38
beginning of the sample period, a wave of defaults outraged the holders of foreign bonds, who
asked British authorities to “take prompt and energetic steps” to “compel the governments to
pay.”
62
At every turn, though, the government refused to get involved. Speaking to the House of
Commons in 1824, Foreign Secretary George Canning “did not mean to throw the slightest
blame on those who employed their capital in loans to the states of South America. All men had
a perfect right to advance their capital in foreign governments, if they thought fit….” But
“parties so engaged ought not to carry with them the force and influence of the British
government, in order to compel foreign states to fulfill their contracts.”
63
Canning’s successors agreed. At the end of the sample period, Palmerston succinctly
summarized the British position that had prevailed for a quarter century: “no doubt an expression
of the intention of the British Government authoritatively to interfere on behalf of the
bondholders might be useful to them; but such a declaration would be at variance with the fixed
rule of the British Government in regard to all such cases.”
64
Although the British government eschewed any official involvement, its diplomats
assumed an unofficial role, sometimes using “good offices” to represent the feelings of
disappointment and express the hopes of British investors. As the correspondence clearly shows,
though, when diplomats entered into dialogue with a defaulting state, they did not threaten to
take any coercive steps, commercial or otherwise. On the contrary, they argued that continued
default would undermine the reputation of the country in the eyes of capital markets, and would
therefore make it unlikely that investors would offer new loans. Without such money, economic
development would suffer. The consistent line during this period, then, was not the threat of
coercion but an appeal to reputation.
62
George Shee to William Ewing, 5 October 1831, letter 165.
63
XI Parl.Deb. 2s, 15 June 1824: 404.
64
E.J. Stanley to Thomas Lethbridge, 6 March 1847, letter 29.
Convention