"Neue Rheinische Zeitung" – The State of Trade

The State of Trade

["Neue Rheinische Zeitung" No. 239, March 7, 1849]

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Cologne
, March 6.
An Englishman is never more miserable than when he does not know what to do with his money. This is the secret of all grand-scale speculations, of all profit-yielding undertakings; but also the secret of all bankruptcies, all money crises and all commercial distress.

In the years 1840, 1841, etc., it was the new Asian markets which, apart from the normal traffic with the European continent, particularly absorbed English export trade. The manufacturers and exporters had every reason to hail Sir Henry Pottinger on the Manchester Exchange with loud hurrahs. But the fine times quickly passed. Canton, Bombay and Calcutta were soon glutted with unsaleable goods, and the capital which could no longer find an outlet in that direction sought employment once more, for a change, at home, throwing itself into railway construction and thereby opening up a field for speculation in which it was soon able to disport itself on an unheard-of scale.

According to a moderate estimate, the total sum of undertakings may be put at £600 million, and matters would probably have gone much further had not the failure of the potato harvest in England, in Ireland and in many parts of the Continent, the high price of cotton and the reduction in the sale of manufactured articles resulting from both, and finally the excessive railway speculation itself, prompted the Bank of England to raise the discount rate by half a per cent on October 16, 1845.

Given the superstitious fear which the Briton has of the omnipotence of his Bank, this trifling rise in the discount rate, or in other words, this mistrust on the part of the Bank directors, immediately brought about a reaction against the previous activity, so that general despondency set in, and a restriction of credit and numerous bankruptcies followed hard upon this apparent prosperity. One of those great commercial crises, like those of 1825 and 1836, would therefore have developed straightaway had not the repeal of the Corn Laws, which followed soon after, suddenly come to the aid of sinking confidence and spurred on the spirit of enterprise anew.

The commercial world, indeed, promised itself so much from the immediate consequences of that great measure that it could not help easily forgetting the distress that had barely broken out. The settlement of the Oregon dispute, which promised a continuation of the American business that had previously flourished in the highest degree, and the British victories in the Punjab, which secured the tranquillity of Hindustan, naturally did their part to raise courage again; and even though the bad harvest of 1845 was seen to be followed by a similar one in 1846, even though everywhere people were still labouring under the stocks of past times and had to pay 12 to 15 per cent for money to carry on business, they nonetheless set all the spinning mills of Lancashire and Yorkshire in such ceaseless motion as if bad harvests, railway speculations and glutted markets were suddenly mere trifles that one could leap over in a twinkling.

The whole glory was, however, not to last much longer, for while in September 1847 Dr. Bowring at the Brussels Free Trade Congress was expounding the wonderful results of the repeal of the Corn Laws in such highly comical pathos <see Volume 4, pp. 294 and 303/304>, it was already being noticed in London that even “Sir Robert Peel’s all-powerful measure” was no longer capable of saving the country from the long-feared catastrophe. People had to bow their necks, and the London houses which, like Read, Irving & Co., had almost a million pounds sterling of landed property in Mauritius, opened the round of bankruptcies amid the disordered state of that part of the English colonies and, in collapsing, dragged down with them to left and right several smaller East and West Indian houses.

The matadors of the factory districts realised at the same time that they had been mistaken about the consequences of the repeal of the Corn Laws. Business came to a standstill in every part of the world, and terror spread in the same moment through the City of London, as on the exchanges of Liverpool, Manchester, Leeds, etc.

The crisis of October 1845, held back by all sorts of events, thus at length broke out in September 1847. Confidence was at an end. Spirit was gone. The Bank of England let the banks in the interior of the country fall; the interior banks withdrew credit from traders and manufacturers. Bankers and exporters restricted their business with the Continent, and the trader on the Continent again squeezed the manufacturer who was tributary to him; the manufacturer naturally made up his losses on the wholesaler, and the wholesaler fell back on the small shopkeeper. Everyone struck down the next, and the distress of the commercial crisis shot through the world by degrees, from the giants of the London City down to the last German huckster.

That was
before
February 24, 1848! England had seen the worst days in the four last months of 1847. With the railway speculators a clean sweep had been made; in the colonial produce trade, 20 of the first London houses failed between August 10 and October 15, with liabilities amounting to £5 million and paying about 50 per cent dividend; and in the factory districts the distress reached its peak when in Manchester on November 5, out of 175 spinning mills only 78 were working full time and 11,000 workers stood in the streets.

Thus the year 1847 drew to a close. It was reserved for the Continent to feel the after-effects of this English crisis in the course of 1848 – after-effects which, naturally, were all the more painful this time inasmuch as the political upheavals did not exactly help to compensate for the consequences of English extravagance.

We now come to the most interesting point in recent commercial history, namely the influence which the revolutions had on commerce.

