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The Financial Panic

Karl Marx

London, April 29, 1859

Yesterday being settling day in Foreign Stocks and Shares, the panic on the Exchange, which had commenced on the 23d, reached a sort of climax. Not less than twenty-eight failures of members of the Stock Exchange were declared since Monday last, of which eighteen occurred on the 28th. The sums involved, reaching in one instance the amount of £100,000, surpass by far the usual average of such "executions." The simultaneous advance by the Bank Directors of the rate of discount to 3½ per cent from 2½ per cent, at which it was fixed on Dec. 9, 1858, an advance consequent upon the efflux of bullion necessitated by the purchase of silver for shipment to India, concurred in a slight degree to highten the disturbance. Three per cent Consols[260], quoted, April 2, at 96¼, had sunk, April 28, to 89, and for some hours even to 88¼. Russian 4½ per cent stock, quoted, April 2, at 100, fell on the 28th to 87. During the same interval Sardinian stock went down from 81 to 65, while the Turkish 6 per cent loan realized a decline from 93½ to 57, from which point it rose again in a later hour to 61. Austrian 5 per cent stock was quoted as low as 49. The principal circumstances that created this enormous depreciation of home and foreign stocks, accompanied by a similar fall in railway shares, especially the Italian railways, were the news of the invasion of Sardinia by the Austrians, the advance of a French army on Piedmont, and the offensive and defensive treaties concluded between France, Russia, and Denmark[261]. It is true that in the course of the day the telegraph conveyed a denial on the part of the Constitutionnel of the offensive and defensive treaty between France and Russia[a]. Yet, credulous and sanguine as the Stock Exchange mind certainly is, for once it dared to discredit the veracity of French semi-official declarations. It had not yet contrived to forget that hardly a week ago the Moniteur had taken upon itself to deny that France was arming or intended to arm[b]. Moreover, while denying the treaty, the French oracle confessed that an "understanding" had been established between the Eastern and the Western Autocrat, so that the denial, in the best case, turned upon a quibble. With the failing British stock-jobbers, there went down at the same time the Russian loan of £12,000,000, which, but for the sudden resolution taken on the part of Austria[262], would have been swallowed by Lombard street. Mr. Simpson, the money article writer of the London Times, makes these curious remarks on the bursting of that loan bubble[c]:

"One of the points particularly worthy of remark in the present state of affairs is the escape the public have had from the projected loan to Russia. Although the designs of that Power have been transparent ever since the premature termination of the Crimean war, through the influence of our 'ally', and the subsequent meeting of the Emperors at Stuttgart[263] it was certain that no warnings short of absolute demonstration would be of avail to prevent her from obtaining any desired amount, if a house of standing could be found willing to undertake the transaction. Accordingly, when the scheme for getting £12,000,000 was put out a month or two back, the greatest elation and confidence were expressed by all the parties interested. English capitalists might please themselves! Only a very moderate portion would be granted them! People at Berlin and elsewhere were anxious to get it at one or two per cent above the price at which it was to be offered in the London market. Under such circumstances, there was little hope of any word of caution being heard. True, neither Messrs. Baring nor Rothschild, who are usually eager enough to compete in such matters, had shown any willingness to touch it. There were also reports of a mysterious concentration of 100,000 Russian troops in Georgia. The Russian Embassador at Vienna[d] likewise was said to have remarked openly that the Emperor Napoleon was quite right in demanding a revision of the treaties of 1815; and, finally, the recent contrivances for annulling the Treaty of Paris, as regards the Danubian Principalities[264], the tour of the Grand Duke Constantine in the Mediterranean, and the adroit movement for counteracting the pacific mission of Lord Cowley[265], might have been supposed sufficient to induce hesitation. But nothing can influence a sanguine English investor, bent upon what he conceives to be a stock that will yield him 5 per cent, and there is no measure to his contempt for alarmists. So the hopes of the contractors remained undiminished, and it was actually only a day or two before the announcement of the Austrian ultimatum that the last deliberations were held, in order to have everything in readiness to bring out this proposal at a moment's notice. On the very next receipt of tranquilizing assurances in the French Moniteur, to back those already furnished, that France had not armed and did not intend to arm, the whole affair was to prove a great success. The 'criminal' movement of Austria, however, in not waiting till her opponents had obtained all they required, spoiled the proceeding, and the £12,000,000 will now have to be kept at home."

At Paris, of course, the panic of the money market, and the failures consequent upon it, leave the London disturbances far behind in the race; but Louis Napoleon, having just voted himself a new loan of 500,000,000 francs[e] by his footmen of the Corps Législatif, has rigidly forbidden the public press to take any notice of these. untoward accidents. Yet, we may arrive at a just appreciation of the present state of things by perusing the following tabular statement, which I have extracted from the official quotations:

 March 24.
f. c.
April 7.
f. c.
April 28.
f. c.
Three Per Cents69 2067 9562 00
Bank of France, shares2,865 002,840 002,500 00
Crédit Mobilier805 00707 50530,542 00
Orleans1,368 001,257 501,150 00
Northern940 00915 00835 00
Eastern682 00627 50550 00
Mediterranean850 00830 00752 00
Southern523 00503 75412 50
Western600 00537 50485 00
Geneva540 00520 00445 00
Austrian560 00536 25406 25
Victor Emmanuel400 00390 00315 00
Lombardo-Venetian[f]527 50512 50420 00

