Various
Blackwood's Edinburgh Magazine, Vol. 71, No. 438, April 1852
THE COMMERCIAL DISASTERS OF 1851
(TO THE EDITOR OF BLACKWOOD'S MAGAZINE.)
Sir, – The country is shortly to be called upon to decide the important question whether the policy, under which it has for the last few years been governed, is, or is not, susceptible of some modification; and, as one portion of this question, the soundness of our present commercial policy must undoubtedly be discussed. Indeed, it seems to be taken for granted on all hands that this must be the case; and in a great empire like our own, whose main source of strength has been conceived to rest upon the pre-eminence of its mercantile and industrial character, it would be singular if it could be otherwise. And it would be lamentable, too, and little calculated to inspire the hope of peace for the future, and confidence in the stability of our institutions, should that portion of the question at issue be discussed in any other spirit than that of an anxious and careful desire to arrive at the truth. No policy not based upon the truth has ever long prevailed in any civilised country. No Christian man, conscious as such a man ought to be of the imperfections of merely human judgment, could ever set himself up above his fellows as infallible. We have surely a perfect right to appeal to past experience in order to discover what has been the effect of our policy upon the different interests of the country; and in the following pages I shall endeavour to examine dispassionately what has been that effect upon our mercantile and trading classes, and particularly upon those engaged in conducting our large importing and exporting operations.
It is, of course, an acknowledged principle, that an increased import of foreign commodities, to be a profitable one, must be attended by increased means of consuming in the importing country, and be balanced ultimately by increased exports, at paying prices to the producer. The question, then, so far as the mercantile body is concerned, is simply this, – Have the transactions of the past year been satisfactory to that body, or not? I do not hesitate to say in reply, that, with the solitary exception of the year 1847 – if indeed it be an exception – there has been no such disastrous epoch in the annals of British commerce for the past quarter of a century as the year 1851. If the year 1847 was more disastrous, it was because it was one of monetary revulsion, of potato rot, and of the collapse of absurd railway speculation. During the past year we have had nothing of this kind to encounter. We entered upon 1851 with prognostications, all but unanimous, of a coming year of prosperous business. During the course of the year we had neither civil commotion nor foreign embroilment to trouble the even tenor of our way. Yet we have closed the year with the mercantile and trading interests of Great Britain poorer than they commenced it, by, I am satisfied, at least twenty millions sterling and upwards. During the whole of the past year, the reports of our commercial circulars have told an unvarying tale of declining prices and unprofitable imports. Scarcely a single foreign product has remunerated the merchant, or even realised the cost at which it was purchased abroad; and stocks of all kinds, not only in our seaports, but in every retailer's shop or warehouse throughout the country, have been every week deteriorating in saleable value. In no single commodity of importance has the consumption kept pace with the increase of importations; and had we at any period of the year been visited with monetary difficulty, had the Bank of England not been full of specie, and anxious to extend its accommodation to the public, the losses upon our accumulation of stocks would have been sufficient to prostrate one-half of the mercantile community.
In endeavouring to form an estimate of the actual losses of the year upon imports, I shall commence with the important article Cotton. We entered upon 1851 with a stock, according to Mr Burn's Commercial Glance, of 581,120 bales in the entire kingdom, in the hands of importers, spinners, and speculators, spinners being estimated by Mr Burn to hold 60,000 bales. Messrs G. Holt and Co. of Liverpool, calculate the quantity at 100,000 bales in the hands of spinners and dealers. The bulk of this stock had been purchased at the high prices which had ruled during the last four months of 1850; and, in the first week of January, the price of "fair upland," which may be taken as a standard, was 7⅞d. per lb. Such were the rates ruling in the countries of its growth, it could not have been bought there within at least ¼d. per lb. of that price. Although such stock would naturally find its way gradually into the market, and its place be supplied by fresh imports, and as there was a nearly similar one – estimated by Messrs Holt at 594,000 bales – left at the close of the past year, it will simplify the process of calculation, and at the same time be correct as to the general result, if I treat the stock of January 1851 as having borne the fall of the entire year. The price, then, of fair uplands having been, in the last week of December, 4⅞d. to 5d., and other sorts in nearly that proportion, there would be a reduction of from 2⅞d. to 3d. upon those American sorts which