The French Crisis^[436]

The successive reduction by the Bank of France of its rate of discount from 10 per cent, at which it stood after Nov. 12, to 9 per cent on Nov. 26, 8 per cent on Dec. 5, and 6 per cent on Dec. 17[a], is, of course, pointed out by the Imperialist organs as irrefutable proof that the commercial revulsion has entered its decreasing stage, and that "France will go through the severe trial without any catastrophe." The financial system of Napoleon III. is said to have created "this evident superiority of the commercial state of France over that of all other nations," and to insure the fact that France is, and always will be, "less injured in a time of crisis than the countries competing with it." Now, 6 per cent is a rate of bank discount which, since the beginning of the present century, has never occurred in France save in February, 1800, some days after the foundation of the Bank by the uncle[b], until under the nephew[c], in the critical period of 1855 and 1856. But if the Bank of France continues to lower its rate of interest, say to 4 per cent, what then? The rate of discount was reduced to 4 per cent on Dec. 27, 1847, when the general crisis still lasted and the French crisis had not yet reached its climax. Then, as now, the Government congratulated France on its privilege of escaping general crisis with nothing but scratches, and those not skin deep. Two months later the financial earthquake had overturned the throne and the wise man who sat upon it.[d]

We do certainly not contest the fact that thus far the crisis has had less influence on French commerce than was expected. The reason is simply that in transactions with the United States, Great Britain, and the Hanseatic towns, the balance of trade is, and has been for a long time, in favor of France. Thus, in order that the disasters occurring in those countries should directly recoil on France, large credits must have been given to them, or commodities for export to them have been speculatively accumulated. Nothing of the sort has happened. The American, English and Hanseatic events could, consequently, produce no drain of bullion from France; and if its Bank for some weeks raised the rate of interest to the English standard, it did this only for fear lest French capital should seek more profitable employment abroad.

But it cannot be denied that the general crisis has, even in its present phase, told on France in a form agreeable to the commercial relations of that country with the United States, England and the Hanseatic towns, viz.: in the chronic form of distress. It has forced Bonaparte—who, in his letter of November 10, declared "the evil to exist in the imagination only"[e]—to come out with another official message to the effect that "in spite of the prudence of French trade and the vigilance of the Government, the commercial crisis has obliged many branches of industry, if not to suspend work, at any rate to shorten their time or lower their wages," so that "many workmen suffer from forced idleness."[e'] He has consequently opened a credit of a million francs for the relief of the necessitous and finding them means of employment; he has ordered military precautions to be taken at Lyons; and, through his journals, has appealed to private charity. The withdrawals from the savings banks have begun by far to exceed the deposits. Heavy losses from failures in America and England have been sustained by many manufacturers, production is contracting to a disastrous degree at Paris, Lyons, Mühlhausen, Roubaix, Rouen, Lille, Nantes, St. Etienne, and other industrial centers, while serious embarrassments prevail at Marseilles, Havre and Bordeaux.

The general stagnation of trade throughout the country is most evident from the last monthly report of the Bank of France, which shows for the month of December a decrease in circulation of 73,040,000 francs, as compared with October, and of 48,955,900 francs as compared with November; while the aggregate of discounts has fallen about 100,000,000 francs, if compared with October, and 77,067,059 francs compared with November[f] In the present state of the French press it is, of course, not possible to ascertain the exact state of the failures occurring in provincial towns, but the Paris bankruptcies, although certainly not yet serious, exhibit a tendency to grow not only in quantity, but also in the quality of the concerns involved. In the fortnight from Nov. 17 to Dec. 1 thirty-four Paris bankruptcies only occurred, of which not fewer than twenty-four were of dealers in second-hand clothes, milk-dealers, tailors, artificial flower-makers, cabinet-makers, reticule-makers, gilders, leather dealers, jewelers, fringe-makers, vinegar-makers, cap-makers, fruiterers, &c. From the 1st of December up to the 8th the bankruptcies were no fewer than thirty-one, and from the 9th to the 15th the number amounted to thirty-four, including some of greater importance, such as Messrs. Bourdon, Dubuch & Co., bankers; the General Company of voitures de remise[g], a Company for Jacquard looms, an oil Company[h], &c. On the other hand, Bonaparte's. attempt at checking the ruinous fall in the prices of wheat and flour by the abrogation of the prohibition decrees, has proved a failure, prices having progressively sunk from the 26th November to the 21st of December, and despite a fair margin of profit on sales in London, no more than 3,000 sacks (of 110 kilogrammes) being shipped thither up to the 22d of December.

