Commercial Events from 1810 to 1819.

“Nothing had been seen since the beginning of the century to compare with the distress of 1811 and 1812.... Our manufacturers were set fast, and could not pay wages on which their workmen could live; and workmen could not live on low wages when the average price of wheat was 112s, [the quarter, of 8 bushels], and that of meat 8d. or 9d. per pound. The ordinary course of manufacture, particularly of the hardware manufacture, was broken up. The factor stepped in between the employer and the operative, and made his market of the necessities of both, leaving them discontented with each other. The employer sold off his stock at a loss, and the workmen made inferior wares by means of advances from the factor for materials.”

Nature seemed to make common cause with war and bad finance. The winter of 1812 was extraordinarily severe, and the accidents by flood and fire were numerous. Crimes began to multiply in that accord between physical distress and moral decay so often noticed. Wages were down at starvation point. Spinners had 7s. 6d. per week in a time of high prices for the necessaries of life. The recent introduction of machinery and the extension of the factory system would have caused an inevitable period of pressure on hand-workers. Now these causes fell in with others to enhance the distress. The artisans, in striking analogy with our own farmers at the present time, sought their foe in the nearest and most palpable shape in which the bad circumstances of the time pressed upon them. They attacked the machines, burned the factories, and united in riotous disturbances. The corn laws were in full force, and prevented the relief which might have come from other countries in time of scarcity, while manufacturers were entangled in a mesh of restrictions of every description, more ruinous even than Napoleon's Decrees or the Orders in Council. “The war and famine price [of grain] of 1812 was reached again in the latter part of 1816, 1817, and 1818. The golden days of the deity that is found in no mythology—the anti-Ceres—were returned. But the people were starving. Misery and insurrection filled the land.” The harvest of 1815 was abundant, and to prevent importations, all such were prohibited when wheat was under 80s. In 1816, in spite of this law, the agriculturists were once more “in distress.” The years when they were not so, down to the repeal of the corn laws in 1846, were the few years when nature refused her bountiful returns.

In 1814 peace was restored, and it was believed that commerce must at once revive. Anticipating this, enormous exportations were made to the continent and to the United States, “The shippers found to their cost, when it was too late, that the effective demand on the continent for colonial produce and British manufactures had been greatly overrated, for, whatever might be the desire of the foreign consumers to possess articles so long out of their reach, they were limited in their means of purchase, and accordingly the bulk of the commodities exported brought very inadequate returns.”

They found that it is impossible to “inundate” a country with foreign commodities, or to “drain off its bullion” by foreign trade, if it does not want to be drained. As for a true exchange of goods, the laws hampered it by all sorts of restrictions and prohibitions.

Thus, in 1816, after the long endurance of the war, and the dragging misery of 1812, '13, and '14, broken only by fitful gleams of prosperity, this “overtrading” prostrated commerce and manufactures together, and agriculture was no better off.

Turning now to the currency to observe its movements contemporaneously with these expansions of speculation, we find a great difficulty in the impossibility of estimating the country bank circulation. The best information we have is given in the report of the Lords' Committee of 1819. They gave two estimates as follows. The rate of gold per oz. is added from McCulloch's Adam Smith.

The steady expansion until 1816 is at once apparent, and its effect on prices is distinctly shown by the gold premium, which advances with the expansion of the paper. In 1816, when the revulsion came, the country banks failed in great numbers. The contraction of their issues was so great that, though the Bank of England increased its issues in 1817, the gold premium fell, and the paper was within a few pence of par. Resumption at this time would scarcely have cost a struggle. However, no effort of this kind was made. On the contrary, no sooner was the immediate crisis over, than a new expansion commenced. (See the diagram at the end of this chapter.)

The harvest failing in 1817, the price of wheat rose above 80s., and the ports were opened; speculation in grain was active during that year. 1818 presented the same phenomena, but now were added speculations in silk, wool, cotton, and other raw materials. Imports were double or treble what they had been in 1816.

In 1817, the Bank voluntarily undertook to redeem its notes dated before Jan. 1st, 1817, but, adhering to the doctrine that the issues could not affect the exchanges, it continued to expand the circulation, while paying out gold. The laws against exportation having fallen into neglect, a run upon the Bank began, and a rapid exportation to France took place. The government ordered the Bank to cease paying specie. According to the doctrines of the Bullion Report, to expand the circulation with gold at a premium and the exchanges adverse, and then pay on demand, was as certain to produce exportation as it would be, if a tub full of water should be lifted on one side, that the water would run out. The fact seemed to fall in with this doctrine.

Another incident which co-operated in the financial situation of 1818 was the reduction of interest on the Exchequer bills. This, coming just at a time when several foreign nations were anxious to negotiate loans, led to a great exportation of coin for investment in such loans, the rate of interest offered being higher than the new rate for Exchequer bills. On a specie basis, and with no usury law, such a movement could have no perils; but in the existing circumstances, the Bank was led to make more advances on government securities and augment the inflation. It paid off by contract with government those who refused to hold the securities at the lower rate.

The most powerful cause, however, which was at work, and the one of which the last-mentioned was only a secondary form, was the reduction of paper issues on the continent. The loans were contracted to accomplish this. If it had not been that these issues had produced abnormal relations throughout Europe and America, which, as soon as they were rectified and the normal state of things restored, must produce a redistribution of the metals, the loans would have had no importance. The force of this cause it is impossible to estimate, but it lay at the bottom of the fluctuations of bullion at the Bank during the years 1816 to 1819.

The crash came in the fall of 1818, and numerous failures occurred during the winter. By February the Bank of England circulation had fallen to 25.1 millions. The subject of cash payments was now once more forced on public attention.