The Crisis in Trade and Industry (1855)

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The four articles of the series published below had the following titles in the original: 1—"Geschäfts-Krisis"; 2—"Die Zunahme des englischen Handels und der englischen Industrie in den Zeitraum von 1849 bis 1850"; 3 and 4—"Zur Handels-Krise".

London, January 8.
While clubs and newspapers here are fully occupied with self-important gossip about "ministerial crises", they have no time to realise the far more important fact that once again one of the great British crises in trade and industry has broken out, and in more calamitous dimensions than in 1847 and 1836. At long last this realisation which had not been produced even by the bankruptcies which have been breaking out sporadically for the past three months and recently increased in number and intensity has become unavoidable as a result of the publication of the annual trade reports and of the tables issued by the Board of Trade which give the export and import figures for the past eleven months. It follows from these figures that exports have decreased by £1,710,677, if compared with the corresponding eleven months of the year 1853, and by £1,856,988 when only the last month of both years—November 5 to December 5 —is compared. From the export figures we have taken the following details which show a decline in some of the most important branches of industry:

	1853 £	1854 £
Cotton manufacture	23,757,155	22,877,050
Cotton yarn	6,322,639	6,055,640
Linen manufacture	4,379,732	3,735,221
Linen yarn	1,069,812	852,763
Wool manufacture	9,470,413	8,566,723
Silk manufacture	1,492,785	1,144,506
Export of machinery	1,368,027	1,271,503

In the trade reports an attempt is of course made to blame the war for the crisis of 1854, just as the revolution of 1848 was blamed for a crisis which had already broken out in 1847. However, this time even the London Economist which, as a matter of principle, tends to explain all crises as due to accidental circumstances, extraneous to trade and industry has been forced to admit that the commercial misfortunes and losses of 1854 are the beginning of a natural reaction against the "convulsive prosperity" of 1853. In other words, the commercial cycle has again reached the point where overproduction and over-speculation turn into a crisis. Most effective proof: the United States of North America, which were affected by the oriental war only insofar as it gave an unheard-of impetus to shipbuilding and shipping trade, and created markets for many American raw products formerly supplied exclusively by Russia. In the United States the crisis has already lasted more than four months and is still growing steadily, although already 109 of 4,208 banks, or about 2½ per cent, have gone bankrupt; moreover, there has been such a stagnation of industry combined with such a depression of wages in the industrial states of the East that last month more than 4,000 European immigrants "migrated back" to Europe. The American crisis of 1837 followed on the British crisis of 1836. This time the course is reversed. America has taken the initiative in the matter of bankruptcies. The United States and Australia are equally flooded with British products. How important this is for British trade can be seen from the fact that out of approximately £100 million which Great Britain exported in the form of goods in 1853, £25 million went to the United States and £ 15 million to Australia. After the United States and Australia, the East Indies were the most important export market. However, even in 1852 the East Indies were so glutted that only by an entirely new expansion of trade across the Punjab and Sind to Bokhara, Afghanistan and Baluchistan and from there, on the one hand, to Central Asia, and 'on the other hand to Persia, could exports with difficulty be kept at the old level of £8 million. Now even in those areas all outlets are so congested that, a short while ago, goods were shipped from Hindustan to Australia, thus "carrying coals to Newcastle". The only market which, due to the oriental war, was for a time supplied "cautiously", was the Levantine market. However, it is an open secret in the City that, since the crisis in the United States and stagnation in Australia forced the commercial world to look out anxiously for any markets not yet glutted, Constantinople has become the store-house for all goods requiring buyers, and it, too, must now be considered as "closed". Similarly, the most recent movement in Spain has been used to smuggle in as much British merchandise as the country can hold. The last attempt of this kind is now being made in South American countries whose very small consumer capacity requires no proof.

In view of the vital importance of the British crisis for the social and political state of the whole world, it will be necessary to return at greater length and in more detail to the history of British trade before 1854.

II

London, January 9.
The increase of British trade and of British industry in the period 1849 to 1853 may be judged by the following figures. In 1846 the tonnage of ships carrying goods from and into British seaports amounted to 9,499,000, in 1850 this had increased to 12,020,000 tons, and in 1853 to no less than 15,381,000, exactly double the tonnage of 1843. In 1846 the value of exported British manufactured goods and raw materials was £57,786,000, in 1850 £71,367,000, and in 1853 more than £98,000,000, that is to say, more than double the total exports of 1842. What part is played by the United States of North America and by Australia in this increase in exports? In 1842, the value of British exports to Australia amounted to less than £1,000,000, in 1850 they reached almost three million, and in 1853 as much as £14,513,000. In 1842, exports to the United States amounted to £3,582,000, in 1850 to almost 15 million, and in 1853 to no less than £23,658,000.

