Small Change and The Depression of 1837-1843 - Part Three

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Part one of this series appears here and part two appears here.

Part three – Paper pennies and discounts

In the late 1740s, two of Scotland’s textile machinery experts presented the Lord Justice Clerk with their plan to create "a company on a much bigger scale than hitherto seen in Scotland." Ebenezer McCulloch and William Tod had their own engineering drawings for the improvement of the spinning and weaving of linen fiber. They also had a business plan for an enterprise to gain a near monopoly over the linen trade between Britain and its North American colonies. McCulloch and Tod had very good reasons to think that their idea for a venture would appeal to the second most senior judge in Scotland. Andrew Fletcher, Lord Milton, was not only a commissioner on the Board of Trustees for Fisheries, Manufactures and Improvements in Scotland but also the chairman of the Manufacturing Board’s Linen Committee.

Best of all, he was already an owner in the Edinburgh Linen Co-Partnery.

The events of 1745 and 1746 – i.e., the Jacobite rebellion of Bonnie Prince Charlie – had made things Scottish rather unpopular with King George II and his ministers. The three gentlemen decided that their chances for a royal charter would be greatly improved by seeking incorporation under the name of “The British Linen Company.” Whether by happy accident or Lord Milton’s clever design, the charter granted by the Crown was a hybrid. The incorporation not only gave Messrs. Fletcher, McCulloch and Tod limited personal liability but also granted the manufacturing company the right to establish a bank “unless prohibited.” By 1749 the British Linen Company was issuing promissory notes as payments to carters, fullers, weavers, and spinners. The next year the company printed and distributed non-interest-bearing demand notes in the size and style of those issued by Scotland’s two established banks – the Bank of Scotland and the Royal Bank of Scotland. The British Linen Company’s bank notes were denominated in pence and shillings as well as pounds; some were as low as a single penny.