It's well known that John Newton was the captain of a slave trading ship who converted to Christ and eventually became an Anglican minister. Some people condense the whole story romantically by implying the horrific storm at sea that spurred Newton to first turn to God immediately led to a mature and complete repentance from his evil ways—such that he wrote ‘Amazing Grace’ as an expression of his gratefulness for being saved. But for some time after Newton's storm-driven adoption of Christianity, he continued to make his living from the slave trade.

However, I believe it is accurate to say that soon after his conversion, he did begin to treat his slaves better. Yet it was only 32 years after his conversion—long after he'd given up seafaring and become an Anglican minister, and some years after he wrote ‘Amazing Grace’—that in 1780, Newton began to express regrets about his part in the slave trade. In 1785, he began to fight against slavery by speaking out against it, and he continued to do so until his death in 1807 (the year of the trade's abolition).

For John Newton, slavery was never abstract, but concrete. Looking back, he wrote,

Disagreeable I had long found it, but I think I should have quitted it sooner, had I considered it, as I now do, to be unlawful and wrong. But I never had a scruple upon this head at the time, nor was such a thought once suggested to me by any friend. What I did, I did ignorantly, considering it as the line of life which Divine Providence had allotted to me, and having no concern, in point of conscience, but to treat the slaves, while under my care, with as much humanity as a regard to my own safety would admit.

He later acknowledged, “I hope it will always be a subject of humiliating reflection to me, that I was once an active instrument in a business at which my heart now shudders.”

There is no agreement as to the date Newton composed ‘Amazing Grace’, though it is generally dated to about 1770 or '72. It was first published under the less catchy title of ‘Faith's Review and Expectation’ in the 1779 first edition version of Olney Hymns, written by John Newton and William Cowper.

The first three verses of Newton's original are familiar to us. However, the next two verses are less commonly sung today. They are often replaced as a final verse by the “When we've been there ten thousand years, bright shining as the sun …” stanza. However, this was not original to Newton; it appears to have been written by John Rees, and was popularized by its inclusion in Harriet Beecher Stowe's novel Uncle Tom's Cabin (1852).

The last verse (about snow dissolving!) in Newton's original I had never heard sung until recent years—when Chris Tomlin's re-working of the hymn with the “my chains are gone” chorus included it again at the hymn's end.

As with other hymns of this period, the words were sung to a number of tunes before it became linked to the current popular tune with its Gaelic feel around about the 1830s.

Here are the lyrics, as published in the 1779 edition of Olney Hymns:

Amazing grace! (how sweet the sound)
That sav'd a wretch like me!
I once was lost, but now am found,
Was blind, but now I see.

'Twas grace that taught my heart to fear,
And grace my fears reliev'd;
How precious did that grace appear,
The hour I first believ'd!

Thro' many dangers, toils and snares,
I have already come;
'Tis grace has brought me safe thus far,
And grace will lead me home.

The Lord has promis'd good to me,
His word my hope secures;
He will my shield and portion be,
As long as life endures.

Yes, when this flesh and heart shall fail,
And mortal life shall cease;
I shall possess, within the veil,
A life of joy and peace.

The earth shall soon dissolve like snow,
The sun forbear to shine;
But God, who call'd me here below,
Will be forever mine.

That sceptical urban myths website, snopes.com, concludes with this positive assessment:

Newton did eventually grow into his conversion, so that by the end of his days he actually was the godly man one would expect to have penned ‘Amazing Grace’. But it was a slow process effected over the passage of decades, not something that happened with a clap of thunder and a flash of lightning. In Newton's case, the “amazing grace” he wrote of might well have referred to God's unending patience with him.

Sources:

• ‘Amazing Grace’ (Wikipedia)
• Al Rogers, ‘Amazing Grace: The Story of John Newton’, reprinted from the July-August 1996 issue of Away Here in Texas.
• Snopes.com
• ‘What would it take the change the world?: Amazing Grace Faith Discussion Guide’ (PDF)

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