22 The English Gold
In 1822 the British Government decided to convert the rate of interest paid on government bonds from five per cent to four per cent. In 1824 the rate was further reduced to three and a half per cent. These actions had a profound—though of course unintended—effect upon the course of the Greek War of Independence. Indeed, it is difficult to see how Greek independence could have been achieved when it was but for the cupidity and short-sightedness of the British property-owning classes.
Philhellenism had taken many forms since the Greek Revolution broke out in 1821, but never before had it appeared that the best way to promote the Greek cause was also the best way to maximize the return on capital. For a short period in 1824 and 1825 a few rich Englishmen were to enjoy the delusion that by helping themselves to grow richer more quickly they were also helping the poor struggling Greeks to regain their freedom.
Because of the British lead in the industrial revolution, capital began to accumulate at a faster rate than domestic agriculture and industry could absorb it. In addition, many of the holders of government bonds began, as a result of the reduction in interest rates, to look for more lucrative forms of investment. During the early 1820s the most attractive investment seemed to be in foreign bonds. During these years, as the depression following the end of the long wars with France came to an end, several governments were in need of money to help pay for war debts to their nationals, and the only place where such money could be found was London.
The first major foreign loan was to France to allow her to defer some of the reparation payments due to the victorious allies. This was a huge success since not only was the rate of interest high but it appeared that the investment was guaranteed. When, on one occasion, Baring Brothers, the contractors for the loan, found that they could not pay, it was obvious to the governments concerned that it was more in their interest to give help to Baring Brothers than to allow them to default and so lose all chance of getting their money. Judicious bankers, especially Barings and Rothschilds, were thus in the comfortable position of having unlimited opportunities for making profits with no risk of loss.
After the French loan there was a rush of foreign loans on the London market. Nearly all took the same form. A firm of bankers was appointed contractors and they were responsible for selling the bonds. The interest rate was usually between five and eight per cent—a few percentage points above government stock—but the return was in fact much greater since the bonds were initially offered at a large discount. The contractors set their conditions for handling the loans, conditions which may have appeared to be details but which in practice were a charter for profiteering. It was usual for the contractors to take a large commission at every stage of the transaction and to insist on monopoly rights as buying agents for the foreign government. As one economic historian has commented, ‘They received a commission for raising the money, a commission for spending it, and a commission for paying it back’.1
International economic relations was a subject little understood at the time but, even so, the contradictions were plain for all to see. For example the absolutist powers, Russia, Austria, Prussia, and France all had loans from the London market, and at least one of the loans was specifically and avowedly raised in order to equip forces to put down the revolutions in Naples and Spain. And yet simultaneously the Constitutionalist Government in Spain raised loans. Furthermore, a host of South and Central American countries which were in revolt against Spain—whether Constitutionalist or not they did not mind—also had no difficulty in raising money. The investing public seems to have believed that because governments were involved, as with the first French loans, their money was somehow guaranteed, and in the early years dividends were actually paid since the governments were constantly returning for second and third loans. Between 1822 and 1825 over £45 million was loaned to foreign governments, all of it ultimately from the few thousand men who formed the British wealthy class.2
In these circumstances, it is not surprising that the Greeks should have tried London in their attempt to find money, and that talk of a loan for Greece should have dominated the scene long before it was arranged. Bowring, who was well connected with the financial establishment in London, was not exaggerating when he told Hobhouse in December 1823 that he could ‘engage to raise a loan of £600,000 by tomorrow morning if anybody invested with powers were here’.3 The miserable state of South America had not prevented the countries there from obtaining a loan. How much more attractive was the Greek cause.
Yet the loan would probably not have been concluded if it had not been for the connivance and co-operation of the British Government. The Government on the whole was not much bothered if its citizens pursued commercial policies at variance with its own foreign policy, even if British money was being borrowed specifically to frustrate British policy on the Continent. But the Ottoman Empire was an ally of Great Britain. It was stretching even the most liberal interpretation of the rights of a subject to argue that he was entitled to exploit British institutions and British resources to organize and strengthen armed rebellion against a British ally. The loan would not have been permitted if the British Government had not been convinced from its intelligence sources that the rival schemes for loans being bandied about by the Knights of Malta, by the mysterious Robert Peacock and General de Wintz, and by Ruppental, were promoted by rival European powers.
It had been Edward Blaquiere who first brought the Greek agent Andreas Louriottis to London in early 1823 and he never lost the proprietorial tone which comes easily to those who regard themselves as leaders and founders of great movements. Louriottis and the other official agents of the Greek Government, known as the Greek Deputies, were at first treated as protégés of the London Greek Committee, to be protected from the temptations of the great city and guided and instructed like promising schoolboys. They were so overwhelmed at their good fortune, at the prospect of obtaining any money at all, that they willingly put up with this treatment. They were content to be led about as celebrities and to leave the policy-making to their self-appointed friends. When the Committee discussed plans to raise a loan they readily consented to leave the handling of it entirely to the men who seemed so well versed in these matters, the respectable Benthamites of the London Greek Committee.
When the decision to float a loan on behalf of Greece was taken, the Committee intensified its efforts to attract publicity. It was usual during these years when a loan was in the offing, to circulate prospectuses and to inspire puffs of one kind or another. There was however no control over their accuracy. But of all the dubious claims for this or that country which were put about the City of London during the early 1820s to entice British money abroad, only one was more extravagant or more misleading than the Greek. The prize for effrontery must go to the Scottish impostor who raised a loan on behalf of the mythical Kingdom of Poyais in South America of which he had assumed the title of ‘cazique’.