form the bulk of the consumption, and 2⅛d. to 2¼d. upon the next in importance. Bearing in mind that the prices on the 1st of January were not remunerative to the importer, I believe I am within the mark in fixing the loss at £5 per bale of 400 lb. average weight, which, upon the stock of 581,120 bales, amounts to the large sum of £2,905,600 sterling. We now come to the imports of the year, which were, of all kinds, into the United Kingdom, 1,903,506 bales. With respect to these, the first striking fact which presents itself, on a comparison of the prices current in this country and the cotton-growing countries, is that, throughout the whole of the year, the foreign purchases of our importing merchants were made at a large advance over the prices which could be realised on their arrival here. I have gone carefully through files of the most authoritative foreign circulars, and, with respect to American cotton particularly, the unvarying result has been to find prices considerably higher than in the British market. Thus, on the 4th of January, I find "middling to fair" cotton from the Atlantic ports, corresponding with our Liverpool classification of "fair upland," quoted in New York at 13⅞ to 14 cents per lb.; on the 15th, at 14 to 14¼ cents on the 22d, the same; and on the 29th, 13⅞ cents. Assume the average of the month to have been 14 cents, and allowing a penny per lb. for freight, commission, landing charges, &c., which I am assured is too little, the cotton shipped in that month would cost in Liverpool fully 8d. per lb. Prices here, however, began to decline after the first week in January, when fair upland was quoted at 7⅞d.; and on the 31st of that month the quotation was only 7½d. to 7⅝d. On the 14th and 21st of February they were quoted at 7d. to 7⅛d.; and in all March, when the purchases of the month of January would be reaching us, the average was about 7¼d. – showing a loss on importation of ¾d. per lb. In February, prices in America commenced at 13 cents to 13⅛ cents; but on the 1st of May they had fallen to 11 cents to 11½ cents. The early purchases of February, which would cost, landed in Liverpool, about 7⅝d., would probably arrive about the middle of March, when prices here averaged about 7¼d. – a loss of ⅜d. per lb., or nearly 10s. per bale. Those of the closing week of the month – about a week's transactions – might possibly save themselves, if sold in the beginning or middle of April. Throughout March prices rallied in America; and were sustained until nearly the middle of April at from 11¾ cents to 12¼ cents – about 7⅛d. here. Prices in Liverpool, however, had been falling rapidly; and a portion of these purchases arrived in Liverpool in the middle of May, to be sold at 5¾d. to 5⅞d – a loss of above 1¼d. per lb., or £2, 5s. per bale. By the end of April, prices in America had receded slightly; but in the beginning of May there was another attempt to rally them – the quotations being, on the 7th, 11⅜ cents to 11⅝ cents, or about 6¾d. to 6⅞d. here. In the whole of June, however, when the cotton bought at these prices would arrive here, the average in Liverpool was little over 5⅞d. – showing a loss of from 30s. to 35s. per bale. From this point a gradual decline took place in all May, June, July, and August, reaching the lowest point – 8¾ cents to 9 cents – on the 9th of the last month. The decline in America, however, never overtook that experienced here – the bulk of the transactions of these months resulting in a loss. A slight rally again took place in September, and prices were forced up to an average of about 10 cents, or 6d. laid down in this country. No corresponding movement, however, took place here; and the average losses of September shipments would be nearly 25s. per bale. An unprofitable result, less disastrous, however, attended the remainder of the year's arrivals.
The loss has been nearly as serious in our transactions with the East Indies, the length of the voyage operating to aggravate the unhappy position of the importer. Thus cotton orders, transmitted by overland mail in the first three months of the year, whilst prices of Surat were about 4d. to 6½d., would arrive here in June, July, and August, when the quotations were from 1¼d. to 1½d. per lb. less, or from 45s. to 50s. per bale.
The question then arises, At what are we to estimate the loss on imports for the year? And the following circumstance appears to me to have an important bearing upon its solution. The bulk of the arrivals during the year – 1,212,377 bales – took place from the beginning of March to the end of August, the period in which the greatest decline below cost price occurred. Taking this and other circumstances into consideration, I cannot consider that I am exceeding the truth in averaging the loss on importation during the year at ¾d. per lb., or 25s. per bale, upon the whole quantity received, deducting the stock on hand at the close of 1851 – 594,500 bales. This will give upon 1,409,046 bales a loss of £1,761,307, which, with £2,905,600, previously ascertained as the difference between the value of the stock on hand at the commencement of the year, and the same quantity of the article at its close, makes up a total loss upon cotton of £4,667,000. Of this, at the very least, the British merchants' share is four millions sterling!
