Gladstone once said that the surest way to get into the insane asylum was to study the
money question. Hecould not have made that statement had hebeen familiar withthe simple mannerinwhichthe inhabitants of one ofEng- land's Channel Islands hadsolved the question for themselves and in a way so direct and logical that it is strange the political econ- omists have paid so little attention to it.
At the close of the Napoleonic Wars the Island of Guernsey was in a deplorable state, both financially and physically. The sea walls were in such a bad state that large areas had been swept away and othertractswere in dan- gerof inundation. Theestimatedcostto repair
and strengthen the sea walls was $50,000, which the parishes adjoining the threatened districts were too poor to supply.
The annual revenues, after providing for the interest on the public debt and ordinary ad- ministrative expenses left a surplus of only
$3,000 for unforeseen expenses and improve- ments.
The roads leadingto St. Peter, the principal
port, were too narrow for a horse and cart to pass abreast. They were only four and a half feet wide, unpaved and the rains tended to render them deeper and narrower.
There were no public conveyances for the use of visitors. There was not a four-wheeled carriage in the Island.
The conditions of the thoroughfares of St.
Peter were no better. Narrow lanes were the rule and the main street that led from the country to theharbor was only seven feet wide and lined on both sides by lofty buildings.
The impossibility of cartspassing each other in such a narrow passage resulted in congested
traffic at each end and accidents were numer- ous and delays exasperating.
The population was decreasing—stagnation
of business causing the laboring class to emi- grate and those in comfortable circumstances were leavingin search of the conveniences and
pleasures the Island failed to afford.
The circulating medium consisted of badly worn French and English coins. There was no bank in the Island.
The Government ofthe Islandis autonomous.
Ithasa Parliament, calledthe "States," which
is elected from the parishes, but its decisions are subject to the Privy Council of Great Brit-
ain, to whom there is also the right of appeal.
The pressingneedof arevenue led the States to request the Privy Council to permit an excise tax to be levied to one shilling per gal- lon on spirituous liquors. This was granted for a period of five years. The duty was renewed in 1819 for afurtherperiod oftenyears and in 1825 forfifteenyears, or until 1844. One thou- sand pounds per year of this duty was to be usedto liquidate the public debt.
As wasusual in provincialtownsinthe early part of the nineteenth century, a great part of the retail trade of St. Peter was carried on in a public market. This market was held in the vacant space around the church. There was no building provided and the traffickers were subject to all the losses and exposures due to heat, rain and cold.
A committee of the States on April 12, 1815, brought in a recommendation to issue £6,000 ($30,000) in onepoundState notes, for the pur- pose of providing a suitable market for the use of the farmers and townsmen. The States rejected this recommendation. However, later in the same year the Finance Committee re- ported money wasbadlyneeded for roads. The
States authorized the issue of £4,000 ($20,000) in notes, which were to be redeemedout of the
liquor tax at various fixed dates during the followingthree years.
It will thus be seen that while the issue of notes was first urged on behalf of the market, and they thus become known as Market House
Notes, the real security for their redemption was the duty on liquor.
These notes bore no interest, but circulated
among the people and greatly stimulated trade and commerce. The last of them were due April 15, 1818, and the success attending their issue and circulation resulted in a new issue of
£1,250 ($6,250), on June 18, 1818.
A meat market company which had pur- chased a site and some buildings for £5,000 ($25,000) had been given the privilege of charging a certain price per head for all ani-
mals killed, upon condition that it would sell the site to the States at any future time at the price originally paid. The States took advan- tage of the purchase clause on April 10, 1817, borrowing the £5,000 at 4i/^ per cent interest, a report of the committee to issue £1 notes with which to make the purchase being re- jectedbya majority of onevote.
The advocates of a larger and better market
still persevered and were finally successful on
May 12, 1820, five years and one month after the first request was denied.
The States provided for an issue of £5,500 ($27,000) in States notes for the erecting of the building, the notes to be redeemed from the rents received for the stalls, to which the States weretoadd£300 ($1,500) per year from the duty on spirituous liquors, for a period of ten years.
Thebuilding was completed and opened Sat- urday, Oct. 12, 1822, with a general jubilation.
The cost of the building was about $21,000.
It was computed at the inception that the
Market stalls would bring a net annual rental of £150, to which the States would add £300,
making a total of £450, or $2,250,and the notes could all be redeemed and cancelled in ten years, but the result far exceeded their an- ticipation.
The "Treasurer's account of the Market"
for the year 1827, as published, shows a net revenue from the stalls for that year as £608, or over four times the anticipated revenues.
Had the Guernseymen stopped here, the suc- cess achieved would have been sufficiently illuminating to guide other communities in the
way of financing public enterprises without re- course to interest bearing bonds. But they did
not Stop. In 1820 they issued £4,000 ($20,000) in one pound notes and paid off the floating debt. A year later an issue of £580 was used
to purchase a house occupying a site needed for the new market. Later in the same year
£4,500 ($22,500) was issued to redeem an out- standing interest bearing public debt.
In 1824 £5,000 ($25,000) in one pound notes were issued to repay the 4^/2 per cent loan made in 1817 with which to purchase the land upon whichthe Market house wasbuilt.
In 1826 about £10,000 ($50,000) in noteswere
issued, some of it for the neighboring Isle of Sark, the balance for Elizabeth College, schools and other purposes.
In 1827 £11,000 in one pound notes were au- thorized to be used in widening and improving Rue de la Fountaine, a street adjoining the market. This involved the destruction of old buildings and their replacement by new ones and the rents were pledged to redeem the notes.
Thiswasfollowedduring 1828 and 1829 with furtherissues, among which wasone appropria- tion of £8,500 for the benefit of Elizabeth Col- lege and £11,000 for street improvements.
A threatened epidemic of cholera in 1834 caused an appropriation of £1,000, to be voted
to defray the costs of preventive measures.
Thisvras issued inone poundnotes.
Here we have the history covering a period of twenty years, during which time approxi- mately£80,000 ($400,000) of non-interest bear- ing circulating notes were issued and which had no metallic basis, but the redemption of which was secured by rents from stalls, build- ings and the excise tax. The worn and mu-
tilated notes were replacedby new ones. They
circulated without question and were the source of great benefit and convenience to all classes.
While the total issued was £80,000, there never wasat any time more than £55,000in cir- culation. While new issues were provided for
new purposes, old issues were being redeemed bythe application of surplus revenues that had been pledged to thatpurpose.
The public benefits derived by the Island of Guernsey throughthis methodof financing can be appreciated by a knowledge ofthe fact that during the fifteenyearsbetween 1815 and1830, not only had there been expended $100,000.00 on old and new breakwaters, piers, etc., but therehad been twostreetsinthetownwidened, paved and sewered, sixty-eight miles of good country roads built, in addition to the Market