Edward Blaquiere’s first pamphlet on Greece, which was rushed into print at the end of September 1823, claimed that nineteen-twentieths of the territory held by the Greeks was national land taken from the Turks and was being reserved as guarantee for a loan. Greece, Blaquiere declared, could ‘calculate upon becoming one of the most opulent nations of Europe’.4 But Blaquiere reserved his main claims for his book The Greek Revolution, which was also rushed into print in the spring of 1824 when confidence in the loan was flagging.* Sometimes, in reading Blaquiere’s description of the wealth of Greece, one is tempted to revise the judgement that he was simply a naive and superficial busybody and conclude instead that he was a liar and a trickster. Surely no partisan of the Greeks, however unscrupulous, if like Blaquiere he had visited the country, would have thought of making such claims as are in this book.
The soil of Greece, he declared, was ‘the most productive that could be named’.5 The ‘prospect of wealth and prosperity is almost boundless’.6 Greece is ‘a land flowing with milk and honey’.7 Crete is ‘the most prolific and beautiful spot on earth for its extent’.8 Blaquiere carefully noted the advantages of Greece, its climate, its intelligent, educated, and industrious population, its harbours. ‘I should have no hesitation whatever,’ he decided, ‘in estimating the physical strength of regenerated Greece to be fully equal to that of the whole South American continent’.9 In choosing this particular comparison he no doubt had in mind that the London market had in the last year or so already extended credit to Chile, Peru, Buenos Aires, Mexico, Guatemala, Colombia, and Brazil, to say nothing of the Kingdom of Poyais.
If the public had any doubts about the loan, he said, this was because of their total ignorance of the state of Greece. The loan could have been raised and repaid by the smallest island in the Archipelago. The doubts must have been deliberately sown by the Jews, who were in league with the Levant Company merchants and had co-operated with the Turks in massacring the Greeks. In particular, Blaquiere claimed, ‘a leading Jew capitalist’,10 meaning Rothschild, was behind the conspiracy. ‘Surely that person must know that of all the countries or governments who have borrowed money in London within the last ten years, not excepting those for whom he has himself been the agent and the contractor, Greece possesses the surest and most ample means of repayment’.†11 Blaquiere’s anti-semitic smears were later to rebound on the London Greek Committee.
Blaquiere’s third book on Greece, which came out in 1825 after he had been there again, was marginally less extravagant, but he repeated his claims that Greece was entitled to a high credit on the London Stock Exchange. The cause of Greece, he repeated, ‘by far the most glorious that ever graced the page of history, should not be sacrificed at the unhallowed shrine of avarice, envy, or gratitude!’12
There can be no doubt that the effusions of Edward Blaquiere had their effect on promoting and sustaining the Greek loan although, as in the earlier days when the London Greek Committee was campaigning for direct subscriptions on its own account, Blaquiere’s enthusiasm must have actively repelled some potential supporters. But even such an expert and extravagant publicist would have had no success if he had not been telling many of his audience what they wanted to hear. Blaquiere was exploiting reliable emotions—a mild traditional philhellenism, a strong desire for profit; he persuaded the investing public that they could enjoy the rare sensation of serving God and Mammon simultaneously.
Ever since news had arrived in late 1823 of Lord Byron’s new ‘pilgrimage’ to Greece, a climate of expectancy over the loan had been gradually building up. The final stimulus was given a few days before issue day when the Greek deputies were entertained at a banquet in the Guildhall in the City of London. The presence of the Lord Mayor and of Canning himself on this occasion confirmed the general view that the British Government tacitly approved of the whole transaction.
The first Greek loan was floated on the London Stock Exchange in February 1824, in the name of the London Greek Committee. It was heavily oversubscribed. The nominal value was £800,000, but it was issued at a forty-one per cent discount, so that the sale of £100 of stock only realized £59 in cash. The rate of interest was to be five per cent on the nominal capital. The contract also specified that one per cent should be set aside to establish a sinking fund and that a sum equivalent to the interest for the first two years should be withheld. Messrs. Loughnan, Son, and O’Brien, London bankers, the contractors, then proceeded to deduct at various times a sum of about £38,000 for commissions and expenses. And so by the time all the administrative deductions had been made in London, there only remained just over £300,000 to spend on behalf of Greece out of the £800,000 loan! As yet, even the £300,000 existed only on paper. Buyers of the Greek bonds had been required to put down only a first instalment of £10 per £100 bond with a promise to pay the remaining £49 in instalments over the next few months. This detail was to have important repercussions.
On the back of the bonds was the proud guarantee, ‘To the payment of the annuities are appropriated all the revenues of Greece. The whole of the national property of Greece is hereby pledged to the holders of all obligations granted in virtue of this loan until the whole of the capital which such obligations represent shall be discharged’.13
The spending of the money was to be entrusted to three commissioners appointed by the Committee. At first they were to be Byron, Napier, and Stanhope. The Greek deputies were so anxious to get their hands on the money and send it to Greece that they seemed ready to agree to almost anything. But it soon occurred to them that if decisions about the spending of the money were to be entirely in the hands of Englishmen they would be accused of having sold Greece to the English. They felt they had been tricked; Bowring felt that they were trying to undo decisions that had already been taken. The first of many arguments between the Greek deputies and the Committee was on this occasion resolved by the intervention of Jeremy Bentham. It was decided as a compromise that one of the three commissioners should be a Greek.
