H.M. Hyndman

Commercial Crises of the Nineteenth Century

Chapter I
The Crisis of 1815

The first important crisis of the nineteenth century occurred under quite exceptional circumstances, and though not entirely confined to Great Britain, this country was chiefly affected by it. This crisis of 1815 came immediately upon the conclusion of the peace on the downfall of Napoleon. It was generally believed that immediately after the signature of the treaty of peace at Paris a period of great commercial prosperity would begin, and that England in particular would reap the fruits of her supremacy at sea and of the great development of her internal resources which had taken place during the war. Such exertions had never before been made, nor such expenditure incurred, by any nation.

The weight of taxation was crushing during the war, the drain for men and material was unprecedented on so small a population, and so great was the stringency in the precious metals that the Bank of England had suspended specie payments since 1797. In 1756 the funded debt of the United Kingdom was little more than £72,000,000, in 1815 it was £800,000,000. The public expenditure in 1814 was no less than £106,832,260, in 1815 it was £92,000,000, and two years later only £55,000,000. Tens of thousands of men were then set free from the useless services of war to devote themselves to increasing the wealth of the country; the markets of the Continent, long nominally, at least, closed to English goods, were thrown open; and a fine harvest at home helped on, as it was thought, the general improvement due to the beneficial change in foreign affairs.

Precisely the contrary, however, of that which was expected took place. Great Britain had been enabled to hold her own during the long war of twenty-two years, had subsidised half Europe against the French, and had supported a weight of taxation previously unknown, because during these twenty-two years the great machine industry and the extension of commerce poured into the pockets of her trading and land-owning classes untold wealth. Napoleon’s policy of excluding English goods from Europe had forced our manufacturers and merchants to seek outlets for their cotton, iron, wool, and other manufactures farther afield. They found their new markets, thanks to the complete supremacy of England at sea, in India, North and South America, the West India Islands, and Asia Minor, pushing their trade over, the whole known world with the greatest vigour. The cheapness of English goods became the marvel of the universe, and the machine-made stuffs of Lancashire and Yorkshire gave an impulse to English commerce scarcely equalled even during the period of railway construction and the gold discoveries. Hargreaves and Jennings, and Arkwright and Watt, the first fruits of machinery, and the early application of steam, piled up riches for England; and military and naval victories were made possible by extraordinary commercial success.

But now there was peace. The great European markets close at hand were again open to our trade, and every preparation was made to take full advantage of this great opportunity. Scarcely a manufacturer in business had failed to take time by the forelock and produce more than his usual quantity of goods, with a view to disposing of them on the Continent. The truth was, however, that English commodities had never been so completely shut out as supposed. Cheapness had broken down the Custom-House barriers, and smuggling, winked at by officials, had developed the proportions of a regular trade. In addition, Continental manufacturers, though lagging behind their English competitors in some branches of business, had not been wholly neglectful of the changes in the form of production. They, too, were beginning to produce the new machinery, and with the aid of steam.

Thus, in all districts which English goods were obliged to reach by long land transport, the native manufacturers had the advantage. No account of these facts was taken at the time, and it was hastily assumed that if, under all the drawbacks of smuggling and possible confiscation, twelve millions sterling worth of English goods could be profitably delivered at foreign ports, certainly not less than double that quantity might safely be disposed of now that peace had been firmly established. All rushed in at once to benefit by this exceptional opportunity. The result was that the foreign markets were speedily glutted. English goods were to be had cheaper at foreign ports than they could be bought for at their place of manufacture. For the foreign buyers had nothing to offer in exchange for these manufactures except their agricultural products. But these were shut out from the English markets by high duties. Corn, wine, and spirits could not be taken by English merchants owing to the tariffs, and as there was nothing else to offer, piles of English commodities lay unsaleable on the Continent, and either brought their owners nothing at all, or were “slaughtered” at ridiculous prices. Not only were numberless speculators ruined, but the manufacturers sustained terrible losses.

The good harvest itself did but seem to make matters worse. Everybody had become accustomed to high prices during the war. The land-owners and farmers had done well during the troubled period. Paper money at a discount of about twenty-five per cent., as compared with gold, was the general currency, and inflated prices ruled to an abnormal extent. All calculations for sale of agricultural produce had been based on the continuance of a similar state of things. But suddenly the change came, and with it so plentiful a harvest that the barns and storehouses were filled to repletion with grain, in the same way that the warehouses were choked with manufactured goods. There was a conspiracy of superfluity to impoverish all classes. Nobody knew what to do. The state of things transcended all experience. Crises and stagnation of trade had been known before, but never on so large a scale. For in this case, as in those cases which follow, the cause of all the collapse of trade and general poverty was manifestly a superabundance of wealth.

The working people, who suffered most from the crisis, were little inclined to bear their misery silently. Discharged soldiers and sailors came in to compete on an already overstocked labour-market, and the attitude of the unemployed and starving labourers became threatening in the extreme. Observing that machinery was everywhere supplanting hand-labour, they not unnaturally jumped to the conclusion that these increased powers of producing wealth were really injurious to the workers, seeing that they were, in many instances, the direct cause of their want of employment. Bands of men consequently paraded the country smashing machinery, and demanding work and food.

The amount of machinery even then in use in Great Britain very far exceeded in power of production the total quantity of manual labour employed. But the war, that great and most extravagant customer to farmers, manufacturers, and other producers of wealth, having come to an end, those who were most anxious to obtain some of their superabundant supplies of food and manufactures in return for useful work were prevented from doing so by the fact that they could not be employed at a profit. Instead of increasing the number of their hands, and thus aggravating the glut, the one object of the producers was to lessen their output, until the accumulated stocks should be taken off the market, and they might, owing to rising prices, be able again to produce at a profit. If the stock in the farm buildings and warehouses had been burnt then, such was the irony of the situation, prosperity would have immediately recommenced on the same scale and for practically the same reasons as during the war.

At this very time, indeed, as during all such periods, the actual impoverishment, except for the working classes, was far more apparent than real. Even the Corn Laws, which were introduced in 1815 to keep up the price of grain, though the enactment occasioned a serious revolt in London, did not permanently check the growth of wealth; and, notwithstanding that exports fell from £51,000,000 in 1815 to £35,000,000 in 1817, the imports of cotton grew from 53,000,000 pounds in 1814 to 92,000,000 pounds in 1815, 86,000,000 pounds in 1816, and 116,000,000 pounds and 162,000,000 pounds in 1817 and 1818 respectively, while the population increased rapidly. The check, that is to say, on the growth of national wealth bore no proportion to the mischief inflicted on large portions of the population.

This crisis of 1815, though it had an effect upon the Continent and the various countries which traded to a considerable extent with the United Kingdom, could scarcely be called an international industrial crisis. In it, nevertheless, could be traced in the germ the peculiar phenomena of all the succeeding crises. Notably, we may observe the glut of commodities as the pre-eminent cause of lack of employment and misery for the working classes, already instanced by Robert Owen as directly due to the use of machinery by the great capitalists exclusively for their own profit. England, also, the victor in the great war, the country which had gained enormously in territory and influence during the struggle, underwent a far more trying crisis than France, the nation which had been completely overcome. In Great Britain the collapse of credit and the trade distress was very sharp, if short in its duration: in France there was practically no crisis at all. The very economical development which gave the English such resources to draw upon in war became a cause of commercial collapse on the conclusion of peace; in much the same way that Germany, after the victories of 1870, underwent a more serious shock than France, and the £200,000,000 of indemnity proved for the time, at any rate, rather a curse than a blessing to her people.

Last updated on 29.7.2007