A large sum might fairly be added to this as the manufacturers' and spinners' share in the loss sustained upon their stocks from the declining prices of the raw material during the whole of the year's operations. I will not, however, enter into detail with respect to this part of my subject; but glance at it briefly when I come to estimate the losses, sustained by holders of produce generally, whilst in transitu from the importers' hands to the marts of its final consumption.
Next in importance to the article of cotton is that of Sugar, a great staple of food, which it has been the express object of our recent legislation to cheapen, regardless whether or not in doing so we inflicted ruin upon the colonial proprietor. It is not within the limits of the inquiry which I have prescribed to myself to trace the course of that legislation which, from whatever motives prompted, bids fair ultimately to reduce our once flourishing tropical possessions to their pristine condition of waste and jungle, and to throw back their coloured population into the barbarism from which, a few years ago, it was the pride of every lover of his kind to see them rapidly emerging. A brief reference to that legislation, however, is necessary, in order to render intelligible the mode in which I have calculated the extent of the past year's losses upon our imports of the article. At the period of emancipation, (1834,) our West Indian colonies, producing for British consumption 3,844,244 cwt. of sugar out of a total import of 4,743,415 cwt. for the year, were owned by a distinct class of proprietors, partly resident, but chiefly consisting of capitalists in this country. Up to that period the "West Indian Interest," as it was termed, was one of the most powerful in Great Britain, and afforded, through its import and export transactions, a most profitable source of employment to our merchants at home, as well as to their numerous branch establishments in the colonies. The measure of that year – exchanging compulsory labour for the apprenticeship system in the first instance, and shortly afterwards for free labour – precipitated the whole of this class into a fearful struggle, required from them to maintain production up to the wants of the home consumer. It was found necessary to import additional labourers to supply the place of those who, on receiving their freedom, had betaken themselves to other avocations than those of the sugar plantation; and every effort of science and improved culture had to be resorted to, in order to keep down the cost of production, and increase the yield of the soil. Whilst immersed in this struggle – a most unprofitable one, as it proved – the Free-Trader stepped in, and introduced the new element of competition with the foreign slave-grown article. The result of the much too sudden rate of reduction of the differential duties then adopted has been to render cultivation utterly unprofitable; and, so far as the original proprietors of the West Indies are concerned, the last measure directed against these unfortunate colonies may be justly termed one of direct confiscation. Under these circumstances, the bulk of the West Indian sugar and other estates have virtually lapsed to mortgagees – principally merchants in this country, who have advanced money upon them for the increased outlay required to keep up and cheapen production; and hence, so far as the West Indies are concerned, it is necessary to treat the importer and planter as one in such an inquiry as the present. There can scarcely be said to be a price at all in the West Indies – the bulk of the exports coming to the British market on the planter's and merchant's account. The same remark applies to coffee, rum, and every other description of West Indian produce. With respect to the produce of the East Indies and Mauritius, there does exist a price at the port of shipment, the articles being bought for the British markets in the ordinary way; and the result of the importation, as a purely mercantile transaction, can therefore be more correctly ascertained.
The importation of sugar during the past year was, in round numbers, 400,000 tons against 330,000 in 1850, and 340,000 in 1849. Of this quantity 270,000 tons consisted of colonial, (two-thirds of which was West Indian,) 110,000 tons of foreign, and 20,000 tons of foreign refined. In a general summary of the year's proceedings, the editor of the London New Price-Current– an authority of high standing – of Tuesday, Jan. 6, remarks: —
"The excess in stock of all sorts is 57,000 – viz., 157,000 tons against 107,000 at the close of 1850. Prices are lower by 7s. to 9s. per cwt. for low to mid prices of colonial, and 5s. to 6s. per cwt. for good to fine."
