Isaac Newton and John Pollexfen

In Newton’s first year as Master, John Pollexfen, MP and member of the Board of Trade (1696-1707), published his Discourse on Trade, Coin, and Paper Credit (1700). In it, Pollexfen argued that England’s current trade, with its reliance on artificial paper credit, was helping to create the excessive export of bullion which was causing coin shortages and damaging the wealth of the English nation.

Pollexfen was a mercantilist: he believed that creating a favourable balance of international trade would lead to an influx of physical money (known as specie) into a country, thus creating national plenty and power. Though mercantilists of the early modern period differed on various points of economic policy, they all agreed that the management of money was an extremely important political consideration, one which was connected to all aspects of an improving society and required active regulation by the state. The relationship between specie and international power was, for them, a forceful argument for colonial expansion.

Mercantilists’ worries about the damage of paper credit were at the heart of important cultural debates on the place of luxuries in English society in the early eighteenth century. Mercantilists believed that healthy trade could only be achieved when a country’s exports exceeded its imports. As such, many economic thinkers like Pollexfen were critical of contemporary fashions which relied on importing ‘unnecessary’ foreign luxuries such as teas and spices, fabrics and metalware, and all kinds of natural or artificial rarities. Economists and cultural writers alike raged against the evils of commerce and targeted the East India Company for encouraging the export of silver to India in return for what they called ‘trinkets and baubles.’

Contemporaries believed that excessive importation not only saw money and bullion leave a country, but it also threatened the livelihood of important domestic industries. For example, there were many intense political debates over how best to protect the English wool industry from its international competitors (mainly France and Ireland, as well as new kinds of fabrics such as calico and chintz being manufactured in India and elsewhere). The progress of other domestic industries and colonial expansion were together assessed according to a need to keep the scales of trade balanced.

Newton generally agreed about the damaging effects of excessive luxuries in society but did not share Pollexfen’s view about the automatically damaging role of paper credit in the economy. He responded to the MP’s Discourse with a statistical analysis of governmental accounts of gold and silver from 1660: Newton was one of the first to tie the movement of gold and silver with international events such as war and how this changed economic relations and trade balances between countries. He emphasised the need to overcome circumstances such as these by managing national money supply through the moderate use of credit:

Too much may hurt us as well as too little. So much is best for us as suffices to lower interest, make dispatch in business, set the people on work & inspire life & vigour into all the busy part of the nation too strongly to luxury. For it enriches us only among our selves & not in respect of foreign nations. But What proportion in respect of gold & silver is best for us is a determination which may vary with circumstances of time & must be left to experience & the wisdom of the legislative power.[1]

In this assessment, Newton was promoting a policy of moderation which was representative of much of the social and political culture of the time. But it is clear that he saw a nation’s government as playing a critical role in managing not only a nation’s finances but also their international markets.