The monetary mind of England is at this moment heated with excessive anger at the British Government, whom they accuse of having made themselves the laughing-stock of diplomatic Europe; and what is still more, of having led astray the commercial public by their own willful blindness and misapprehension. In fact, Lord Derby allowed himself, during the whole course of the mock negotiations, to be made the foot-ball of France and Russia. Not content with his previous uninterrupted blunders, he fell again into the same trap on the arrival of the news of the Austrian ultimatum, which, at the Mansion dinner, he branded as "criminal," having even then not yet become aware of the Russo-French treaty[g]. His last offer of mediation, which Austria could not but accept, was a mere electioneering trick, that could result in nothing but giving Bonaparte forty-eight hours more for the concentration of his troops and paralyzing the inevitable operations of Austria. Such is the diplomatic acumen of that proud aristocracy which pretends to oppose the popular Reform bill because it possibly might wrench the management of foreign affairs out of the clever hands of hereditary politicians. In conclusion, let me remark that the insurrections in Tuscany and the Duchies[266] were just what Austria wanted to give her a pretext to occupy them.

Written on April 29, 1859
First published in the New-York Daily Tribune, No. 5634, May 12, 1859;
reprinted in the New-York Semi-Weekly Tribune, No. 1457, May 13, 1859
Reproduced from the New-York Daily Tribune


[a] See Louis Boniface's article in Le Constitutionnel, No. 119, April 29, 1859.—Ed.

[b] Le Moniteur universel, No. 109, April 19, 1859. See also this volume, p. 296.—Ed.

[c] The Times, No. 23293, April 29, 1859.—Ed.

[d] V. P. Balabin.—Ed.

[e] This loan was co enlarge military contingents. For the discussion of the question in the Corps législatif see Le Moniteur universel, No. 117, April 27, 1859.—Ed.

[f] This table was made by Marx on the basis of tables contained in Le Moniteur universel, Nos. 84, 98 and 119, for March 25, April 8 and 29, 1859, but the Moniteur gave no figures for the Lombardo-Venetian railway.—Ed.

[g] Lord Derby's speech at a dinner at the Mansion-House on April 25, 1859, The Times, No. 23290, April 26, 1859.—Ed.

[260] Consols is short for consolidated annuities, i.e. government securities consolidated in 1751 into a single stock at three per cent. Up to the First World War they made up a large part of the British national debt.

[261] The reference is to the secret Paris treaty of February 19 (March 3), 1859 concluded between France and Russia. Russia undertook to adopt a "political and military stand which most easily proves its favourable neutrality towards France" (Article I) and not to object to the enlargement of the Kingdom of Sardinia in the event of a war between France and Sardinia on the one hand and Austria on the other. Information about this secret treaty leaked into the press but the Russian Foreign Minister Gorchakov officially denied the existence of any written obligations to France. As was proved later, Denmark did not take part in the negotiations.

[262] The reference is to the Austrian ultimatum to Sardinia of April 23, 1859 which marked the beginning of the 1859 war between France and Sardinia on the one hand and Austria on the other.

[263] The Stuttgart meeting of the Emperors, Alexander II and Napoleon III, took place on September 25, 1857. It was a sign of rapprochement between France and Russia after the Crimean war.

[264] Under the Treaty of Paris (see Note 143↓) the autonomy of the Danubian Principalities within the Ottoman Empire was guaranteed by the countries which took part in the Paris Congress of 1856. Austria, which occupied the principalities in 1854, was to withdraw its troops from them. In 1858 a special conference was convened in Paris to decide finally on the status and rights of the Danubian Principalities (see Note 242↓).

[265] In mid-February 1859 the Derby government in Britain offered to mediate in settling the Franco-Austrian conflict. With this aim in view Lord Cowley was sent, with Napoleon III's consent, to Vienna at the end of February for talks with Emperor Francis Joseph of Austria. His mission, however, failed.

[266] In the spring and summer of 1859 popular insurrections flared up in Tuscany, Modena and Parma. The members of the ruling dynasties fled from their duchies to seek the protection of the Austrian army. The national assemblies set up as the result of the insurrections declared that the population of the duchies wished to be incorporated in Piedmont. This question was settled in March 1860 by a plebiscite.

[143] This peace treaty was signed at the Paris Congress on March 18 (30), 1856 by France, Britain, Austria, Sardinia, Prussia and Turkey on the one hand and Russia on the other; it ended the Crimean war of 1853-56.

[242] Under the Peace of Paris Russia was deprived of the Danube estuary region and part of Southern Bessarabia and was compelled to give up its protectorate over the Danubian principalities of Moldavia and Wallachia.

Later, in order to strengthen its influence in the Balkans, Russia supported the national liberation movement of the Balkan peoples against the Turkish rule. Together with France it supported Moldavia's and Wallachia's desire to form a united Rumanian state. Russia also backed the dynastic coup d'état in Serbia in late November 1858, as a result of which the Karageorgević dynasty whose foreign policy was oriented on Austria and Turkey was replaced by the Obrenović dynasty.

Source: Marx and Engels Collected Works, Volume 16 (pp.303-306), Progress Publishers, Moscow 1980
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