another few years continued to prosper till the cotton industry was for a second time almost ruined by the effects of the Slavery War between the Northern and Southern States of America. A "cotton famine" occurred in Lancashire, when 800,000 wage-earners were deprived of their livelihood. This caused an increase of cotton-growing in India, which has continued since that time.1

§ 260. Commercial Crises since 1865.

But once again this industry recovered from what seemed to be a very severe blow, and the close of the American War in 1865 even gave a further impetus to new business, while, at the same time, considerable developments took place in our trade with China, India, and Australia. But the very next year the sudden and unexpected failure of the great bill-broking firm of Overend, Gurney & Co. caused much panic,2 not only in financial but in industrial circles, though the ordinary symptoms of crisis were fortunately not apparent in the trade returns, and for some years our prosperity continued to increase, till a crisis of truly international magnitude occurred in 1873. It was felt from New York to Moscow, and affected the trade industry and agriculture of all intervening countries. It was due to some extent to the great financial inflation which took place within the German Empire after the payment of £200,000,000 indemnity by the French to their conquerors, while a similar inflation prevailed in the United States, owing to the rapid growth of business and the extension of railways after the Civil War. England escaped much of the severity of this international crisis (1873), but soon afterwards suffered from agricultural depression, and has continued to do so since, from the causes mentioned in a previous chapter. During the last twenty years, the two most severe periods of crisis have taken place in 1882 and

1 Hyndman, Commercial Crises, p. 93. 2 Ib., p. 95.

3 Ib., ch. vii.

4 Though two great failures-that of Collie & Co., in 1875, and the Glasgow Bank, in 1878-showed that there was some uneasiness. 'Hyndman, Commercial Crises, chs. viii. and ix.

1890, the former connected with the failure of the Union Générale of France, combined with the low prices and general stagnation of trade in Great Britain, which lasted till 1888; and the latter due to the extravagant speculation, especially in South American securities, which terminated in the difficulties experienced by the well-known firm of Baring Brothers, and the panic which followed the discovery of their unsafe situation. More recently still, the increasingly protective M'Kinley tariff adopted by the United States has had a depressing effect upon many British industries.

§ 261. The Recent Depression in Trade.

Still more recently (1895) there has been an outburst of speculative activity in the shares of South African goldmines, and some derangement has occurred, but we are assured by an eminent authority that there has been no absolute panic since 1866. There has been, however, a very long period of depression, beginning about 1875 and gradually growing worse till 1885, when a Commission was appointed to take evidence on the subject. The peculiarity of this depression has been its gradual growth and continuance, in contrast to the former crises, which occurred after periods of sudden inflation, and passed away with comparative rapidity. The evidence of the Commission of 1885 showed that during this depression wages had, on the whole, remained firm, and that the incomes of those in trades and professions had actually increased, while, on the other hand, profits had been lowered, and the rate of interest reduced. It was agreed by most of the witnesses. before the Commission that there had been much overproduction, and though this is true to some extent, it would seem, on the whole, that at least one of the main causes of this prolonged depression was a slow but radical change in the relations of labour and capital, causing a closer approximation between the shares of the total product

1 Mr W. Fowler in his article on the Crises of 1857, 1866, and 1890, in Palgrave's Dict. Pol. Econ., i. 462. The articles on Crises in this Dictionary should be compared with Hyndman's views in his book above quoted.

allotted to each. It is also probable that the term depression is only comparative in this case, and only shows a falling-off as compared with the abnormal activity of 1871-74, and also it should be borne in mind that, though English manufacturers have hitherto had a considerable start over their foreign neighbours, this advantage cannot be expected always to continue, as other countries will naturally tread more closely on the heels of our own in the race of international competition. In any case, however, there is no immediate fear for the future of English industry, although individual merchants or manufacturers may suffer, for it has already been seen above (p. 461) that the volume of our trade is by no means yet diminishing. But there are certain considerations on this subject of crises and depressions which are of a more general character.