Another authority, Messrs Littledale & Co., of Liverpool, remark upon this article as follows, in their circular of the 1st January: —
"Great indeed has been the disappointment during the past year of importers and holders of nearly every description of produce; but to no parties has it been so severe as to those interested in the article of sugar, cotton excepted. The year 1851 opened with high prospects – moderate stocks, an average supply, and a largely increased consumption, arising from the satisfactory condition of the manufacturing districts, and the great prospects which were generally entertained of the approaching Exhibition; but these hopes were soon dissipated, the imports of foreign continuing on an unusually large scale, and the consumption, instead of increasing, barely supporting that of the previous year. The increased production of sugar from beetroot on the Continent is fast displacing all foreign, and the latter, in turn, displacing our colonial, or forcing it down to so low a figure that its production will be unremunerative. In little more than two years the duties will be equalised; and we can see no salvation for our colonies but a complete change, both in the manufacture and curing of this article, as it is quite evident that the taste of the large consumers in the country is changing year by year more in favour of crushed refined… The decline in the value of sugar throughout the past year has been gradual, though marked; and prices now rule 5s. to 6s. per cwt. lower on better descriptions, and 8s. to 10s. on the common and low brown sorts."
With respect, then, to that portion of the supply of sugar derived from the West Indies, the only question which can arise is – Can the grower have succeeded during the past year in reducing the cost of production so far as to have allowed the Gazette average of British plantation to fall from 29s. 2d. nett in February of last year, to 20s. 2d. in the February of this year? We know that during this period no economising of labour has been achieved to warrant a decline of 9s. per cwt. – nearly thirty per cent; and the conclusion is obvious, that the bulk of this saying to the British consumer has come out of the pockets of the colonial proprietor and the British colonial merchant. The price at the commencement of the year, it is admitted, was a barely remunerative one; and every shilling of reduction since has been positive loss.
With respect to East India sugar, which is actually purchased in the country of its growth, the loss has fallen directly upon the importer – the fact being notorious, that prices throughout the year have ruled higher in the colonial markets, and in China, Java, &c., by from 4s. to 5s. per cwt. than it could be sold for on its arrival here. Messrs Littledale & Co. quote the prices of Bengal, Madras, and Mauritius, best and good descriptions, in bond, from 6s. to 6s. 6d. lower in January this year than in January last year, and common and inferior descriptions as much as 8s. to 9s. lower. Upon China and Manilla the fall has been from 3s. to 4s. 6d.
The same authority to which I have before referred – the New London Price Current– remarks of Mauritius sugar, that the "rates are 5s. to 8s. per cwt. lower, the difference being most apparent on brown and inferior qualities;" and of East India, "Stock is 6950, (in London,) and in 1850 it was 5500 tons. Prices range 4s. to 8s. per cwt. under that period, the difference being more apparent on brown and inferior qualities, of which there is a loss upon importation."
With respect to foreign sugar, a few preliminary explanations are necessary. As is the case with East India produce, the sugar which we draw from foreign countries – the bulk from Cuba and the Brazils – is purchased by British merchants at a price in the country of its growth, regulated of course by the cost of production, and the probable market price in Great Britain. The foreign planter, however, is seldom more than a nominal proprietor, working with borrowed capital, for which he pays an interest of from fifteen to twenty per cent, and living, in all respects, only like a superior servant or agent. With the question, whether of late he has been enabled to reap a profit on his cultivation, I have here nothing to do, although it is most probable that he has not done so, even at the prices which he has been able to secure from the British purchaser. He has had labour foisted upon him beyond his requirements, and at an exorbitant price, the slave-dealer being in many cases the party supplying capital for sugar cultivation, and the virtual proprietor of the soil and stock. So far as regards the operations of British merchants in the produce of Brazil, Cuba, and other foreign tropical produce, the result has been almost equally disastrous with that attending the trade with our own possessions. Prices in these countries have, throughout nearly the whole of the past year, been from 3s. to 5s. above those which could be realised in this country; and the loss upon the entire importation has been little, if at all, less than that upon British colonial produce. The London New Price-Current sums up its remarks upon the trade in foreign sugar by saying, – "Prices, compared with this date last season, exhibit a decline of 3s. on the better, and 4s. to 6s. per cwt. on the brown and inferior qualities." A comparison of the prices in the country of production, with those realised here, will prove this part of my case. From the Pernambuco Price Current, of the 24th of February 1851, I find that the following were the prices of Brazilian sugar, free on board; and I have set opposite to the figures the price which it would command in bond, on its arrival here, as furnished by one of our leading brokers: —
The first qualities of the above are not imported into this market; and adding to the other, for freight at 60s. per ton, 3s. – buyer's commission in Brazil, 3 per cent – insurance, interest, brokerage, and other charges, say 4s. 6d. to 5s. per cwt. – there would be a small loss upon the importation.
