Third Letter of Malachi Malagrowther

In Malachi's first letter, Walter Scott laid out the strengths of the Scottish banking system, how the system of paper credit (backed by landed estates) had fostered economic growth through the circulation of small bank notes.  He also protested the illegality of the English adopting measures that did not lead to Scotland's "evident utility"; a phrasing from the 1707 Treaty of Union.  Malachi's second letter played to nationalistic feeling, both in Scotland and in Ireland to oppose, by peaceable means, measures that would prove harmful to the poorer countries in the United Kingdom. In Malichi's third letter, Scott tackles the issue of the gold standard, as England's proposed banking reform included the replacement of paper bank notes with circulating specie.

Scott introduces a character, Christopher Chrysal, who takes the side of the gold standard, admonishing Malagrowther: ``Why, Mr. Malachi Malagrowther,'' said my friend, in wrath, ``I pronounce you ignorant of the most ordinary principles of Political Economy."  The argument for gold is laid out by a standard analogy: "Gold, therefore, like all other commodities, will flow to the place where there is a demand for it. It will be found, assure yourself, wherever it is most wanted; just as, if you dig a well, water will percolate into it from all the neighbourhood."

Malachi's (Scott's) counter argument considers how Scotland, a country with little specie, but a flourishing economy might fare if it was forced suddenly to obtain gold, a scarce commodity, for use in both everyday circulation and to remit to England. He answer's this question by turning the flowing water analogy around: 
"Mr. Chrysal's proposition should not then run, that gold will come when it is most needed, but should have been expressed thus,---that in countries where the presence of gold is rendered indispensable, it must be obtained, whatever price is given for it, while the means of paying such a price remain...Scotland, sir, is not beneath the level to which gold flows naturally. She is above that level, and she may perish for want of it ere she sees a guinea, without she, or the State for her, be at the perpetual expense of maintaining, by constant expenditure of a large per centage, that metallic currency which has a natural tendency to escape from a poor country back to a rich one..."  In Malagrowther's view, the English would benefit at the expense of the Scots.

Scott's Malachi makes an interesting observation as he draws toward the conclusion of his third and final letter that touches on the human aspects of the free trade issue, wherein people are treated merely as commodities.  This issue is at the heart of the economic rationale for the Highland Clearances.  "Mountainous countries inspire peculiarly strong attachments into the natives, showing, perhaps, if we argue up to the Final Great Cause, that while it was the pleasure of God that men should exist in all parts of the world, which His pleasure called into being, the Beneficence of the Common Father annexed circumstances of consolation, which should compensate the mountaineers for want of the fertility and fine climate enjoyed by the inhabitants of the plain...A Scottish gentleman, in the wilder districts, is seldom severe in excluding his poor neighbours from his grounds; and I have known many that have voluntarily thrown them open to all quiet and decent persons who wish to enjoy them. The game of such liberal proprietors, their plantations, their fences, and all that is apt to suffer from intruders, have, I have observed, been better protected than where severer measures of general seclusion were adopted...Above all, the peasant lives and dies as his fathers did, in the cot where he was born, without ever experiencing the horrors of a workhouse. This may compensate for the want of much beef, beer, and pudding, in those to whom habit has not made this diet indispensable..."

This observation echoes that of the English Sir Thomas More (and others) three centuries earlier, who noticed that workers were better off on farms than when they tried to find work in towns.  So often, More noted, workers ended up impoverished, and ultimately, in trouble with the law.  While Scott may not have extended his argument against specie for Scotland to the English economy, he is in essence questioning the viability of that system for all.

Scott's delving into the banking system was precipitated by a personal financial crisis, which had been triggered by ruinous speculation on the part of English banks; the Panic of 1825/26.  Scott learned from this calamity, and transcended his personal issue to effectively defend the Scottish banking system from a change that would have been injurious to it and Scotland.  For this reason, Sir Walter Scott is pictured on Scottish £5 notes.

Treaty of Union

The Scottish Parliament ratified the Treaty of Union with England this day (January 16) in 1707.  Sir Walter Scott devotes significant time to this union, and the historical actions leading up to its formulation and framing, in "Tales of a Grandfather".  Scott's dedication references the union:

To Hugh Littlejohn, Esq.

My dear child,
I now address you to two volumes of Scottish Stories, which brings down the History of that Country from the period when England and Scotland became subject to the same King until that of the Union, when they were finally united into one Kingdom.  That you and children of your age, may read these books with pleasure and improvement, is the desire and hope of,
My dearest Child,
Your very affectionate Grandfather,
                            Walter Scott
Abbotsford, 15th October, 1828

John Dalrymple, 1st Earl of Stair

John Dalrymple played a significant role in the history of Scotland and England.  He was best known for his role in the Massacre of Glencoe, in 1692.  At Glencoe, 38 MacDonald's were murdered while having received, on friendly terms, more than 100 English troops under Captain Robert Campbell.  In a government review afterwards, Dalrymple was indicated as the individual who ordered the killing.  He received a short suspension as a result.  Though he died on January 8, 1707, Stair was also integral to the 1707 Treaty of Union between England and Scotland.

Scott describes Dalrymple's role at Glencoe in his "The Highland Widow":

"...At this time Sir John Dalrymple, afterwards Earl of Stair, being in attendance
upon William as Secretary of State for Scotland, took advantage of Macdonald's
neglecting to take the oath within the time prescribed, and procured from the King a
warrant of military execution against that chief and his whole clan. This was done
at the instigation of the Earl of Breadalbane, whose lands the Glencoe men had plundered,
and whose treachery to government in negotiating with the Highland clans,
Macdonald himself had exposed. The King was accordingly persuaded that Glencoe
was the main obstacle to the pacification of the Highlands ; and the fact of the unfortunate
chief's submission having been concealed, the sanguinary orders for proceeding
to military execution against his clan were in consequence obtained..."