The Commercial Crisis in Britain^[422]

The English commercial crisis, whose premonitory symptoms were long ago chronicled in our columns[a], is a fact now loudly proclaimed by the highest authorities in this matter the annual circulars issued from the British Chambers of Commerce, and the leading commercial firms of the kingdom, along with extensive bankruptcies, mills running short-time, and stinted export tables, which speak to the same effect. According to the latest official "accounts relating to trade and navigation," the declared value of enumerated articles of export in the month ending Dec. 5, was:

One cannot be astonished at the endeavor of the professional free-traders of Great Britain to show that the present crisis, instead of flowing from the natural working of the modern English system, and being altogether akin to the crises experienced at periodical intervals almost since the end of the 18th century, must, on the contrary, proceed from accidental and exceptional circumstances. According to the tenets of their school, commercial crises were out of the question after the corn laws were abrogated[423], and free-trade principles adopted by the British legislature. Now they not only have high prices of corn with an abundant harvest, but also a commercial crisis. California and Australia added to the markets of the world and pouring forth their golden streams, with electric telegraphs transforming the whole of Europe in one single Stock Exchange, and with railways and steamers centuplicating the means of communication and of exchange. If their panacea had to be put to the test, they could not have expected to do it under circumstances more favorable than those which signalize the period from 1849 to 1854 in the history of trade and commerce.

They have failed to realize their promises, and naturally enough the war is now to be made the scapegoat of free-trade, just as the revolution in 1848 was. They cannot deny, however, that to a certain extent, the Oriental complication has delayed the revulsion, by acting as a check on the spirit of reckless enterprise, and turning part of the surplus capital to the loans recently contracted by most of the European powers; that some trades, like the iron trade, the leather trade and wool trade, have received some support from the extraordinary demand the war has created for these products; and, lastly, that in other trades, like the shipping, the woad trade, etc., where exaggerated notions as to the effects of the war fostered over-speculation on both sides of the Atlantic, only a partial outlet has been furnished to the already ruling and universal tendency to over-trading. However, their principal argument amounts to this, that the war has produced high prices for all sorts of grain, which high prices have engendered the crisis.

Now, it will be recollected that the average prices of corn ruled higher in 1853 than in 1854. If, then, these high prices are not to account for the unprecedented prosperity of 1853, they can as little account for the revulsion of, 1854. The year 1836 was marked by commercial revulsion, notwithstanding its low corn prices; 1824 as well as 1853 were years of exceptional prosperity, notwithstanding the high prices that ruled in all sorts of provisions. The truth is, that although high corn prices may cripple industrial and commercial prosperity by contracting the home market, the home market in a country like Great Britain will never turn the balance, unless all foreign markets be already hopelessly overstocked. High corn prices must, therefore, in such a country, aggravate and prolong the revulsion; which, however, they are unable to create. Besides, it must not be forgotten that, conforming to the true doctrine of the Manchester School, high corn prices, if produced by the regular course of nature, instead of by the working of protection, prohibitive laws and sliding scales, altogether lose their fatal influence, and may even work advantageously by benefiting the farmers. As the two very deficient harvests of 1852 and 1853 cannot be denied to have been natural events, the free-traders turn around upon the year 1854, and affirm that the Oriental war, working like a protective duty, has produced high prices notwithstanding a plentiful harvest. Putting aside, then, the general influence of the prices of breadstuffs upon industry, the question arises as to the influence exerted by the present war upon these prices.

The Russian importation of wheat and flour constitutes about 19 per cent. of the entire importation of the United Kingdom, and its whole importations forming but about 20 per cent. of its aggregate consumption, Russia affords but little more than 21/2 per cent. of the whole. According to the latest official returns which do not extend over the first nine months of 1853, the entire imports of wheat into Great Britain were 3,770,921 qrs., of which 773,507 were from Russia, and 209,000 from Wallachia and Moldavia. Of flour, the entire imports amounted to 3,800,746 cwts., of which 64 were supplied from Russia, and none at all from the Principalities. Such was the case before the war broke out. During the corresponding months of 1854, the importation of wheat from Russian ports direct was 505,000 qrs., against 773,507 in 1853, and from the Danubian Principalities 118,000 against 209,000; being a deficiency of 359,507 qrs. If it he considered that the harvest of 1854 was a superior, and that of 1853 a very bad one, nobody will affirm that such a deficiency could have exerted any perceptible influence on prices. We see, on the contrary, from the official returns of the weekly sales in the English market of home-grown wheat—these returns representing but a small portion of the entire sales of the country—that in the months of October and November, 1854, 1,109,148 qrs. were sold, against 758,061 qrs. in the corresponding months of 1853 more than making up for the deficiency said to have been caused by the Russian war. We may remark, also, that had the English Cabinet not caused large stores of Turkish wheat to rot in the granaries of the Principalities by stupidly or treacherously blockading the Sulina, mouth of the Danube, and thus cutting off their own supplies, the war with Russia would not have stinted the importation of wheat even to the small amount it has done. Nearly two-thirds of the London imports of foreign flour being derived from the United States, it must be admitted that the failure of the American supply in the last quarter of 1854 was a much more important event for the provision trade than the Russian war.[424]