I select a later date, in order to ascertain the cost of the stocks on hand at the commencement of this year. On the 29th November last the quotations were —
At this period freights ruled low, 35s. to 40s.; and, as is always the case when there is an abundance of shipping seeking cargo, the foreigner advanced his rates for produce. Adding 3s. 6d. to 4s. for charges upon imports, there would be a loss of, say 3s. 6d. to 5s. 6d. upon white; 3s. 6d. upon yellow; 5s. 6d. upon low brown, and 3s. 6d. upon the better quality. The same result is found to have resulted upon Cuban and other foreign sugars.
The reduction in this article has not been so sudden as to entitle us to put down more than a portion of it as loss to either importer or producer. Bearing in mind, however, that, from the commencement of the year to the close, it has been arriving in this country at a cost considerably over what it would realise, and that we had a good stock to begin the year with, which has kept accumulating, I believe I am justified in assuming the result of the year's business to be a loss, upon the whole of our sugar imports, of at least £5 per ton; which, upon 400,000 tons of all descriptions, amounts to the sum of £2,000,000 sterling. In this I am borne out by some of our leading authorities, whose names I hand you for your own satisfaction. Having in this calculation merged the stock in hand at the commencement of the year, (107,000 tons,) which was imported at extreme prices, and lost much more than I have taken as an average, it is but fair to add something for the depreciation of the increase of stock held at the close of the year, 50,000 tons, (the total stock having been 157,000 tons against 107,000 at the commencement.) If I estimate this depreciation at £3 per ton – it fell nearly £1 in the beginning of January, and has since been quoted lower – I am satisfied that I am within the mark. This will make the total loss on sugar £2,150,000 sterling.
In the important article of Coffee there has also been a serious loss upon the year's transactions; and this notwithstanding the fact that the import was lighter in 1851 than in either of the two preceding years, having been 22,100 tons of all descriptions against 22,700 in 1850, and 27,000 in 1849. The prices at the close of the year are stated by the London New Price-Current to have been "from 8s. to 16s. per cwt. below this date last season." Messrs Littledale's annual circular shows a fall, in "native ordinary Ceylon" of 16s., and of 15s. in "middling plantation." The fall is less in some of the scarcer sorts. The greatest reduction, however, was in the middle of the year, "good ordinary native Ceylon," which was worth 57s. per cwt. in January, having fallen to 37s. in June. The total loss to importers, I am advised, cannot be estimated at less than £10 per ton, which, upon the total import of 22,100 tons, makes up an amount of £221,000 sterling. It is worth while remarking here, as an instance of the blindness of Whig legislation, that although the duties on coffee were reduced last year from 6d. on foreign, and 4d. on colonial, to a uniform rate of 3d., to the serious injury of colonial interests, and apparently with no other object in view, the consumption was very little increased, having been 31,226,840 lb. in 1850, and only 32,564,164 lb. in 1851. The actual vend by retailers of what is called coffee– the adulterated article – is, however, known to have largely increased; and the grocer and fraudulent dealer, by the use of chicory, the admixture of which with coffee the Chancellor of the Exchequer refused to restrict, and of other worse ingredients, have been enabled to put far more than the amount of the duty remitted into their own pockets. The stock held over from 1850 was 19,300 tons; and as this was very little reduced in December 1851, and the bulk of it was bought at even higher prices than those ruling at the commencement of the year, it will not be unfair to estimate the loss upon it at £10 per ton, the same as that upon the importations. I will, however, assume it to have been only, in round numbers, £150,000. This will make the total loss on coffee £371,000.
