George Joachim Goschen, 1831-1907.

19th C. English banker and statesmen.

George Joachin Goschen (after 1900, Viscount Goschen) was born in London, the son of a German immigrant.  He had been named after his grandfather, a successful printer in Leipzig (Saxony), who had been involved with Goethe, Schiller, Wieland and other giants of Weimar Romanticism.  The publisher's third son (Goschen's father), Wilhelm Heinrich Göschen, then in his early twenties, went into partnership with a young Bremen merchant named Heinrich Frühling, and they moved to London together in 1814, to seek out their fortune.  They established the London commercial house of Fruhling & Goschen (the umlauts were dropped).  The commercial house prospered over the next few years, and Goschen senior eventually married an Englishwoman.  George Joachim Goschen was their eldest son.

George Joachim Goschen was groomed by his father for the family business from an early age. Believing English schools were inadequate,  at the age of eleven, Goschen was packed off to school in Meiningen, Saxony for a few years.  Eventually Goschen senior decided to make an Englishman out of his son, and enrolled Goschen at Rugby School (where he came under mastership of Bonamy Price).  Goschen flourished at Rugby, and subsequently went to enroll at Oriel College, Oxford.  Goschen achieved a double first in classics and received his B.A. in 1853. 

After graduating from Oxford, Goschen immediately entered into his father's commercial banking house of Fruhling & Goschen. In late 1854, Goschen was dispatched to Colombia, South America, to look after business interests there for a couple of years.  After his return, he got married.  Goschen took to the business with relish, his father yielding increasing responsibility over to him (Goschen senior was frequently absent abroad, in Germany).  The young Goschen rapidly acquired an impressive reputation in the City of London - the "fortunate youth", as he was labeled by other financiers. Goschen was made a director of the Bank of England in 1858, at the tender age of twenty seven.

In 1861, Goschen published his most important economics work, The Theory of Foreign Exchanges.  The book was an instant classic and became authoritative handbook in the field of international finance  Although Goschen had not really read any economics (save for  "Aristotle and Mill", 1905: p.viii), Goschen grasped the principles of demand-and-supply intuitively and applied it to financial markets.  This is arguably the first book to explain in detail how the Bank of England could actively use its discount rate to protect gold reserves and control credit in the real economy- the beginnings of "monetary policy", as it were. Goschen explained how raising the Bank's discount rate will attract foreign funds, and eventually lead to a credit contraction at home, driving down domestic prices, boosting exports and diminishing imports, thereby turning the balance of trade in Britain's favor and thus inducing an inflow of gold bullion.   Although Goschen himself was a liberal and a firm believer of laissez faire, he admitted the reality of business cycles and recommended that the Bank of England adjust its own interest rates vigorously (at least by an increment of  1%, (1861: p.130-31), with the eye to "correcting" the economic conditions.  This significant interference in the markets led some doctrinaire liberals to raise an eyebrow (Goschen promptly reassured them with some hand-waving in the second edition of 1863, p.131). Nonetheless, Goschen's recommendation was apparently adopted by the Bank of England.  It would be later applauded by Bagehot, and become basically the orthodox monetary view in Britain for years (indeed, until challenged by Keynes in the late 1920s).

In 1863, Goschen was persuaded to by fellow bankers to run for a parliamentary seat that had been opened in the City of London.  Goschen was elected as a member of the liberal Whig party.  A strong supporter of the Liberal government of Viscount Palmerston, Goschen was a near-doctrinaire defender of classical liberalism in virtually every vote (although he was chastised by Cobden and Bright over his support for British participation the Schleswig war in 1864).  Goschen spearheaded the effort to open the universities of Oxford and Cambridge to religious minorities.  In November 1865, Goschen joined the Liberal government of Lord John Russell as of Vice-President of the Board of Trade, hoping to make use of his commercial expertise, and two months later (January 1866) was moved to the post of Chancellor of the Duchy of Lancaster, allowing him to participate in Russell's cabinet. 

Busy in government affairs, Goschen resigned from his business duties in Fruhling & Goschen and thereafter Goschen remained focused on a political career.  After the fall of Russell's government in the summer of 1886, Goschen allied closely with William Gladstone, the new Liberal leader.  When Gladstone became prime minister in December 1868, Goschen was appointed to head the Poor Law Board.  In a notorious 1869 article, ("Goschen minute"), Goschen expressed concern that the 1832 Poor Law Reform had been ineffective, and there was growing abuse of outside relief.  This led to another reform in 1871 which transferred responsibility for the administration of poor relief to the Local Government Boards, creating a more professional and less-haphazard welfare system.  Goschen moved to the Admiralty in March 1871, and undertook major reforms in the British navy, before the fall of Gladstone's government in early 1874.  Goschen submitted proposals for local tax reform in Britain, but these were less well-received.   