With the launching of the Greek loan, the London Greek Committee abandoned almost completely its original objectives of raising money for the Greek cause by direct subscription. The Committee always had been dominated by a small caucus. Day-to-day control now passed entirely into the hands of a very small group, men with contacts in financial circles, Joseph Hume and Edward Ellice, both rich Scotsmen and Members of Parliament, and Bowring, who hoped to emulate them. Hobhouse, Stanhope, and Blaquiere remained active but they seem to have been gradually excluded from some of the most important business. The occasional meeting was arranged to draw attention to the Greek cause—including on one occasion the presentation to the public of a Danish gentleman called Friedel, lately returned from Greece;14 the impostor baron was apparently still doing business. But already the main focus of radical indignation and Benthamite energy had moved away from the cause of the Greeks. The familiar names were now issuing high moral appeals to the people of Britain in favour of the Spaniards who had been exiled from the country following the French invasion.
Within a few weeks of the flotation of the Greek loan the first consignment was ready to be sent to Greece. £30,000 in gold sovereigns and £10,000 in Spanish dollars was dispatched from London in the Florida at the end of March 1824. Edward Blaquiere, still feeling that the successful floating of the loans, if not the whole British philhellenic movement, was somehow his own property, decided to take passage to Greece and to try to assume the mantle of Stanhope. The Florida reached Zante after an especially quick voyage at the end of April.
Now there occurred a complex series of muddles to which allusion has already been made in an earlier chapter. The first news that greeted the Florida on its arrival was that Lord Byron was dead. Apart from all the other implications of that unexpected tragedy, what was to be done with the money? Byron was to have been one of the commissioners; Napier and Gordon who had also been named, had declined to come to Greece; Stanhope had received his letter of recall by the army authorities in London, and in any case was opposed to the money being paid over. There were thus not enough commissioners to receive the money officially. For the time being therefore it was consigned to Samuel Barff, a British banker established in Zante, to remain in his vault until instructions could be obtained from London. In spite of the pleadings of Blaquiere, Barff and the Ionian Government insisted that the money could not be released.
Since it usually took about six weeks to send a message from Zante to London (or in the other direction) the Committee and the Greek agents in London were taking their decisions on the basis of very out-of-date information. There was a further complication in that the Ionian Government was pursuing a different policy from the British Government, the Lord High Commissioner not being kept up to date with Canning’s devious thinking. And so in June 1824 the second instalment of the loan, a further £40,000 in specie, arrived at Zante from London in the Little Sally. To the intense frustration and fury of all Greeks and Philhellenes, this money too was consigned to Samuel Barff’s bank.
Meanwhile in London, the Committee was struggling with a quite different problem. Here again the slowness of communication between Greece and England was one of the most important factors. At the time when the loan was first floated in February 1824 the publicity situation was as favourable as it was ever likely to be. Not only had there been the build-up by Blaquiere’s first pamphlet, and by the Guildhall banquet, but the British Government announcement of the reduction in interest rates on government bonds from four to three and a half per cent came the day after the announcement of the loan. In addition, it was at this time that Bowring, as secretary of the Committee, was receiving the voluminous letters from Colonel Stanhope describing his success in rapidly turning Greece into a model Benthamite state. These letters as they arrived were being fed to the press to such good effect that on the day that the loan was announced one newspaper reported that Stanhope’s corps, meaning the Byron Brigade, had ‘succeeded to the utmost extent of his wishes’; that the Greeks had ‘a force more than sufficient to reduce all the fortresses in the hands of the Turks’.15
As a result of the concurrence of all these favourable factors the value of the Greek bonds which had been issued at 59 rose to 63 and seemed set to rise further or, at worst, to stay above the issue price. The leading members of the Committee saw their chance to make some easy money. Hume and Ellice speculated heavily and it was partly because they were seen to be buying that the rate rose. Bowring was even more deeply involved. Not only did he accept an outright commission of £11,000 for his part in promoting the loan but he had contracted to buy at least £25,000 worth. He seemed set to make a killing. But they left it too late. During March as payments became due and investors began to sell off, the rate began to fall. By the end of the month it stood at 54—five per cent below the issue price. Instead of their expected gain, Bowring and the other members of the Committee who had speculated appeared likely to make a loss. The leaders of the Greek Committee now had a profound personal interest in the future of the Greek loan.
Bowring was later to protest vehemently that there had been no financial irregularities during his secretaryship of the London Greek Committee. The best that can be said in his favour is that different standards existed in 1824 from today. Bowring apparently saw nothing improper in making use of his official position and knowledge to promote his own interests. In April, Bowring, Hume, and the contractors put pressure on the Greek deputies to use some of the money already collected to buy up stock and so stimulate the market, and this was done. Blaquiere’s book The Greek Revolution, which was published at this time, was apparently his contribution to trying to reflate the Greek cause on the Stock Exchange.
Then on 14 May came the news that Lord Byron was dead. The Greek scrip immediately fell and by 13 June it was down to 44¾. The situation was now becoming critical for the speculators. Relations between them and the Greek deputies worsened almost to breaking point. The deputies suspected, with good justification, that Bowring was now more interested in his own precarious financial position than in the troubles of Greece. Bowring and the others, on the other hand, were quite ready to call the kettle black. The Greek deputies had quickly shed the charming naïveté with which they had arrived in London. They had now set themselves up as gentlemen of leisure, enjoying the delights of London and drawing shamelessly and lavishly on the loan money. In addition the deputies and their friends were not only themselves deeply engaged in speculations in the Greek bonds, but were clearly enriching themselves by direct peculation of the money. A contest in mutual blackmail between Bowring and the deputies was the outcome.
