Bagehot: The Life and Times of the Greatest Victorian, by James Grant (W.W. Norton & Company, 334 pp., $29.95)

In 1835, the Reverend Sydney Smith, the wittiest divine that the English National Church ever produced, wrote a letter to one of his young female friends peculiarly emblematic of the English nation, then on the brink of becoming the most powerful nation on earth. “Lucy, dear child,” Smith wrote, “You are going to Boulogne, the city of debts, peopled by men who never understood arithmetic; by the time you return, I shall probably have received my first paralytic stroke, and shall have lost all recollection of you; therefore, I now give you my parting advice. Don’t marry anybody who has not a tolerable understanding and a thousand a year, and God bless you, dear child.”

Money, in other words, meant a great deal to the nineteenth-century English. Yet even the most celebrated historians of the period suffered from a kind of financial illiteracy. Who, for example, would go to E. P. Thompson, the Marxist author of The Making of the English Working Class (1963) for a reliable handle on how money animated that admirably dynamic society? Or Asa Briggs, who wrote highly regarded histories of the Victorians before serving as president of the William Morris society? Or even G.M. Young, whose Victorian England: Portrait of an Age (1953) offers dazzling intellectual history but has little to say of the financial world. It’s true that the prolific David Kynaston somewhat compensated for this omission by writing his multivolume history of the City of London (1995–2002), but since he writes primarily of the City as a world unto itself, he does not put the financial preoccupations of the Victorians in a wider context.

Enter James Grant, the crack financial commentator and gentleman scholar, whose books on John Adams and Bernard Baruch abound with historical and financial acumen. In his latest biography, Walter Bagehot: The Life and Times of the Greatest Victorian, Grant takes up the life of a man steeped in finance to show how it was precisely his appreciation of the deeply financial character of his society that enabled him to anatomize it with such discrimination and verve.

Nevertheless, Grant is critical not only of Bagehot’s irresponsible financial prognostications—especially with regard to Overend Gurney & Co., the largest discount house in the City of London at the time, which suspended payments on May 10, 1866, or Black Friday—but also of his rather snobbish opposition to electoral reform. In the lead up to the Reform Bill of 1867, which gave the vote to the English and Welsh working classes, Bagehot tried to scuttle the bill by reminding his readers that the “lower orders” compared with “the educated ‘ten thousand’” were “narrow-minded,” “unintelligent,” and “incurious.” For Grant, “the schoolboy who had called his classmates ‘the mob’ had grown up to become a supercilious man. . . . his contempt for his fellow man—especially the ‘little people,’ as Bagehot was wont to call the underlings—was jarring.”

At the same time, Grant never overlooks Bagehot’s genius, which he celebrates in a narrative as fast-paced as it is toughminded and revelatory. Readers interested in Victorian history, banking, English literature, constitutional government, or all of the above will revel in the critical sympathy that Grant brings to understanding his paradoxical, exasperating, incandescent subject.

Like Grant himself, Walter Bagehot (1826–77) was both a financier and a littérateur. After a scintillating university career at University College, London, he edited the Economist, invented the Treasury Bill, advocated for cabinet government, and wrote two books that have never lost their appeal: The English Constitution (1867), which remains the “go to” book whenever royal crises arise, and Lombard Street, which Grant nicely calls “the canonical guide to stopping a run on the banks.”

Bagehot was also a redoubtable prose stylist, an inspired historian, and a gifted literary critic. Grant is particularly good on Bagehot’s brilliant coverage of the 1848 revolution in France—written when he was all of 25—and his dealings with Gladstone, Disraeli, and Robert Lowe, later Viscount Sherbrooke, the Coriolanus-like elitist who served as Chancellor of the Exchequer, a post he famously likened to a “taxing machine.” Why? “He is entrusted with a certain amount of misery which it is his duty to distribute as fairly as he can.”

Despite Bagehot’s own epigrammatic prose, some of his judgements were specious. For example, he often made glib plugs for reckless central banking:

A panic, in a word, is a form of neuralgia, and according to the rules of science you must not starve it. The holders of the cash reserve must be ready not only to keep it for their own liabilities, but to advance it most freely for the liabilities of others. They must lend to merchants, to minor banks, to “this man and that man,” whenever the security is good. In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them.

In our own increasingly volatile world, this has become the justification for “too-big-to-fail” economics, and its misguided thinking still animates twenty-first-century central bankers. “No sooner do the banks bring down a crisis on themselves, or stock prices take a tumble,” Grant writes, “then the call goes out for the Federal Reserve to infuse the market with emergency credit.” To prove his point, Grant points out that in his memoir, The Courage to Act, “Ben S. Bernanke, chairman of the Federal Reserve from 2006 to 2014, cited Bagehot more frequently than any living economist.”

Nonetheless, when Bagehot’s judgements were on the beam, they could be far-sighted, as when he turned his attention to the question of what sort of statesman would most effectively govern a modern parliamentary democracy. For Bagehot, no one could look dispassionately at Gladstone’s career without seeing that it was not the intellectual but the capable man of business who made the best statesman. The man who most fit this pragmatic bill for Bagehot was Sir Robert Peel, who passed Catholic Emancipation into law, repealed the protectionist Corn Laws, and gave the English their first metropolitan police force. “In common life,” Bagehot argued, in prose that Grant rightly compares to good civilized talk, “we continually see some men as it were scarcely separable from their pursuits . . . It is so with Sir Robert Peel. So long as constitutional statesmanship is what it is now, so long as its function is the recording of views of a confused nation, so long as success in it is confined to minds plastic, changeful, administrative—we must hope for no better man. You have excluded the profound thinker; you must be content with what you can obtain—the business gentleman.”

Notwithstanding his admiration for Peel, Bagehot had his doubts about the prime minister’s controversial 1844 Bank Charter Act, otherwise known as Peel’s Act, which sought to avert panics by securing the gold value of the pound. For Bagehot, as Grant remarks, “Peel’s Act served no useful purpose in tranquil times,” and “in a panic, only incited the fear that the chancellor would refuse a letter to suspend it.” Thus, Bagehot was not opposed to extraordinary government intervention in finance, though others rightly foresaw that it could prove ruinous. Grant’s reading of the matter is incisive: “If we consider the ideas central to the debate—discretion versus regulation in monetary management, the problem of moral hazard—the battle has raged to this day.” In any case, the advocate of the gold standard in Peel might have made him an even better model for the modern statesman than Bagehot imagined.

Two previous biographies of Bagehot, one by his sister-in-law Mrs. Russell Barrington and one by Alistair Buchan, may still be worth reading, but Grant’s biography must now be accounted the best. It makes particularly good use of Ruth Dudley Edward’s history of the Economist, Kynaston’s recent history of the Bank of England, and Bagehot’s own voluminous works, which Norman St. John-Stevas collected some years ago in 15 volumes. Witty, shrewdly judged, and enviably well written, Grant’s life will give aficionados and neophytes alike an enhanced understanding of Bagehot and the real financial world in which he and his contemporaries moved, not the vague or ideologically distorted one offered by too many historians of the English nineteenth century.

Sydney Smith would approve.

Photo by Hulton Archive/Getty Images


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