, partly as a mechanical check on arbitrary issues; partly as a means of exchanges with foreign nations. In proportion to the extension of civilization, and increase of trustworthiness in Governments, it will cease. (18)

Although Spencer and Ruskin agree on the general relation among progress, currency, and trust, they disagree on the appropriate object of trust. Whereas Spencer focuses on interpersonal trust ("the degree of trust individuals can place in one another"), Ruskin emphasizes trust in Governments."

Less obviously, these different objects of trust entail different views of the gold standard itself Although Spencer suggests that gold currency might one day disappear ("save in nominal amount"), he does not suggest that the underlying gold standard should be abandoned. Instead, when his argument is read against the backdrop of his economic views, Spencer suggests that the gold standard both embodies and guarantees a trust that is tacit because it grows out of the unfettered workings of the free market. For champions of a free market like Spencer, the gold standard allowed the international money market to resist the regulatory meddlings of governments. The gold standard promoted trust in the soundness of a nation's currency because it was a self-regulating and hence seemingly natural process, …