In 1876, while the Liberals were still in opposition, Goschen was recruited by a group of British creditors to travel to Egypt (along with French counterpart Joubert) to inquire into the financial situation of Egyptian government.  Falling into fiscal straits, the Egyptian khedive Ismail had suspended interest payments on Egyptian bonds the prior year.  Goschen's report led to the beginning of the "Dual Control" system over Egypt - Egyptian debt was consolidated, but a new institution created, the Caisse de la Dette Publique, with European controllers (British and French), to ensure debt service was maintained. 

Goschen began his break with the Liberals in 1880, over the issue of electoral franchise, feeling that proposed parliamentary reforms were going to place government entirely in the hands of merely one class. He was also suspicious of increasingly aggressive younger Liberals like Joseph Chamberlain, whom he felt were departing from classical liberal principles.  When Gladstone returned to power in 1880, Goschen reluctantly agreed to serve as ambassador in Constantinople for a spell, but Goschen otherwise refused to accept any other government posts offered to him.  Losing his parliamentary borough of Ripon in the reform of 1885, Goschen won a seat in east Edinburgh, effectively as an independent candidate. Many of his political speeches were unusually apolitical, and discussed high-minded topics, such as education reform.  Education remained a lifelong concern for Goschen, and he was a significant promoter of University Extension and the push to include economics in curriculums.

In 1886, Goschen finally split from Gladstone's Liberals over Irish Home Rule, and became one of the leaders of the schismatic Liberal Unionists.  Although successful in defeating the Home Rule Bill,  Goschen's vocal unionist position led to the loss of his Edinburgh seat in 1886 elections.  Nonetheless, Liberal Unionists had won the election overall in coalition with the Conservatives, and Goschen was offered the high position of Chancellor of the Exchequer by the Conservative Prime minister Lord Salisbury on 20 December, 1886 (although unable to work in parliament initially, Goschen eventually won a seat in a London by-election in February 1887).

George Goschen served as Chancellor of the Exchequer for six years, from 1886 to 1892.  It was a relatively successful tenure, Goschen managing to reduce the national debt and cut interest payments considerably.  The biggest challenge of this period was managing the Baring Crisis of late 1890, and the short but severe recession which followed.   In a speech at Leeds in 1891, citing the shortfall of gold reserves, Goschen famously made a proposal to allow the Bank of England to issue £1 notes to substitute the gold sovereign (by the prior banking acts, its lowest denomination note was £5 notes), thereby, allowing the Bank to mop up some estimated £30m worth of gold that was needless circulating as coinage in the British empire.  Although well-received in several quarters, the scheme was not taken up.

Goschen somehow found time during this tenure as Chancellor to serve as president of the Royal Statistical Society in 1886-8.  He went on to become the first president of the Royal Economic Society in 1890 (then called the British Economic Association), a post he held until 1906.

After the fall of the Salisbury government in August 1892, Gladstone's Liberals resumed office and promptly introduced a second home rule bill.  By now, Goschen had formally joined the Conservative Party in opposition.  In 1895, the Conservatives Salisbury returned to power, and Goschen was assigned the Admiralty.  In his second tenure at the Admiralty, Goschen presided over a large increase in British naval strength.  This became particularly acute after Germany entered the naval race in 1898.  Feeling the new challenge required more energy than he had - his increasing age and the death of his wife in 1898 had shaken him - Goschen decided to resign in October 1900, and retire from public life. 

Goschen looked on for a leisurely but still active retirement.  Raised to the peerage as "Viscount Goschen" in 1900, he looked toward a quiet period in the House of Lords.  He spent much of his time outside politics, collecting his essays and and taking up the Chancellorship of Oxford University in 1903.  But this was interrupted by Joseph Chamberlain's proposal to revive protectionist tariffs in 1903.  Goschen leaped out of retirement into the forefront of the effort to defeat Chamberlain's proposals and in defense of free trade. This campaign would drag out until 1906. Goschen emerged victorious, but exhausted.  He died shortly after, in February 1907.

Top

Top

Top

All rights reserved, Gonçalo L. Fonseca