In another important article – Tea – there have been very heavy losses. We commenced the year with prices of congou, the leading article of black tea, at 1s. to 1s. 0½d. for "ordinary to good ordinary," and better sorts proportionally higher. The year closed with the same teas at 8d. to 8½d., and a proportionate fall in other descriptions of black. In some sorts of green there has not been so great a fall; but upon all kinds (two excepted, of which the consumption is not large) I find the decline estimated by Messrs Littledale & Co. at 25 to 35 per cent. The fall per lb. may, with tolerable safety, be set down at 4d. It has not been so gradual as in the case of other descriptions of produce, having, on the contrary, occurred rather suddenly towards the middle and close of the season; and this fact has an important bearing upon the amount actually lost by importers. In the first four months of the year prices gave way a little; but the demand was good, and no serious disaster in the trade was expected. Imports, however, flowed in freely, beyond the requirements for consumption; and the new crop arriving unusually early by the clipper ships, now engaged between this country and China, a sort of panic ensued, and reductions of 2d. to 4d. per lb. were submitted to. With a view to render my calculations with regard to this article perfectly intelligible, I subjoin the state of imports, stock, and consumption, as given in Messrs Littledale's Circular of Jan. 3: —
Thus, although the deliveries in 1851 exceeded those of 1850, there was an increased stock, caused by the unusually early arrival of the new crop. Under these circumstances, I find that I am fully justified in taking the loss upon the entire imports at 2d. per lb., which, upon 72,000,000 lb., will be £600,000. The stock on hand at the commencement of the year, 34,500,000 lb., may be estimated as having lost 4d. per lb., or £575,000, leaving in its place an accumulation of 48,000,000 lb. at the close of the year, upon most of which there is a farther loss upon the price at which it was imported, even assuming that it was well bought, according to the range of prices here in November and December, when the bulk of the new crop reached us. I do not take into account, however, any loss upon this stock, or even upon its excess over that of the preceding year; and only set down the result as above, at a total loss of £1,175,000 for the year.
Even in the import of Foreign Grain the transactions of the year have been of a most unsatisfactory character, and the general result has been a loss, estimated at a very moderate computation to amount to, at the least, £500,000. The whole of this, however, has not fallen directlyi upon British merchants, who are regularly engaged in the trade, but in part upon foreign houses; and upon speculators who, having been misled by the miscalculations of the Free-Trade press, and by an over-sanguine temperament, to anticipate a considerable revival of prices during the close of 1850 and the beginning of 1851, were induced to become holders of the article. In the most favourable cases, however, up to the slight revival which took place at the close of the past year, the importer has been unable to secure more than a bare brokerage, except upon French flour; and taking every redeeming circumstance into consideration, I am warranted in setting down the loss of the year at £500,000, as above stated.
Upon a number of other important articles, the loss has been very heavy throughout the year, both to importers and holders of stock. Amongst these, I may mention many kinds of American provisions, colonial molasses, silk, indigo, jute, hides, linseed, and other seeds, linseed oil, gums, madder roots, dyes, dye-woods, spices, foreign fruits, &c. I shall only trouble your readers with a few, and give, in doing so, the stock and total decline during the year, not being able to give the aggregate loss in detail: —
On dye-woods the loss has been fearful, cargoes imported having in many cases not realised more than actual freights; and foreign fruits have been a drug throughout the year, and have perished, or else been sold at ruinous reductions from import cost. The total loss upon the import of these articles, added to what I have already estimated, will make up a gross amount of ten millions sterling.
I have already stated that, in addition to the loss in first hands, there must have been a very serious one sustained by manufacturers, dealers, and retailers, throughout the country. In all cases of falling markets of either raw materials or produce, the cheaper import presses upon previously made purchases, and compels a sacrifice of a portion of stock in hand. The manufacturer who is consuming cotton bought at 7d. per lb., finds, when he has converted the raw material into goods, that he has to compete with his neighbour, who is willing to make a contract for the same article with cotton at 6d. per lb. The calico printer and dyer finds a competitor who has bought his dyes ten per cent below him. The grocer and tea-dealer has in the same way to accommodate his prices to those which happen to rule in the wholesale market. With respect to the cotton manufacturer, we have been told that his business has been satisfactory; that he had made contracts in advance, which paid him a profit upon the raw material purchased for the purpose of fulfilling them. Suppose this to have been the case, which is only partially so, the loss must have fallen upon the buyer, who would have to take his goods into the home or the foreign market, in competition with more recent and cheaper purchases. Every speculative holder of produce, and every dealer, must have been similarly affected. I conceive, then, that I am not exaggerating the loss sustained by these parties, by estimating it at one-fifth of that which I have traced to importers, and adding another two millions sterling to the previous amount of ten millions.