Bowring was thoroughly impaled and the more he wriggled the deeper the hook entered. He considered resigning the secretaryship of the Committee but this would have meant the certainty of ruin. He began to campaign openly for the Greek agents to be recalled to Greece and replaced by more amenable men. His desperation can be clearly seen from his letters of the time. ‘We are all of us very ill satisfied with the Greek deputies’ he wrote to Gordon. ‘They are feeble, timid, suspicious, and impractical men wholly unfit for the post they occupy’.16 To Hobhouse he wrote, ‘I cannot obtain from Orlando and Luriottis even the civility of an answer to my letters—I will write no more. A man who has written three or four thousand letters to serve a cause (as I have done) and then by way of reward cannot get a civil word from the representatives of that cause must have passion for being so scorned if he bear it long’.17
Early in June a stormy meeting took place between Bowring and the Greek deputies. The date was approaching on which stockholders were due to pay the fourth instalment of money on their bonds. Despite the low rating of the bonds on the Stock Exchange the deputies were determined to press ahead in the belief that once the fourth payment had been made it would be too late for the stockholders to withdraw and that the bonds would be more secure as a result. Bowring, on the other hand, recommended that payment of the fourth instalment should be postponed until the situation in Greece itself was clarified. Bowring’s advice was probably sound but by then he was personally far too deeply embroiled for his advice to have any claim to be objective.
His own financial position was now desperate. He was already in arrears on the payments for his bonds. He could not pay the fourth instalment and to sell the bonds at their current price would have been ruinous. He therefore swallowed his pride and begged the Greek deputies to lend him £5,000, offering his £25,000 of unpaid-for bonds as security. The deputies were affronted, but after pressure from other members of the Committee they reluctantly consented to a device to extricate Bowring from his embarrassment. In September they bought Bowring’s £25,000 bonds at ten per cent discount, although the market stood at sixteen per cent below par, the difference being generously attributed to gratitude for Bowring’s services to the Greek cause.
That was not the end of the matter. No sooner had the deal been concluded than a new factor appeared. Edward Blaquiere who had gone to Greece with the first instalment of the loan in the spring now reappeared on the scene. Blaquiere had spent his few months in Greece rushing around trying to continue the work of Colonel Stanhope. Although he had Stanhope’s pomposity he lacked his ability. As Humphreys told Gordon in August 1824, ‘Blaquiere … is a most extraordinary fellow. I should think he is a little cracked. He has a mania for writing letters of advice. He wrote one to the Lord High Commissioner which was a matchless production’.18
Blaquiere was, as ever, more interested in the appearance than the reality. His letters of advice may not have had any effect on the Greeks but that was not their sole purpose. They were carefully collected to be worked up into yet another book on his return to London. When he was due to leave Greece he had one of his most brilliant ideas. He persuaded the Greeks to send a Greek ship to England. The appearance of the first ship flying the colours of regenerated Greece in British waters would, he argued, be bound to cause a sensation and to resuscitate the flagging bonds. The Amphitrite, a Hydriote vessel with Blaquiere on board, duly reached the Medway in the middle of October. She had a cargo of currants and other Greek products to give the impression that Greece was a flourishing country easily able to repay the loan. She also carried nine frightened Greek boys (a tenth had died on the voyage) who were due to be sent to school as an example of practical regeneration in action.
One of Blaquiere’s first actions on landing was to dress two of the Greek boys in expensive Greek costumes and parade them round London. They were taken to the Stock Exchange where, it was said,19 they were greeted with cheers. Blaquiere’s theatricals had the intended effect. The discount on Greek bonds which was standing at sixteen per cent below par on 26 September before the arrival of the Amphitrite, had fallen to a mere four and a half per cent by the end of October. The speculators were not slow to seize their chance. Bowring, bold as brass, now wrote to the deputies asking to have his bonds back. The deputies were flabbergasted at his effrontery but again, after the usual pressure, they gave way. Bowring’s bonds were given back to him at the old price and sold off on the market at the enhanced price.
Hume was also reimbursed by the deputies. He had bought £10,000 worth of scrip but had been obliged to sell in August at a loss of £1,300. From that day onward Hume never lost an opportunity of complaining that the deputies had treated him unjustly. At last, at the end of November, the deputies paid him a visit at his London house. After a good deal of sparring it emerged that the deputies were prepared to pay him £1,300, the amount of his loss, from their funds in return, presumably, for his silence. Hume accepted but only on condition that the deputies paid him a further £54, for interest for the period during which he had been without the money!
If the Greek deputies thought that by these expensive favours they could repurchase the co-operation of Bowring and the others, they were soon disabused. Early in December Bowring informed them officially that the London Greek Committee had decided to make direct representations to the Greek Government impeaching their public conduct. The news was passed to the Greek Government that there could be no question of another loan in the London market while Orlandos and Louriottis remained in London. But this time Bowring and his friends had over-estimated their strength. At the beginning of January 1825 the Greek deputies gleefully announced that arrangements had been made with Messrs J. & S. Ricardo, London bankers, to float a second loan on behalf of Greece, this time for £2,000,000. The whole affair had been concluded in secret without reference to the London Greek Committee. Orlandos and Louriottis were in a stronger position than ever.