The export lists of English trade provide us with the best illustrations of this, for, given the dominant position which England occupies in world trade, the content of these lists is nothing more than the politico-commercial condition, or better, the solvency of the various nations, expressed in figures.

If, therefore, we see exports fall by £1,467,117 in April 1848 and by £1,122,009 in May, and the total sum of exports from £51,005,798 in 1847 to only £46,407,939 in 1848, one might certainly conclude from this very much to the disadvantage of the revolutions, and the more readily since exports in January and February 1848, i.e. immediately before the outbreak of the revolution, were actually £294,763 more favourable than in 1847.

Nonetheless, this view would be entirely mistaken; for, firstly, the increased export of January and February, precisely the two months that lie between the peak of the crisis and the revolution, is easily explained by the fact that the Americans, in return for their enormous corn shipments to England, at that time took more British manufactured goods than ever before and in this way at least momentarily covered a deficit that would otherwise have arisen. Moreover, in the commercial history of England we find the most striking proofs that exports do not diminish immediately after the crisis, but only when the crisis has had time to spread over the Continent as well.

The increased export of the first two months of 1848 must therefore by no means mislead us, and we may calmly turn to the total deficit of the entire year.

This, as we have already observed, amounted to £4,597,859 compared with 1847 – a considerable diminution indeed, which in the hands of the reactionaries, who behave like yelping dogs in politics and like old women in trade, has become an argument against the revolution, of which only too effective a use is made vis-à-vis all the uninitiated.

Nothing is easier, however, than to overthrow the fraudulent assertions of that party; one need only look up the export lists of the last 30 years to demonstrate that the diminution in exports of 1848, arising from the combined influences of a commercial crisis and a revolution, stands in no proportion whatever to the export deficits of earlier years.

After the commercial crisis of 1825, when the sum of exports amounted to £38,870,851, exports fell in 1826 to £31,536,724. They therefore diminished by £7,334,127. After the crisis of 1836, when exports amounted to £53,368,572, exports sank in 1837 to £42,070,744. They were thus £11,297,828 smaller. Nothing can be more striking than this!

After two commercial crises, which admittedly arose more exclusively from over-production of manufactured goods but which in their extent are not to be compared at all with the one last past, exports thus diminished by twice the deficit of 1848, a year which was preceded by a glutting of the Asian markets, by two bad harvests, by a speculation such as the world had never seen, and which with its revolutions convulsed old Europe down to the remotest corner!

Truly, the year 1848 was still a very merciful one for trade! The revolutions contributed to the stagnation of business here and there, to sales becoming difficult and hazardous, and to many a man collapsing under the burden of his obligations – but during the course of the past year one would have encountered the same difficulties under Louis-Philippe in discounting a wretched 20,000 or 30,000 frs. in Paris as under the Republic; we should have had our bankruptcies just as much without as with the revolutions in Southern Germany, on the Rhine, in Hamburg and in Berlin; and Italian business would have been just as depressed under Pius as under the heroes of Milan, Rome and Palermo.

It is therefore also ridiculous when the revival of trade is ascribed to the momentary victory of counter-revolution. The French do not pay 25 per cent more for wool at the London wool auctions because a few ministers of Louis-Philippe are again at the helm – no, they have to pay more because they need wool, and they need it more, their demand increases, precisely because it had fallen very greatly in the last years under Louis-Philippe. This movement of demand is apparent throughout the whole of commercial history.

And the English do not work all day long anew in all the mines, in all the smithies, in all the spinning mills, in all their ports, because a Prince Windischgrätz is having the Viennese shot by court-martial – no, they work because the markets of Canton, New York and St. Petersburg want to be supplied with manufactures, because California opens up a new market that seems inexhaustible to speculation, because the bad harvests of 1845 and 1846 were followed by two good harvests in 1847 and 1848, because they have thrown railway speculations to the winds, because money has returned to its regular channels, and they will work until a new – commercial crisis.

Above all, we must not forget that it was by no means the monarchical countries which gave English industry the bulk of its employment in recent years. The country which has almost uninterruptedly come forward with the most colossal orders for English articles, and which even at this moment knows how to clear the markets of Manchester, of Leeds, of Halifax, of Nottingham, of Rochdale, and of all those great entrepôts of modern industry by its orders, and to enliven the seas with its ships—it is a republican country, it is the United States of North America. And these states

are flourishing most just now, when all the monarchical states of the world are collapsing together.

But if some German branches of industry have picked up somewhat recently, they owe this only to the English prosperity period <period of upswing>. From the entire commercial history the Germans could know that they have no commercial history of their own, that they have to bear the brunt of the English crises, while in the English overproduction periods a few percentual crumbs fall to their share. But to their Christian-Germanic governments they owe nothing but accelerated bankruptcy.