If, however, the balance of trade is in favor of France in her dealings with the United States, England, and the Hanseatic towns, it is against her in her commerce with Southern Russia, the Zollverein[437], Holland, Belgium, the Levant and Italy. As to Switzerland, the temporary balance of trade is always against her, but France is so deeply indebted to her—most of the Alsatian manufactures being carried on by Swiss capital—that in times of monetary scarcity she may always heavily pull upon the French money market. At this period, as at every former one, there will be no active French crisis before the commercial difficulties in those countries have reached a certain hight. That Holland cannot tide over the present storm; will be understood on the simple consideration that her still large commerce is almost limited to that description of produce which has undergone and is progressively undergoing the most fatal depreciation. In the industrial centers of the Zollverein the premonitory symptoms of the crisis are already visible. Apprehensions of a crash in the Black Sea and Levantine trade are announcing themselves in the Trieste papers, and its first precursory flashes have sufficed to bring down some large houses at Marseilles. In Italy, finally, the monetary panic, at the very moment that it seems subsiding in the North of Europe, has burst out ablaze, as will be seen from the following extract from the Opinione of Milan, of Dec. 18:

"The difficulties of the present time are very, very great; failures are occurring on a frightful scale, and after those of Palleari, of Ballabio and Co., of Cighera, of Redaelli, of Wechler and Mazzola, after the contre-coup of foreign cities, after the suspension of payments by the best houses of Verona, Venice, Udine and Bergamo, our strongest firms also begin to waver, and to make up their accounts. And the accounts are very sad. Let it suffice to remark that among our great silk houses there is not one that has in warehouse a less quantity than 50,000 pounds of silk, whence it is easy to calculate that at present prices every one of them must lose from half a million to two millions of francs—the stock of some of them exceeding 150,000 lb. The firm of Brarnbilla Brothers was supported by a loan of one million and a half of francs; Battista Gavazzi is liquidating, and others are doing the same. Every man asks himself what we have to look forward to; so many fortunes vanished, so many reduced by one-half; so many families, lately in easy circumstances, now at their last shift; so many workmen without work or bread, or means of subsistence of any kind."[i]

When the French crisis, consequent upon the growing pressure from these countries, comes to maturity, it will have to grapple with a nation of gamblers, if not of commercial adventurers, and with a Government that has played the same part in France as private commerce has done in this country[j], in England and Hamburg. It will fall severely upon the stock market and endanger the supreme security of that market—the State itself. The natural result of the contraction of French commerce and industry is to place money at the disposition of the Bourse, especially as the Bank of France is bound to make advances upon public funds and railway securities. Instead of checking stock gambling, the present stagnation, of French commerce and industry has favored it. Thus we see from the last monthly report of the Bank of France, that its advances on railway shares have increased simultaneously with the decrease in discounts and circulation. Thus, in spite of the heavy decrease in the receipts of most of the French railways, their quotations are looking up, the receipts of the Orleans line, for instance, having decreased by 22½ per cent toward the close of November, as compared with the corresponding period of last year; yet Orleans was quoted on Dec. 22 at 1,355, while it stood on 1,310 francs only on Oct. 23.[k]

When the depression of trade set in upon France some railway companies were at once compelled to interrupt their works, and a similar fate threatened almost all of' them. To mend this the Emperor forced the Bank of France into a treaty with the companies, by dint of which it becomes in fact the real railway contractor. It has to advance the money upon the new bonds which the companies are authorized by the settlement of Nov. 30, 1856, to emit in 1858; and on that part which remained still to be issued for 1857; the authorized issue of bonds for 1858 amounting to forty-two and a half millions. The Crédit Mobilier[438] seemed also destined to succumb before the first shock, and had on the 3d of December to sell at an enormous sacrifice part of its immense amount of securities. There is now a project afloat of amalgamating it with the Crédit Foncier and the Comptoire d'Escompte[439], in order to make it share in the privilege granted to those institutions of having their bills discounted and their securities received by the Bank of France. Thus the plan evidently is to weather the storm by making the Bank of France responsible for all these concerns—a maneuver which of course exposes the Bank itself to wreck. But what even Napoleon III cannot think of, is to make the Bank pay the calls the private shareholders of the different joint-stock companies will have to encounter. Excluding petty affairs, the calls to be met toward the close of December were: Mercantile and Industrial Company of Madrid (Messrs. Rothschild), $30 per share; Franco-American Navigation Company, $10 per share; Victor Emmanuel Railway Company, $30 per share; Herserange Iron Works Company, $20 per share; the Mediterranean, $30 per share; the Austrian Railway, $15; the Saragossa, $10; the Franco-Swiss, $10; the Société Générale de Tanneries, $ 10; the Companie de la Carbonisation de Houilles[l] $10, &c. At the beginning of the year there is a payment of $20 per share on the Chimay and Marienburg Railway, of $I2½ on the Lombard-Venetian Railways, and $20 on the Belgian and South American Steam Navigation Company. According to the settlement of Nov. 30, 1856, the calls for French railways alone will, in 1858, amount to about $50,000,000. There is certainly a great danger that France may founder on these heavy engagements in 1858, as England did in 1846-47. Moreover, capitalists in Germany, Switzerland and the Netherlands, are large holders of French securities, the greater part of which, at the progress of the crisis in those countries, will be thrown upon the Paris Bourse to be turned into money at any price.

Notes