Before the events of the Second Loan are described, the upshot of the other aspect of the muddle mentioned earlier should be explained. As the summer of 1824 progressed, the deputies and the Committee learnt that the two instalments of gold which had been sent to Greece had been sequestrated at Zante following the death of Lord Byron for lack of commissioners to receive it on behalf of the Greeks. The obvious solution was to send out new commissioners, but with Bowring and the Greek deputies engaged in a desperate struggle with one another over money and policy, it is hardly surprising that the obvious solution was not an easy one. Gordon, who had been named as commissioner to succeed Byron, saw what was happening and prudently refused to accept the commission. Hobhouse, who felt a deep sense of personal obligation to carry on the work begun by Lord Byron, was ready to go to Greece and even had his bags packed when he too realized that the interests of Greece, of the Greek Committee and of the Greek deputies could not be reconciled with one another, let alone reconciled with the interests of the bond holders. Furthermore, distressing news was arriving in London of a civil war raging in Greece. It was not at all clear that there was any longer a government in Greece to whom the money could properly be consigned.
In August 1824 the Committee at last found two commissioners willing to go to Greece to try to sort out the muddle. James Hamilton Browne, a dismissed official of the Ionian Government, had been in Greece before—he had accompanied Byron from Genoa—but he had no position or authority. The other, Henry Lytton Bulwer, the brother of the novelist, had been intending to go to Greece as a volunteer. Bulwer was later to achieve some distinction in the British foreign service. To judge from the book which he published about his visit to Greece,20 in 1824 he was still a supercilious young man, proud of showing off his education, a romantic Byronist with a condescending manner. The London Greek Committee were sending a boy on a man’s errand although, as events turned out, the situation was probably beyond correction in any case.
The exact nature of the mandate Browne and Bulwer were given cannot now be ascertained. They seem to have been instructed to hand over the money to the Greek Government if they found a Greek Government with roughly the same amount of authority in Greece as at the time when the loan was contracted for. But they also seem to have been instructed to persuade the Greek Government to accept conditions for the spending of the money and, in particular, to clarify the respective powers of the deputies and the Committee in London.
Browne and Bulwer crossed Europe by land to save time and reached Greece at about the same time as the Florida arrived at Nauplia with £50,000 worth of gold on board, the third instalment of the loan. To their surprise they found that the first two instalments, which were thought to be safely locked up at Zante, had already been paid over to the Greeks. Samuel Barff, taking the initiative into his own hands in a manner not to be encouraged in bankers, had disregarded the details of the contract and the law of the Ionian Islands, and exported the money with the simple excuse that the money was intended for Greece and to Greece it should go.
The task of Browne and Bulwer, which had seemed difficult enough before, was now rendered impossible. Once the Greeks had taken possession of the first £80,000 it was unlikely that they could consent to any conditions restricting their freedom of action. Browne and Bulwer’s strongest bargaining counter—the fear that more loans would not be forthcoming without the co-operation of the British Philhellenes—was fast losing its force. Not only were the deputies reporting fully from London on their negotiations with other bankers there, but the omnipresent Knights of Malta were renewing their offers to raise money for Greece in Paris. Browne and Bulwer hung around Nauplia week after week waiting for an answer to their overtures but were fobbed off with the old diplomatic trick of ‘Tomorrow’. Then they both fell severely ill and their negotiating position declined from weakness to impotence. It seemed certain that they would die—as did the captain of the Florida—if they did not leave Nauplia at once for the fresher air of the islands. Abandoning the negotiations they sailed away and by great good fortune both survived. They did obtain a piece of paper from the Greek Government before being taken to safety by a British warship, but it was little more than a receipt for the money.
The abortive mission of Browne and Bulwer can be regarded as the last gasp of the London Greek Committee—their final feeble attempt to exercise some control over the Greek deputies in London and over the spending of the money. By the end of 1824 the deputies were in complete command. The launching of the second loan merely confirmed their supremacy. The Committee existed only in name—even minutes were no longer kept. The Florida, Little Sally, and Nimble plied a shuttle service through 1824 and 1825 conveying to Greece their cargoes of English gold.
The second Greek loan was floated in February 1825. Its terms were even more attractive to investors than the first. It was discounted to 55½ instead of 59. As with the first loan, a sum equivalent to two years’ interest at five per cent of the nominal capital was withheld along with a sum equivalent to one per cent to establish a sinking fund. The administration of the loan was in the hands of Messrs. J. and S. Ricardo, London bankers. Orlandos and Louriottis, the Greek deputies, had almost absolute control and the London Greek Committee was not officially concerned at all. However, the deputies continued to deal on an individual basis with several members of the Committee whom they believed to be their friends.
The sum realized was £980,000 but that takes no account of the ‘commissions’ and ‘expenses’. If some of the dealings connected with the first loan were less than proper, the handling of the second loan was scandalous. Despite the voluminous information that was gradually drawn out by successive inquiries, the complete story still defies reconstruction. Hundreds of thousands of pounds were wasted on the schemes to build a fleet for Greece—a complex story told in a later chapter. But waste is one thing, corruption another. A sum of £113,000 was said to have been spent on ‘rejuvenating’ the stock of the first loan—in other words playing the market to try to keep the price up, an activity affording innumerable opportunities for the exchanging of favours and the lining of pockets. Bonds were bought when the market was low and accounted as if they had been bought when it was high. Other huge sums were put down as expenses or commissions for this or that which were little more than bribes. Bowring is said to have accepted a further payment as simple hush money. Many thousands of pounds remained entirely unaccounted for. The deputies were not subtle embezzlers. Not content to appropriate large sums by the safe method of making false purchases and sales, they could not resist taking a rake-off even when small sums passed through their hands and when the chances of detection were high. For example, a sum of £2,695 was charged as lost owing to the failure of a Greek merchant in London: the merchant’s books showed only £500. The sum of £1,200 was credited as received from Calcutta from a subscription there, but the Calcutta accounts showed that £2,200 was sent. It is not even possible to discover how much money was remitted to Greece.