From these figures it follows, first of all, that the year 1854 represents a turning-point in the history of modern trade, analogous to the years 1825, 1836 and 1847; secondly, that the crisis in the United States is only a factor of the British crisis, and finally that the war of 1854 called, most aptly, une guerre pacifique by the Pays, journal de l'Empire—has exercised no influence whatever on this social catastrophe, or, if any influence at all, it has been restricting and inhibiting. Individual branches of industry, e.g. the manufacture of leather, iron and woollen goods, as well as ship-building, have actually been helped by the demand created by the war. For a short time, the consternation caused by a declaration of war after forty years of peace, paralysed the flight of speculation. The loans of various European countries brought about by the war kept interest rates at a level which prevented rash industrial undertakings and thus retarded the crisis. How-ever, says the Peace Society, has not the war raised corn prices? Is not the rising of corn prices tantamount to a decline in domestic trade, i.e. in British consumption of industrial products? And is not this contraction of the home market the main element of the crisis? To begin with, it must be remembered that the year of greatest British prosperity—1853 was a year of high corn prices, and that corn prices of 1854 range, on average, below those of 1853, so that neither the prosperity of 1853 nor the crisis symptoms of 1854 can be explained from the level of corn prices. However, leaving aside the influence of corn prices on industry for the time being: what influence has the war had on corn prices? In other words: have corn prices risen, because supplies from Russia have dropped? Of the total corn and flour which Great Britain imports, Russia's share is about 19 per cent, and as total imports satisfy only about 20 per cent of national consumption, Russia supplies some 2½ per cent of national consumption.

The latest official report on the comparative corn and flour imports from different continents and countries to Great Britain was published at the beginning of November 1854, giving a comparative table for the first nine months of 1853 and 1854. According to this, in 1853 the total imports of wheat amounted to 3,770,921 quarters, of which 773,507 came from Russia and 209,000 quarters from Moldavia and Wallachia. Total imports of flour amounted to 3,800,746 hundredweights, of which Russia supplied 64 and the Danubian Principalities none at all. In the war year 1854, Great Britain received 505,000 quarters of wheat from Russia and 118,000 quarters from Moldavia and Wallachia. No one would wish to claim that this reduction (which, moreover, was offset by larger imports of flour from other countries) has pushed up the prices of the excellent harvest of 1854 to approximately the level of the bad years, 1852 and 1853. On the contrary. Even a total cessation of Russian grain imports would not have had that effect. What remains enigmatic although unimportant as far as the economic question is concerned is the reduction of supplies from the Danubian Principalities. The solution of the riddle is simple. Though nominally the Coalition has blockaded the Russian Black Sea ports, in fact, however, it has blockaded first the Bosphorus and later the mouth of the Danube; instead of Russia, it blockaded Turkey and the Danubian Principalities. The Russian crusades against the Crescent of 1812, 1828, 1848 (at that time reputedly against the rebels of Jassy and Bucharest) and 1854 were, as everyone knows, partly determined by trade competition of the southern Russian provinces against the Danubian Principalities and, incidentally, against the Danube trade of Bosnia, Serbia and Bulgaria. What a stroke of genius, therefore, on the part of an English Ministry to punish Russia by leaving her trade at Odessa and Taganrog free, but suppressing, blockading the trade of Russia's competitors on the Danube, thus cutting off their own [i.e. England's] supplies.

III

London, January 16.
With reference to the present crisis in trade and industry, the London Economist remarks:

"Whatever may be the falling off in the export of other articles, there is none in machinery. The value in 1854 exceeds the value in 1853. Other countries, therefore, are now taking into use our machinery. We have no longer any advantage of this kind over them. France, Germany, Belgium, Holland, Switzerland, and the United States are all now great manufacturing countries; and some of them have advantages over us. We have a race to run, and we cannot succeed if we tie our legs. [...] Experience has satisfied every person that the restrictions imposed for the benefit of the landlord injured. him, that restrictions imposed for the benefit of the master manufacturers injured them; and by and by the factory workers will find out that the restriction imposed for their benefit will injure them. It is to he hoped, however, that they will find it out before the countries before mentioned have made such progress as to supersede England in their own and third markets, and have reduced the factory hands to destitution."

Mr. Wilson, editor of The Economist and factotum in the Ministry of Finance of the anointed and unctuous Mr. Gladstone, apostle of freedom and place-hunter rolled into one, a man who in one column of his paper denies the necessity of the state in general and in another proves the indispensability of the coalition government in particular Mr. Wilson, then, begins his homily with a deliberately distorted fact. The export tables for 1854 contain two columns on the export of machinery. The first, relating to railway locomotives, shows that in 1853 exports amounted to £443,254, but in 1854 to £525,702 which is undoubtedly an increase of £82,448. The second column, how-ever, which includes all machines used in factories, i.e. every kind of machinery except locomotives, shows £1,368,027 for 1853, as against £1,271,503 for 1854, or a decrease of £96,524. If both columns are taken together, they reveal a decrease of £ 14,076. This detail is characteristic of the gentlemen of the Manchester school. They consider the present moment opportune for the abolition of "restrictions" benefiting industrial workers, that is the legal limitation of the working hours of young people under 18, of women, and of children under 12. To achieve so lofty a purpose, the falsification of a few figures may surely be permitted. But, according to the Manchester Examiner, the special organ of the Quaker Bright, and to every trade circular in the factory districts, the foreign markets, those traditional outlets for our surplus manufactures, are groaning under the weight of our over-production and over-speculation.