The causes of such depressions in trade are various, and not always obvious. They are, so to speak, dislocations of industry, resulting largely from mistaken calculations on the part of those "captains of industry" whose raison d'être is their ability to interpret the changing requirements in the great modern market of the civilised world. A failure in their calculations, a slight mistake as to how long the demand for a particular class of goods will last, or as to the number of those who require them, results very soon in a glut of the market, in a case of what is called overproduction," but is in reality merely production of the wrong things; and this is as inevitably followed by a period of depression, occasionally enlivened by desperate struggles on the part of some manufacturer to sell his goods at any cost. With such a vast field as the international market, it is not to be wondered at that such mistakes are by no means rare, nor does it seem as if it were possible to avoid them under the present unorganised and purely competitive industrial system. They have been aggravated in England by a belief that our best customers are to be found in foreign markets, while the importance of a steady, well established, and well understood home market is not fully perceived. "A pound of home trade," it has

1

been said, "is more significant to manufacturing industry than thirty shillings or two pounds of foreign." The comparison may not be exact, but it is on the right lines. Now one of the most important branches of our home trade must be the supplying of agriculturists with manufactures in exchange for food. But when the purchasing power

2

of this class of the community has sunk as much as £43,000,000 per annum, it is obvious that such a loss of custom must seriously affect manufacturers. Again, no small portion of our home market must consist in the purchases made by the working classes, yet it does not seem to occur to capitalist manufacturers that if they pay a large proportion of the industrial classes the lowest possible wages, and get them to work the longest possible hours, while thus obtaining an ever-increasing production of goods, the question must sooner or later be answered: who is going to consume the goods thus produced?

§ 262. The Present Mercantile System. Foreign Markets.

The answer as far as the capitalist is concerned seems to be-foreign customers in new markets. English manufacturers and capitalists have consistently supported that policy which seemed likely to open up these new markets to their goods. For a considerable time, as we saw, they occupied themselves very wisely in obtaining cheap raw material by passing enactments actuated by Free Trade principles, and removing protective restrictions. Cheap raw material having thus been gained, and machinery having now been developed to such an extent as to increase production quite incalculably, England sends her textile and other products all over the world. She seems to find it necessary to discover fresh markets every generation or so, in order that this vast output of commodities may be sold. The merchant and manufacturing classes have supported and still support this policy, from a desire, apparently, rather to find new customers than to keep the old; and, largely for the sake of British trade, wars have been made 1 Thorold Rogers, Relations of Economic Science to Social and Political Action, p. 10.

2 Sir J. Lawes, quoted above, p. 451, note 1.

on China, Egypt, and Burmah, while at the present moment England is scrambling with Germany, Portugal, and other powers for the new markets of Africa. To-day, indeed, the industrial history of our country seems to have reached a point when production under a purely mercantile system is overreaching itself. It must go on and on without ceasing, finding or fighting for an outlet for the wealth produced, lest the whole gigantic system of international commerce should break down by the mere weight of its own immensity. Meanwhile, English manufacturers are complaining of foreign competition in plaintive tones, a complaint which merely means that, whereas they thought some years ago that they had a complete monopoly in supplying the requirements of the world, they are now perceiving that they have not a monopoly at all, but only a good start, while other nations are already catching them up in the modern race for wealth.

§ 263. Over-production and Wages.

With all this, too, we hear cries of over-production, a phrase which economically is meaningless (except in so far as it indicates that production is proceeding in the wrong direction), more especially at a time when very large numbers of people in civilised communities are daily on the verge of starvation, when the paupers of every civilised country are numbered by thousands, and plenty of people who never complain have neither enough clothes to wear nor enough food to eat. Wages are certainly better than they were fifty years ago, but no one who knows the facts of the case will deny that for the average workman-I am not speaking of skilled artisans and the élite of the working classes—it is practically impossible to save anything out of his wages that would form an adequate provision against old age or sickness. It is not the business of a historian to vituperate any particular class, but he may justly point out the mistakes to which classes have as a matter of his

tory been liable. And the great mistake of the capitalist class in modern times has been to pay too little wages. is an old agricultural saying-quoted, I believe, as Arthur

It