During most of 1824 and 1825 the British public and the holders of Greek bonds remained in ignorance of the sordid dramas being enacted behind the scenes with their money. They occasionally read in the newspapers that the Florida or one of the other vessels had left England with another consignment of gold and assumed that everything was going well. Then towards the end of 1825 a distressing series of events occurred. First, the South American mining speculations collapsed whereupon the Bank of England, becoming alarmed at the galloping speculation, stopped discounting commercial paper. Suddenly the country was in the grip of a financial crisis. There were a few dramatic bank failures and the gold poured from the Bank’s reserves. In December the country was said to be ‘within twenty four hours of barter’ and only emergency government measures, allowing the Bank to exceed the legal limit on its note issue, saved the situation; but it did not prevent numerous business enterprises from bankruptcy. Foreign stocks followed soon afterwards. In January 1826 the agents for the Colombian Government loan stopped payment and the myth that stocks were safe just because they were ‘government’ exploded. Suddenly the horrible truth burst in on thousands of investors—the only interest they had received came out of the principal of successive loans and the only way they were likely to get any more payments from abroad was by making more loans. Within a few months a long list of foreign governments were in default—Spain, Portugal, every South American country except Brazil, and of course Greece.
It was natural, since the speculation boom had now clearly burst, that attention should again be directed towards the progress of the Greek loan. At the beginning of 1826 rumours that the loans were being mismanaged began to circulate, culminating in the publication of a book, Greece Vindicated, by an Italian Philhellene, Count Palma, which threw out a number of accusations and demanded an investigation into the conduct of the deputies. The bonds slipped down to eighteen per cent below par. At the same time frightening news began to arrive of the progress of the war in Greece. In particular, accounts were gradually coming through of the fall of Missolonghi, the circumstances of which will be described in a later chapter.
The situation on the Stock Exchange was too bad even for ‘rejuvenation’ dealings to have much effect. Attempts were made to hush up or deny the reports from Greece. False reports* were deliberately published in order to puff up the cause, as had been done in 1821 and 1822 from the famous ‘mints of philhellenic mendacity’22 in Germany and Italy. Blaquiere, always to be relied upon, rushed into print for the fourth time on the Greek cause, dropping encouraging hints that diplomatic action by the powers would soon restore the situation,23 but gradually the pressure for an investigation became irresistible.
Most of the accusations were directed at the deputies, and the suspicious stockholders assumed that the London Greek Committee was the proper body to protect their interests. Bowring, sensing this, tried to forestall any criticism that might be levelled at himself for his part in the first loan, by joining the pack in attacks against the second loan. It was a mean device, and ultimately it failed, but Bowring rode the tiger for a surprisingly long time. The Greek deputies—hardened embezzlers and double-dealers though they were—must have felt that British hypocrisy was especially blessed when Bowring was appointed secretary of an investigating commission by the Greek Government. The commission made no discoveries since the deputies simply refused to accept their right to investigate their affairs.
Then in July 1826 Bowring published an anonymous article in the Westminster Review in defence of the London Greek Committee. It was a skilful piece of unscrupulous politics. As far as the first loan was concerned, he gave a categorical undertaking that the funds had been well applied with ‘no waste, no jobbing in any state whatever’. In turning to attack the second loan for which the Committee had no responsibility he casually mentioned that the bondholders could expect ‘total and final loss’. It was a brilliant stroke. The bondholders, worried though they were, had never feared this even in their deepest moments of depression. Indignantly they began to organize themselves to demand action, assisted by Bowring who gave them a paper on the results of the earlier abortive investigation. Then in September, led by the unsuspecting Colonel Stanhope, they decided to appoint a further investigating committee and again Bowring was made a member. As before no progress was possible since the deputies and Messrs. Ricardo refused to co-operate. Bowring brazenly continued his bluff. ‘We are going most courageously and determinedly’, he wrote in statesmanlike terms to a friend, ‘into the enquiries connected with the Greek loans. Whether any ultimate good will result I know not but the public shall know the facts’.24 In October a further angry meeting of bondholders discussed a recent admission by Louriottis that £8,000 worth of bonds had been purchased at 54 when the market stood at less than half that figure. Bowring who was present joined in the chorus of condemnation and declared that the truth must be ruthlessly pursued ‘no matter to whom it attached reproach’.25 No gambler under strain was ever more cool or courageous. He staked his reputation on being able to stir up enough dust and cause enough bluster to obscure his own guilt.
By now Orlandos had left England but Louriottis, the other deputy, refused to be browbeaten. With the help of The Times he skilfully redirected the indignation of the bondholders. In disclosing that £8,000 had been bought at far higher than the market rate, Louriottis had declared cryptically that this had been done on behalf of a ‘friend of Greece … whose name he could not possibly state’. The Times led the demand that the ‘friend of Greece’ should be named, thundering that ‘the man who has done this is what we call in English a swindler’. Soon a lively correspondence developed in the newspapers with every day bringing new charges and counter-charges. It was The Times which in the end, from its own inquiries, published the apparently anticlimatic story that the ‘friend of Greece’ was a little-known man called Burton, a London broker. Once the circle of silence was broken the whole story became clearer. Burton, it seems, had made an agreement with the deputies that the transaction in which he was involved could only be made public in the context of a general revelation of all similar transactions, including the one in which Bowring was involved. The deputies had a strong motive for not making public the Burton transaction since Burton was only an agent for bonds owned by Louriottis’ secretary, George Lee; Burton was in fact merely an instrument of the deputies’ own embezzlement! Bowring may have been relying on this net of intrigue holding enough to preserve his own activities secret, but even when the full story of his transactions in 1824 was published he denied it with high disdain. It was not until The Times had published one of Bowring’s letters of 1824 which left no room for doubt, that he was compelled to admit what had happened, and then he claimed lamely in his defence that he had been suffering from a family sorrow at the time and could not be held responsible.
