The Guernsey experiment
Wednesday 15th October 2008, 2:30PM BST.
In the second of three articles, Toby Birch (pictured), who, under the pseudonym Hugo Bouleau, wrote The Final Crash: Addictive Debt and the Deformation of the World Economy, recalls a historic tale of triumph in the face of economic turmoil that happened right here…
As weary troops returned from a protracted foreign war, they encountered a land racked with debt and rising prices whose crumbling flood defences were about to be overwhelmed.
This was not New Orleans in the new millennium but the grim reality of life in the Bailiwick just after the Napoleonic Wars.
As is often the case, victory brought about severe austerity on the home front. To contain inflation and deficits, which then, as now, go hand in hand with war, Britain had introduced the gold sStandard to restrain the money supply. The unintended consequence was that loans issued over many years to fund the fighting were recalled overnight.
Gridlock ensued as labour and materials were abundant but much-needed projects stalled for want of capital, a period known as ‘poverty amongst plenty’. With sterling as the common currency, Guernsey suffered similarly.
The swamping of Sarnian sea defences was symptomatic of her overwhelming debt trap, with borrowing costs alone consuming 80% of annual revenues.
An already crippling deficit would need to be doubled simply to fix the failing infrastructure.
In what proved to be a defining moment for the island’s finances, Bailiff Daniel de Lisle Brock formed a States committee to defeat the dilemma. He is still commemorated on our £1 notes, as are the Town Markets, the first of the experiment’s many successes.