If such glutting of the world market has been achieved in spite of the improvisation of two new golden markets Australia and California, in spite of the electric telegraph which has transformed the whole of Europe into one big commodity exchange, in spite of railways and steamships which have improved communication, and therefore commerce, to an incredible degree, how long would it have taken for the crisis to come if the factory owner had been at liberty to order his workers to work eighteen hours instead of eleven? The arithmetical problem is too simple to require a solution. However, the relative acceleration of the crisis would not have been the only difference. A whole generation of workers would have forfeited 50 per cent of their physical strength, spiritual development and vitality. The same Manchester school which will answer our misgivings with the words:

[why] should this distress distress us,
since it increases our pleasures?

deafens England with sentimental lamentations about the human sacrifice which is the price of her war with Russia, the price of any war! In a few days we shall hear Mr. Cobden at Leeds, protesting against the mutual slaughter of Christians. In a few weeks we shall hear him in Parliament, protesting against the "restrictions" which impede the too rapid consumption of human beings in the factories. Does he, of all heroic deeds, consider only one to be justified, that of Herod?

We agree with the Manchester school that compulsory legal restrictions of working hours do not exactly indicate a high level of social development. But we find the fault not in the laws, but in the conditions which make them necessary.

IV

London, January 22.
It is well known that the Chancellor of the Exchequer, Mr. Robinson, opened the Parliament of 1825 with a dithyramb on the unprecedented boom in trade and industry. Some weeks later, the Bank of England was on the point of suspending cash payments. Since then Mr. Robinson has kept the nickname of "Prosperity-Robinson", given him by Cobbett. As the English are fond of historical precedents, it was inevitable that Prosperity-Robinson should have successors. The Queen's Speech which inaugurated the last extraordinary session of Parliament, congratulated the country on the exceptional state of prosperity in agriculture, manufacture and trade. And yet, by then even the semblance of prosperity which might possibly have deceived Mr. Robinson had vanished. Ministerial congratulations seem to be part of the ceremonial with which, in England, disasters affecting the world market are suitably announced. Even stranger than the language of Ministers is the silence of the press at this moment. Does it believe it will be able to burke the trade crisis, in the same way as in the literary coteries of Paris unpopular books are burked—by a conspiracy of silence? However, price lists talk, the lists of bankruptcies in the Gazette talk, and the letters of "business friends" talk. Soon, too, the newspapers will talk. Last week, very significant suspensions of payment occurred in the City, among the most important being that of Messrs Lonergan & Co., in the Spanish and West Indian trade; that of Messrs Rogers, Lowrey, trading with Manchester and the surrounding factory districts; that of Messrs Kotherington & Co., in the American trade; and finally that of the Auberten brothers, an old and respected firm. The liabilities of these various firms are said to amount to an average of £100,000 to £150,000. For the current week, new suspensions of payment by at least seven important City firms are expected.

From a business letter of January 20, from Birmingham, we have extracted the following details concerning the situation of industry in South Staffordshire:

"With the exception of firms in iron manufacture which are producing war materials for the Government, only very few have any orders at all, and those in hand are at extremely reduced prices. At present, £8 10s. will buy a ton of bar-iron, which in mid-summer was quoted at £12, but even at these reduced prices it is scarcely possible to make a sale, so that production has to be restricted. There are few of the important interests of the United States of North America which have suffered more on account of the trade crisis there than heavy industry. Nearly all the great iron works in the United States in which enormous sums have been invested, have turned their workers out into the street without any chance of early re-engagement. America's consumption of iron must therefore be regarded as almost completely suspended, and we may expect no further orders from there.

"Last Saturday many workers from the tin factories" (of Birmingham) "were sacked and many more will follow tonight" (January 20). "Ore and brass workers are no better off, since most of the big works here are on short time.

"Orders in hand for fashion articles are very scarce, and commercial travellers seeking spring orders in this branch are sending home very discouraging reports.

"The situation in the money market continues to have a disrupting effect on all branches of trade. The banks are raising their rate of interest in a most detrimental way, and at this moment only one business is doing well—that of the money-lender. Clients are flocking to the small pawnbrokers' shops, and discount houses are reaping a rich harvest."