Gradually one scandalous fact after another was dragged before the public gaze. The deputies’ guilt was never in any doubt. They at first refused to give any account and then, when they did, their accounts had such huge ‘miscellaneous’ items and such dissimilar services lumped together that it was obvious that money had disappeared. But the British public was more interested in the revelations about the British.
Bowring came in for more criticism than the others. Attempts were made to warn Bentham against his favourite disciple and chosen executor, but Bentham forgave him. Hume came out of the scandal with some scraps of dignity. He admitted openly what he had done and tried to give the impression that it was only what any red-blooded man of affairs would have done in similar circumstances. Ellice feebly feigned indignation at the accusations against him until overwhelming evidence was produced. Stanhope and Hobhouse, although they may not have been proved to have been directly involved in any malpractices, had been made to look thoroughly incompetent and simple. All the leaders of the London Greek Committee were either knaves or fools.
Numerous bankers and brokers were also exposed as enriching themselves by doubtfully proper activities. The embarrassment of Hume and Ellice and of the bankers provided a feast of opportunities for ritual attacks on those ogres ever present where finance is concerned, the Scots and the Jews.
The satirists poured out their doggerel on the theme:
Roused by the sound of liberty and scrip
To arms, to arms belligerent brokers skip:
Loud rings the cry of freedom far and wide;
Stocks and subscriptions pour on every side;
Contractors, weeping over Grecian wounds,
Pocket their four-and-sixty thousand pounds.
∗ ∗ ∗
Here ‘Brimful now is misery’s fatal cup
The Turks have blown another fortress up’
Their Forts blown up! I’ve heavier news to tell;
The scrip—the scrip will be blown up as well’
One cries ‘The cause is lost’, another ‘Zounds!
Who cares: I’ve lost my four and fifty pounds’
Snuffles a saint ‘I sorrow for the Cross!
But 19 discount is a serious loss’.26
The chief victim of the Greek bubble was Benthamism. Joseph Hume had been the scourge of the Government in the House of Commons. He had employed clerks at his own expense to go through the public accounts to look for the smallest items of unnecessary expenditure. He had exploited his experience in making fortunes in India to attack the administration of the East India Company. Ellice had been a leader in criticizing the Government’s methods of administration and seeing waste in every activity undertaken. Hobhouse and Stanhope had for years bored and exasperated the British public with their sermonizing.
At last the public had its own back. The radicals, the denigrators, the men who adopted a high moral tone, the men who were forever pushing fashionable liberal causes down the throats of the people, the men who saw nothing right with the community in which they lived but had a ready answer to every political problem, these men had been proved to be either corrupt or incompetent and in some cases both. The men who had assumed a superiority in wisdom, who never doubted that they were the best leaders for the British Empire, had shown themselves unable to handle even such a puny enterprise as the Greek loan without bungling it. The downfall of the Benthamites was enjoyed throughout Britain with a savage self-satisfied relish.
But in politics memories are short. The Benthamites had the kind of resilience which accompanies arrogance. Within months Hume, Ellice, and the others were attacking the Government as successfully as ever, undismayed by the affair of the Greek bubble. Within a few years Bowring’s misdemeanours had been forgotten to the extent that he was being employed by the Government for commercial investigations on the Continent. If in the end the careers of these remarkable men did not match their ambitions, the reasons lay elsewhere.
What then did the loans achieve? The story of the £1,000,000 or so that was actually spent on behalf of Greece will be told in later chapters. Here it is enough to round off the story of the loans. No interest was ever paid on the bonds. The price fell steadily. Many investors lost heavily. The bonds were bought up from the original investors for a shilling or two by professional speculators, and for the next fifty years they were passed around the stock exchanges of Europe. They still had a value. As long as Greece was in default on her loans the holders of the bonds managed to keep the stock exchanges of Europe closed to her. Greece, along with the other countries who had defaulted in the speculative bubble of 1823-5, was virtually cut off from European credit and capital and her economic development was retarded as a result. The speculators calculated that a time would come when Greece would settle with the bond holders in order to have access to European capital.
It was not until 1878 that the time came. The sum owed by Greece for the two loans then amounted to no less than £10,030,000. Since the total revenue of the Greek Government for all purposes at that time was about £750,000 and the irreducible expenditure about £850,000, it was clear that the chances of the loans ever being repaid in full were slender. After long negotiations the bondholders accepted a complicated arrangement, the basis of which was that the accumulated debt would be cancelled on the issue of £1,200,000 worth of new bonds at five per cent. It was a generous settlement.
Footnotes
* See p. 212 below.
† If this nonsense means anything, it must mean that Blaquiere expected Rothschild to agree with him that Greece was a richer country even than France, than Prussia, than Austria, than Russia.
