[The Trade Crisis in England]

While on this side of the ocean we were indulging in our little prelude to that great symphonious crash of bankruptcy which has since burst upon the world, our eccentric cotemporary The London Times was playing triumphant rhetorical variations, with the "soundness" of British commerce as its theme. Now, however, it tunes another and a sadder chord. In one of its latest impressions, that of Nov. 26, brought to these happy shores by the Europa yesterday, that journal declares "the trading classes of England to be unsound to the core." Then proceeding to work itself up to the highest pitch of moral indignation, it exclaims:

"It is the demoralizing career pursued through eight or ten years of prosperity, before the consummation arrives, that works the deepest ruin. It is in calling into existence gangs of reckless speculators and fictitious bill drawers, and elevating them as examples of successful British enterprise, so as to discourage reliance upon the slow profits of honest industry, that the poison is infused. [...] Each point of corruption thus created forms an ever-extending circle."[a]

We shall not now inquire whether the English journalists who, for a decade, propagated the doctrine that the era of commercial convulsions was finally closed with the introduction of Free Trade, are now warranted in turning all at once from sycophantic encomiasts into Roman censors of modern money-making. The following statements submitted to recent meetings of creditors in Scotland, may serve, however, as matter-of-fact comment on the "soundness" of British commerce.

"It appears from this statement", as The North British Mail says, "that on the bankrupts' own showing, £1,183,000 have been lost to the creditors of five houses."

Still the very recurrence of crises despite all the warnings of the past, in regular intervals, forbids the idea of seeking their final causes in the recklessness of single individuals. If speculation toward the close of a given commercial period appears as the immediate forerunner of the crash, it should not be forgotten that speculation itself was engendered in the previous phases of the period, and is therefore, itself a result and an accident, instead of the final cause and the substance. The political economists who pretend to explain the regular spasms of industry and commerce by speculation, resemble the now extinct school of natural philosophers who considered fever as the true cause of all maladies.

The European crisis has so far maintained its center in England, and in England herself, as we anticipated[b] it has changed aspects. If the first reaction on Great Britain of our American collapse manifested itself in a monetary panic, attended by a general depression in the produce market, and followed more remotely by manufacturing distress, the industrial crisis now stands at the top and the monetary difficulty at the bottom. If London was for a moment the focus of the conflagration, Manchester is so now. The most serious convulsion which English industry ever sustained, and the only one which produced great social changes, the industrial distress from 1838 to 1843, was, for a short period during 1839, accompanied by a contraction of the money market, while during the greater part of the same epoch the rate of interest ruled low, and even sunk down to 2½ and 2 per cent. We make this remark, not because we consider the relative improvement of the London money market as a symptom of its final recovery, but only to note the fact, that in a manufacturing country like England, the fluctuations of the money market are far from indicating either the intensity or the extent of a commercial crisis. Compare, for instance, the London and the Manchester papers of the same date. The former, watching but the efflux and influx of bullion, are all brightness when the Bank of England, by a new purchase of gold, has "strengthened its position." The latter are all gloom, feeling that strength has been bought at their expense, by a rise in the rate of interest and a fall in the price of their products. Hence, even Mr. Tooke, the writer of the History of Prices, well as he handles the phenomena of the London money and colonial markets, has proved unable not only to delineate, but even to comprehend, the contractions in the heart of English production.

As to the English money market, its history during the week ending Nov. 27 shows, on the one hand, a continuous alternation between a day of failures and a day marked by the absence of failures; on the other hand, the recovery of the Bank of England and the downfall of the Northumberland and Durham District Bank. The latter bank, founded 21 years ago, numbering 408 shareholders, and disposing of a paid-up capital of £562,891, had its head office at Newcastle and its branch establishments at Alnwick, Berwick, Hexham, Morpeth, North and South Shields, Sunderland and Durham. Its liabilities are stated to amount to three millions sterling, and the weekly wages alone, paid through its instrumentality, to £35,000. The stoppage of the great collieries and iron-works carried on by the advances of this bank will, of course, be the first consequence of its collapse. Many thousand workingmen will thus be thrown out of employment.

The Bank of England is stated to have increased her metallic reserve by about £700,000, an influx of bullion to be accounted for partly by the cessation of the drain to Scotland, partly by shipments from this country[c] and from Russia, and lastly by the arrival of Australian gold. There is nothing remarkable in this movement, since it is perfectly understood that the Bank of England, by screwing up the rate of interest, will curtail imports, force exports, draw back a portion of the British capital invested abroad, and consequently turn the balance of trade and effect an influx of bullion to a certain amount. It is no less sure that on the least relaxation of the terms of discount gold will again begin to flow abroad. The only question is how long the Bank will be able to maintain these terms.

The official reports of the Board of Trade for October[d] a month during which the minimum rate of discount was successively advanced to 6, 7, and 8 per cent, prove evidently that the first effect of that operation was not to stop manufactures, but to force their products into foreign markets and to curtail the importation of foreign produce.

In spite of the American crisis, the exports for October, 1857, exhibit a surplus of £318,838, as compared with October, 1856, while the considerable decrease in the consumption of all articles of food and luxuries exhibited by the same returns proves that this surplus manufacture was far from being remunerative, or the natural consequence of thriving industry. The recoil of the crisis on English industry will become apparent in the next Board of Trade returns. A comparison of the returns for the single months from January, 1857, to October, 1857, will show that English production attained its maximum in the month of May, when the surplus export over that of May, 1856, amounted to £2,648,904. In June, consequent upon the first news of the Indian mutinies, the total production sank down beneath that of the corresponding month in 1856, and exhibited a relative decrease in the exports of £30,247. In July, despite the contraction of the Indian market, the production had not only recovered the standard of the corresponding month in 1856, but exceeded it by no less a sum than £2,233,306. It is, therefore, clear that in that month the other markets had to absorb beyond their ordinary consumption not only the portion usually sent to India, but a great surplus over the usual English production. In that month, therefore, the foreign markets seem to have been so far overstocked that the increase in the exports was successively forced down from about two and one third millions to £885,513 in August, £852,203 in September, and £318,838 in October. The study of the English trade reports affords the only trustworthy clue to the mystery of the present convulsion in that country.

Notes