II. Sir Thomas Gresham

The great businessman of England in the dawn of capitalism was Sir Thomas Gresham, financial adviser to three Tudor monarchs—Edward VI, Mary, and Elizabeth—founder of the Royal Exchange and reputed discoverer of Gresham’s Law, known to every crossroads store controversialist on money.

Son of a baronet who was a friend of Wolsey, born in 1519, when Fugger was at the peak of his career, merchant-adventurer by inheritance, studied at Cambridge—Thomas Gresham was the prototype of the modern Peel-Hanna-Chamberlain-Mellon school of merchant-banker-statesman. Starting with an education amid members of the mercers’ guild, who had but little, he spent twenty years as merchant and king’s factor in Antwerp, money metropolis of Europe, where he learned more about money, credit, exchange, and speculation than any of his English contemporaries.

He went to Antwerp as king’s agent in 1551 when Edward VI’s ministers were looking ruefully down that bottomless hole known as the national debt. It was an external debt—more kings have fallen by it than by guns. English kings borrowed from Flemish, German, and Italian bankers. More money flowed out in usurious interest than flowed in in loans. Edward VI had to find 40,000 pounds a year for interest to foreign bankers. “How can the king be rid of his debt?” asked the ministers. Gresham’s answer was an amazing one. “By paying them and incurring no new ones.” Seemingly it had occurred to no one. It was the hard way. Politicians have a preference for the easy way—the primrose path down which they lead people to the ever-lasting bonfire. Gresham persuaded the ministers of Edward, Mary, and Elizabeth to try the hard way. It led to riches for England.

By skillful manipulation on the Antwerp bourse he got control of pound exchange over a considerable period, making it favorable to London. He induced the government to economize and to remit to him weekly sums for extinguishing the debt.

He had observed in Antwerp and Amsterdam that the worn and inferior coins drove out the good ones. England’s slipshod coinage resulted in the continuous flight of the sound ones and of the precious metals. Gresham supposed he discovered this law. As late as 1857 H. D. Macleod, economist, supposed so, too. He gave it the name of Gresham’s Law. It is probably the best known of economic principles. But actually Gresham did not discover it. It had been observed by others before him—Copernicus for one. To Elizabeth he said: “And it please your majestie to restore this your realm into such estate as heretofore it hat bene, your highness hath none other ways, butt, when time and opportunyty serveth, to bringe your base money into fine, of xi ounces fine. And so gowlde.” This was done.

He perceived that foreign interest payments drained away England’s metal money. Why not borrow from Englishmen at home? There was the canon law against it. But off in Augsburg Jacob Fugger and his personal philosopher Peutinger had already argued the ecclesiastical and secular validity out of that old Aquinian fetish. And so Gresham got Elizabeth to end the ban on interest in England. She fixed the legal rate at ten per cent.

Buying abroad and selling too little also took away England’s precious metals. Gresham contrived to shift the base of England’s trade from Antwerp to the free port of Hamburg. From thence he built a large trade into Germany. The Hanseatic merchants had had almost a monopoly of that. Gresham took away their hold upon England’s export trade to Germany. Thus he weakened the Hanse merchants and drove the Steelyard out of London. Almost as important, he taught England a lesson. Wars are made, not merely with arms, but with economic weapons. But he did not neglect the value of weapons. In his role of adviser he taught Queen Bess that a navy was a thing of great value to England and proceeded to supply her with one in his role of merchant.

Lastly, Sir Thomas Gresham—knighted for his services—built out of his own funds the Royal Exchange to provide London merchants with a bourse such as he had seen in Antwerp. In 1571 the fine building was formally dedicated by the Queen, after dinner at Gresham’s home.

Serious, severe, sober in his dress, he lived well, but not ostentatiously as did Fugger and the Medici. He had a home in Bishopgate Street and several in the country. He endowed a college—Gresham College—an almshouse in Broadstreet, and distributed alms to five prisons and four hospitals each quarter. He attained to no such wealth as Fugger or Medici. Moreover, he came on the scene after them and when the devices of the new flowering capitalist and mercantilist world had been much advanced. But he must rank as one of the great commercial figures of that era.