* It is perhaps worth quoting one of these false reports in full for the light it sheds on public opinion at the time. The reports are presumably an attempt to set down the kind of news the stockholders wanted to hear, but clearly if they had outraged public credulity too far they would not have been accepted for publication. The following composition from The Examiner emphasizes how profoundly ignorant the public still were about conditions in Greece. None of the brave Philhellenes mentioned in the letters (except Berton) are otherwise known to history, nor are the 1,500 French and Italian volunteers from Livorno. General Lafayette took part in the American War of Independence, but exercised his philhellenism from Paris; at the age of 69 he is unlikely to have been successful with the bayonet. The battles described—ferocious enough for anyone’s money—are equally imaginary:
Missolonghi, Jan. 2, 1826.—[From a Correspondent.]—On the morning of the 30th December, the Turks were seen advancing in three heavy columns in the direction of the George Franklin and Betzaris batteries, led on by German Officers, under a tremendous fire of artillery and mortars; at the same time their fleet commenced a most furious attack on the port. They were received by a destructive shower of grape and musquetry from the troops and batteries; at the same time a discharge of shells and rockets added to their dismay; but in spite of a heavy loss they advanced and carried two of the outports. The conflict now raged with the greatest fury, shot and shells spread death in every direction. Our gallant artillery and riflemen excited terror around them. It is impossible to describe the horrors of the scene; all around was obscured with clouds of smoke. At this moment two Turkish vessels blew up with a tremendous explosion; still they persisted, and, after two hours fighting, they succeeded in obtaining possession of the Franklin battery. After a heavy loss, an officer planted the Turkish colours on the rampart, when our gallant leader, St Aubyn, rushed forward and hurled him from the walls. The ground was now disputed inch by inch, the slaughter was tremendous on both sides, the Turks were three times driven back with immense loss, or they must have succeeded, when Admiral Miaulis entered the harbour, and commenced a furious attack on their fleet, which ended in their total defeat, with the loss of sixteen sail burnt or taken. The infidels were now totally routed, and flying in all directions, pursued by our victorious troops, leaving the ditches filled, and the wall covered with their dead. Two 24-pounders on the Franklin were literally covered with blood.
I regret to state, our brave Major St Aubyn lost his arm while cheering his men at the third attack. Our loss was severe; the Turks lost four thousand killed, eight hundred wounded, five hundred prisoners, fifteen German and other Officers, with fifteen cannon and mortars taken.
Had not Admiral Miaulis arrived to relieve us, it was the intention of the Governor and Officers to have blown up all together.
Camp of St. Anne’s, near Lepanto, Jan. 17, 1826.
I take the first opportunity of writing you the account of the late victory. On the 12th there was a sharp skirmish, in which the Turks lost a number of their best men and officers, and fell back to the village. About seven o’clock next morning the contest began with the outposts, which fell back into line. A large body of Mamelukes were charged by our cavalry, headed by Colonel Berton, and totally routed. Our riflemen in front picked out the officers as they advanced to their post. Our artillery was served by French and English volunteers, who had orders not to fire till the Turks were within 200 yards. The enemy now endeavoured to turn our left wing, but were received at the point of the bayonet by General La Fayette, our second in command. The battle now raged along the whole line with the most deadly fury. The village of St John was three times taken and retaken, with great slaughter; their second in command fell in the last attack, when they gave up the contest, leaving 800 dead on the spot, besides prisoners and wounded. General Gouras, at the head of the Corinthian brigade, carried the village of St Anne’s, and ordered a general attack with the whole force, when the Turks were completely routed, and fled in every direction, leaving 3000 dead, 900 prisoners, 400 wounded, 2 generals killed, 14 officers wounded, 25 taken, with 9 cannon, the Pacha’s tent, 14 baggage and ammunition waggons, &c. Our loss was 800 killed and 700 wounded. A young man of the name of Herbert took two standards, for which he was made Captain on the field; three other standards were also taken. The Turkish force was 10,000 men; ours was 7,000. Make all the haste you can to join us. I hope the next will inform you that the Cross floats on the walls of Lepanto.
LETTER FROM COLONEL BERTON.
Camp at Lepanto, Jan. 25, 1826. Dear—, After the affair of the 12th, we had a fatiguing march in pursuit of the runaway Ibrahim Pacha, who was collecting his troops at Lepanto and Patras, and talking very largely of putting us all to the sword, but we saved his Highness the trouble, by a signal defeat. We arrived under the walls of the above place, on the 20th, driving his picquets before us, and next morning blockaded the town. Generals La Fayette and Delcroux having surveyed the ground, we began our trenches, in spite of a heavy fire from the town and castle. On the 22nd we were joined by fifteen hundred French and Italian volunteers from Leghorn, consisting of lancers, hussars, &c. and a small battering train of eight thirty-six pounders and four mortars. On the same night, two German officers deserted to us, and informed us of the Pacha’s intent of attacking us in the morning with 15,000 horse and foot. Our force was only 9,000. At daybreak, the Turks advanced, covered by a heavy fire from the fortification, with loud shouts of Alla and Mahomet. Our artillery and musquetry opened on them with tremendous effect, and in fifteen minutes the whole line was furiously engaged; our cavalry charged the enemy in grand style, cutting numbers of them to pieces. The battle had now raged seven hours with the greatest obstinacy, when the fine convent of St Mary’s was blown up, and 700 Turks with it; their line was now broken and routed, they flying in every direction to the town, pursued by our cavalry to the gates; a part entered pell-mell with them, but not being supported, cut their way out, only losing six men in that daring exploit. A party of our cavalry had nearly taken the Pacha prisoner, who was carried off the field wounded by a carbine ball in his breast. The enemy lost 4,000 killed, 800 wounded, 2,000 prisoners, 8 standards, 10 cannon, 6 ammunition waggons. Our loss was 2,000 killed, 400 wounded. General Gouras was slightly wounded in the head by a musket ball. The Turks had orders to give no quarter. They lost 125 officers. I forgot to inform you, in my last, that the Pacha (Ibrahim’s) tent and seraglio of ladies were taken.
B. BERTON.21