If we are asked how to explain the high prices of corn in Great Britain in the face of an abundant harvest, we shall state that more than once during the course of 1853, the fact was pointed at in The Tribune[b], that the free-trade delusions had caused the greatest possible irregularities and errors to take place in the operations of the British corn-trade, by depressing prices in the summer months below their natural level, when their advance alone should have secured the necessary supplies and sufficient orders for future purchases. Thus it happened that the imports in the months of July, August, September and October, 1854, reached but 750,000 qrs. against 2,132,000 qrs. in the corresponding months of 1853. Besides, it can hardly be doubted that consequent upon the repeal of the corn laws such large tracts of arable land were transformed into pasture in Britain, as to make even an abundant harvest, under the new regime, relatively defective.

"Consequently," to quote a circular of the Hull Chamber of Commerce, "the United Kingdom commences the year 1855 with very small stocks of foreign wheat, and with prices almost as high as in the beginning of 1854, while depending almost entirely on its own farmers' supplies until spring."

The reason of the English commercial revulsion of 1854, which is not likely to assume its true dimensions before the spring of the present year, is contained in the following few arithmetical characters: The exports of British produce and manufactures having amounted, in 1846, to £57,786,000, reached, in 1853, the enormous value of £98,000,000. Of those £98,000,000 of 1853, Australia, which, in 1842, had taken off less than one million, and in 1850, about three millions, absorbed near fifteen millions; while the United States, which, in 1842, had only consumed £3,582,000, and, in 1850, somewhat less than £15,000,000, now took the enormous amount of £24,000,000. The necessary reaction upon the English trade of the American crisis, and the hopelessly glutted Australian markets, need no further explanation. In 1837 the American crisis followed at the heels of the English crisis of 1836, while now the English crisis follows in the tracks of the American one; but, in both instances, the crisis may be traced to the same source the fatal working of the English industrial system which leads to over-production in Great Britain, and to over-speculation in all other countries. The Australian and the United States markets, so far from forming exceptions, are only the highest expressions of the general condition of the markets of the world, both being about equally dependent upon England.

"We have the facts staring us in the face of glutted foreign markets and unprofitable returns, with few exceptions," exclaims a Manchester circular, relating to the cotton trade. "Most of the foreign markets," says another circular, relating to the silk trade, "usual vents for our surplus manufactures, have been groaning under the effects of overtrading." "Production was enormously increased," we are told by an account of the Bradford Worsted trade, "and the goods, for a time, found an outlet in foreign markets. Much irregular business has been done in reckless consignments of goods abroad, and we need scarcely remark that the results generally have been of the most unsatisfactory character."[c]

And so we might quote from a score of leading commercial circulars that reached us by the Pacific.[425]

The Spanish Revolution and the consequent activity of smuggling in that quarter, has created an exceptional market for British produce. The Levant market, consequent upon the apprehensions arising from the Oriental war, seems to be the only one which had not been overdone, but some three months since, as we learn, Lancashire set about retrieving what had been neglected in that quarter, and at this very moment we are told that Constantinople is also groaning under the overwhelming masses of cottons, woolens, hardware, cutlery, and all sorts of British merchandise. China is the only country where it can be pretended that political events have exerted a perceptible influence on the development of the commercial revulsion.

"The hopes entertained about the gradual increase in our export trade with China," says a Manchester house, "have been almost entirely dispelled, and the rebellion spreading at present, in that country, at first considered as favorable to foreign intercourse, seems now to be organized for the depredation of the country and the total ruin of trade. The export trade with China, which once was expected to increase greatly, has almost entirely ceased."[d]

Our readers will perhaps remember that when the Chinese revolution[426] first assumed anything like serious dimensions, we predicted the disastrous consequences[e] now complained of by the English exporting houses.

While denying all connection between the war and the commercial crisis, the symptoms of which had become apparent before the war was ever thought of, we are of course aware that the latter may dangerously aggravate the severe ordeal Great Britain will now have to pass through. The continuance of the war is tantamount to an increase of taxation, and increased taxes are certainly no cure for diminished incomes.

Notes

[426] In 1850 popular disturbances occurred in a number of southern provinces of China and developed into a big peasant war. The rebels established a state of their own over a considerable part of China's territory. Its leaders put forward a utopian programme of transforming the Chinese feudal social system into a militarised patriarchal one based on the egalitarian principle in production and consumption. The movement, which was also anti-colonial, was weakened by inner dissensions and the rise of a local aristocracy among the Taipings. The rebellion was suppressed in 1864, mainly due to intervention by Britain, the USA and France.